4 ms·

> Since virtually all human traits follow a Gaussian distribution, it seems like whatever the wealth-building factor is, it would also follow a Gaussian distrib

> Since virtually all human traits follow a Gaussian distribution, it seems like whatever the wealth-building factor is, it would also follow a Gaussian distribution. But wealth follows more of a power law distribution. You never encounter anyone 1000 times taller than average, but there are many people 1000 times wealthier than average. This is nonsense. Lets take an easy example, books, people don't want to waste their time reading bad books so only the most palatable books gets a good amount of sales. This means that a small difference in skill leads to a large difference in sales, which would recreate the power-law of wealth creation. Similar arguments can be made about engineering skills, management skills etc.

pytester 7y ago
If you look at the actual richest people in the world though, they largely make their wealth off the hard work of others (walmart family), through some kind of gamble (finance), some kind of parasitism (unearned income like interest) or by monopolizing that "magically existing wealth the OP doesn't believe in" (e.g. saudi arabian oil). For every JK Rowling or Steve Jobs there's maybe 100 who either fully or mostly extracted their wealth while going to great efforts to pretend that they're really just another JK Rowling or Steve Jobs.
- qnsi 7y ago
  More than half billionaires are self-made.
- joeblow9999 7y ago
  so?
anovikov 7y ago
Very true. And my opinion of why distribution becomes even more skewed in both the income and wealth, is that it becomes easier to exploit this small difference in skill thanks to computer and the Internet (and books are the best example: it costs nothing to "publish" the book in millions copies online, so the feedback loop moving slightly better authors on top works a lot better than in times of printed books).
bildung 7y ago
And yet the reality does not reflect your model at all: Most wealth in the US is inherited. https://www.washingtonpost.com/us-policy/2019/02/06/people-like-estate-tax-whole-lot-more-when-they-learn-how-wealth-is-distributed/ https://www.washingtonpost.com/us-policy/2019/02/06/people-l...
tremon 7y ago
This means that a small difference in skill leads to a large difference in sales That does not follow at all from your initial observation. You could just as easily state that a small difference in exposure leads to a large difference in sales, thereby taking skill out of the equation again, and thus supporting the GP's initial argument.
- username90 7y ago
  But exposure in the form of publishers costs money. Therefore publishers try to find authors whose work will sell, meaning that skill also makes exposure easier. And once your books sell your skills are validated, so you will have even more opportunities. But if the books doesn't sell enough then you are thrown away, and the publisher lost money. If you used your own money then you lost money betting on yourself, money didn't help you earn money here it just gave you more leverage to lose/earn more. This is why people say "The first million was the hardest", because after you have used their skills to make a million others will trust your skills and thus give you more exposure and opportunities. So winning a million on the lottery wouldn't help much, it gives you capital but it doesn't validate your skills which was the most important part. Of course I am not saying that luck doesn't play a part, just that earning power doesn't follow a Gaussian distribution.
  - vannevar 7y ago
    This is why people say "The first million was the hardest", because after you have used their skills to make a million others will trust your skills and thus give you more exposure and opportunities. It is precisely advantages like this that drive the "trickle up" effect. To use your original example, let's say one author legitimately wrote a book that was 10% 'better' than the next best effort. As a result, many more people bought her book (let's leave aside for now the notion of winner-take-all markets, which is another factor in the skewed distribution), and now she (and her publisher) are enriched. On her next book, they can afford a lot more promotion, and with her name recognition, her next book is a huge success, even though it is 10% worse than her nearest competitor. Now they've both written two books, and they're both 1-1 in terms of quality. But the one with the first good book has two best-sellers, and the second is a failure who will probably drop out. No one is saying that the first author is morally wrong, they're simply saying that if we, as a society, want to reward people according to their skill and effort, the current system fails in numerous cases because it is heavily biased in favor of existing wealth over talent.
amalcon 7y ago
This is itself nonsense. It presumes several obviously false things: - That people who are bad at writing books are either equally bad at everything, or derive most of their income from writing books. "Don't quit your day job" is a meme for a reason. - That writing quality (by some metric), as opposed to marketing, is the primary driver of book sales. Sales of Twilight demonstrate otherwise. It's even more clear in music: see any one-hit wonder from a past decade. In many cases, people who liked it then now wonder why. - That the economic model of book sales is representative of the economy as a whole. Books are almost pure intellectual property. Intellectual property is typically characterized by high development costs recouped through high margins. Services and commodity physical goods are typically characterized by low development costs and low margins, with non-commodity physical goods lying somewhere in between. The latter categories make up most of the global economy, so most of the economy doesn't meaningfully compare to books.
- TeMPOraL 7y ago
  The first two of your three points only mean GP needs to replace "authors" with "marketers". Also worth noting that it's not the authors (or musicians) that get rich, but primarily the people facilitating the marketing and distribution. I feel marketing itself could be enough to recreate power law - ceteris paribus, even a little edge in marketing lets you get more money quicker, which you can then reinvest in marketing; rinse, repeat. And marketing is not the only way you can reinvest money to make more money. All those ways turn making money into a form of: dmoney/dt ~ money, to which solution is an exponent.
  - amalcon 7y ago
    > The first two of your three points only mean GP needs to replace "authors" with "marketers". Granted, but if you do that, it's no longer making the point that GGP seems to be trying to make.

