
Make elites compete: Why the 1% earn so much and what to do about it - walterbell
http://www.brookings.edu/blogs/social-mobility-memos/posts/2016/03/25-make-elites-compete-why-one-percent-earn-so-much-rothwell
======
Snargorf
The analysis is broken by the focus on the top 1%. They should be looking at
the top 0.1%, or smaller.

It's absurd to put together hedge fund managers making $30 million a year with
the established doctor who works two blocks from your house making $250k.
These are entirely different phenomena.

You can see it by the section where they realize, shockingly, that the most
common workplace among the 1% is the doctor's office. Well, duh. That's what
makes it so clear that the 1% is much too broad of a target.

When people (innumerately) rage against the 1%, they're not thinking of real
estate agents and local doctors and lawyers and dentists and university or
hospital administrators. But that's who the 1% is.

~~~
alayne
You have to be worth something like $8 million to be in the top 1% in the U.S.
by net worth. I don't think that includes most dentists.

~~~
jedberg
This report is about top 1% of income, not wealth.

To be in the top 1% nationally, you had to have earned $383,000 in 2015.

In some cities that number is as low as $175K, very doable for a doctor or
dentist.

~~~
sokoloff
That $383K is very likely a household income (or tax return AGI, which is a
close proxy for household) figure, not an individual income figure.

~~~
jedberg
Yes, it's household income, not individual.

------
exabrial
Instead of complaing about what others have and I don't, I like to remember
that my dogs eat better food than the majority of the world and I poop into
cleaner water than the rest of the world drinks.

I give my money away to the Ronald McDonald house and my time free to the
Lords Dinner, a local organization the provides free meals to anyone.

Im not better than anyone else, theres a lot more I could do. But I realized a
long time ago its not the .1% thats the problem, its the 99.9% of us that do
nothing. That starbucks you have in the morning would go a long way overseas
towards education.

~~~
crdb
> my dogs eat better food than the majority of the world

This immediately reminded me of Viktor Belenko [1] who flew his MiG-25 to
Japan and defected. He wrote (I think, in his autobiography, it could have
been an interview) of the amazement that dawned upon him when he entered a
Western supermarket for the first time.

edit: found it.

"Once I bought a can which said "dinner." I cooked it with potatoes, onions,
and garlic-it was delicious. Next morning my friends ask me, "Viktor, did you
buy a cat?" It was a can of chicken-based cat food. But it was delicious! It
was better than canned food for people in Russia today. And I did test it.
Last year I brought four people from Russia for commercial project, and I set
them up. I bought nibble sized human food. I installed a pâté, and it was cat
food. I put it on crackers. And they did consume it, and they liked it. So the
taste has not changed." [2]

[1]
[https://en.wikipedia.org/wiki/Viktor_Belenko](https://en.wikipedia.org/wiki/Viktor_Belenko)

[2]
[http://www.videofact.com/english/defectors2_4en.html](http://www.videofact.com/english/defectors2_4en.html)

~~~
jessaustin
I grew up in and have lived mostly in USA, but I've never understood canned
pet food. Pets will eat anything you feed them, eventually. Why _choose_ to
feed them something expensive and wasteful?

~~~
liveoneggs
why not just eat your pet, then everyone wins

------
themgt
This is essentially what's known as "rentier capitalism", but the Brookings
paper unsurprisingly limits its scope mainly to the medical and legal fields.

The much deeper problem is the degree to which much of "the system" itself is
captured by these sorts of dynamics. Look at the amount many large companies
and wealthy individuals spend on political lobbying of myriad forms. We're
talking countless billions of dollars.

Money, power and connections are used at every level of government, from local
to state to federal to subtly and not-so-subtly tilt the pinball machine in
far too many and complex ways to attempt to enumerate, but anyone who has been
in or near the workings of power understands intimately how this works.

One salient point for me is witnessing similar phenomena in other countries to
a varying degree, down to e.g. official government border guards, law
enforcement and civil service officials in some countries who openly shake
people down for bribes to perform their normal duties, either expeditiously or
at all.

So my takeaway is, this sort of subtle corruption is endemic and impossible to
completely end in any human society, but nonetheless the _degree_ and
_character_ of the corruption vary hugely from country to country, and the US
seems relatively unique in the "first world" in allowing this corruption to
grossly undermine basic foundations of modern western democracy to the point
people are getting ready to grab the pitchforks.

One of the main things elites and intellectuals took away from the rise of
fascism and communism in the 1930s/cold war period was the need for democracy,
no matter how corrupt and sold out, to provide some sort of floor beneath
which it would not allow its citizens to fall, and some sense of forward
progress and shared success, even if not equally shared ... a sense of we're-
all-in-this-togetherness. This is the principle that both political parties in
the US have now effectively abandoned, rhetoric aside, and the consequences
are unfolding before our eyes.

