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April 02, 2007

More on the Deserves

To say a bit more about TheStreet.com's primer for millions, my objection is partially articulated by commenter DivGuy, who writes, "the problem here is that thestreet is creating the conditions for one to believe that people with less wealth, less financial stability, deserve their situation in the same way that the wealthy fundamentally deserve their wealth due to their financial acumen. I find that position ethically indefensible."

My problem goes a bit further: It's economically indefensible as well. To offer one of many possible examples, take this bit on the economic importance of social networks from Malcolm Gladwell's Six Degrees of Lois Weisberg:

The sociologist Mark Granovetter examined this question in his classic 1974 book "Getting a Job." Granovetter interviewed several hundred professional and technical workers from the Boston suburb of Newton, asking them in detail about their employment history. He found that almost fifty-six per cent of those he talked to had found their jobs through a personal connection, about twenty per cent had used formal means (advertisements, headhunters), and another twenty per cent had applied directly.[...]

If you think about the world in this way, the whole project of affirmative action suddenly starts to make a lot more sense. Minority-admissions programs work not because they give black students access to the same superior educational resources as white students, or access to the same rich cultural environment as white students, or any other formal or grandiose vision of engineered equality. They work by giving black students access to the same white students as white students -- by allowing them to make acquaintances outside their own social world and so shortening the chain lengths between them and the best jobs.

Lists like the one at TheStreet.com simply erase social networks from the equation. These networks, which have repeatedly proven utterly critical to economic mobility, are not the products of prudence, or virtue. But they are powerful governing forces in economic life.

But we don't actually think an economy run on the principle of "who you know" is fair, and if we were to conclude that our economy was such a place, and thus the poor and the marginal and the rural and the shy were heavily disadvantaged, we might have to think about how to rectify some of those inequities. By instead pushing the myth that riches come from virtues, that we live in a pure-ish meritocracy, that wealth is the direct product of the puritan work ethic, we assuage that guilt, ignore those questions, and set into motion myths that are bad for public policy. If wealth is deserved, redistribution is immoral. If it is lucked into, redistribution is just. The answer, of course, lies somewhere between the two, but attempts to frame economic mobility entirely or even largely in terms of virtue should be resisted.

Update: From comments, this is pretty funny. Atlas Shrugged 2: One Hour Later.

April 2, 2007 in Inequality | Permalink

Comments

Ezra, this is bang on. The great American mythology regarding "rugged individualism" and meritocracy is precisely the reason the US is so far behind other Western nations in pursuing social justice. Props for so articulately stating the heart of the matter that is so rarely brought up.

Posted by: moo-cow | Apr 2, 2007 3:28:17 PM

I'm a good example of your point. I had enough money to attend a program to get a professional certification. While in the program, I completed a practicum at a local institution. After I graduated, I contacted my practicum supervisor and inquired about job possibilities. He championed my cause to the administration, and a job became available, which became my present job. None of this would have happened if I hadn't been a student there, which depended on me having the money to attend that program.

Posted by: beckya57 | Apr 2, 2007 3:40:44 PM

1974???

I would venture that with Monster and the other nationwide job search systems available today, the figures would be different. Also, since 1974 blacks have much more access to everything including the 'good ol' boy' system. Put simply, they are more integrated (if they wish to be) in society than ever and yet the "need" for Affirmative Action seems to be going up.

Posted by: Fred Jones | Apr 2, 2007 3:41:49 PM

Ezra, I have to tell you point blank here that you're off-base in your criticism. The context of the original article at TheStreet.com was about saving and financial planning. Now, if the article had been entitled, "why you suffer long-term unemployment and can't find a good job since being layed off," then, yes, points like, "You don't have enough casual acquaitences," "your social class does not contain enough people who can offer you a job," and "you ended up in a profession that does not have legal protections that create high barriers to entry from competitors." I'd be insulted if TheStreet.com didn't mention those things in such an article. That wasn't what the article you linked to was about. "Why you're not a millionaire" was not about "why you're not pulling down 500k/yr as an investment banker." It was about "why your middle-income-level financial planning might not be up to snuff."

