Talent is a Scarcer Resource than Wealth

Freddie deBoer takes a shot at Matt Yglesias for failing to appreciate the role his privileged background played in his success:

The last point gets to what some will call a personal attack, but which I think is actually entirely impersonal: he reminds me very much of other rich kids I’ve known who have never really learned how to act in a way that demonstrates self-awareness about their privileged upbringings. Were I the fortunate son of a millionaire screenwriter and novelist, growing up in the tony environs of the West Village, taking vacations at the family compound in Maine, attending the elite and ludicrously pricey Dalton School before stumbling along to Harvard, moving to an immediate position of influence and accomplishment as a blogger, breezing into stodgy elite media with The Atlantic, putting my feet up at the desk at the Center for American Progress, and now letting the wind blow me into outlandish success in crowdfunding

The Freddie vs. Yglesias spat goes back years and is seen in articles about NIMBY laws and zoning. Regarding the Dalton School, that was decades ago when Mr. Yglesias was a child; presumably, the tuition was much lower, not the $60k/year it is now. Did his upbringing confer some advantage, all other things being equal? Yes, but not nearly as much as Mr. deBoer assumes. Departing from his usual criticism of the ‘blank slate’, Freddie takes an uncharacteristically tabula rasa approach by putting too much weight on the role of environment, that being family wealth, over innate factors like talent or IQ.

In the post The incoherence of looking at the world through the lens of privilege, I argue that pundits and laypeople alike overestimate the role of family wealth or other privilege in explaining exceptional individual success, and erroneously discount innate factors like talent. The majority of kids from rich upbringings grow up to be duds even with every possible advantage:

Not to mention, the vast majority of rich kids even with every possible advantage still fail to amount to much, as discussed earlier. The odds of having rich parents and being successful are still really slim, because as it turns out, rich people are not that uncommon (as the Mensa example above shows).

Instead, wealth is a more abundant resource than talent; and second, the conversion rate of wealth into preeminence is surprisingly low. I give the example of how being a millionaire is five times more common than meeting the 132 IQ cutoff for Mensa:

There are 22 million millionaires in the US, or about 1/10 of the adult population. But this is five times more common than being smart enough to meet the cut off for Mensa, which is one-in-50 rarity in terms of IQ, or at least 132. Yet being a millionaire is still seen as less obtainable or more exclusive. Or in the context of social media, someone who flashes a ‘Lambo’ is more likely being honest than someone who claims to have an IQ of 145 (1 in 400 rarity), yet many default to the assumption that the car is rented.

And at the same time, the media is constantly putting out stories about how Americans are poor or indebted, so one may be inclined to underestimate just how many wealthy people there are in the US, which is a lot. According to a 2022 Federal Reserve consumer survey, the average net worth of U.S. households is a million dollars. But as far as the media is concerned, every year is the Dust Bowl or Oliver Twist:

In reality, contrary to the media, America is overflowing with rich people. Over the next 2 decades, as much as $90 trillion will passed from boomers to their children. As evidence of this, on Reddit there are many threads–with new ones created everyday–of seemingly ordinary young people happening into windfalls, particularly inheritances:

The rich tend to be covert or inconspicuous, hence the ‘The Millionaire Next Door‘ phenomenon. It’s not like the rich go around flashing their wealth, except for maybe a high-end Tesla, which does look much different from any other Tesla, and when they do discuss money online it’s always behind alt/anonymous accounts for additional privacy. When the rich splurge, it’s typically to either isolate from the masses (e.g. private schools, flying business class, vacation homes, stadium box seating) or for convenience, such as Uber Eats, which is surprisingly expensive if one makes a habit of using it for everything.

Conversely, intelligence is upsold and inflated. Online, it seems like 130+ IQ people are a dime a dozen. People regularly list their academic credentials in their Twitter or other social media bios, as if trying to impress total strangers or signal some sort of intellectual kinship with like-minded people. Yet how often does someone put their income in their bio? Never. It’s not that hard or uncommon for someone with only an above-average IQ to superficially pass for having a genius-level IQ. A lot of people are not nearly as smart as they let on.

