Death, Taxes, and Three Other Inevitable Things

Life guarantees:

1. Talent will cluster around tiny groups of people because people like associating with winners, so success snowballs.

Joshua Bell is one of the top violinists in the world. He sells out auditorium concerts, and if you can find a ticket, congrats, they can be several hundred dollars each.

In 2007 Bell did an experiment. He played his violin in a D.C. metro station, like a starving artist begging for change. He didn’t advertise who he was, and wore a baseball hat to stay incognito.

Eleven hundred people passed Bell playing his violin. Only seven stopped to listen. No one cared.

Not every metro rider appreciates classical music. But those who do don’t just want to hear a good violinist. They want to hear Joshua Bell. Remove the name recognition and the actual music is infinitely less notable. The same thing happens with books. J.K. Rowling once published a book under a pseudonym, and it barely sold. After it was revealed that she was the author it instantly went from 4,709th on Amazon’s bestseller list to number three.

Equal talent does not get equal recognition because customers, employers, and fans like associating with known winners. And being known as a winner is not the same thing as being talented.

Two things cause this.

One is that winning opens doors, so perceived talent creates greater opportunities for actual talent. The best athletes get the best coaches; the best investors get the most patient capital.

Another is that the perception of winning makes it easier for people to check the boxes necessary to value your worth. Sociologist Duncan Watts once wrote:

People almost never make decisions independently — in part because the world abounds with so many choices that we have little hope of ever finding what we want on our own; in part because we are never really sure what we want anyway; and in part because what we often want is not so much to experience the “best” of everything as it is to experience the same things as other people and thereby also experience the benefits of sharing.

You can believe in meritocracy, and you should. But you should also believe in the Matthew Effect, which is the idea that success tends to snowball independent of skill because perceived talent can be more advantageous than objective talent.

What it means in practice is that success clusters around a small group of people – not because only a few people are talented, but because a few people’s success snowballs into something incredible independent of their relative skill. It will always be that way, and there’s not much we can do about it. It’s just one of those things that is, like death and taxes.

2. The boom-bust cycle will never go away, because most people capable of driving growth don’t have the kind of personality that can quit while they’re ahead.

What kind of person makes their way to the top of a successful company?

Someone who is determined, optimistic, doesn’t take “no” for an answer, and is relentlessly confident in their own abilities.

What kind of person is likely to go overboard, bite off more than they can chew, and discount risks that are blindingly obvious to others?

Someone who is determined, optimistic, doesn’t take “no” for an answer, and is relentlessly confident in their own abilities.

Part of the reason the boom-bust cycle occurs is because the same traits needed to propel huge growth are the same traits that cause collapse.

The book Super Pumped chronicles the rise and fall of Uber founder Travis Kalanick. Early in its existence Uber was slapped with a cease and desist order from San Francisco, arguing it was an illegal cab company. The city said Uber would be fined $5,000 per day it continued to operate, and each of its employees could be jailed for 90 days if it didn’t stop operations that afternoon.

Here’s what happened next:

Graves was scared. “What are we supposed to do here?” he said aloud, reading his name on a piece of paper that said he could be going to jail … Geidt, just a few months out of college, stood quiet and nervous, too. This was her first foray into the professional world. Now she was looking at jail time.

Kalanick didn’t miss a beat. “We ignore it,” he said to the room.

The others looked at Kalanick like he had grown horns. “What do you mean ‘ignore it?’” asked Graves.

“We ignore it,” Kalanick replied.

Uber was staying open for business.

Of course this attitude helped Uber grow big. And of course it also led to Kalanick’s downfall. They’re one and the same.

That’s how boom-bust works. Bold leaders will rise to the top, with the brashest rising fastest. Employees and investors gravitate toward bold, and boldness creates the fastest growth in the shortest time. But boldness rarely knows how to tone it down, because it’s so foreign to the personality that brought success. So the kind of person who rises to the top keeps pushing until they’re forced to stop, which is often when they go over a cliff and can’t come back.

Managers at all levels do this. The kind of person who says “I’m just going to push a little and then retreat before we’ve reached out potential” is not the kind of person likely to gain much authority in a capitalistic economy.

Booms and busts will never go away because people capable of causing a boom rise to the top and keep rising until they cause a bust. It’s always been that way, and always will be. As inevitable as death and taxes.

3. There are social problems that will never be solved, because they evolve and adapt to solutions.

Hard science can permanently solve problems. In 1902 we couldn’t fly. Now we can because we found the solution, and that solution will be as valid 1,000 years from now as it is today.

Social problems – everything from relationships to the stock market – are different. Social solutions have shelf lives, limited applicability, and affect people differently.

Say you have an investing strategy that works. Doesn’t matter what it is. It will always have two caveats that limit its importance. One, a strategy can be right for you and disastrous for someone with different goals and risk tolerances. So “solution” will always be in the eye of the beholder, with no objective measure of success. Two, markets adapt, trends fade, companies evolve, and competition feats on previous advantages. So solutions come and go. And the game of investing is never solved.

Or take wealth inequality, probably the most pressing social issue today. There’s a long history of power swinging between labor and capital. Each cycle is driven by policies designed to help the losing side eventually going too far, because no social group benefiting from policies will say, “OK, that’s enough, we don’t need any more help.” A new imbalance emerges enriching the old losers. Then the new losers say, “This isn’t fair, it’s time for new policies,” and the cycle repeats. It doesn’t matter whether you think this is good or bad. It’s just what’s happened. And it’ll keep happening, meaning we’ll never solve the wealth inequality issue.

Every solution to a social trend is, at best, like the flu vaccine. It can be effective in a given period of time. But it has to be constantly updated, because the virus it’s protecting against evolves and adapts.

Few problem-solvers want to admit that. It’s neither easy or intuitive to let go of a good idea whose time has passed. So we’ll always be debating problems and chasing new answers, despite our desire to think we’ve found a solution. As certain as death and taxes.