This seems to happen whenever there's (a) direct competition (b) the value provided by the winner is very scalable (media, sports, software) and (c) most importantly, it can't be substituted by splitting the job among more people.
So footballers follow this model because you can only have 11 people on the pitch - there's no amount of low-wage non-first-worlders you can replace Ronaldo with. Megastars follow this model; if you want to see Taylor Swift, that doesn't substitute cleanly with Ariana Grande or your local bar band.
And software engineers follow this to some extent because splitting problems up is in itself the difficult bit.
Maybe that works for Levandowski-level celebrity engineers. There are, maybe, a few thousand pro football players in the world, and a few hundred on the top teams. (For comparison, there are 450 players in the NBA.) The tech behemoths each have tens of thousands of employees, so most engineers are a commodity.
Software engineers follow for the same reason as footballers or doctors.
In football, there's only a market for the best. Nobody likes a loser.
It's the same in health. There's no market for mediocre or bad doctors.
Similarly, there's not really a market for software that doesn't work. Writing novel software that solves real problems isn't yet trivial. So there's not a huge market for bad software engineers. And there isn't yet a big enough supply of good ones to meet demand.
See why Google doesn't just lower their bar to hire more candidates. It wouldn't do them any good.
> Similarly, there's not really a market for software that doesn't work.
Not sure you and I are in the same market, friend.
Engineers and doctors are highly commoditized compared to professional athletes and celebrity entertainers. We produce a fundamentally fungible good.
If you can pay the market rate, you can find a replacement engineer to work your software. If Taylor Swift's concert is sold out, you cannot see Taylor Swift. If Aaron Rodgers dies, there are how many quarterbacks in the world capable of replacing him?
These are categorically different things with categorically different market dynamics. Approximately no software engineers (or doctors) have a personal brand, nor an objectively superior skillset.
This is quite confused reasoning. Sports are by definition zero sum games. There can only be one world champion etc.
No such mechanism exist for doctors or software engineers. They get rewarded for the value they create, and there can in principle be any number of them, as long as they create additional value.
The market valuation of unicorns also assumes there can be only one "world champion" in each market, with high margins. In the medium term either one of Uber or Lyft has to win or investors have to accept big writedowns.
(Doctors are different, they're not scalable and can only treat whoever's in front of them)
Few markets have a market for "bad" employees, surely? What matters in the tournament situation is that the number #2 employee isn't as good as the #1 employee, regardless of what absolute quality level we're talking about.
> Fwiw though, I think there's lots of room for the mediocre software engineer. Enough work requires little to no skill. I've done some of it myself b
Unlike janitors or checkout operators, software work can be outsourced. Outsourcing doesn't make sense for high-skill software engineering for two reasons. First, actually writing the code is only a small part of the job. And second, even when it comes to writing the code, there's still a real quality difference between top US candidates and top international candidates [1].
But software work that requires "little to no skill" is exactly the sort of thing you can successfully outsource.
> In football, there's only a market for the best. Nobody likes a loser.
Would totally disagree - given the number of football competitions [1], it is obvious that there's a market for anybody who wants to and can kick ball.
Same for software engineers - there are 23 millions of those in 2018 [2] and abundance of body shops, government jobs ("good enough for government work") and various engineering support functions says the opposite of what you're saying.
This is pretty muddled thinking. He talks about categorical variables and then points out that they are not normally distributed. Which doesn’t make sense. (It almost could, but he skips an important step.)
Apart from that it's mostly handwaving and opinion with no actual data. When you don't use data it's unsurprising that your personal experience matches your hypothesis.
Yes, he just chose a satisfactory cutoff for whatever counts as a "true" flagship. Some people would say only this generation iPhone. Some would say only this generation iPhone + Pixel + Galaxy. Some would say this generation, and the previous generation of iPhone + Pixel + Galaxy.
And even then, we're ignoring features like internal storage capacity for each phone.
Even if you are making $10 million a year, you split that between your yacht, your car, your mansion, and jewelry for the wifey.
You aren't going to have the biggest mega-yacht and no jewelry for the wifey, so there will be a tapering at the higher end of the demand curve for yachts for people making $10 million a year.
Yeah, I felt like there is perpetually a point the author is about to get but then just moves on to the next thought. Kind of frustrating to read, honestly.
>We can see, too, that these bifurcations are driven by a shift from a world of scarcity to a world of abundance.
To me all these bifurcations seem to me to stem from a change of a world of more evenly distributed wealth (for working, lower middle, and middle class) and one with wild inequality.
It's a world where a 10-20% can afford the "whatever" (e.g. best phone, live in NY/Bay area, university degree, etc) and the rest have to scrap by and increasingly pinch pennies (while still doing some desperate wealth-signalling purchases, like poor urban blacks that buy $200 sneakers to feel like they have something nice and can participate in the kind of society they see in ads).
Back in the 50s and up to the 80s a signle-income middle class household could still send a kid to college, buy a house, and so on. And living in NY or the Bay are was still very affordable (to the point that both areas had large artistic / bohemian communities living there, and not of the latte sipping urban wealth variety, but the penny pinching / stick it to the man / junky variety).
500 years ago, only 1-2% could afford "whatever" and the rest had to scrap by and pinch pennies. I'm not sure we're moving to a world of less evenly distributed wealth.
Only we're not beasts. Wealth is social and relative based on the era.
E.g. nobody feels like a champion as a unemployed homeless in LA, or a single mom making ends meet hand-to-mouth, just because 8000 years ago other people lived in caves, died at 30, and where often hunted by wild animals...
The change compared to not-so-distant decades, when a single-income middle class family had a job for life, could afford a house, and college education for their kids -- compared to living paycheck to paycheck is more relevant to whether we enter a world of more inequality, than what they did in the caves or the wild west.
