Pencil Pushers and The Miracle of Capitalism

Although I often rail against collectivism, an exception is collectivism in the context of a firm. The miracle of capitalism and comparative advantage is that it gives a high standard of living to otherwise mediocre people.

To go somewhat on a tangent, consider the somewhat grim prospects of self-publishing (indie) writing, a topic I have discussed here, here, and here.

Successful self-publishers will often extol the benefits of publishing on Amazon – higher royalty rates, no political biases, creative control, etc – glossing over the fact that traditional publishers offer two thing Amazon doesn’t: promotion and an advance, the latter which – contrary to all the doom and gloom about traditional publishing – can be quite big for debut authors. Guy like Vox will bemoan the political ‘bias’ in the publishing world (gatekeepers), and maybe he’s right, but if you go to Barnes and Noble, for example, you’ll see thousands of books spanning many genres and many publishing houses. I find it hard to believe that books with conservative themes are being systematically suppressed. I was at a Borders (this was before it shut down) and there was an entire shelf full of various conservative-themed books from Ann Coulter, Johnah Goldberg, Mark Levin, etc.

But the earnings for writers (both indie and traditional) are highly skewed, an extreme ‘winner-take-all’ distribution where the mean is substantially grater than the median. An example of such a distribution is the long-normal distribution. Half of self published-authors earn less than $500 a year and the mean is $10,000.

The skew for salaried income is less (a 2-1 ratio of mean vs median, vs. 20-1 in writing):

So in other words, your typical writer will make as much a third world worker…pretty bad. Like with regular jobs, there is likely a correlation with IQ, with smarter writers likely earning more than less intelligent ones. The smartest and savviest self-publishers are successfully able to build brands and sell thousands of books, making tens or even hundreds of thousands of dollars a year. Mike Cernovich, for example, sold 20,000 copies of his book Gorilla Mindset in eight months. With each copy costing $10 and Amazon taking 30%, the total take is $140,000. But there are probably other expenses, too, like cover design, editing, etc. So maybe we can extrapolate a total profit of $150,000 for the year, assuming additional sales for the remaining four months. According to the income percentile graph above, that puts him in the top 5% or the 95% percentile. Mike as well as Vox Day, who sold thousands of copies of Cuckservative and SJWs Always Lie), are unquestionably hugely successful authors who earn probably more than 99% or even 99.9% of writers – both traditional and indie. Mike himself says he earns more than 99% of writers.

But, as successful as the are, this isn’t a huge sum of money, relatively speaking, for the rarity of talent involved. Mike and Vox, as well as James Altucher and other writers, are among the top 1% or even .5% of IQ, skill, and talent compared to their peers. These people are at the very top of their game. But some no-name Microsoft pencil pusher, on the other hand, can make $100,000-200,000 a year. You’ve never heard of him, and his internet presence is probably invisible and he has 0 twitter followers, but he (as well as thousands of other pencil and paper pushers at other large corporations) make a lot of money despite being somewhat mediocre in talent and skill. The pencil pusher is in the top 70% of of his game (the top 1% guys make a million a year), not top 1%. Then you have regular workers, who are average (50% percent) in terms of IQ, skill, and talent – they make $20,000-$40,000 a year – which is the same as top 5% writers who also likely also have top 5% IQ and skill.

So what is the meaning of this. It comes down to the miracle of capitalism, and, more specifically, comparative advantage. A large, successful firm is able to generate so much economic value, as well as through comparative advantage extract value from people of varying skill levels and talents, that it is able to pay ordinary people a livable income, whereas ordinary people on their own would make far less ($500/year for the typical indie writer). These average, mediocre people should be grateful, not resentful to the ’1%’ who create so much economic value so they (mediocre people) can have jobs that pay a livable income.

Some say the US government is analogous to a giant corporation, in which case bureaucrats are vastly overpaid relative to skill and competence.

But with the ‘shrinking middle‘ and the rise of temp and gig jobs, the sun may be setting on the pencil pusher era. Consequentially, since 2008, profit margins for S&P 500 companies have surged, as management re-evaluates why they are paying mediocre employees high salaries. The result is lower real wages and a more competitive economic environment where individuals are more accountable for whether they succeed or fail, with talent and skill being paramount, which for better or worse, benefits smart, competent people and hurts those of middling intelligence who have just been riding the coattails and benevolence of the most productive.

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