But talent is harder to come by than wealth. Talent is more like a performance or routine, than a one-time thing like allocating capital and then doing nothing as the value appreciates, or inheriting a windfall. Similarly, buying a home and getting rich from the equity is not talent. As the number of millionaires keeps growing, it’s not like my reading list of bloggers or authors has grown in lockstep. There are five-hundred Fortune-500 CEOs, and a much larger rank of ‘C-suite’ executives, but only one Rogan, one Mr. Beast, one Andrew Huberman, etc. Erik Hoel calculated that being a successful author is as rare as becoming a billionaire; I believe him. The number of political pundits on Twitter who have large followings by my estimate is only around fifty individuals, including among them Matt Yglesias. [The distribution of followers is like a power law and drops off quickly.] But unlike CEOs, who come and go, the same names tend to stay relevant for a long time, perhaps forever. Even pundits who made major blunders, such as endorsing the Iraq War even long after it became a quagmire, still to this day somehow retain many readers and credibility.

Love or hate him, I posit Matt succeeded in large part because of his talent for writing (both long-form like his viral article about getting gastric bypass, but also his short-form Twitter ‘takes’) and standing out in an otherwise saturated field in which attention is becoming ever more scarce and writers have to compete not just against masses of ‘unpaid contributors’ but also now AI, as writers for Vice or Sports Illustrated can attest. Look at all the upper-middle-class people who attended elite schools who also aspire to be writers and join the ranks of the creative class; how many achieve even a fraction of the career and financial success as Mr. Yglasises has done?

Yes, it’s possible that Mr. Yglesias owes his success to luck instead of talent, but this still counters Freddie’s privileged upbringing argument. If wealth is what separates or delimits the successful from the unsuccessful, I would expect there to be way more than only fifty pundits who have the bulk of the followers and engagement. Who does not want a career of posting pithy opinions to Twitter, and the affirmation comes from the respect and feedback of other like-minded peers and readers. Or to be Substack millionaire like Matt Yglesias. I’m sure pundits 51-500 are as determined as the top 50, and their failure isn’t for a lack of money; a Twitter Premium subscription is only $8/month.

Freddie’s case is weakened furthermore when one considers that Mr. Yglesias’ privileged upbringing is more of an exception than the norm. The vast majority of successful bloggers and writers I follow came from much more modest or even disadvantaged backgrounds. Noah Smith for example was an obscure undergrad economist who happened to strike it big as a pundit in the early 2010s. Rob K. Henderson , according to his publisher, “…was born to a drug-addicted mother and a father he never met, ultimately shuttling between ten different foster homes in California.” Same for Matt Taibbi, whose parents separated when he was young. And still, despite his privilege, his famous dad, and attending Harvard and Dalton, it still took Mr. Yglesias 20 years to become as successful as is, having started blogging at Harvard in 2002; it was hardly overnight or handed to him on a platter.

This is not to dismiss the role of connections and wealth entirely. If you’re starting a business, few things beat getting a zero-interest loan from a rich family member, with no expectation of repayment and no credit or background check. Many ‘self-made’ millionaires and billionaires owe their success to uncredited family help. But this is less fruitful for intellectual endeavors, in that there is considerably more competition (the barriers to entry to short-form non-fiction writing are a lot lower than starting a restaurant) and raw talent takes precedent or priority over access to capital. In business, if you throw enough shit at the wall something will eventually stick. Many business biographies usually list a long string of failures until hitting it big.

This is typically not the case with intellectual endeavors; talent tends to manifest early, and those who have potential tend to demonstrate so early in life even if they are not yet famous. For example, Richard Feynman was a child prodigy who mastered calculus at 15; he didn’t in middle age decide he wanted to be among the greatest physicists of his era. Same for chess champions or math Olympiad winners, in which talent tends to manifest early in life and money does not seem to confer much, if any, of an advantage. Although exclusive private football and basketball schools exist, still, talent is the deciding factor for who makes it to the big leagues or not.

[The oft-repeated examples of famous authors’ manuscripts being rejected some large number of times (e.g. Frank Herbert’s Dune being rejected 23 times) does not prove that perseverance matters more than talent; the untalented ones get rejected 100% of the time. Given that publishing houses are inundated with far more manuscripts than they can ever hope to publish, high rejection rates are expected.]

Or, wealth is an independent variable if intellectual output is any good or not. More money won’t make bad writing better, or imbue an untalented person with talent. Unless a rich person also has name recognition, which the vast majority don’t, what business sense does it make for a publishing house or a magazine to publish subpar work just because the author is wealthy or comes from a wealthy family? Also, those elite, selective schools like Dalton and Harvard have high rejection rates among wealthy applicants already. And the fact that wealthy parents spend hundreds of thousands of dollars on admissions consulting and gifts in the hope of giving their dull kids an edge, however small, is further evidence that it’s talent that is lacking, not the ability to pay.