~~~
natrius
_> this sort of subtle corruption is endemic and impossible to completely end
in any human society_

You're correct that democracy will always be captured by money. In a very real
sense, our political system isn't democracy. It is capitalism.

The only way to prevent this is to stop trying to enforce so many rules with
centralized democracies and move to a decentralized enforcement mechanism
instead. Individuals act in their own perceived interests, so if individuals
enforced our rules instead, you'd have to pay _everyone_ to look the other
way, which is a perfectly acceptable outcome.

So what is a decentralized enforcement mechanism? Trade. When people spend
money, they're trading access to everyone's work. You and I give that money
its value, and as individuals, we can take that value away from people who
break the rules. We can stop accepting money that was traded by people who
broke our rules.

You and I have the power to restore democracy by punishing the people who use
their wealth to manipulate our democracy.

~~~
ubernostrum
This works great until someone who comes in with a lot of money hires a bunch
of these individuals to enforce their will on others.

~~~
natrius
If money is used in ways you find harmful, don't accept that money. People
trade access to your work to wield power, and you can withdraw consent for
them to do so by rejecting that money. If people think money is being used for
bad, they can stop it. Free people control the influence of money on their
world.

~~~
ubernostrum
_Free people control the influence of money on their world._

Those free people will last all of about five minutes against an organized
armed force raised up by someone who doesn't care about idealism but does come
in at the beginning of your system with plenty of resources.

Sitting around the campfire singing songs about the dignity of trading labor
for money is incompatible with reality.

~~~
natrius
Resources are an illusion that requires your consent to maintain. That armed
force is getting paid with money that people have to agree to accept for it to
be worth anything. Alternatively, that armed force could enslave the people at
gunpoint, but that's pretty hard to sustain in the vast majority of the world.

This might sound crazy, but we just haven't had the technology to implement
this sort of system until recently. It requires a decentralized ledger of all
payments, which is a pretty new thing. Now that we have it, you can decide to
only accept money that has been traded by people who follow your rules. If the
people choose to do so, they can make it impossible to be subjugated by money.

My email's in my profile. Open to talking about this any time. I know it
sounds crazy, but I truly believe that this new capability we have can be used
to liberate people.

~~~
ubernostrum
If you could wipe out all of human history up till now and start over fresh
with a completely clean slate, then _maybe_. The problem is that there's
already an unbalanced system in which there are people who control vast
resources and are able to use that control to bribe or coerce others into
doing what they prefer, which causes your scheme to be dead on arrival.

~~~
natrius
The people overthrew kings, and they were up against the same imbalance of
power. I think it's going to be even easier this time. Potential loyalists
will be able to see those who would bribe them lose buying power as the people
declare that they won't accept any money they've touched. The playing field is
actually lopsided in the people's favor. They just need to be told and given
the tools to use their power.

Wealth is a social construct, and we now have the technology to modify that
social construct without anyone's permission. If we wield it carefully, we
might be able to build a better society with this power.

------
jnordwick
Taxing capital is about the worst, most destructive tax policy you can have.

1- Capital is the main driver of productivity, and productivity is the only
long-term way to increase the standard of living.

2- Capital is very mobile. Static analysis of taxation doesn't just fail, it
fails miserably. It can move offshore. It can be structured so that its gains
are realized in years or ways that avoid taxes.

3- Taxes on capital affect everybody, not just who they are intended to
affect. If you want to tax those with very high incomes, directly tax those
with very high incomes. Remember, ALL taxes are paid for by people by
definition. A corporation doesn't really pay taxes, but shareholders take a
hit in the form of a lower stock price and lower dividends, employees take a
hit in lower pay, the jobless who would have worked there aren't hired, the
suppliers take a hit in less production, and the customers take a hit in
higher prices. Most people hurt are those that aren't the 1%.

The US has one of the highest marginal tax rates on capital, and it has only
exasperated the problem because capital is what improves the lives of those at
the bottom. Tax it, and the wealthy will find ways to shield themselves, but
those who can't afford sophisticated tax strategies will be hurt the most.

STOP TAXING CAPITAL. The single best thing the US could do to raise the
standard of living for everybody is to entirely eliminate all corporate and
capital gains taxes. They collect so little money for the damage they do, and
when you count in the cost of enforcement, they barely pull in their cost.

~~~
m0th87
How do you then prevent a regressive tax policy, given capital is almost the
exclusive form of wealth accretion for the 1%?

