Do rich people really earn their wealth?

In ancient times, kings and nobles made the circular claim that if they had achieved power, it must be because heaven wanted them to be leaders and receive special treatment.

That argument rings hollow in modern society where it’s been replaced by a new refrain: “we worked hard for our money.” It’s a popular phrase in North America where the belief that anyone can be successful with hard work runs rampant through our cultural consciousness. The belief that hard work leads to success is practically a religion. But is it true?

Let’s start by ignoring the people who were born independently wealthy, because there’s no debate there. Instead, let’s look at a billionaire’s claim that since he earned his wealth from scratch, he deserves every penny.

Famous hacker and venture capitalist Paul Graham argues a merit-based perspective. As a renowned programmer himself, he talks about the enormous differences in productivity between programmers. A truly great programmer isn’t just 5% or even 20% better than the other programmers. They may write ten times as much code in the same amount of time. Or since the amount of code written doesn’t really reflect productivity, great programmer can literally create 10 or 20 times the value they’re paid. A single act of brilliance can conceivably save or earn thousands or even millions of dollars.

In contrast, a really bad programmer isn’t worth the salary they’re paid. In fact, they often cause major problems, whether by creating horrendous security flaws, or by introducing so many bugs that every other programmer’s development grinds to a halt as teams try to track down obscure errors that no sane programmer would make.

Grahams point is this: if a programmer can create 10x or even 100x more value, isn’t it fair for them to be paid accordingly? By extension, isn’t it fair for some people to be paid vastly more than others, since a free market economy should take care of setting salaries that are commensurate with contribution?

The answer isn’t simple. Let’s take a maxim from the sports world: “practice doesn’t make perfect, perfect practice makes perfect.” Or to rephrase it for the business world, “working hard won’t make you successful, doing the right work will.”

That actually underscores the complexity of the wealth issue, because there are two components to “doing the right work.”

The first component is that the work that will get you rich, varies frequently with time and by geographic region. If you worked in the textile industry in India on the eve of the British conquest, you had a shot at a good living because of the English demand for high-quality Indian textiles. But only a few decades later, the Industrial Revolution in England brought the mass manufacture of cheap textiles to the Indian market, impoverishing native artisans.

In the modern world, Bill Gates is a great example of this kind of success. He’s an extremely hard-working, brilliant entrepreneur, but his success depended on a lot of amazing timing, such as being born in just in time to make software for the first personal computers, and being lucky enough to get a wildly advantageous deal with IBM. Warren Buffet is famous for arguing this point:

“If you stick me down in the middle of Bangladesh or Peru or someplace, you find out how much this talent is going to produce in the wrong kind of soil … I work in a market system that happens to reward what I do very well — disproportionately well.”

Amazingly this point was argued extremely well on Cracked.com, by writer David Wong.[1]

As a dance teacher I’ve noticed this as well: what is commonly perceived as talent in dance is very frequently just the happy coincidence that your body naturally moves the way a certain dance style prefers. You might be a “natural” at Tango, but not at Hip Hop. Now, some people have real talent for dance: their brains and bodies adapt well to different styles and ways of moving. But in most cases, our bodies just choose at random a default way to move, and it works better for some situations than others.

In that sense, success requires some amount of hard work, but it still depends a lot on luck.

And it requires even more luck. I mentioned above that Bill Gates was extremely lucky to land an amazing deal with IBM early on. The best entrepreneurs work hard to create luck for themselves, in the sense that they seek out opportunities and learn to adapt. But Hollywood and Silicon Valley both show that extremely talented, hard-working people still need to get a “break” to make it.

But “doing the right work” has a second component that isn’t pure luck.

One of the things that extremely successful people have in common is frequently the willingness to “do anything to win.” If what they enjoy and find easy brings them success, they’ll just work harder at that. But if it doesn’t, they’ll adapt and find a new strategy. Having fun might be important, but it’s not enough.

If someone achieves success by being willing to do whatever it takes to succeed, then success is a choice. It’s the choice to stay at home studying instead of going out to a party. It’s the willingness to work 16-hour days if that’s what is needed. It’s about enjoying pottery but working in real estate because you can make better money that way.

Is wealth just a matter of luck? The final answer is vague: “not entirely.” Hard work and talent are a big factor, and sometimes they’re enough. But for many successful people, luck plays a greater part than they are willing to admit.

Links:

1. http://www.cracked.com/blog/6-things-rich-people-need-to-stop-saying/

“Atheists and agnostics are more driven by compassion to help others than are highly religious people” according to this article.

Except that it’s a misleading sentence in an article that’s just bad science. The article tries to suggest that the study demonstrates atheists to be more compassionate and generous than religious people, but in a classic example of misusing data to support an unconnected position, that’s not really what the study says.

What the article and the study it quotes actually reveal, is that religious people base the way they help others, such as giving to charity, on their religious beliefs. They’re not very much affected by emotional appeals. In contrast, atheists react more strongly to emotional appeals, as shown by their greater increase in charity after watching a heart-wrenching video to inspire them.

It’s possible that overall, either atheists or religious people could be more generous or compassionate, but that’s not what this particular study revealed. It really just showed that religion works as advertised.

