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 (or power, for that matter).
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 and so the idea was to start dealing with these groups from a political, economic, social, AND military perspective.
It was brilliant but as much as I’d like to talk about the West’s meddling in international affairs (it’d be a great yet pointless article), our article has more to deal with the speaker’s IQ than with the content of her conference.
As the event was ending, I googled the girl’s name and stumbled on her resume.
She had graduated summa cum laude from a bachelor of science in Middle Eastern studies, had subsequently studied an MA and Ph.D. in international relations, and done research at Harvard, 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 (and not one of these shitty TEDx, a real TED talk).
Upon looking at her resume, I felt three different feelings: sadness, jealousy, and desperation.
Sadness because we were in presence of a world-class policymaker (I mean, a policymaker heads of state call for advice) dedicating her time to a bunch of students that either didn’t care for her knowledge, weren’t going to do anything with it, couldn’t understand it or were not brilliant enough to grasp the value of it (like teaching physics to a bunch of 4-years-old).
I felt sad for this remarkable person that was probably wasting her time with us.
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”.
Later on, I stumbled on her as she was waiting for the bus by herself under the rain and thought maybe her life wasn’t so different than mine, but it was obvious bs.
As I was going back to my shitty apartment, she was going to the airport.
The Origin of Greatness
In my research for paths to greatness, I have noticed one common attribute to self-made politicians and business people of our time (artists and athletes are different): they’re smart as f* (if you’re stupid, becoming an artist or an athlete might do it for you).
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 btw, showed at a very young age.
Musk coded and sold a computer game as a child, Zuck also learned how to code by himself.
Esther Perel spoke 5 or 6 languages when she was a teenager (and subsequently learned 3 others), Dalio started buying stocks at 11 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 (wouldn’t have guessed), 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.
Laurent Simon has graduated from electrical engineering at 10 years old, Ken Griffith created a hedge-fund at 18, Branson started a national newspaper at 17, Michael Dell built computers at 18 (like Steve Jobs), 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 these people were lucky to get where they are, neither that what they have today 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.
If you were the son or daughter of someone with power, then you could have made use of your brain and use education to your best advantage.
If you had been born in a family of farmers though (or worse, slaves), it was slightly more difficult because smart people were in less demand at the time, and had fewer options to show their capacities.
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.
Wanna trade options for Goldman Sachs?
Then register a trading account, start trading with your own money then send your results to Goldman.
If you have sufficient brainpower to understand how trading works, Goldman will hire you without a blink.
You won’t even have to go to university.
Or you could also learn how to code and build an app, software, or a website, sell it, and make a bank.
You could write a book and sell it online.
Or you could start a dropshipping empire.
There are unlimited ways that you can use to shine and provide value on the Internet (someone even created a new currency called bitcoin lol) and it is that 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 (God, provided it exists) 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 (unless you’re a primary school teacher: massive value providing, 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 (you also need to work), it is nonetheless necessary.
Life VS Society
As I was cycling home, I was thinking about the conference we just had.
I was thinking about the brilliance of this girl.
I was thinking that the world was fair, that this scholar had attained positions in world governance equal to her talent, work, and intelligence.
I was also thinking that if the world was fair, life wasn’t.
Life gave different capacities to different people, and some people are cursed to remain at the bottom of society before they’re even born.
For some others, it will mainly depend on how hard they work.
For a very small elite, their intelligence will greatly facilitate their struggles for value production, and if they work hard enough, they will rise to the top.
I suspect this obvious principle to have been noticed by the early socialists of the world.
If life isn’t fair, it made sense to use society as a balance to compensate for life’s lack of fairness.
This compensation principle is the core of the socialist doctrine: the haves must redistribute their wealth to the have nots.
Communism was different.
The main point Marx denounced was access to capital.
Communism wasn’t motivated by intelligence differences, but by access to capital. Had owners not been so greedy, communism may never have existed.
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, which isn’t happening because Jeff Bezos is smart, and Jean-Michel isn’t.
This explains the difference in their net worth and quite frankly, in their quality of life.
Rather than meritocratic, this society is valuecratic, 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 Ortega much more than it needs the person that cleans his house (hard to hear, I’ll admit it), Ortega 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 focus on people providing 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.
What we can do though, is through (fair) redistribution schemes, try to attenuate the effects of the valuecratic society in which we live, and take care of everybody.
No one should be left behind (except vegans, of course ;)).