Statins, anti-retrovirals, common availability of antibiotics, treatment for TB, vaccines for many population-decimating (in the traditional sense of the word) viruses.
Everyone has a super computer in their pocket, the vast majority of human knowledge is available in your hand for free all the time, you can video chat anyone you want anywhere in the world in HD for free, world-leading educators post hundreds of hours of video lectures online for free. You can get O(every song ever recorded) instantly anywhere you are for $10-$15/month.
In my opinion, what we're seeing is that things split into two categories: generally free or almost free, and expensive enough to be out of reach of most people. The thing that is really exciting is that things are moving from the latter to the former very quickly. The problem specifically with education is that expectations (everyone must have a degree!) Hasn't kept up with reality (degrees are no longer the only/best marker of skill!).
The real costs for most people in the US is artificial. Housing, internet, and healthcare in the US is 2-5 times what it is in most countries because of systemic corruption.
Consider, 15 minutes of a doctor’s time making 300k total compensation directly costs ~40$. Meaning your copay is often the actual cost of the services rendered and you need insurance to cover overhead.
> 15 minutes of a doctor’s time making 300k total compensation directly costs ~40$.
So the nurses, administrators, technicians, lawyers, accountants, janitors etc that are needed to allow that doctor to see you don't factor into that cost? I'm not saying the pricing of healthcare in the States makes sense, but neither does the argument you present.
I simply put an actual price tag on a doctors time. Dentists and Doctors both need receptionists, janitors, deal with insurance, and have an office etc. However, compare a few bills and a few different situations and some clear differences show up.
If you want an actual examples a famous one is the Medicare Prescription Drug Price Negotiation issue. Each individual little bit is not a big deal, but they compound with inefficiency growing at each step.
After a trillion dollar bailout on the real estate bubble (where banks propped house prices for more than a decade), and widespread studies of healthcare inflated prices you need "citations"?
It's like some bizarro world where to speak of something well established you also need to prove the universe exists all the way to modern history...
Things are also moving the other way at unprecedented speed - the expensive ones: housing, medical care, education. None of which is discussing the comparative inequality of the two periods.
Are you saying inequality is required for that list of innovations? If so, on what grounds?
We came up with contraceptive pills, eradication of polio, visited the moon, transformation of aviation and personal transportation, domestic appliances - including TVs, washing machines, dish washers went from unaffordable luxury to in every home. Doesn't seem like the pace of innovation has increased, just moved to a different field compared with the period of lowest US inequality. If anything it's slowed markedly.
So why didn't these innovations need inequality?
Nit: antibiotics were commonly available 60 years ago, they just weren't yet abused by stupid uses in agriculture.
>Additionally, yes, the US society in the 50s-80s was pretty egalitarian and full of opportunities — as long as you were white, male and heterosexual.
It was full of opportunities for all kinds of people, not just "white, male, and heterosexual". That's when the civil rights movement and the feminist movement flourished too and ensured the rights for women and blacks.
People born after some age seem to remember some bizarro version of history, when it was all oppression with no redeeming qualities, and if you were a woman or black etc you were as good as dead. People think we made some huge strides in the 00s, probably because they have no experience of the 60s to 90s. That main strides have been done for gay/lesbian rights (and even those were increasingly more permissible after the 70s and the sexual revolution).
Though all of the above are beyond the point. As if to have those other things (affordable housing, college and healthcare) that the 50s-80s enjoyed, you need to also have racism and sexism... How does that compute?
Not that it's required, but it's the effect of progress. Individual progress requires focus. With these new options being available every single day, those that have scarce resources have more and more problems with optimising the for their best outcome.
On a poker table, one that has more chips, has advantage over one that has less. Doesn't make it unfair.
>Statins, anti-retrovirals, common availability of antibiotics, treatment for TB, vaccines for many population-decimating (in the traditional sense of the word) viruses.
Those are technological innovations, not really relevant.
We could have had smartphones and anti-retrovirals AND affordable education/housing/healthcare/job prospects.
Like how people in the 50s and 60s could enjoy all kinds of technological and social innovations compared to 100 years before (electricity, TV, improved medicine, vaccines, etc) AND have cheap college tuition, affordable housing, etc.
Spare some catastrophe technology is monotonically increase -- it advances with new inventions.
So not really relevant as to whether we are more or worse off than the 50s and 60s in economic aspects.
You don't think what you get for your money is important in a discussion of economic advancement? It sounds like you decided on an answer, then went looking for a question which fits it.
> We could have had smartphones and anti-retrovirals AND affordable education/housing/healthcare/job prospects.
How can you possibly know that's true? Where are these example economies that have US-level innovation but also has the wealth distribution you crave.
>You don't think what you get for your money is important in a discussion of economic advancement?
No, I think technical progress is not important in a discussion of economic advancement. The economy can go up and down, but technical progress only goes forward (spare some catastrophe).
Even in the Great Depression or WWII, technology advanced just fine.
>How can you possibly know that's true? Where are these example economies that have US-level innovation but also has the wealth distribution you crave.
US had US-level innovation AND that "wealth distribution I crave" in the 50s-70s.
USSR was run by a party elite, devastated with millions dead/imprisoned in their purges, devastated with millions of dead in WWII, and starting from an agrarian economic base much behind the US of the time (1917) to begin with.
Without those aspects (but keeping equality more or less same, e.g. like Swedish style democratic socialism) it could be a very different story.
It's not like inequality produced them. If anything, today with rampant inequality we have far fewer innovations (and the US has far worse infrastructure, roads, etc) than in the golden post-war era up to the 90s.
I think a better comparison is East and West Germany.
You might also want to revisit your assumption that the US in 1917 wasn't an agrarian economy, given that the majority of Americans worked on farms between the World Wars.
Also, Baku (joined the USSR into 1920) produced over half the world's oil at that time.
