More on this book
Community
Kindle Notes & Highlights
the top 1 percent of the 1 percent (or the top 0.01 percent)—saw their share of national income double from 3 percent to 6 percent between 1995 and 2007. This is nearly six times as much as the 0.01 percent earned between World War II and the late 1970s.
the top 0.01 percent now get a bigger share of the top 1 percent of income than the top 1 percent get of the whole economy.
Omg
there are over 1.35 million households in the top 1 percent with an average income of $1.12 million,
the 0.01 percent represents just 14,588 families each with incomes over $11,477,000.*
the fifteen people who created Instagram didn’t need a lot of unskilled human helpers and did leverage some valuable physical capital. But most of all, they benefitted from their talent, timing, and ties to the right people.
And willingness to TAKE RISK
Technology has supercharged the ability of authors like Rowling to leverage their talents via digitization and globalization.
through a variety of channels and formats. More often than not, when improvements in digital technologies make it more and more attractive to digitize something, superstars in various markets see a boost in their incomes while second-bests have a harder time competing. The top performers in music, sports, and other areas have also seen their reach and incomes grow since the 1980s.6
weird
The ratio of CEO pay to average worker pay increased from seventy in 1990 to three hundred in 2005.
One rationale for this increase in executive pay is that technology increases the reach, scale, or monitoring capacity of a decision-maker.
Direct management via digital technologies makes a good manager more valuable than in earlier times when managers had diffuse control via long chains of subordinates, or when they could only affect a smaller scale of activities.
bezos
cheaply replicate his or her services and deliver them globally at little or no cost? Suddenly the top-quality provider can capture the whole market. The next-best provider might be almost as good, but it will not matter. Each time a market becomes more digital, these winner-take-all economics become a little more compelling.
In a traditional market, someone who is 90 percent as skilled or works 90 percent as hard creates 90 percent as much value and thus can earn 90 percent as much money. That’s absolute performance.
By contrast, a software programmer who writes a slightly better mapping application—one that loads a little faster, has slightly more complete data, or prettier icons—might completely dominate a market. There would likely be little, if any, demand for the tenth-best mapping application, even it got the job done almost as well. This is relative performance.
When consumers care mostly about relative performance, even a small difference in skill or effort or luck can lead to a thousand-fold or million-fold difference in earnings. There were a lot of traffic apps in the marketplace
Suddenly second-rate producers can no longer count on consumer ignorance or geographic barriers to protect their margins.
network effects.
Why fire phone failed
network effects can create both winner-take-all markets and high turbulence.
Even as the technology destroys geography—a barrier that used to protect authors from worldwide competition—it opens up specialization as a source of differentiation.
A superstar or long-tail economy with low barriers to entry is still one with far more inequality.
The great economist Joseph Schumpeter wrote of “creative destruction,” where each innovation not only created value for consumers but also wiped out the previous incumbent.
For many characteristics, humans fall roughly along a normal distribution, also known as the Gaussian distribution or the bell curve.
Normal distributions are very common (hence the name), and they have an intuitive pattern. As you move further and further into either tail, the number of participants drops precipitously. What’s more, the mean, median, and mode of the distribution are all the same number.
a power law, or Pareto curve,
“The era of bell curve distributions that supported a bulging social middle class is over and we are headed for the power-law distribution of economic opportunities. Education per se is not going to make up the difference.”26
this means that when income is distributed according to a power law, most people will be below average—say
Adjusted for inflation, the combined net worth on Forbes’ billionaire list has more than quintupled since 2000, but the income of the median household in America has fallen.
We wish that progress in digital technologies were a rising tide that lifted all boats equally in all areas, but it’s not. Technology is certainly not the only force causing this rise in spread, but it is one of the main ones. Today’s information technologies favor more-skilled over less-skilled workers, increase the returns to capital owners over labor, and increase the advantages that superstars have over everybody
And if your offering succeeds like crazy, the rewards can be huge. When these incentives are working well (and not doing things like providing huge, risk-free rewards to people taking inappropriate risks within the financial system), the benefits can be both large and broad: innovators improve the lives of many people whose purchases, in aggregate, make the innovator rich. Everyone benefits, even though not all benefits are the same.
skill-biased technical change accelerates.10 Many
“the origins of power, prosperity, and poverty.” According to Acemoglu and Robinson, the true origins are not geography, natural resources, or culture. Instead, they’re institutions like democracy, property rights, and the rule of law; inclusive ones bring prosperity, and extractive ones—ones that bend the economy and the rules of the game to the service of entrenched elite—bring poverty.
A commission of scientists and social theorists sent an open letter to President Lyndon Johnson in 1964 arguing that: A new era of production has begun. Its principles of organization are as different from those of the industrial era as those of the industrial era were different from the agricultural. The cybernation revolution has been brought about by the combination of the computer and
By reducing the costs of production and thereby lowering the price of a particular good in a competitive market, technological change frequently leads to increases in output demand: greater output demand results in increased production, which requires more labor, offsetting the employment effects of reductions in labor requirements per unit of output stemming from technological change.
economist William Nordhaus documented how technology has reduced the price of light by over a thousand-fold since the days of candles and whale oil lamps, allowing us to expend far less on labor while getting all the light we need.20 Whole sectors of the economy, not just product categories, can face relatively inelastic demand. Over the years agriculture and manufacturing have each experienced falling employment as they became more efficient. The lower prices and improved quality of their outputs did not lead to enough increased demand to offset improvements in productivity.
falling food prices might reduce demand for agricultural labor, but they free up just enough money to be spent elsewhere in the economy so that overall employment is maintained.22 The money is spent not just buying more of the existing goods, but also on newly invented products and services. This is the core of the economic argument that technological unemployment is impossible. KEYNES DISAGREED. He thought that in the long run, demand would not be perfectly inelastic. That is, ever lower (quality-adjusted) prices would not necessarily mean we would consume ever more goods and services.
more recently, job growth decoupled from productivity in the late 1990s. According to Jared Bernstein, the anti-Luddites call this fact a “head scratcher.” Which history should we take guidance from: the two centuries ending in the late 1990s, or the fifteen years since then? We can’t know for sure, but our reading of technology tells us that the power of exponential, digital, and combinatorial forces, as well as the dawning of machine intelligence and networked intelligence, presage even greater disruptions.
The owners of the androids and other capital assets or natural resources would capture all the value in the economy, and do all the consuming. Those with no assets would have only their labor to sell, and their labor would be worthless. This thought experiment reflects the reality that there is no ‘iron law’ that technological progress must always be accompanied by broad job creation.
Since 1996, manufacturing employment in China itself has actually fallen as well, coincidentally by an estimated 25 percent.29 That’s over thirty million fewer Chinese workers in that sector, even while output soared by 70 percent. It’s not that American workers are being replaced by Chinese workers. It’s that both American and Chinese workers are being made more efficient by automation. As a result, both countries are producing more output with fewer workers.
Haha
We’ve never seen a truly creative machine, or an entrepreneurial one, or an innovative one. We’ve seen software that could create lines of English text that rhymed, but none that could write a true poem (“the spontaneous overflow of powerful feelings, recollected in tranquility,” as Wordsworth described it). Programs that can write clean prose are amazing achievements, but we’ve not yet seen one that can figure out what to write about next. We’ve also never seen software that could create good software; so far, attempts at this have been abject failures.
The college premium exists in part because so many types of raw data are getting dramatically cheaper, and as data get cheaper, the bottleneck increasingly is the ability to interpret and use data. This reflects the career advice that Google chief economist Hal Varian frequently gives: seek to be an indispensable complement to something that’s getting cheap and plentiful. Examples