~~~
jnordwick
Let's say you could double the wealth of everybody in the country in 20 years,
but the top 1% (or 0.1% or choose your most hated percentile) would have their
wealth in crease 10x. I don't really see wealth accretion as a problem.

If that incredibly wealthy person goes and spends his money ostentatiously --
basically why we generally hate the rich in the first place because of the
social stratification caused by them have bigger and better things -- then a
sales tax with luxury tax or high profile items would quickly bring them back
into the category of those most taxed.

If that incredibly wealth person didn't spend a lot of money and lived well
below his means, then why do we care? He is basically producing for free for
the rest of use to consume. If he invests his money or just puts it in a bank
account, he is helping to increase capital formation and drive society
forward. Even if he just burns his money or buries it, he is basically giving
everybody else in the world more purchasing power -- and in this case he
literally is working for free. I never understood this who argument about the
rich sitting on their money: it means they are working without consuming and
that means they really aren't being paid.

Income taxes are okay to an extent too. But they are just so much more
difficult to get right. Defining income is difficult, and some people have
very volatile income streams earning $200k one year and $50k the next. Should
they really be taxes more (and a great deal more) than the guy who make $125
in two years? A sales tax or VAT is just easier from an implementation point
of view. And there is nothing stopping you from excluding items like food and
medical bills and nothing stopping luxury taxes either.

~~~
usrusr
> If that incredibly wealthy person didn't spend a lot of money and lived well
> below his means, then why do we care?

Because wealth is many different things. Too the poor, wealth is food. This
can be increased, within reasonable limits. Too the middle class, wealth is
access to inherently limited resources, like properties with a non-atrocious
commute. Too the rich, wealth is power and that, by nature, happens at the
expense of others. Capital accretion is power accretion, even more so when the
rich lives like a monk. And the power you give one person is freedom you take
from another. Once they have used their power to own all nice spots of land
and use the food to run their boats and jets on "green" fuel, it turns out
that all the supposed wealth you have given the lower classes was just money.

Taxing capital suddenly looks dead easy when you compare it to taxing power.

~~~
stale2002
Dollars are just green pieces of paper.... If you don't actually use those
green pieces of paper for anything then they remain green pieces of paper.
There is no shortage of dollars. The government can create more of them
whenever it wants, if it feels like the wealthy are hoarding them

------
11thEarlOfMar
Part of the argument here is that the top 1% has access to investment classes
that have high yields and and which are not available to the remaining 99%.

There is one obvious, government mandated reason that the 99% don't have
access to high-yielding investments such as hedge funds: Investors in these
funds are required to be accredited investors. This means they must be already
wealthy _by law_. For example, while researching I've found a hedge fund that
makes small business loans and yields 11% with no risk to capital. But in
order to invest, one must be accredited, which means they have $1,000,000 of
net worth outside of their home equity, or, have earned at least $200,000
household income in each of the last 2 years, or, have earned at least
$300,000 last year. So by law, the 99% (I am using that term somewhat loosely
here) is not legally permitted to take advantage of high-yielding
opportunities.

Thanks to the Web and Internet tech in general, opportunities are becoming
available. For a $2,500 minimum, any investor can put money into peer lending
and earn >10%.

But I believe what really separates the 1% from the 99% is financial knowledge
more than anything else. It's actually a pretty involved effort for the
majority of the population to become wealthy. Involved in that there is a lot
that needs to be understood about earning, budgeting, saving and investing.
That knowledge then needs to be applied for the long term (decades), and then
one must hope that there is no divorce, illness or major college bills that
can derail a well-run effort.

~~~
lquist
" I've found a hedge fund that makes small business loans and yields 11% with
no risk to capital. "

A down market will show you what kind of losses make that kind of return
possible in an up market.