Sweden had a very good run during the USSR time period. Especially post war until the ~90s. Somewhat ironically partly because we wanted to be more [0], and less [1], like the US.
[0] “In the end, all such authoritarian measures were dismissed by the Commission, which instead went with Sundbärg's goal of bringing the best sides of America to Sweden (unsurprisingly, as Sundbärg himself wrote the conclusions). First on his list of urgent reforms were universal male suffrage, better housing, general economic development, and a broader popular education which could counteract ‘class and caste differences.’” https://en.m.wikipedia.org/wiki/Swedish_Emigration_Commissio...
[1] “Always a dedicated traveler, Mr. Palme after graduation hitch-hiked around the United States for four months, visiting 34 states on a $300 shoestring budget that took him into pockets of poverty in a land of plenty. It was a shocking experience for the young aristocrat. He recalled having seen 'how poor some people were in the world's richest land.' The advanture marked a turning point in his life, and the comment was virtually a theme for what was to become the socialist ideology of his political life.” https://www.nytimes.com/1986/03/01/obituaries/olof-palme-ari...
You can surely search for 3+ decades of books, studies, and articles on the declining US middle class, stagnant wages, increased housing/college/healthcare costs, etc, right?
Isn't it funny how when you ask for citations, the other person flips out and says do it yourself? Like, I have to spend my time figuring out if you actually did research or pulled something out of your ass? Sorry bro, got better things to do with my time than your work for you.
In 1980 median house price in SF was $200k. Median US household income was $17k. So it wasn’t exactly affordable and of course the Bay Area is much more appealing now so it makes sense that relative prices have risen.
In Manhattan rent in 1980 was around $1200 for a one bedroom, so it’s not even significantly different.
"Average rents may have been pretty high, but crime rates were high and many parts of New York were more than gritty. As such, there were a lot of cheap places to live, especially Downtown and in Brooklyn. The Lower East Side offered a lot of options for the $300 price range; June 1982 ads show a Ludlow Street studio and a two-room East 2nd Street apartment (in a "well kept locked building") both for $275. For a real bargain, one could rent a four-room unit at 332 East 4th Street for $295. Across the river, a "charm 4 rms" on a "beaut blk" near BAM was listed for $325, while units in a Williamsburg walk-up were asking $275 to $325."
But it does seem to me that rentals in Manhattan have gotten a lot less affordable since 1980. (Manhattan in the 80s was not a particularly posh place, at least not throughout. There was probably more divergence in rents between neighborhoods in the 80s than now). It would take some more specific investigation than national median wages to investigate that. (Note, though, the median income in Manhattan specifically may have outpaced inflation as lower-earners get priced out).
But, as far as inflation and wages, yeah, inflation year after year means salaries in the 80s seem like very low numbers to us now.
> To me all these bifurcations seem to me to stem from a change of a world of more evenly distributed wealth (for working, lower middle, and middle class) and one with wild inequality.
> Back in the 50s and up to the 80s a single-income middle class household could still send a kid to college, buy a house, and so on.
Is the right word inequality? There aren't less college places, houses in NY/the Bay, etc in the world than there were in the 80s. By extension, the problem is not enough new wealth creation rather than inequality.
I'm open to being wrong, but at a guess there aren't all that many rich people who consume more than 2 degrees, live in 2 houses, etc. There are those that do, but they are relatively rare. Mostly they just get first pick from the existing stock, except in housing where they buy but then rent out in my experience, so it isn't exactly removing stock from general availability. If the rich disappeared tomorrow, would that free up enough resources that the poor could all have "whatever"?
I've no answer, but rhetorically I doubt it. The rich physically can't consume that many resources in absolute terms.
The resource they consume is wealth. It's disingenuous to claim that a wealthy person does not consume more resources. Houses are a particularly poor example.
A wealthy person may have a 2. 5 million mansion and a quarter million dollar vacation home and own 3 rental homes.
They may trivially capture some of the resources available for others housing by buying up the housing supply and renting for more than the cost of the mortgage while fighting to maximize the value of investment by limiting the supply of new housing.
With 40% of their neighbors paying rent to people like them and some living on the street it's hard not to qualify the situation as unequal.
> They may trivially capture some of the resources available for others housing by buying up the housing supply and renting for more than the cost of the mortgage while fighting to maximize the value of investment by limiting the supply of new housing.
You're focusing on accounting, which is fine and all, but there are two scenarios here:
(1) There are 10 houses, 10 people live in them. Everyone owns their own house.
(2) There are 10 houses. 10 people live in them. All the houses are owned by 1 person. 9 people rent.
From an inequality perspective, obviously one scenario here is grossly less equal than the other. From a what-is-phyiscally-happening perspective, these situations are roughly identical.
The $2.5 million mansion you mention is potentially a nice house that is the same physical size as a $700k house in the country. My point here is although the situation may be grossly unequal, but part of the issue here is what actual, physical resources do we want the rich not to be using?
Eg, do we want to take away vacation homes from people and subdivide it into government housing? How much stock does that create? Is that going to solve housing affordability in, say, SF?
This isn't me being disingenous, I'm just genuinely curious why people think inequality is the problem since I personally favor that wealth creation is being strangled by hostile political forces.
Inequality is a problem; it is a symptom of things going badly wrong. But that doesn't mean that reducing inequality cures the disease - it is easy to reduce inequality by forcing everyone to have nothing. We all want to reduce inequality be creating more wealth. Houses, stuff, fun experiences, etc, etc. Is that possible? Is redistribution a valid route? Maybe. It does work sometimes.
When you find yourself proving that 2 + 2 = 17 this is your cue to examine the chain of logic that got you there.
The idea that one person can own everything and everyone is equally well off as if they all owned equal shares is wrong on its face.