Posted by: Constantine | Apr 2, 2007 3:43:54 PM

Fred, riiiight. Monster gives you 500 resumes, and you'll go through them all, and not look at the ones sent by friends and acquaintaces. You'll tell them to have the applicant go through Monster.

Posted by: Barry | Apr 2, 2007 3:50:39 PM

Valid concerns, but, again, as Constantine points out, they're misplaced in connection with the TheStreet.com article. The article is directed to people with money to invest who aren't millionaires. It isn't for or really about people in general. It's about things readers of the site can do (which doesn't include being born with more money or being luckier). There's no reason it should deal with the issues you raise. Habits are treated as good or bad solely in relation to the goal of being rich. It nowhere talks about desert, nowhere argues the rich are better than the poor, or even that we should want to be rich. It's for those who want to be rich and have some money to invest already.

Posted by: Sanpete | Apr 2, 2007 3:51:39 PM

Hey, before I employed myself, Monster gave me the widest exposure and I got a great break there working for the second largest software company in the US. I was from a poor family who had no social or political contacts at all.

Of course, no one is willing to pay me what *I'm* willing to pay me so pretty soon it felt like it was costing me to stay employed by corporations.

Posted by: Fred Jones | Apr 2, 2007 3:57:39 PM

You keep saying this about TheStreet, but here's the lede:

"The reason why you aren't a millionaire (or on your way to becoming one) is really quite simple. You probably assume it's because you aren't earning enough money, but the truth is that for most people, whether or not you become a millionaire has very little to do with the amount of money you make."

"Most people." Those are the key words.

Posted by: Ezra | Apr 2, 2007 3:59:27 PM

I recently got a mailing from Fidelity talking about retirement investing. They gave a couple of case studies that they pitched as regular people getting ahead on their retirement, which really gave me a good laugh.

In one they start out trumpeting a family that has a $2 million dollar nest egg for retirement by their mid-40s. They start by talking about the husband's various investments, maxing out his 401K, etc, that were worth $400,000 then in a short paragraph that follows they mention the wife got a $1.6 million inheritance from her aunt! I about blew the coffee out my nose.

In another they talk about a couple in their mid-30s who have saved something like $300,000 for their retirement. The couple gave up eating out except on their anniversary, they stopped taking vacations that required any real travel, made their kids pick only one extracurricular activity, etc. They were saving like 40 or 50% of their take home pay, but seemed to be living a soulless existence for their goals.

In the end their suggestions were much more realistic that those on the Street. Much more about not spending your money, just saving it. No debt. Not much fun, unless you have a good paying job or inherit a boatload of cash. Probably pretty realistic, even though it was evident the mailing was aimed at people earning well above the average income.

Posted by: Ricky | Apr 2, 2007 4:08:21 PM

Fred: such a typical, arrogant Oracle guy! I’m joking; I spend time there too… who hasn’t in the valley.

Posted by: DM | Apr 2, 2007 4:14:32 PM

Actually, I was talking about INTUIT, DM. Perhaps I was wrong in ranking it second.

Posted by: Fred Jones | Apr 2, 2007 4:19:18 PM

I wonder if you could make an analogy between this and how Hollywood works. There's a debate I hear within the industry about success and whether it comes from talent or who you know. Some folks think that the creme rises to the top, and regardless of your connections, if you're talented, you'll be successful. Others say it's ALL about who you know and who the people you know, know, ect. In reality, both are kind of true, and I suspect the same is true when it comes to careers and making money in the real world.

The problem is the same problem we have with every other issue in the entire world, there's no room for a middle ground, because the only people who think/care about issues are on one extreme or the other.

This is what appeals to me about Obama, he strikes me as a guy who isn't interested in playing the same old game, he seems interested in finding actual solutions to problems and doesn't give two shits about you or the other guy's warped frame.