~~~
riggins
BTW if you could really earn 11% with no risk of principal loss ... Just
borrow as much as you can and collect the interest spread ...

~~~
Slothrop99
To get that loan, you actually need the money that would make you an
"accredited investor"?

------
heisenbit
It is worth considering the source: Brookings.

When looking on the increasing difference between the 0.1% and the rest the
author makes the observation that the latter can't participate as accredited
investors in some schemes. Everyone laughed about Bernakes helicopter money
idea. However right now helicopters are circling the casinos where only the
0.1% have access. The solution is not to let everyone in. Maybe also the
copters are running out of fuel. It is worth noting that a lot of hedge funds
are getting clobbered these days and it is tempting to look for retail
investors to take and hold the bag.

Lots of data in the article showing the differences between different branches
of labor. Then an argument that unions increase pay differences. All correct.
But ignoring the elephant in the room the "pay" difference between labor and
capital. Regulation (like blanket leveling of price/labor in WWII), unions,
merit based access to education and hard limits like death/estate tax are
forces that help to restore a level playing field between labor and capital
where everyone competes.

Capital enables investment and we need capital accumulation and probably on
broader scale. Part of that capital needs to be accumulated from labor through
saving and ingenuity. Inequality between jobs, industries and maybe even tax
can be healthy. It provides signals collected by many looking to better
themselves and others. Capital breeding capital and being increasingly the
only source for investment means one sided and less effective steering of
investments. It is not surprising growth slows when the Gini index becomes
larger.

~~~
JanezStupar
> It is not surprising growth slows when the Gini index becomes larger.

Are you sure you are not mistaking correlation for causation here?

------
barrkel
This is an analysis of top 1% wage earners, not top 1% capital owners; and
besides, it's not really the top 1% where it gets egregious; more like the top
0.1%. The analysis of returns to capital doesn't seem to include capital
appreciation itself, and how it is taxed much more favourably than labour.

~~~
RyanZAG
> capital appreciation itself, and how it is taxed much more favourably than
> labour.

This is very much on purpose. Capital is extremely mobile and not part of a
market transaction, while most labor is immobile and constrained as a market
transaction.

It is easy to take tax from a labor market transaction, and this tax is borne
just as much by the capital employing the labor as by the labor itself. Taking
tax from capital appreciation is far more difficult - if you put your capital
tax too high, the capital just moves to a different market with better
dynamics.

Of course if you go overboard with your labor regulation and tax, then other
labor markets are able to out compete your own labor market, and that is even
worse.

Basically: you don't have free reign to decide on these labor and capital
taxes and regulations. Any policy change you make is going to have
consequences. You can't just say "OK, we will just double capital tax! Money
for all!" and not face extreme changes in your entire base.

I'm in South Africa and watching this unfold as the socialist government
continues to raise capital taxes each year, and now faces enormous foreign
capital flight and lack of investment in the economy, destroying GDP growth
and pushing the more vulnerable parts of the population out of jobs and into
extreme debt and poverty. Believe me, you don't want that in USA just to get
rid of some mythical '1% problem' that hurts your sensitivities.

~~~
wycx
<i>Capital is extremely mobile and not part of a market transaction, while
most labor is immobile and constrained as a market transaction.</i>

It does not have to be. The neo-feudalists have relentlessly advanced an
agenda of removing capital controls since the early 1970s. If you look at
modern, rich, mixed industrial economies that have emerged since WW2, they did
it with very strict capital controls in place during the period they nurtured
their infant industries. At one time in South Korea the highest penalty for
violating capital controls was the death penalty!

------
fsaneq2
It's an interesting article, but how exactly is "skill" measured for things
like [1]? I couldn't find a description of this in the article or the linked
paper (that I skimmed).

Furthermore, how does this account for personal preference for less dangerous
jobs for example? I'd much rather be a waiter than a coal miner, even though
you could say both require the same/no skill.

Pay is only one of many different aspects of compensation (a more
dangerous/stressful job will likely pay more even if it requires the same
skill; many teaching jobs have a lot of vacation which you might value more
than a pay increase, and so on).

[1]: [http://www.brookings.edu/~/media/Blogs/social-mobility-
memos...](http://www.brookings.edu/~/media/Blogs/social-mobility-
memos/2016/03/25-make-elites-compete-why-one-percent-earn-so-much-
rothwell/Rothwell-32516002.png?la=en)

------
ebbv
The article basically has two points:

Point 1) If we loosen regulations on mutual funds to allow them to behave like
hedge funds (borrow more aggressively against their capital) then more of the
99% will get higher returns on their investments.

2) If we loosen regulations on medical and law professions to allow people
with less training to offer more services, then more people will have better
paying jobs and people will save money.

Let's address Point 1 first; most of the 99% don't have investment accounts of
any kind. Most of those that do have only retirement accounts. This
deregulation isn't likely to create much increase in wealth for the 99%, but
it does present a great increase in risk. Allowing mutual funds to borrow more
against their capital can lead to another 2008-esque meltdown, only this time
instead of mortgages it will be retirement accounts that collapse. Lovely.