In practice in an environment that isn't deeply unequal the landlord creates value by investing capital in maintaining housing stocks that renters may lack or not want to invest. They trade both current money and foregone future wealth for increased flexibility and predictable costs.
In an increasingly unequal one renters have no options because nearly 100% of the value they create for society is captured by others including the landlord or go to pay for their increasingly lackluster survival. In many cases they may end up creating less total value for society and themselves because they can't invest the time and money to maximize their own value.
Your 9 renters example is too small in scale. Back in reality some portion are pushed onto the street, some live substantially poorer lives, families barely see one another because one party or both is gone 60-70 hours per week, people die sooner due to substandard health care, people don't go back to school because they can't work 60 hours to support their family AND go to school. People don't take chances that would improve themselves because they can barely afford to live now. They live in the ghetto because that's all they can afford.
Having an increasing share of the wealth means trivially mathematically that others have less. Only for the upper middle class does that mean they have just as nice a house in a less desirable neighborhood.
Meanwhile in reality in the last several decades 25% more than previously, people take a look at life ahead of them and put a gun in their mouth,forego going to the doctor and end up dying of an infected tooth, or ration their insulin and wind up dead.
> The idea that one person can own everything and everyone is equally well off as if they all owned equal shares is wrong on its face.
You say that, but it your counter is also obviously wrong. It would be trivial to have a system where everyone owns equal shares of everything - dissolve private property rights and nationalise. On the face of it that isn't a bad idea but when it is tried it fails spectacularly. I'm not aware of any surviving examples where equal ownership has worked without becoming hopelessly corrupted.
So in practice we know that some level of inequality which, if dropped below, does result in everyone being worse off.
As an interesting aside, ~90% of Canada is owned by the Crown [0]. It isn't obvious that this inequality is their biggest problem w.r.t. living standards.
> Back in reality some portion are pushed onto the street ... and end up dying
Yeah all that stuff does sound awful, but you are not going to the meat of what I was asking. Assuming we aren't creating new wealth (because that would be something that could be done now) then the wealthy will have to give something up so that the poor can gain. What is it? If wealthy people stop going on holidays then retrain the hotel receptionists as doctors? Are wealthy people taking more hours of doctor time than they need and so we make them live with shorter appointments?
I don't believe the wealthy are using enough raw resources for to make a difference; there'd need to be a massive redeployment and upskilling program training new people to have higher skills. That isn't obviously an equality issue, it might be an education problem or related to government healthcare policy.
> Only for the upper middle class does that mean they have just as nice a house in a less desirable neighborhood.
You haven't changed the number or quality of the houses, so you're basically suggesting the middle class and the poor swap houses. If the poor persons prior home wasn't an acceptable dwelling, why would it be acceptable to put a middle class family in it? Is there something wrong with the poor persons house? Is the issue that the wealthy are using too much building material so the poor can't do home repairs?
> Can you really not conceive of anything that could be done to decrease inequality less than literally swapping houses?
I can think of lots of ways to decrease inequality.
> Money is an abstract store of value so that we don't have to trade goats and houses.
Yes.
> I suggest we tax the rich to fund a better social safety net, education, and free medical care for all Americans.
That is cool and all, but talking hypothetically what if we doubled everyone's real wealth & income? That'd more than double the tax take and the poor would have more to start with to boot.
So that would be a big improvement for everyone even though inequality would have risen some ungodly amount.
Why would the rise in inequality in such a scenario be bad? The list of things you have here is of phenomenon of absolute amounts of resources. Inequality is a phenomenon of relative amounts.
:P That does seem unlikely. It is a thought experiment to illustrate that whatever the problem is it is not the inequality per se. Which is why I'm asking questions along the lines of "What is the problem here, and why do people think it is wealth inequality?". I think the problem is a lack of resource provision for the poor.
Protip: No amount of wealth creation will ever trickle down to the poor people.
We can increase equality by providing free national health care and a social safety net that would allow people to take time off and retrain along with educational opportunities.
Turns out that this works better than giving handouts to the rich.
Is the right word inequality? There aren't less college places, houses in NY/the Bay, etc in the world than there were in the 80s. By extension, the problem is not enough new wealth creation rather than inequality.
Yes, the right word to describe this bifurcation is inequality. It's correct to note that the absolute number of available housing and students going to university are up, but relatively compared, people are finding harder to do both because the number of available spots has grown slower than population growth.
At first glance, this may seem like an issue with not enough wealth creation: why are there not more houses and universities being built? But when you look at productivity versus income [1], the issue is with the unequal capture of wealth not with its creation.
In that regard, the mid-20th century is an anomaly in human history.
Which is not to say we shouldn't aspire to such a relatively even income/wealth distribution. However, the political will for progressive taxation - which facilitated that level of equality - has been on the wane since the 70's. Possibly related to the extreme American economic dominance in the Post-WWII era, which we shouldn't expect to ever see again.
Well, middle class now is closer to working class precariousness, than before, so it's not exactly that "every pair of points is further apart than it used to be".
Nearly every line of that budget screams "luxury", with the exception of two things:
1. The skyrocketing cost of college really does create enormous problems. I'm assuming the family profiled are either doctors or lawyers, because otherwise those $32K/yr payments would only last for a few years at most. (I paid $40K/yr in loans for both my wife and I when I got my first real job, but that happened exactly once... and we weren't buying BMWs or Land Rovers while we were doing it.)
2. Pensions, which have largely eroded away in the private sector, were enormously valuable. The switch from pensions to 401(K)s without a significant corresponding increase in pay is one of the most significant ways in which the real value of take-home pay has declined in the past 30 years.
But everything else could be cut in half, probably without even noticing:
1. $42K/yr on childcare is au pair/"elite" preschool money.
2. $5,000/mo mortgage is pretty high, even for a family of four in a high CoL area.