Posted by: Matt | Apr 2, 2007 4:20:10 PM

Nice post, Ezra. You're absolutely right to tie this issue to the question of affirmative action.

Also, I'm terribly impressed that you included "the shy" in your list of those who are "heavily disadvantaged" by the it's-who-you-know economy. I thought no one would ever notice! :)

Anyway, for those of us fall into the category, it's a daunting world these days. I work two part-time jobs, both highly skilled and both wildly underpaid. If I could just be a different person--an extravert--but with the same abilities, I suspect I'd have a lot more opportunities and therefore a lot more leverage in the job market. Not to mention health and retirement benefits.

Posted by: Rifka | Apr 2, 2007 4:23:06 PM

DM, I didn't! I avoided the Oracle trap! Of course, people who stay stuff like "I worked for the 2nd largest software company in the world!" reminds me of the article from The Onion Teen Lands Job With Fortune 500 Company.

Anyway, Ezra, it looks like this is all coming down to the author's throwaway line about "most." I don't honestly think that the author has a political agenda. He just forgot that the demographics of his readers are not "most people." But middle-income earners are a lot of people.

Ricky, now perhaps that last couple you describe isliving a bit more of a Spartan lifestyle than you would be comfortable with, but plenty of families don't take pricey vacations and also they eat out sparingly and their kids don't participate in a large selection of pricey activities. They don't consider that existence "soulless." It might not be normal for people of their income level, but that's why they have $300k in savings and their peers don't.

Posted by: Constantine | Apr 2, 2007 4:23:27 PM

Matt, I would argue that in Hollywood, there are far, far more excellent actors than there are starring roles. Not only that, but the utility of being a good actor is much lower for steady, but lesser acting roles.

So you've got a lot of actors who are good at what they do, but few top spots for them to fill. For the lesser spots, their excellent acting skills don't necessarily give them a significant leg up on the competition. At the end of the day, auxillary factors are going to come into play when it comes to determining whether you're successful (connections, happenstance, etc.). I'm sure this applies in other fields, as well, though perhaps not to as stark a degree.

Posted by: Constantine | Apr 2, 2007 4:27:58 PM

Ezra, you're putting way to weight on two incidental words in the article. It clearly isn't really about most people, most of whom live in other countries, are poor, and aren't in a position to read TheStreet.com or invest. It isn't even about most Americans. It's about the kind of people reading the article.

The barking is good; it's just the wrong tree.

Posted by: Sanpete | Apr 2, 2007 4:29:13 PM

Ezra:

Now THAT's a post.

Damn!

Nate W.

Posted by: Nate W. | Apr 2, 2007 4:31:03 PM


The real point is that Granovetter's discoveries make TheStreet.com's list both trivial and wrong. Under Granovetter, it often is economically superior to drive new cars and wear expensive clothes, for example. Why? Because the country club, where many wealth-creating connections can be made, won't allow you to become a member if you're driving a beat-up grey '78 Chevette with rust spots and wearing stuff from the bargain bin.

Many extravagances (lavish entertaining, for example) are, in fact, often economically valuable. They establish you in the community, without which oftentimes it's much more difficult to hear about opportunities. They signal to others that you're a high-status individual. They signal that you already are an economic success.

Posted by: burritoboy | Apr 2, 2007 4:40:21 PM

Constantine,

The thing about that family was in reading their quotes about their new ways, they really did sound like they had given up the fun in their lives for the pursuit of their financial goals. I just found it interesting because as a marketing piece both case studies fell relatively flat in their intended goal of trying to persuade me to invest more money with them. But the tone of the marketing piece was actually similar to the details in the Street's list, which was basically you will get ahead if you spend all your time (and save all your money) worrying about and studying your portfolio. Ignoring, of course, the fact that there is risk in any investment and being lucky is often as important as being smart (As anyone who was unluckly enough to retire in late 90s will tell you.). The only safe investments do require you to have a ton of money or a generous income.