pytester 7y ago

If you look at the actual richest people in the world though, they largely make their wealth off the hard work of others (walmart family), through some kind of gamble (finance), some kind of parasitism (unearned income like interest) or by monopolizing that "magically existing wealth the OP doesn't believe in" (e.g. saudi arabian oil). For every JK Rowling or Steve Jobs there's maybe 100 who either fully or mostly extracted their wealth while going to great efforts to pretend that they're really just another JK Rowling or Steve Jobs.

qnsi 7y ago
More than half billionaires are self-made.
joeblow9999 7y ago
so?

anovikov 7y ago

Very true. And my opinion of why distribution becomes even more skewed in both the income and wealth, is that it becomes easier to exploit this small difference in skill thanks to computer and the Internet (and books are the best example: it costs nothing to "publish" the book in millions copies online, so the feedback loop moving slightly better authors on top works a lot better than in times of printed books).

bildung 7y ago

And yet the reality does not reflect your model at all: Most wealth in the US is inherited. https://www.washingtonpost.com/us-policy/2019/02/06/people-like-estate-tax-whole-lot-more-when-they-learn-how-wealth-is-distributed/ https://www.washingtonpost.com/us-policy/2019/02/06/people-l...

tremon 7y ago

This means that a small difference in skill leads to a large difference in sales That does not follow at all from your initial observation. You could just as easily state that a small difference in exposure leads to a large difference in sales, thereby taking skill out of the equation again, and thus supporting the GP's initial argument.

username90 7y ago
But exposure in the form of publishers costs money. Therefore publishers try to find authors whose work will sell, meaning that skill also makes exposure easier. And once your books sell your skills are validated, so you will have even more opportunities. But if the books doesn't sell enough then you are thrown away, and the publisher lost money. If you used your own money then you lost money betting on yourself, money didn't help you earn money here it just gave you more leverage to lose/earn more. This is why people say "The first million was the hardest", because after you have used their skills to make a million others will trust your skills and thus give you more exposure and opportunities. So winning a million on the lottery wouldn't help much, it gives you capital but it doesn't validate your skills which was the most important part. Of course I am not saying that luck doesn't play a part, just that earning power doesn't follow a Gaussian distribution.
- vannevar 7y ago
  This is why people say "The first million was the hardest", because after you have used their skills to make a million others will trust your skills and thus give you more exposure and opportunities. It is precisely advantages like this that drive the "trickle up" effect. To use your original example, let's say one author legitimately wrote a book that was 10% 'better' than the next best effort. As a result, many more people bought her book (let's leave aside for now the notion of winner-take-all markets, which is another factor in the skewed distribution), and now she (and her publisher) are enriched. On her next book, they can afford a lot more promotion, and with her name recognition, her next book is a huge success, even though it is 10% worse than her nearest competitor. Now they've both written two books, and they're both 1-1 in terms of quality. But the one with the first good book has two best-sellers, and the second is a failure who will probably drop out. No one is saying that the first author is morally wrong, they're simply saying that if we, as a society, want to reward people according to their skill and effort, the current system fails in numerous cases because it is heavily biased in favor of existing wealth over talent.

amalcon 7y ago

This is itself nonsense. It presumes several obviously false things: - That people who are bad at writing books are either equally bad at everything, or derive most of their income from writing books. "Don't quit your day job" is a meme for a reason. - That writing quality (by some metric), as opposed to marketing, is the primary driver of book sales. Sales of Twilight demonstrate otherwise. It's even more clear in music: see any one-hit wonder from a past decade. In many cases, people who liked it then now wonder why. - That the economic model of book sales is representative of the economy as a whole. Books are almost pure intellectual property. Intellectual property is typically characterized by high development costs recouped through high margins. Services and commodity physical goods are typically characterized by low development costs and low margins, with non-commodity physical goods lying somewhere in between. The latter categories make up most of the global economy, so most of the economy doesn't meaningfully compare to books.

TeMPOraL 7y ago
The first two of your three points only mean GP needs to replace "authors" with "marketers". Also worth noting that it's not the authors (or musicians) that get rich, but primarily the people facilitating the marketing and distribution. I feel marketing itself could be enough to recreate power law - ceteris paribus, even a little edge in marketing lets you get more money quicker, which you can then reinvest in marketing; rinse, repeat. And marketing is not the only way you can reinvest money to make more money. All those ways turn making money into a form of: dmoney/dt ~ money, to which solution is an exponent.
- amalcon 7y ago
  > The first two of your three points only mean GP needs to replace "authors" with "marketers". Granted, but if you do that, it's no longer making the point that GGP seems to be trying to make.