Now for Point 2; again it's about risk versus reward. There may indeed be
services that nurse practitioners could offer, or legal technicians instead of
actual lawyers, that they currently cannot offer. But it's a matter of where
you draw the line, who do you trust to draw that line? And are we sure that
that this isn't just a short term gain?

A large reason nurse practitioners are cheaper than doctors is that they don't
need the same extremely expensive malpractice insurance that doctors do. But
if they start providing more services, then they might and your cost savings
go away.

And in both of these fields in particular, there's a reason you have doctors
go through such thorough training before they start providing medical advice,
or a lawyer does before providing legal advice; because the cost of fuck ups
can be enormous. If nurse practitioners start writing prescriptions and their
lack of training leads to bad mixes of medication the malpractice suit would
come immediately.

Regardless, both of these suggestions are mere drops in the bucket compared to
the vast gap in increased earnings between the 99% and the top 1% (or worse
0.1%), and in no way would create meaningful impacts on people's lives. Let
alone addressing the root issues that really lead to the monstrous differences
between worker and executive pay levels at many/most companies.

------
qwtel
I really don't like the 1% designation. According to [1], if you have an
annual income of $55,000 or above (after tax) in the U.S. you are among the 1%
globally.

I like the idea of equality and all, but it feels like, when people talk about
inequality, they mostly want to be richer.

[1]: [https://www.givingwhatwecan.org/get-involved/how-rich-
am-i/?...](https://www.givingwhatwecan.org/get-involved/how-rich-
am-i/?country=USA&income=55000&adults=1&children=0)

~~~
usaar333
That seems far too low to count as 1%. ($55k is 75th percentile in the US, a
country of 300 million -- 25% of the US is 1% of the world.). As far as I can
tell, they are considering all people, not just those with incomes, which
really distorts the data.

~~~
pink_dinner
When peoplw talk about solving equality, it usually involves taking away from
the wealthy and giving to the poor.

Rather than the more difficult task of educating the poor to create their own
wealth.

We should be striving for equality of opoortunities, not outcomes.

------
justsaysmthng
> The real cause of elite inequality is the lack of open access and market
> competition in elite investment and labor markets..

I stopped reading after that, because that's not the _real_ reason. The _real_
reason is the way these people _think_.

(then I went back and read the article anyway and still think it misses the
_real_ reason)

Most solutions to the "1% problem" are based on building these legal cages of
rules, regulations and taxes, where the "wild, untamed, mad" entrepreneurs are
allowed to work.

But here's the catch - _they_ are the ones who are supposed to build the cages
for themselves !

\--

We need a new 1%. We need a third option besides Karl Marx and Adam Smith.

Both those theories are based on incomplete understanding of human psychology,
sociology, information technology and so on. In simple words - both
"capitalism" and "socialism" are old and wrong.

For example, nowhere will you see a mention of "advertising" in the theory of
supply and demand. Not a single mention ! Check it out on wikipedia.

But advertising is a demand producing engine, which in turn generates supply
and with some more advertising produces more demand and so on. There is no
"economic equilibrium", there are marketing and PR budget limits !

We call it "economic theory" or even science, when in fact it's always been
economic ideology with math added on top of it.

And any ideology is a consequence of learning and regurgitating the same half-
truths until everyone deeply believes it to be the only truth.

\--

We also need a new Dale Carnegie and Napoleon Hill. The whole "achieve your
full potential" idea. If achieving means earning and hoarding things, then
this leads to a whole bunch of heartless, selfish assholes - what we have
today. "But I've worked hard for it, so I deserve it!"

