Humans differ in abilities by at most an order of magnitude along dimensions that can be meaningfully measured, such as speed or height. When humans compete on the basis of such “Olympics” variables, you tend to get a linear relationship between effort and outcome. If you can run twice as fast as me, you will cover twice as much distance over any given period of time.
It takes civilized tools and social constructs to create greater differences. Written language and mathematics are civilized conceptual tools. Guns and computers are civilized physical tools (because it takes civilizations to manufacture them). Money is a social construct.
A race that depends strongly on tools, and with outcomes measured in terms of social constructs, can lead to exponential relationships between efforts and outcomes (due to compound-interest style accumulation dynamics), as well as orders of magnitude differences in relative outcomes. How does this work?
Here’s an example: skill with mathematics (a conceptual tool), computers (a physical tool) and money (a social construct) can make a person several orders of magnitude more successful in a game like “investing.”
By contrast, a race that depends on Olympics variables and non-civilized tools (such as hunting with a spear) can never lead to exponential differences in outcomes. There’s just not much point to, say, hunting 100x as many deer as the next-best hunter over a career, as there is to making 100x as much money as your neighbor.
This is the reason the pen is mightier than the sword. A great warrior can perhaps kill a hundred people with a sword or spear before being overwhelmed. But a great orator or writer working within a society where language is inextricably linked with political power, can easily control hundreds of millions of people through institutions.
But there is a catch. Civilized tools and social constructs are necessary, but not sufficient, for exponential differences in outcomes. The reason is that these potential exponential levers are usually arranged in balance-of-power configurations. So in a game like investing, there are others armed with computers and mathematical knowledge too. Often the balance of power is a dynamic one, based on an arms race among evenly matched members of a group that is pulling away from the rest of humanity. I covered this idea in The Crucible Effect a few years ago.
The balance of power has to be disturbed in order to create an actual opportunity for exponential relative outcomes. This generally means an unfair advantage. Often the unfair advantage is a break in an existing boundary constraint.
When you have an unfair advantage in a balance of power situation involving civilized tools and constructs, you can experience what I call a breakout: a path of runaway, exponential outcomes. Eventually, others will catch on and catch up, but by then, you will have accumulated a priceless asset. In fact, the whole point of social constructs like money, I have come to believe, is to enable accumulation of wealth in more liquid, enduring and scalable forms than (say) women or cattle.
Breakout moves often follow rich moves based on fertile variables. So in American politics, studying law at an Ivy League institution is a rich move if you want to be President. This creates the balance of power among many people with promising political careers. But only one or two in a generational cohort will get to be President. There are consolation prizes along the way — seats in Congress or governerships — but the Presidential role is several orders of magnitude more powerful and valuable.
This is typical of civilizational races involving things like political power, money or fame. While they aren’t usually winner-take-all, they are usually winner-take-exponential-slice.
Curiously though, while mastery of appropriate civilizational tools and social constructs is necessary to enter such races, winners are usually determined by barbarian dynamics. The masters of the universe are barbarians in civilized clothing.
These are ideas I am primarily exploring for my second book, Game of Pickaxes, but there is a strong relationship to the ideas in Tempo as well. My goal in my new book is to primarily apply these ideas to specific questions, but I hope to develop the conceptual framework further, to include in a future edition of Tempo.
For those of you with sufficient mathematical background, this is also a fertile subject for mathematical exploration. Compound interest is the most familiar example, but the phenomenon is more general, and involves systems that create races among exponential trajectories.
About Tempo
I think the reason that so many people are bothered by wealth inequality per se is that being products of civilization, exponential outcomes are a relatively recent possibility. When our species’ social instincts were being honed, because productivity could only vary within the range allowed by differences in “olympic” variables, the only way one could have, say 10x more meat than another in the group was by plundering it; disparity could only be zero-sum (even the first exponential levers, arguably weaponry and horsemanship, merely extended oly-variables such as strength and speed to increase plunder capability). There would then be strong pro-social reasons to ostracize/scapegoat/be suspicious of people with “more than their fair share”. So even now, when we live in the ultimate civilizational epoch of exponential leveraging that is global capitalism, at a gut level we find it hard to believe that a CEO is paid for being 400x more productive than a janitor rather than just finding a way to somehow steal from 400 janitors. This pops up everywhere from benign Romney-bashing and Occupy-ing to pogrom inducing anti-semitism.
This doesn’t happen all the time though, even in capitalist societies.
Capitalism provides a promise to the people, namely that they can achieve moderate wealth by working hard and if they are clever they can become millionaires and better. As long as this is perceived to be true by the masses there are no significant wealth re-distribution debates at least not in the center-left / center-right. When average income declines over a longer period of time and / or unemployment grows significantly the middle class gets nervous and begins to consider nullifying the former “barbarian moves” of the riches by a counter OWS style move, using the state and taxes as their instrument – and this is still the civilized variant.
Not only on a gut level, but there is just no measure of “productivity” – a genuine proletarian concept – which could explain the factor. In fact no one believes that the worker-number-1 is a working super hero, it is just that a certain kind of work and decision making is mystified. Still, this is mostly accepted as long as more people benefit from this fiction than suffer.
This is a convenient coincidence, because I just had a thought about rich moves.
I finally got around to reading Cowen and had a thought:
Are fertile variables the same thing as low hanging fruit?
I think that they are if we look at things from the standpoint of probability. A rich move is a heuristic that is relatively simple compared to the complex and varied benefits that it may bring. Getting an extra hour of sleep or cutting out highly processed snack foods are both examples of very rich moves. On the other hand, attempting to optimize by say… eating less almonds (supposedly high in omega-6 and phytic acid) is simply not going to get you as far because you’re chasing a relatively precise tweak with less unknown-unknowns.
My conclusion for now: rich moves = low hanging fruit = hydra
And one other question:
Is a cheap trick nothing more than a rich move?