The author Joan Williams, in an insightful article, explains that the working class is impressed by the rich, as role models. Michèle Lamont, the author of The Dignity of Working Men, whom she cites, did a systematic interview of blue collar Americans and found present a resentment of professionals but, unexpectedly, not of the rich.
It is safe to accept that the American public –actually all public –despise people who make a lot of money on a salary, or, rather, salarymen who make a lot of money. This is indeed generalized to other countries: a few years ago the Swiss, of all people almost voted a law capping salaries of managers . But the same Swiss hold rich entrepreneurs, and people who have derived their celebrity by other means, in some respect.[ii]
Taleb has a tendnecy to overgeneralize, and this is no exception. His assumptions are dubious because:
1. The ‘American public’ includes salaried individuals. Its like those on the 'left' who say they want unity but then attack the rich.
2. 60% of American workers are ‘white collar’, and hence typically earn a salary instead of a wage. So by Taleb’s logic that would mean a lot of workers despise their own success.
3. Again with the overgeneralizing. It is really ‘all’..did he literally poll every single person? The part about Michèle Lamont and Joan Williams of HBR is unconvincing, because Taleb doesn’t cite percentages or an actual study. Here is the Joan Williams HBR article: https://hbr.org/2016/11/what-so-many-people-dont-get-about-the-u-s-working-class:
Michèle Lamont, in The Dignity of Working Men, also found resentment of professionals — but not of the rich. “[I] can’t knock anyone for succeeding,” a laborer told her. “There’s a lot of people out there who are wealthy and I’m sure they worked darned hard for every cent they have,” chimed in a receiving clerk. Why the difference?
So Taleb links to an article that mentions a book, The Dignity of Working Men, which gives a single anecdotal example of supposed resentment, yet Taleb generalizes this to mean ‘all’. The rest of the Joan Williams article is about the 2016 election and Hillary.
4. Taleb refutes his own argument by mentioning the Swiss vote, writing “This is indeed generalized to other countries: a few years ago the Swiss, of all people almost voted a law capping salaries of managers.” If such a generalization were true, wouldn’t the vote have passed unanimously?
Here are the actual results of the vote:
Swiss voters on Sunday decisively rejected a proposal to cap “fat cat” pay, in a ground-breaking referendum on the issue.
Final results showed that votes against carried the day by 65.3% to 34.7% in favour. David Roth, the president of Switzerland’s Young Socialists and the referendum’s leading sponsor, said: “We’re disappointed [we] lost today.”
So in Taleb’s dislocated world, 35% = ‘all public’. Close enough. If he were in a university setting, such a misconstruction would be considered academic fraud. And it was socialists who backed the referendum, which goes against his thesis that capitalists supported the wage restrictions.
5. Many workers aspire to be promoted and to move up the ‘corporate ladder’ to become managers. Why else are there so many books, articles, websites, and seminars about getting raises and promotions?
In addition, someone without skin in the game –say a corporate executive with upside and no financial downside (the type to speak clearly in meetings) –is paid according to some metrics that do not necessarily reflect the health of the company; these (as we saw in Chapter x) he can manipulate, hide risks, get the bonus, then retire (or go to another company) and blame his successor for the subsequent results.
Execs are paid more because they have a bigger responsibility. Execs have skin in the game in the form of stock and stock options. Incompetence is the job of the board of directors to determine, with appropriate action taken if necessary. In some cases such as Enron and Wolrdcom, this fails, but such extensive fraud is uncommon, partially because of severe criminal penalties. Taleb wants to take this further by turning all executives into civil servants and having the government regulate compensation, which is what Obama tried to do in 2009 with the financial sector. He’s advocating a bigger regulatory role for the federal government but without explicitly saying so.
Continuing on, he writes:
You do not create dynamic equality just by raising the level of those at the bottom, but rather by making the rich rotate –or by forcing people to incur the possibility of creating an opening.
The way to make society more equal is by forcing (through skin in the game) the rich to be subjected to the risk of exiting from the one percent
Or, more mathematically
He subscribes to the belief in ‘finite wealth’, that in order for someone to become wealthy an existing wealthy person must lose his spot, which is one of the most common misconceptions held by people who are naive about economics. It never occurs to him that the total wealth can rise, as has been the trend forever, and hence more people can become wealthy. To borrow a hackneyed phrase, It's better to grow the pie than seek to make it equal.
Again, diversion and subterfuge. He wants rich people to forfeit or squander their money on stupid, risky endeavors in order to have ‘skin in the game’.
Also, where is the incentive to create personal wealth if such wealth is going to be squandered? One of the reasons people accumulate wealth is for peace of mind and stability for both themselves and their families.
Our condition here is stronger than mere income mobility. Mobility means that someone can become rich. The no absorbing barrier condition means that someone who is rich should never be certain to stay rich.
Wrong again. People are getting rich all the time, everyday. Of the Forbes 400 list, 70% are self-made:
Yet Forbes said that wealth in America has become far more meritocratic over time. It said that in 1984, “less than half of those on The Forbes 400 were self-made; today, 69 percent of the 400 created their own fortunes.”
Look at Facebook…in the past decade it has created many millionaires and some billionaires. One example is Jeffrey J. Rothschild, an early Facebook employee:
Rothschild started working for Facebook in 2005. He was the oldest person working for Facebook at the time. He became Facebook’s vice president of infrastructure software. In 2012, he owned 18 million Facebook shares.
In 2015, he was worth an estimated US$1.67 billion. He serves on the board of trust of his alma mater, Vanderbilt University. Rothschild is married, and he has three children. He resides in Palo Alto, California.
With recent successes of Uber, Snapchat, Airbnb, Whatsapp, and Tesla, stories like these are becoming increasingly common. Since 2002, the number of billionaires and total wealth has surged, thanks to the information technology industry and other factors:
For instance, only ten percent of the wealthiest five hundred American people or dynasties were so thirty years ago; more than sixty percent of those on the French list were heirs and a third of the richest Europeans were the richest centuries ago. In Florence, it was just revealed that things are really even worse: the same handful of families have kept the wealth for five centuries.[iii]
Large fortunes tend to dissolve, mainly due to marriage, business failure and mismanagement, divorce, and offspring, eroding the fortune over many generations. A family surname (such as Kennedy, Rockefeller, or Rothschild) may be collectively rich, but the wealth per person becomes very diluted as the family grows and splits over many generations. In fact, I don’t think there are any Kennedy, Rockefeller, or Rothschild decedents on the Forbes 400 list. The Waltons are the only familial clan on the list.
Again, it doesn’t matter if rich people remain rich, because total global wealth is growing, as well as rising standards of living.
Taleb is lauded as some sort of ‘genius’. On Twitter, he fortresses himself in esoteric philosophy and screenshots of advanced mathematics, creating an aura of intellectual impenetrability, but upon closer inspection, upon scratching off the veneer, is wrong, or at best head-scratching.