\--

So how do we do it ? I don't know, but I know that we _have_ to do something
about it if we are to survive as a species - the state of the biosphere is
another manifestation of the same problem - the 1% god so rich _at the same
time_ as the planet got polluted, mined and abused.

~~~
haxel
I've been working on this problem for quite some time now, and I've distilled
a basis for solving the problem of advertising - connecting sellers with
buyers - into three "laws":

Law 1: Individuals must digitize their own behavior in prediction-friendly
form.

Law 2: Individuals retain the exclusive right to share or sell their
information.

Law 3: Sellers or middlemen who connect with buyers must compete openly for
all information.

The idea is that as we adhere more and more to these laws (which we don't at
all right now), we gradually solve the problems of online advertising. Many
other problems too.

Blog post here: [https://haxel.ca/three-laws-to-fix-online-
advertising.html](https://haxel.ca/three-laws-to-fix-online-advertising.html)

------
Randgalt
Another person's gain is not my loss. We should not care about inequality.
Steve Jobs was 1000s of times more "unequal" than me. Wonderful. I'm thankful
that he existed. It didn't cost me anything. I'd like to recommend this book
to this thread: "Equal Is Unfair: America's Misguided Fight Against Income
Inequality" [http://www.amazon.com/Equal-Is-Unfair-Misguided-
Inequality-e...](http://www.amazon.com/Equal-Is-Unfair-Misguided-Inequality-
ebook/dp/B015CKO1DY)

------
jnordwick
I'm usually not a fan of Brookings articles. They are okay, but this one is
actually pretty good. In the end the author calls for a couple things.

His goal is to increase competition in ALL aspects of the economy, not just
the low end, and he rightfully points out some of the paternalism of current
laws have helped create this economic gap.

1- Open up all investment opportunities for everybody. Get rid of the wealth
and income requirements to invest in certain vehicles. The one he points to is
hedge funds where by law you need to be an accredited investor: $200k income
in last two years and expect the same this year ($300k if married) and a net
wealth (excluding your home) of at least $1mm. This law was made because the
government literally thinks that poor people are too stupid to invest and
gauge risk.

2- Slim down the need for professional associations. While many like to decry
the necessity for a hair braiding license and see the stupidity in that, fewer
are willing to see the same issues with, for example, the onerous and
unnecessary qualification needed to be a nurse or home care provider. These
associations create artificial barriers to entry that artificially boost
wages.

These are the true rent seekers. Oddly enough, a couple of the groups he
decides to call out, such as the financial services industry are the most
egalitarian. Anybody can be a trader, even high school and college drops outs.
My industry has no cap on the number of traders that work on the floor. We
have no special club. Sure you need to get your Series exams if you work for a
broker/dealer, and that can be a pain, but that the government making you do
it. Most non B/D firms encourage you not to take the exams if you don't need
to.

For all the crap people give working in finance, it really is based a lot of
hard work and skill.

~~~
usrusr
> it really is based a lot of hard work and skill.

And the total lack of desire to apply that hard work and skill to something
more productive than applying even more lubrication to a market that is
already too fast for it's own good. But please allow me to take the sting off
of that attack: over here in advertisement, things are not much different.

About those barrier of entry laws for risky investments, that we seem to both
consider the true target of the Brookingns article: they are not about poor
people being stupid, they are about poor people being poor. Too poor to not be
completely ruined by a failed investment.

"Rich people benefit from barriers of entry" and "Poor people will suffer hard
when they are fully exposed to commission-driven investment salespersons
pitching them risky stuff" can (and are) both be true at the same time.

------
iaw
Excellent article detailing the anti-free market practices that the 1% lobby
for allowing them to increase their financial advantage.

