If you're so smart, why aren't you rich?

Turns out it's just chance.

While wealth distribution follows a power law, the distribution of human skills generally follows a normal distribution that is symmetric about an average value. [...] The same is true of effort, as measured by hours worked. Some people work more hours than average and some work less, but nobody works a billion times more hours than anybody else. [...]

The computer model charts each individual through a working life of 40 years. During this time, the individuals experience lucky events that they can exploit to increase their wealth if they are talented enough. However, they also experience unlucky events that reduce their wealth. These events occur at random. [...]

When the team rank individuals by wealth, the distribution is exactly like that seen in real-world societies. "The '80-20' rule is respected, since 80 percent of the population owns only 20 percent of the total capital, while the remaining 20 percent owns 80 percent of the same capital," report Pluchino and co. [...]

The wealthiest individuals are typically not the most talented or anywhere near it. "The maximum success never coincides with the maximum talent, and vice-versa," say the researchers. [...]

The team studied three models, in which research funding is distributed equally to all scientists; distributed randomly to a subset of scientists; or given preferentially to those who have been most successful in the past. Which of these is the best strategy?

The strategy that delivers the best returns, it turns out, is to divide the funding equally among all researchers. And the second- and third-best strategies involve distributing it at random to 10 or 20 percent of scientists.

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3 Responses:

  1. tfb says:

    So now we know (or anyway have good evidence) that a lot of the people who got stupidly rich in the last twenty years were just lucky, how do we persuade them that they are not, in fact the √úbermenschen they clearly think they are?

    • jwz says:

      "It is difficult to get a man to understand something when his salary depends upon his not understanding it."

    • Nick Lamb says:

      You don't. You want a super-rational strategy that privileges the group of rational people who grasp that this is all just basically luck over those who think it isn't. If you were wondering what that might look like, a reasonable first approximation for Americans would be the policies of Bernie Sanders.

      Maybe the rich will listen to reason after their wealth is taken from them. Maybe they won't. Don't care. As we saw these people aren't better than anybody else, caring what billionaires think (about being billionaires or anything else) more than everybody else is how you got into trouble, not how you get out.

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