3. Three vacations a year @ $6,000 a pop. I take more than three vacations a year, but most of them are closer to $500 for a family of 4 (camping/backpacking). The expensive ones never get higher than $3,000. There's "getting away from work for a while" and then there's "flying a family of 4 to Paris a few times a year". The former is not a "luxury" especially for a high stress job, but the latter definitely is.
4. Luxury cars. For $10K they could buy a perfectly functional new car (which would last 10 years) every year. The only way that these are not "luxuries" is if they're required for work.
5. $3K on clothing per year, every year. That's high even for someone who has to dress nicely for work. Yes, nice suits are expensive, but they also last a long time. And your kids definitely don't need "meetings with high value clients" clothing.
6. $1K/mo on "children's lessons". I know how this happens, because I charged up to $100/hr for private tutoring while in grad school. But it's entirely unnecessary. It really is OK for your kid to get a B in an AP course. And if they need $100/hr quality tutoring for every course they're taking, the real world is going to be a rude experience. Also, $1K/mo on "children's lessons" while the kids are also young enough to need childcare is absolutely insane.
In NYC, these fees are necessary if you want to get your child into a "good" public middle and high school. The alternative is to pay $50K/year for private school. So #6 is a valid strategy to cut costs via attending public school--the very opposite of "luxury".
Yes. Plenty of perfectly accessible public schools are good even though they're not nearly the best.
Again, access to the elite educational institutions in the country with most of the elite educational institutions in the world is... a luxury good.
Also, as someone who tutored those kids, IMO you're not doing them any favors in the long. If you have to work for a living, then at some point way before "the best public schools in NYC, $50K/yr private schools, or bust", grit >> prep. That sort of prep also has the effect of disabusing them of a clear-headed understanding of their own limitations; which, again, can be a really terrible thing for them in the long.
> 2. $5,000/mo mortgage is pretty high, even for a family of four in a high CoL area.
I'll take you task on this one, as a crummy 3 BR apartment in Manhattan is north of $2MM. Interest alone on that is $6700/mo. And I've personally seen number of dispiriting 3 BR's listed for $3MM.
You don't have to live in Manhattan to work in Manhattan. Or at the very least, if you value your walkable commute that much, then why the hell do you need $10K/yr in luxury car expenses?
Also, you can recoup up to $3K of that $5K mortgage by cutting the other luxury goods in the budget.
I guess the point is: any one item on this list might be justifiable. At the very least, each on its own is a totally reasonable luxury to indulge in after decades of not just hard but also smart and stressful work. But the budget, taken as a whole, is hard to describe with any word other than "luxurious".
> Or at the very least, if you value your walkable commute that much, then why the hell do you need $10K/yr in luxury car expenses?
Have you ever tried to carry one or more toddler car seats to a rental agent? Even The Rock would balk at that task.
In any event, I appreciate all your counterpoints, but I'd prefer to hear counterpoints from current/former Manhattan parents than a logician without on the ground experience.
But Manhattan is not, I would say, what one should take as an example of "a high CoL area." As I understand things, it, along with Silicon Valley, are the highest-cost-of-living areas in the country, by a significant margin.
Mid-tier cities give a lot of bang for your buck -- Salt Lake, Phoenix, the midwestern midsized cities (Cleveland, St. Louis, Indianapolis, Kansas City, Pittsburgh), Atlanta, etc. Even Portland compared to other coastal options.
And even in some of the "very expensive" housing markets, you can still find homes that are affordable relative to income within 40 minutes of downtown areas. Chicago and Boston both come to mind.
The primary differences, as far as I can tell, are that:
1) Niche senior positions are harder to find in cheaper cities (think "deep hard tech expertise"). For example, nearly all of the major corporate research labs in CS (MSR, Google Brain, Google Research, IBM Research, Oracle Labs, ...) are in or around expensive CoL areas. On the startup side, "hard tech" startups are very often more capital-intensive so are even more attracted to geographic VC bubbles.
2) Moving up within BigCos is sometimes more difficult if you're in a satellite office.
Google, Amazon and Microsoft don't have any sort of engineering presence in Utah. Though Adobe is majorly expanding here. And operationally, Facebook is adding a huge data center.
Cheap housing exists in areas of low-to-negative growth. As in, those who got out did and those who can get out will in order to find better jobs and a higher quality of life.
True, but unless you are a doctor, high wage jobs are few and far between in cheap cost of living areas. Perhaps, that's why they are cheap to live in. :)
> Back in the 50s and up to the 80s a signle-income middle class household could still send a kid to college, buy a house, and so on. And living in NY or the Bay are was still very affordable (to the point that both areas had large artistic / bohemian communities living there, and not of the latte sipping urban wealth variety, but the penny pinching / stick it to the man / junky variety).
Houses are very affordable in almost every part of the country. Buying a home is really not that difficult.
One reason people could afford to live in NYC in the 80s is that it was a dystopian murderous hellhole. Watch this trailer for the 1981 move Escape From New York for a taste: https://www.youtube.com/watch?v=ckvDo2JHB7o
While NYC certainly had a street crime problem then, video from a fictional sci-fi movie where New York is converted to a lawless prison island for criminals is a remarkably poor way to support your argument.
> Back in the 50s and up to the 80s a signle-income middle class household could still send a kid to college, buy a house, and so on.
In the US. Meanwhile much of the rest of the world was mired in communism, which created incredible poverty and misery. After the 80-ties when it was finally overthrown for the most part, those billions of people start competing on equal ground with the US, which equalizes the global situation a bit.
This is about income, and not wealth. Most of these middle-class US families in the 50-ties through 80-ties that you mentioned had very little wealth, and only managed to build it up (via paying off mortgage, saving for retirement) over decades of work and solid income. Now, there's less opportunities for solid income in the US, as they've become more equally spread across the globe.
>In the US. Meanwhile much of the rest of the world was mired in communism, which created incredible poverty and misery.