I do wonder if there aren't other factors contributing to the issue. The ready
dismissal of corporate taxes (read loopholes) seems slightly premature.

~~~
usrusr
It's an excellent article when you are upset that you can't use other people's
money to profit risk-free from risky investments unless those people happen to
be rich. A stab at accredited investor laws, that hinder the financial
services industry far more than they hinder actual small-time investors.

The rest of the article seems to be mostly distraction based on the
uncertainty caused by looking at income where most people instinctly expect a
look at accumulated wealth.

------
JonFish85
One thing that I think gets lost in all of this is just how little money the
richest people actually have, in the big scheme of things. According to [1],
"The combined net worth of the 2013 class of the 400 richest Americans is $2
trillion".

Certainly $2tn is a lot of money, but if the US Government were to "take" all
of that (assuming, of course, no massive stock market crash when it's flooded
with all of their holdings), it wouldn't even cover 2013's US government
spending for one year ($3.45tn [2]). To cover the US 2013 full-year budget,
it'd take _roughly_ the combined net worth of the 800 richest Americans.

Edited to add: This is just _federal_ spending, it completely ignores state
taxes, of course.

[1]
[https://en.wikipedia.org/wiki/List_of_members_of_the_Forbes_...](https://en.wikipedia.org/wiki/List_of_members_of_the_Forbes_400)

[2]
[https://en.wikipedia.org/wiki/2013_United_States_federal_bud...](https://en.wikipedia.org/wiki/2013_United_States_federal_budget)

------
eternalban
Anyone who "earns" is technically not a part of the 1% (which should not be
taken literally [as a mathematical forumula]).

The mythical 1% are the long standing families, and confederations of
interests that _control_ the global economy.

So, to take the fictional character of the Dr. from Eyes Wide Shut, the
_servants_ of the 1% may live in upper east side, have successful social
position, and generally assumed to be "1%" people by the unwashed (and
literal-minded) but are themselves entirely captive members of the economic
regime.

------
Htsthbjig
In a word: Privileges.

In the US lawyers and physicians are rich, but in the rest of the world it is
not so. In the US those professions have privileges.

The main disruption to wealth has been central banks redirecting the wealth to
themselves, by printing money and giving it to themselves at near zero
interest rates. With free money privilege people(savers) loss, they win.

Eternal Copyrights and software and business patents are privileges enacted
recently in order to preserve the status quo forever.

More taxes? that only creates bigger central planning, more resources in the
hands of a few, the politicians.

------
padobson
I don't think there's anything morally wrong with a wealth gap if
opportunities for upward mobility exist. Which is why the following line from
the piece struck a chord with me:

 _A hedge fund is a loose term referring to an investment portfolio that is
less regulated than other funds, because only very rich individuals or
approved institutions (accredited investors or qualified purchasers) can
participate in it._

The accredited and qualified investor rules, when paired with stricter
securities regulations keeping young companies from going public, are almost
certainly one of the biggest barriers to upward mobility.

How many middle class individuals could have enjoyed returns based on the
growth of Yahoo, Amazon and Apple? All companies that achieved most of their
current market cap after they had gone public.

Now how many middle class individuals could have enjoyed returns based on the
growth of Facebook, Twitter, and Uber? Almost none. All of the wealth created
in the most recent technology investment cycle went to wealthy and
institutional investors - with middle class individuals having almost no
access.

Economically, there's an argument to be made that lower concentrations of
wealth lead to more consumption which leads to more economic growth, and I
tend to agree with that. But I, personally, am more interested in solving the
moral problem of inequality and creating more upward mobility than I am in
solving the economic problems of inequality.

------
xivzgrev
This article raises some great points. When I read about a dental hygienist
opening their own practice, my first reaction was - well of course not,
they're not a dentist? But then I thought, why not?? 90% of my dentist visits
have just been cleanings, which is 99% with dental hygenist. I suppose that
look over from dentist at the end is supposed to catch anything early, but
I've never had a dentist actually find something dental hygenist missed.

------
jasonkester
I look at these articles about the "1%" and always come away with a different
interpretation. "That looks pretty achievable", I think. With a bit of effort,
I bet I could crack that income threshold one of these days. It's a little bit
inspirational, actually, especially considering that I started out near the
other end of the spectrum, income-wise.

I don't really get the desire everybody else has to drag those people down.
It's not a zero sum game, so having rich people in existence doesn't really
harm me. It's kinda cool that people can get rich. Certainly much more fun
than a world where nobody could get rich.

If one wanted to get rich, this article does a good job of laying out how to
do that. Pick a career path from that chart of "unfairly high paid
professions" and establish one's self as a good one o' those.

Choices include Doctor, Lawyer, Investment Banker, and Software guy. The first
three require full time doctoring, lawyering or banking, upward of 80 hour
weeks, forever, to pull off. The last one requires only sane weeks working for
the Googles of the world, or a bit of entrepreneurial work building something
that brings in that 1% income and can then be stepped away from.

Seems pretty achievable.

~~~
Houshalter
1% is just a nice number. Really I think most people have an issue with the
top 0.1% or higher. Doctors and lawyers do not fall in that category, but
multi-millionaires.

Anyway of course people don't want to drag them down just for the sake of it.
They want to raise everyone else up. Which requires taxing capital.

Even just among the 99.9%, the world is pretty unfair. Not everyone can be
doctors or lawyers or computer programmers. But at least the majority of
people have been able to do unskilled work and make a living. But soon, the
majority of unskilled will be replaced by machines. And eventually doctors and
lawyers will be too. That leaves only capital owners with the majority of the
income, and everyone else with nothing.

------
bsbechtel
This is a refreshing perspective on inequality. FWIW, I think one additional
thing that would help with tilting the scales away from the 1% is the fact
that most laws and contracts are written to put financial creditors first in
line for any sort of liquidation of assets in a company. The VC industry
oftentimes includes at a minimum 1x liquidation preferences in a liquidity
event of any company. Banks also often get paid first in bankruptcy filings
before suppliers are compensated for goods and services provided on credit.
This may only make a small difference in the global economy, I'm not sure.
However, it seems like someone investing their time into a company, whether as
an entrepreneur or as a supplier providing goods and services, deserves to be
compensated first, given they can't get their time back, before financial
providers are compensated for their contributions. Furthermore, their are many
more suppliers and entrepreneurs than exist financial creditors in the economy
today. Ensuring these individuals are compensated first when things go poorly
tilts the scales a little more towards the 99% vs the 1%. Anyways, that's just
my 2 cents.

