A final trend that promotes income inequality is that more Americans may be engaging in a kind of gambling behavior in their choice of occupation. They are increasingly choosing to play in winners-take-most tournaments, such as the contest to build the leading Internet search engine. For every Sergey Brin, there were thousands of software engineers who played in the search-engine contest and lost.
As best-selling writer and investor Nassim Nicholas Taleb points out in The Black Swan, safe occupations are those where the worker is paid a fixed amount per unit of time. An accountant or a nurse is not going to become extremely rich or extremely poor; they could be called “billers,” because they bill for their time. On the other hand, a professional singer or a software entrepreneur is playing in a winners-take-most tournament. The difference in talent between an international pop star and an unknown lounge singer may actually be quite small. However, the nature of these fields is that the difference in rewards can be enormous. People who choose these sorts of occupations could be called “players.”
Winners-take-most tournaments widen the distribution of income. First, they create a gap between the winning players and ordinary billers. Sergey Brin could have earned a nice salary writing software for Microsoft or for Bank of America, but that would not have made him a billionaire.
Second, winners-take-most tournaments lure people from the security of earning salaries as billers. People who quit their day jobs—or graduates who delay taking one—to “pursue their dream” often end up on the lower end of the income distribution, at least until they “sell out” and join the working drudges. Of course, some of them actually succeed in escaping the cubicle world. Back in the 1990s, one of us (Kling) did just that by leaving a stable job as a biller at a large financial services firm and founding a start-up technology business.
Several factors have made it a lot easier to quit as a biller in order to take a fling at being a player. The Internet is one. As writer Daniel Pink has noted, the low cost of creating a business on the Web has fulfilled Karl Marx’s dream—an ordinary worker can now own the means of production.
What’s more, technological progress is most likely speeding up, leading to more of what Joseph Schumpeter called “creative destruction.” Many jobs destroyed in a modern economy are for billers, which force them to change and in some cases prompts them to try their hand at entrepreneurial, player-type enterprises.
Lots of the opportunities created during this dynamic process are for players. We are seeing greater numbers of successful players, and the biggest winners, like Sergey Brin, are taking in larger rewards than ever.
The supply of players also may be increasing. The change in marital patterns can facilitate this. With fewer households dependent on a single income, it is possible for one spouse to try being a player, while the other spouse remains a biller. The country’s relative level of wealth and the sheer size of its middle class also play a role. In today’s America both parents may remain billers, but their recent college graduate may become a player, knowing that the parents can provide support until the gamble pays off or the humbled child takes a regular job. A few generations ago, entertaining such a thought was a luxury as many parents needed their child to take a stable job to support their retirement.