We all know life is about choices, but in my experience I have found that for every friend who did things right and got ahead there was another who made the same sorts of moves and got burned. By the same token for every friend who was slacker, burnout, or ne'er-do-well and ended up with nothing, there was more than the fair share of those who scammed, coerce, and lied their ways to much more than even the best of my friends who played by the 'rules'! Meritocracy my ass!

Posted by: Ricky | Apr 2, 2007 4:45:35 PM

burritoboy, the spending habits of those profiled in "The Millionaire Next Door" say quite the opposite of what you are claiming.

The purpose of country clubs and the like is not to segregate by income and wealth, but rather by social class. At the time that Granovetter wrote, in 1974, Newton, MA was a middle-class/working-class small-sized city, not the upper-middle class suburb of $500k houses that it is today.

Posted by: Constantine | Apr 2, 2007 4:45:41 PM

Ricky, well, I didn't read the article myself, so I can't comment on it directly. However, plenty of families who, by dint of their actual income, rather than the amount they're saving, can't eat out all very often or take expensive vacations. I wouldn't like to think that because of this, the lives of the lower-middle class were soulless. Now, their habits seem a bit extreme to me, but if I knew a couple who lived like that because they couldn't afford to live otherwise, their lives can still be happy. Thus, so to could people who choose to live lifestyles far below the sorts of lifestyles they could live be happy.

Posted by: Constantine | Apr 2, 2007 4:50:44 PM

So what do you propose? A luck tax? a social skills tax? how exactly do you equitably compensate for things that are immensely difficult to define let alone measure?

Be honest, this is an ad hoc argument. You think inequality of wealth is inherently injust however it is arrived at, and think attempting to portray it as a conspiracy between the wealthy and the cosmos to screw the little guy out of their due makes it more appealing.

Posted by: the invisible pimp hand | Apr 2, 2007 5:05:37 PM

Your post brings up a new point, about social networks, that I did not consider before in the last post. There is inevitable truth in the "who knows you" department - I recently graduated from law school, and so much of what goes into employment decisions is networking - it helps tremendously to already know a few lawyers before entering law school.

But individual choices matter - you have to get into law school to begin with. And you have to choose that over getting your PhD in a social sciences. And you had to have decided to get into an undergraduate school beforehand. You have to care enough to get into school for that.

i.e., you do get to decide "who you know" to some extent.

It's very possible to "follow the rules" and still get hurt - I don't pretend there aren't cheaters, tricksters, and liars out there. But their presence doesn't mean the system is broken - we do need regulation and laws to make everyone follow the same rules. The fix isn't in.

The problem is the same problem we have with every other issue in the entire world, there's no room for a middle ground, because the only people who think/care about issues are on one extreme or the other.

Bravo to that.

DU

Posted by: The Mechanical Eye | Apr 2, 2007 5:06:06 PM

Many extravagances (lavish entertaining, for example) are, in fact, often economically valuable. They establish you in the community, without which oftentimes it's much more difficult to hear about opportunities. They signal to others that you're a high-status individual. They signal that you already are an economic success.

It's known as putting up a good front. Success attracts success, even when it's only the appearance of success. It's underlying principal that enables the Ponzis, Glenn W. Turners and Enrons of the world.

Lots of historical and anthropological precedents for this. Display has been a means of establishing status since before the first stone was laid in Sumer. High status breeds increased opportunity.

Not to speak for Ezra but I think folks who believe he's making too much of the wording need to take into account the fact that he is a journalist. For a journalist, the lede of an article isn't a throwaway. It's a promise that the writer makes to the reader. It states that "this is what you will learn about if you continue to read."

From this angle, the very least that can be said is that the author is a sloppy writer. Sloppy writing is usual indicative of sloppy thinking as well.

I wonder how many of the magazine's target audience read the article and simply accepted the howling inaccurancy of the lede?

Posted by: WB Reeves | Apr 2, 2007 5:22:47 PM

Ezra, go read The Fountainhead or Atlas Shrugged.

Posted by: Steven | Apr 2, 2007 5:40:55 PM

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