The ethical role of religion is largely to take the emotional guesswork out of good behaviour. It’s intended to remove the subjective element–the way you might help one old lady across the street because she has a nice smile, but not her dour looking neighbour. Or the way you might give your spare change to the homeless guy who reminds you of your brother, but not to the one who looks like one of the bullies from your high school.

Religions have ethical rules–such as Judaism’s requirement to give 10% of your income to charity, preferably anonymously, or in general the Golden Rule[1]–to emphasize that doing the right thing shouldn’t depend on your mood or whether or not you just watched a sad video.

On a related note, however, other studies[2] have shown that people are more honest shortly after reading the Ten Commandments or similar reminders of ethical behaviour. Interestingly, it’s not about religious belief; it’s about being reminded of what good ethical behaviour is. Where ethical systems can have an effective role is by providing constant reminders of the right thing to do.

It’s fair to criticize religions where they’ve gone astray, advocating hurtful or unethical behaviour. But it’s also important to recognize that the powerful mechanisms of religion are effective in positive ways, too.

1. The Golden Rule was formulated by the great rabbi Hillel as “That which is hateful to you, do not do to your fellow. That is the whole Torah; the rest is the explanation; go and learn.” About fifty years later, it was promulgated by a young rabbi of Hillel’s school, who we know today by the name of Jesus, with this formulation: “Do to others what you would have them do to you, for this sums up the Law and the Prophets.”
2. See the Ten Commandments study quoted in Dan Ariely’s Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions

According to Jezebel [1], a few idiots who read the Hunger Games and then saw the film adaptation have been rudely complaining that brilliant young actress Amandla Stenberg was cast in the role of Rue because she’s black, and that’s not how they imagined her. Or similarly the character Thresh, who comes from the same “sector” as Rue. Amazingly, it’s written very clearly in the book that they both have the same “dark brown skin and eyes.”

Apparently the real news is that racists don’t read very well. [2]

In the meantime, the rest of us normal people were quite impressed by Stenberg, who played the part perfectly well.

1. http://jezebel.com/5896408/racist-hunger-games-fans-dont-care-how-much-money-the-movie-made
2. Of course, is that really news?

One thing I really appreciate from my mother is that from an early age she taught me to think of skin colours as flavours. She didn’t refer to people as black or white (which they never actually are) but as peach-skinned, or chocolate-skinned, or coffee-skinned, or honey-skinned, or vanilla-skinned… everything was a flavour.

This wasn’t just a quixotic whim, either. This approach was from the highly intelligent woman with a background in political science and sociology, who taught me at age three or so to deconstruct TV commercials and distinguish the product being sold from the means used to sell it. (This gave me a head start in thinking like a marketer, which wasn’t really her original intent, but I’m still grateful for it.)

Part of the brilliance of the flavourful skin strategy was that it made every human hue desirable–just like when you’re a kid you can’t decide which ice cream flavour you want, because they all look good. And by always talking in terms of subtly different shades of pigment, it avoided putting people together in crude classifications. When you think in terms of tints and tastes, you don’t group people together as “black” or “white” any more than you would think of “relatively tall people” as a group. The only thing that coffee and chocolate flavours have in common is that they’re delicious together–but then so are vanilla and coffee.

Did it work? Apparently my first crush was on a girl in the neighbourhood with milk chocolate skin. Causality? Early onset chocolate addiction? Who knows.

But I can guarantee that when you start thinking this way, the whole constructed concept of “race” starts to fall away.

The John Howard Society has some valid concerns about the new Conservative platform on crime, based on the society’s 80-year history in advising the Canadian government on justice issues and helping criminal offenders with community work and rehabilitation. Executive Director of the John Howard Society of Manitoba called the government’s new crime strategies “tough on tax-payers and soft on crime.”

This is very important. Blanket declarations of “longer sentences” or guaranteeing jail time for more offenders are examples of policies that make some people feel good about “being tough on crime” but actually make things worse.

Imagine if the first time a child did something really wrong–such as hitting another child, or stealing money–you sent them away to an expensive private school where they learned how to become career criminals.

That’s what jail time can be for many people, and the research backs it up. Remember that peer pressure thing your parents made a big deal about in high school? Imagine what happens when you’re locked up 24/7 in an institution where 80% of the people you interact with are criminals.

The John Howard Society’s press release [PDF] explains how this works with prisons compared to community sentences in real life:

…less than 14% of offenders serving their sentence in the community reoffended during the period of their sentence. In comparison, national studies show that approximately 45% of those incarcerated re-offend almost immediately and will be convicted of another offence within two years of being released.

Of course, that’s also because the offenders serving community sentences were chosen based on a promising profile, but that’s the whole point: if you can reasonably identify people who won’t re-offend, why put them in prison where they cost us more money, and upon release will commit a number of new crimes before finally being caught again… only to cost more money? At an estimated $87,000 a year per male inmate (as much as double that for women), it probably costs taxpayers more than most criminals even make from criminal activity.

Of course, prisons have a purpose. There are dangerous criminals who shouldn’t be released. And the fear of prison may serve as a deterrent for some. But actually sending people to prison should be a last resort.

Justice is about more than just filling prisons.

Give a man a fish, and he’ll eat for a day. Give a man a hammer and he’ll make a living teaching other people how to catch fish with a hammer.

Finally I have a place to put my most random stuff again. You can see old byroniverse stuff here.