Depends on where of the world.
Most of the rest of the world in the 50s (aside from eastern Europe, USSR and China) was anything but communist.
And even the communist (socialist) parts, where not really about some "incredible poverty" (e.g. in places like Yugoslavia, Czechoslovakia, and so on, just substandard middle/working class existence. Everybody there could get a job, healthcare, college education, and a house, for one.
India was also communist. Just India and China alone is already something like 40% of world population. USSR + Eastern/Central Europe is another 400+ million people. There were also many communist countries in Africa and Asia.
As for the standard of living, I know the realities of communist Poland:
- The "everybody could get a house" is complete falsehood, at least for Poland. In fact, almost no one lived in a house - people lived in small, overcrowded flats (2 rooms for a family of 6, 1 room for a family of 4 were not uncommon), and even getting those shitty flats in drab housing projects required serious sacrifices and often years of waiting in the queue.
- As for higher education, only around 15% of population attended university, and not for the lack of wanting - it was clear that far from anyone could go.
- Healthcare was bad, but probably on par with the general underdevelopment of the country.
- Throught the fifties, people worked 28 days a month - yep, they only had a couple of Sundays off and that was it. The salary they got for such exertion was barely enough to cover rudimentary living expenses. My grandmother had to take a loan to buy a winter coat (to not freeze, not because it was pretty), and she paid that loan off over months. Over time, the living conditions gradually improved, but even in the eighties it was mandatory to work every second Saturday IIRC.
- What's probably most important and probably unimaginable for some who did not live under communism, were that obtaining just basic consumer goods was a challenge at times. Tens of millions of people at times stood for hours every day after work just to buy toilet paper or meat. It was an unimaginable waste of human time and energy.
India as a whole has never been communist, although the Gandhi-inspired self-reliance/import substitution/License Raj era definitely did cripple the economy in similar ways.
Many "communist" countries in Africa and the Middle East were so mostly on paper and they flipped allegiances regularly based on whether the US or the Soviets were offering better carrots.
> It's a world where a 10-20% can afford the "whatever" (e.g. best phone, live in NY/Bay area, university degree, etc) and the rest have to scrap by and increasingly pinch pennies (while still doing some desperate wealth-signalling purchases, like poor urban blacks that buy $200 sneakers to feel like they have something nice and can participate in the kind of society they see in ads).
I don't see why "poor urban blacks" buying $200 sneakers is a "desperate wealth-singalling purchase". Maybe they just like them. I don't see how its any different that the 10-20% buying the "best phone" when it provides no greater utility than a cheaper model.
> And living in NY or the Bay are was still very affordable (to the point that both areas had large artistic / bohemian communities living there, and not of the latte sipping urban wealth variety, but the penny pinching / stick it to the man / junky variety).
I would think as neighborhoods become safer and more gentrified, the number of people that want to live there increases and naturally the price to live there increases as well. Comparing crime ridden NYC from 50 years ago to NYC today makes no sense.
>I don't see why "poor urban blacks" buying $200 sneakers is a "desperate wealth-singalling purchase". Maybe they just like them.
According to economists Banerjee & Duflo: “The poor are skeptical about their supposed opportunities, and the possibility of any radical change in their lives…Therefore, they focus on the here and now, on living their lives as pleasantly as possible, and on celebrating when the occasion demands it.”
>I don't see how its any different that the 10-20% buying the "best phone" when it provides no greater utility than a cheaper model.*
The difference is that for the 10% that is an insignificant amount, and they still can cover their more basic needs with aplenty left anyway.
> I don't see why "poor urban blacks" buying $200 sneakers is a "desperate wealth-singalling purchase".
Far too often sending the right kind of signal is a required prerequisite[1] to e.g. being granted access to a job that might eventually become a better-than-minimum-wage career. Often wealth isn't the intended signal; it's a presentation of having accepted and converted to a group's culture or beliefs.
"-Normal distributions come from multifactorial situations, where many variables matter.
-In a world governed by scarcity, our decisions and preferences tend to be multifactorial in nature.
-In a world governed by abundance, on the other hand, our decisions are no longer multifactorial. They tend to be dominated by one factor above all others: either X matters to you, or it doesn’t."
I'm more curious as to _why_ our decisions become dominated by one factor as we approach abundance. It almost seems counter-intuitive: in a world of abundance, wouldn't there be more things we could afford to care about? In a world of scarcity, wouldn't your decision be based mostly by just "does it do what I want it to do"?
Maybe we're just lazy. Maybe it's the other way around: in a world of abundance, we can _afford_ to be _lazy_ and not care about nearly as much, and instead focus on singular values.
In either case, I'm not convinced that decision distribution is a function of scarcity/abundance, but rather some other factor, of which scarcity/abundance contributes to.
In a world of scarcity, wouldn't your decision be based mostly by just "does it do what I want it to do"?
Yes but also "can I afford it?", "is it available?", "will it be shipped on time and to my address", etc. When you reach real abundance and everything is at your fingertips, the only factor that matters is whether you want it.
> I'm more curious as to _why_ our decisions become dominated by one factor as we approach abundance.
I would speculate that it comes down to the availability of too many different "classes" of products and services, which are often self-exclusive. There is only so much time in a day to consume a limited amount of these products and services. People's time and attention span is the limiting factor.
Let's say that you are in the market for entertaining yourself in some way. You can entertain yourself by riding on a rollercoaster, by watching movies, by driving a sportscar, by hiking, by doing photography. There is too much choice, and you eventually pick only one or two of these activities and they eventually become your "favourites". You become addicted, you prefer buying only high-end, specialised equipment, and you skew the market of that product accordingly.
In a world of abundance where you can (by definition) do whatever you want, you will need to prioritize the things that you want to do vs not. There is simply not enough time to do everything so there is less "weighing" of decisions.
