Category: Economics, Business, & Work

Source: The Real Class War – American Affairs Journal, By Julius Krein

The socioeconomic divide that will determine the future of poli­tics, particularly in the United States, is not between the top 30 per­cent or 10 percent and the rest, nor even between the 1 percent and the 99 percent. The real class war is between the 0.1 percent and (at most) the 10 percent—or, more precisely, between elites primarily dependent on capital gains and those primarily dependent on profes­sional labor.
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While the top 5 or 10 percent may not deserve public sympathy, their underperformance relative to the top 0.1 percent will be more politically significant than the hol­lowing out of the working or lower-middle classes. Unlike the work­ing class, the professional managerial class is still capable of, and re­quired for, wielding political power.

Members of the top 5 or 10 percent have done better than the middle and working classes in recent decades, but this masks their dramatic underperformance relative to the top 1 percent (and espe­cially the top 0.1 percent).

the costs of maintaining elite status—and passing it on to one’s children—have risen disproportionately for the top 5 or 10 percent. The ongoing decline of the middle and working classes may have reinforced the top 10 percent’s sense of elite status, but it also means that any backsliding would be catastrophic. These pressures have converged in two key areas in particular: real estate and education.
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This underappreciated reality at least partially explains one of the apparent puzzles of American politics in recent years: namely, that members of the elite often seem far more radical than the working class, both in their candidate choices and overall outlook. … Many of the most aggressive proposals associated with the Left—such as student loan forgiveness and “free college”—are targeted at the top 30 percent, if not higher. Even Medicare for All could potentially benefit households earning be­tween $100,000 and $200,000 the most; cohorts below that are already subsidized.

The purposelessness of many professional careers in the capital accumulation economy starkly contrasts with the growing number of unaddressed needs in the public sector. The legions of finance drones making utterly pointless discounted cash flow models could be far better employed designing a serious industrial policy. The engineers currently laboring over algorithms to make social media more addic­tive should be funded to focus on more productive technological advances. All the effort now devoted to coming up with new pricing strategies for old drugs could be directed at real medical problems, like increasing resistance to antibiotics. The vast resources invested in unprofitable ride-hailing apps and real estate arbitrage could have been used to solve America’s ever-increasing public infrastructure and housing challenges.

Source: The Costs of Reliability | LessWrong 2.0, by sarahconstantin

“Why can people be so much better at doing a thing for fun, or to help their friends and family, than they are at doing the exact same thing as a job?” … I think it has a very mundane explanation; it’s always more expensive to have to meet a specific commitment than merely to do something valuable.

The costs of reliability are often invisible, but they can be very important. The cost (in time and in office supplies and software tools) of tracking and documenting your work so that you can deliver it on time. The cost (in labor and equipment) of quality assurance testing. The opportunity cost of creating simpler and less ambitious things so that you can deliver them on time and free of defects.

Source: Speed matters: Why working quickly is more important than it seems, by James Somers

The obvious benefit to working quickly is that you’ll finish more stuff per unit time. But there’s more to it than that. If you work quickly, the cost of doing something new will seem lower in your mind. So you’ll be inclined to do more.
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The general rule seems to be: systems which eat items quickly are fed more items. Slow systems starve.

Source: On Inequality and Risk Capacity | The Information, by Sam Lessin

The biggest factor causing inequality is the ability of people to take risk. Those who have already scored a big success have more capacity to take further risks than those who haven’t. … coupled with a changing landscape of the types of risk available to people and their capacity and willingness to take risk.

While I am sure [technology and unequal access to “opportunity”] play a role, I am convinced that they are not the major source of growing inequality in the U.S. The real cause is the compounding advantage that some people have in their ability to take certain types of financial risk in a world where access to capital is commoditized. Real returns come from high-variance, low-probability outcomes.

A smarter, stronger and harder-working person might do better than their neighbor, but at most by a few multiples, not orders of magnitude. Differences in knowledge might at first blush seem like they can provide compounding advantage … But the reality is that knowledge tends to diffuse quite rapidly. It is hard to keep an idea or invention private forever to your own advantage… So, a great idea or a unique piece of information you figure out might provide some advantage for a while, but it is generally not sustainable or compounding.

For most, the risk-taking doesn’t pay off, and these people end up worse off than their non-risk-taking neighbors. … For a minority, however, imagine that their risk taking pays off, and they get dramatically richer than their neighbors… Unlike the first-round risk-taking losers, the winners can now afford to take more and more risks. … over time, we end up in a society where some people can afford to take rational risks with time and capital, but most cannot.

Consumer protections have their place. But there is no question that regulations, which disincentivized companies from going public quickly—and bar unaccredited investors from taking financial risks or investing in funds which do—drive inequality. In the name of protecting people we have set up a world where—quite literally—in order to have access to the best performing investments you need to already be rich.

There will still be inventors, and there will still be hard workers in our future. But as we come to grips with the fact that in modern times economic outcome compounds less on innovation and work, and more on risk taking, either our national identity is going to have to dramatically shift, or we are going to have to think about how we evolve our social structures.