------
sportanova
"These regulatory advantages have allowed hedge funds to consistently
outperform stocks and other assets by roughly 2 percentage points each year"

Ummm... what? hedgefunds vs the S&P is a terrible investment

[http://www.businessinsider.com/hedge-fund-relative-fund-
perf...](http://www.businessinsider.com/hedge-fund-relative-fund-
performance-2015-2)

------
ThomPete
It should be about wealth not income. Income is based on active participation
in the economy and is something which we should be doing everything to keep
our hands of. This includes many of the people who work hard and play hard on
wall street.

Read somewhere that one banker alone would keep 4 waiters jobs alive.

Wealth on the other hand is lazy money that's what should be in competition.

------
reddytowns
It actually would be better if the 1% earned even more. They are the only
group that really has any motivation to fix the environment.

The rest of us spend and try to claw our way ahead. How many of you are
worried about CO2 production? Yet I very much doubt you have done much at all
to fix the problem, besides some symbolic gesture like buying a fuel efficient
car.

The 1% could fix it. And if they became rich enough, they will. If you had so
much money you had everything you wanted in the current environment, the only
way to improve your life further and those of your descendents would be to
improve the environment itself.

~~~
rifung
I think many people besides the 1% have the motivation to fix the environment.
On the other hand, most of us have priorities that are more immediate, like
being able to put food on the table. I don't see any other reason people
besides the 1% worry any less about the environment..

~~~
reddytowns
The difference is the ability to act. If you want to fix the environment, you
need the cooperation of many other people to have any kind of dent.

A person which a huge amount of money and power doesn't need the coordination
of anyone; he can act alone, and make a meaningful impact.

------
jensen123
This article has some valid observations, but it also says that "There is no
evidence to support the idea that the top 1 percent consists mostly of people
of "exceptional talent.""

Actually, there is some evidence for this. A while ago, I read the book IQ and
the Wealth of Nations by Richard Lynn and Tatu Vanhanen. It mentions a few
studies looking at the correlation between IQ and income. If I remember
correctly, the correlation was 0.3 to 0.4 in all of the studies.

~~~
id
Not all of the elite are self-made or have a high direct income. I also don't
see why the talent of _all_ of them would be "exceptional". Higher than
average, sure, if they are self-made they probably had to be smarter than
others to some extent and if they are not they were in the best schools and
had the best support imaginable.

------
DrNuke
Main point is such individuals and corporations act like unregulated States
within regulated States. They reap all they can without having to worry
providing welfare and managing affairs in the manner regulated Stases do. They
are in the very fact pirates or mafias that seize ridiculous amount of monies
out of regulated economies, shield that monies in fiscal havens and starve
regulated economies.

------
ksec
My limited view on the subject, any inequality that does not include land /
property value and it's game of monopoly is incomplete.

------
ck2
Many of the 1% (not all) are that wealthy because they are willing to do
things that are unsavory and/or immoral if not outright illegal.

Remember that Steve Jobs and Woz would not have Apple unless they were willing
to ignore how very illegal it was to make phone hacking devices first and how
it might easily have resulted in prison time if they weren't white privileged
kids.

~~~
tyingq
Feels like a red herring. If anything, the immoral/illegal/unsavory approach
would be more of an equalizer in terms of joining the 1% club...there's no
scarcity or exclusivity there.

------
specialist
Tax windfall profits at cashectomy rates. Doesn't judge, continues to reward
merit and effort while keeping the money moving. Problem solved.

------
mtgx
tl'dr: The game is rigged for the top 1% so it can face less competition and
not allow some of the money it gains to flow downwards.

~~~
hjhgjtyhgd
How exactly is the game rigged for Paul Graham, Mark Zuckerberg, Drew Houston,
Evan Spiegel, Elon Musk, Peter Thiel, and the millions of other entrepreneurs?

~~~
URSpider94
He pretty much gives entrepreneurs and high tech workers a pass, by saying
that they have earned the right to be in the 1%.

The concern is more that their children, and their children's children, are
likely to be in the 1% as well, no matter what they do, or don't do.

~~~
TheLogothete
Wealth does not pass a generation.

[http://time.com/money/3925308/rich-families-lose-
wealth/](http://time.com/money/3925308/rich-families-lose-wealth/)

It is a very known fact, but I couldn't find better sources quickly, so this
article has to do.

------
basiclaser
yeh 1 in 100 is not what were talking about by a long shot. it's catchy though

------
tn13
There is nothing to be done about what other people are earning in my opinion.