> Chances are good that if you’re in the market for a smartphone, you fall into one of two very clear cut categories. Either: a. you’ve decided that your new phone is a very important item in your life, so you’re going to buy the nicest phone available at whatever price. (Usually this means an iPhone, although some flagship Android phones qualify for this category.) Or, b. you’ve decided that just about every phone out there is ‘good enough’ and is more than adequate for your needs, so you’ll go with whatever one costs $0 with your existing wireless contract.
He doesn't provide any figure, he just says things and consider them to be true.
I don't think it is true. Just a cursory google search suggests that the market, at least globally, is a lot flatter and is likely flattening. Not everyone has an iPhone or Samsung. [0]
Similarly, those large cities he lists (LA, New York and San Fran) have relatively low population growth, at 0.67%, 0.25% and 1% respectively [1]. Large cities like Phoenix, and Austin have around 2% growth.
This makes more sense to me. As these cities become crowded and expensive, people will naturally look for a better deal.
These types of articles are just lazy. The author doesn't even seem to bother doing basic research.
Yes, it's just a wrong intuition sold as fact. Millenials have increasingly started to buy larger cars and moved from the big cities to the sunbelt and the suburbs.
It’s worth noting that it’s unclear whether or not this is a generational preference for the suburbs, or rather a result of a lack of suburban-equivalent amenities for families like safe parks, good, not-overcrowded schools, and available daycare options. Not to mention a lack of housing at the 2+ bedroom size.
It’s still a reversal of the ‘60s and ‘70s where the cities were being abandoned wholesale.
>The idea that everyone will be riding around in shared cars and live in the LA megalopolis is a tech industry fantasy.
It's also nowhere near anything TFA says.
What he says is that where people want to live is not very gaussianly (normal) distributed, but there is a peak for major urban centers (LA, NY, SF), and a large plateau of smaller places.
>I don't think it is true. Just a cursory google search suggests that the market, at least globally, is a lot flatter and is likely flattening. Not everyone has an iPhone or Samsung.
He doesn't say that "everyone has an iPhone or Samsung". Quite the opposite. That there's a large flat base of sub-300 phones, and a 10% (or more, depending on country) of people with high end (say over $800 phones), and not much in between.
> That there's a large flat base of sub-300 phones
No, actually he doesn't say that. He says that people who don't care about their phone will take one for $0, any phone:
> Or, b. you’ve decided that just about every phone out there is ‘good enough’ and is more than adequate for your needs, so you’ll go with whatever one costs $0 with your existing wireless contract.
People buy many different phones (including high-end Android phones, and second-hand iPhones); the reality he describes doesn't seem to exist.
Also, including people who don't care about Taylor Swift in a study of the value of Taylor Swift concert tickets' value, is absurd: that some people (or even most people) don't want something, doesn't have anything to do with the price of goods. What matters is who wants it and how hard they want it.
Some people like Taylor Swift a lot, some like her a little, some like to go to concerts, some like to go out, some are looking for a place to bring a date, etc. etc. The author's binary division is completely artificial.
You can see all between price points, but not all have equal peaks -- it's a larger "cheapo" and a smaller but significant "expensivo" segment that dominate, that's the author's point (whether it's true or not).
He doesn't say that there are absolutely no cases that fall in between, just that the distribution of them is not normal, but bifurcated to those two extremes.
You’re looking at 1% population growth, but much higher real estate growth costs. Looking at real estate demand is probably a better way to measure demand in cities since it’s so hard to build new homes these days.
That's not even vaguely true. I don't get the supposed dichotomy between giant $1000+ slabs of glass and plastic junk.
A few years ago, a friend gave me his old mid-level Samsung phone for free. It was a piece of garbage, and I hated using it, but I put up with it until it died. Afterwards, I looked around for something decent that wasn't too expensive, and settled on a refurbished iPhone SE. It cost a couple hundred dollars, and still works just fine. It doesn't have all of the latest bells and whistles, but it's good enough, and actually fits in my pocket.
IIRC it is true, but it's a quirk of the phone market. People either go for the the flagship or for an economy phone, but it's a weird quirk of the mobile market (since most people assume that the cheapest phones are basically as good as midrange phones, or that they're better off with a cheaper phone and more frequent upgrades, so there's no middle).
Cars are different. Not everyone buys a Porsche or a Kia.
The vanishing middle is actually happening in many, many markets IMO. You can either get cheap plastic junk or overpriced glam. MacBook Pro or Chromebook. The high quality, no frills, moderate price product- it's gone from most markets.
Cars are perhaps one of the few exceptions, maybe due to sheer price setting hard limits on the high end and basic safety setting limits on the low end.
And, indeed, Apple's pricing strategy (selling old phones on discount, having multiple versions of the flagship, e.g. "Max" and other) suggests they're trying to hit a broad section of the demand curve.
The author almost stumbles on the answer to his question when he shows the height distribution. It’s bimodal, because men and women have different average heights. Similarly, flagship and lower-tier phone buyers will display distributions in what they’re willing to pay. If you combine two separate normal distributions you can always make a claim that a single distribution is no longer normal. But that doesn’t make it an interesting insight on its face.
It's not similar to height distribution. At the population statistics level, human height is bimodal because humans either have a Y chromosome or they don't. What is the equivalent binary variable for the phone market?
I suspect there are (at least) two populations of phone buyers: those who see it as a cool gadget with the latest technology, and those who just want a device to browse the web, take some pictures, and play some games. The former upgrade every year or two to the best phone they can afford; the latter are happy paying a few hundred bucks or less when their old phone breaks or no longer holds a charge.
The interesting part about IPhones in particular is that they are status symbols. I've seen plenty of working class folks, especially women, flaunting IPhones.
I'm sure part of the reason is that since most carriers (and Apple itself) will finance the phone cheaply, so the practical difference between the cheapest and most expensive phone is $30 a month.
