This Is the Biggest Driver of Inequality Between People
Tl;dr: in a technological world, your net worth depends on the value you deliver to society and that has a lot to do with your problem-solving capacity.
In the article on the Warren Buffett paradox, I explained how mergers of companies created social-economic inequality and that if you wanted to become rich, “all” you had to do was buying companies that offered a lot of value, were well managed and undervalued.
Now, I’d like to dive into the roots of social-economic inequality.
We already established that value = money.
I’d like to explore why some people offer more value than others.
End of the year 2019, I assisted in a conference organized by my university and given by a girl who was working as a policy officer at NATO.
Her speech was about how the West had framed non-states armed organizations as terrorists and hence dealt with them from a military perspective, ignoring the fact that these organizations also performed economic and social roles within their communities.
If you start shooting at someone’s political representative, it’s normal they get angry.
We’ve been missing it since NATO invaded Afghanistan. The idea was therefore to start dealing with these groups from a political, economic, social, AND military perspective.
It was brilliant.
As the event was ending, I googled the girl’s name and stumbled on her resume.
She had graduated summa cum laude with a bachelor of science in Middle Eastern studies, had subsequently studied an MA and Ph.D. in international relations, and done research at Harvard. She had had her work published in the NY Times, got multiple grants and awards, spoke English, Italian, Spanish, French, Hebrew, and Arabic and even gave a TED talk (a real one, not a TEDx).
After the lecture, I went to tell her her work was super impressive and asked her how she had learned both Arabic and Hebrew.
She told me she’d lived in Jerusalem and had had “no choice”.
You Need to Be Smart
In my research on successful people, I have often noticed one common attribute to self-made politicians and business magnates of our time. They’re smart.
When I mean smart, I don’t mean they can instantaneously calculate what 6587×45896 gives.
I mean they have this capacity to integrate knowledge faster than their peers, which often showed at a very young age.
Musk coded and sold a computer game as a child. His estimated IQ is 155. Zuckerberg did the same, with an IQ estimated at 150.
Esther Perel spoke 5 or 6 languages when she was a teenager (and subsequently learned 3 others). Ray Dalio started buying stocks at 12 years old. Warren Buffett had read all of the books on wealth by age 11 and created a Coca Cola distribution business at the same age.
Gates himself declared he was born with some interesting mental capacities, Dickens won a literature competition as a child, Jack Ma was giving free tours of his city to tourists to improve his English at 13, Masayoshi Son built himself and manufactured a language translation device in his early 20’s. Steve Jobs was building computers at 13.
Laurent Simon has graduated from electrical engineering at 10 years old, Ken Griffith created a hedge-fund at 18, Richard Branson started a national newspaper at 17. Michael Dell built computers at 18, Jim Simons was a math prodigy and worked for the NSA in his early 20’s and I’m certain that we can find hundreds of thousands of more examples like this.
I’m not claiming that what these people have made for themselves just magically appeared without making any efforts.
I’m saying they were born with the right capacities, at the right time.
Probably some thousands or so years ago, it was harder for a very smart person to succeed because there were fewer opportunities to shine.
Today, the school system allows for rapid identification of smart people and when they fail school (it happens a lot), smart people can demonstrate their learning and production capacities with the Internet.
There are unlimited ways that you can use to shine and provide value (someone even created a new currency called bitcoin). It is the value you’re providing that creates social-economic inequalities: not everyone can provide as much value as you can.
So on one hand, we have a child prodigy who can code a website solving a problem for millions of people around the world.
On the other, we have someone who cannot do much more than clean a house.
It is clear that society needs both these people (until automation at least), yet it is undeniable that the former is bringing much more value to society (and hence, gets wealth) than the latter (who makes minimum wage).
And while this is fair, the basics onto which this process is established aren’t.
In plain English, you don’t get to decide how smart you are: nature does.
Social-economic inequalities come from a difference in the value provided by different individuals.
An individual that provides high value will receive high compensation, while an individual that provides low value will receive low compensation.
Globalization and digitization have enabled individuals to provide massive value to the world resulting in massive net worth (think of examples such as PayPal).
The bigger the difference in value providing, the bigger the social inequality.
Massive value providing comes from an individual’s capacity to integrate knowledge, invent solutions, and subsequently produce them.
The capacity of an individual’s propensity to integrate knowledge and come up with solutions depends on his/her intelligence.
His/her capacity to manufacture and produce that solution depends on both intelligence and work.
Individuals who don’t have sufficient mental capacities to integrate knowledge and produce solutions cannot provide as much value as people that can.
Even though intelligence is not sufficient to provide massive value, it is nonetheless necessary.
Differences in intelligence remains a huge taboo in our so-called “meritocratic society”.
You will probably have understood by now that this society is not meritocratic at all.
If it was, the efforts of Jeff Bezos should yield the same results as the efforts of Jean-Michel. This isn’t happening because Jeff Bezos is smart, and Jean-Michel isn’t.
This explains the difference in their net worth. Rather than meritocratic, this society we live in is smartocractic.
The more value you’re giving, the more you will get in exchange (it doesn’t even have to be money, I used to have a friend who could get people like no one else, he was providing such massive social value than his network spanned around the entire planet.)
Sadly, nature did not shape us equal in our respective capacity to offer value.
What Can We Do?
While the world needs Elon Musk much more than it needs the person that cleans his house (hard to hear, I’ll admit it), Musk himself needs to have his house cleaned or he can’t do any work.
The world, therefore, needs everybody, but in different capacities.
What should be done is to make sure that those that provide minimum value can still live decently on their salaries.
What should also be done is to make sure that everyone in society provides value in their own capacity, that is that unemployment be close to 0% so that social policies can help those that provide minimum value, not on those that don’t provide any value at all.
Everyone has to some extent, the capacity to provide a minimum of value.
Until we manage to manufacture smart humans or discover the secret to intelligence in another way (could a carnivore diet help?), social-economic inequalities will always exist because nature decided so.
It is through fair redistribution schemes that we can attenuate the effects of the valuecratic society in which we live, and take care of everybody.
No one should be left behind.