One phenomenon in the "concert ticket" space is that promoters have discovered a way to dynamically price tickets. So you'll pay the concert promoter $1000 to sit front and center.
So instead of all floor tickets being $100, there are some floor tickets that are worth way, way more than others. Even "row 1" tickets up in the 3rd deck are more than row 2 tickets in the same section now.
Ticket pricing has evolved to maximize profits at the source. The value of the tickets is very close to their retail price.
So if you ask "how much would you pay for Taylor Swift tickets", the answer is "depends on what row".
His paragraph about jobs is spot on. I've seen this in my own workplace on a team that is 75% contractors and 25% full time employees. Contractors are seen as completely replaceable, and if one leaves they'll be replaced with another one after a quick round of interviews. However, if a full time employee leaves, the process to replace them seems to take much longer as it appears that those doing the hiring are looking for The Superstar. I'm not sure how to fix this, or if it's even possible to fix.
I think people could argue that even years ago many workplaces have been sort of bifurcated between people that would be "first to fire" and those that were "integral", but these days it appears that its become more institutionalized by the use of the contractor and full time employee classes -- I would say generally not a great trend.. seems better to at least allow the illusion to people that are initially considered as less important to have a chance to become more important within the company..
You’re touching on something that may affect these companies medium/long term.
The fact that there’s a class divide among workers now naturally selects out many workers that otherwise might be incentivized to create more wealth for the company. This could have long term consequences in industries that formerly relied on innovation.
In any industry where good employees are in high demand (like tech) this strategy has the unfortunate effect of filtering out most individuals who are both good employees and experienced. None of the really good software engineers I know would accept this arrangement unless the contracting wages were a ridiculous multiplier of their normal salary.
Really? Because I wouldn't accept a normal salary unless it was 20% higher than my contracting rates. Because I go through my own company I get to minimize my taxes so much that regular employment seems like a ripoff by comparison.
First, for a number of positions, salary can make up less than 70% of total compensation. Things like healthcare, stock options, bonuses, PTO, etc. are worth quite a lot of money. To make up for that you need a good multiplier on salary.
Second, unemployment benefits and the possibility of severance offer increased stability that many find both useful and comforting, this is another multiplier on the salary number.
Third, and I think most importantly, the person I'm responding is looking at contractors who want to be employees. We can even set aside the fact that such people, in my experience, rarely set up corporations are do the research to find the tax savings you achieve (kudos on that). If you're an in-demand professional there are people who will hire you on terms you like. Every really good software developer I know with over 4 years of experience never spends more than a couple weeks on the market and are flooded with offers, why bother with some contracting "test" when they could have a good job today? The people I'm acquainted with would only subject themselves to that for giant gobs of money.
When I was contracting I would always get an offer towards the end of my contracts. I never accepted as I enjoyed the clearer supplier/customer relationship you get with contracting. Most of my peers refused because it rarely made financial sense.
Yes, same with me. Sometimes I would accept. And sometimes I would not.
Sometimes this conversation happened during the original job interview. "Would you consider going full time ever?" Good to have that conversation sometimes.
This is what should happen, but doesn't. It could be that this is specific to my company, but it's quite rare that this actually happens. There are people who have been contractors for 10+ years.
Lots of things follow a Pareto distribution (which is what the author is describing). This is the default distribution for anything that relies on network effects and competes in a market with limited availability.
Famously, word usage follows this pattern (Zipf's law). But other things such as wealth accumulation, product usage, celebrity fame, upvotes on Reddit, etc all have this distribution. It's not possible for every person to read every post, evaluate every possible drink, or watch every movie, so they settle on one of the most immediately available options. So they drink a Coke while watching The Avengers and upvote the top-rated comment on Reddit about it.
I would predict things tend toward the bi distribution the article talks about during market lulls and that competition rather than abundance creates the gaussian distribution. In the example of smartphones given, there hasn't been the same rapid progress as there was between each generation even a few years ago. So most middle of the road smartphones are all fairly comparable. That said, if someone wanted to take the energy and time to find the best available of this mid tier I'm sure they could, it's just the majority seeking the middle of the road find the average of this tier good enough. If any revolutionary comes out again soon I would guess there would be an immediate gaussian distribution again
I like the idea but it seems the author is just slicing the normal distribution at a point of interest and calling it bifurcated? e.g. with the phone example. "good enough android" or "iphone / flagship android" all the actual phone models are hidden under two higher level labels. Isn't every decision making process with buying essentially try to get the best for your money?
If this author's conjectures are correct (and I think there's some truth to them), my honest response is not care about anything. Because I'm not willing to be price gouged. If I know that something priced at the top end for the sake of it, I won't pay. I don't need to care about Taylor Swift that much. I don't need the latest smartphone.
This doesn't work with everything; for example, I could need access to health care. But for the vast majority of non life-or-death purchases, I'll opt-out.
I don't think I agree with the rationale: the bifurcation is more likely based in economics. Niche appeal at 10x the cost might be more profitable that reasonably priced, mass appeal products. E.g., when it comes to things like Taylor Swift tickets. I'm unwilling to spend a few hundred dollars to see her. These live performances are for people who are.
Not everyone is an expert in statistics. But there were many other interesting points beyond the statistical in the article, like the implication of this phenomena on our economy.
This seems to happen whenever there's (a) direct competition (b) the value provided by the winner is very scalable (media, sports, software) and (c) most importantly, it can't be substituted by splitting the job among more people.
So footballers follow this model because you can only have 11 people on the pitch - there's no amount of low-wage non-first-worlders you can replace Ronaldo with. Megastars follow this model; if you want to see Taylor Swift, that doesn't substitute cleanly with Ariana Grande or your local bar band.
And software engineers follow this to some extent because splitting problems up is in itself the difficult bit.