
How Everyone Got the Top 1% Wrong - ghouse
http://www.theatlantic.com/business/archive/2014/03/how-you-i-and-everyone-got-the-top-1-percent-all-wrong/359862/
======
DanHulton
This isn't honestly terribly surprising. When the sky started falling, plenty
of folks were happy to mention that bad times are only bad for people who
can't afford to take advantage of them.

When stocks are crashing? That just means they become cheaper to pick up for
the very rich, who get even richer when the economy straightens out again.
Meanwhile, everyone who had to dump their investments to survive has to start
over with less.

It shouldn't be hard to recognize that there's something terribly wrong going
on here, but the tough part is trying to figure out just what to do to fix it.
Hell if I know.

------
jfasi
Whenever I read an article about income inequality, I can't help but ponder
the phrase "the rich get richer." Consider the process by which people acquire
extreme wealth: invest your money in various vehicles, hopefully collect gains
(money, prestige, experience), reinvest the gains. This process doesn't by any
means guarantee wealth, but it can be very kind to those blessed with good
judgement, good fortune, and initial excess capital.

In a discussion of income inequality, the most relevant factor is excess
capital. For those on the bottom of the ladder, whose money goes toward basic
expenses, this potentially virtuous cycle is completely out of reach. Their
money is best spent on purchasing stability rather than attempting to secure
wealth. For those in the middle nurturing already-comfortable lives, the
upside of shooting the moon in an attempt to gain wealth is often outweighed
by the risk of sustaining financially disruptive losses, as well as the
discomfort inherent in turning away from a lifestyle that pleases them. [1]

Then there are the wealthy. I'm not talking about the faux-wealthy whose
lifestyle preferences drive them to buy Maseratis and condos on credit and
spending the rest of their lives wearing golden handcuffs. I'm talking about
those who have money left over after they've secured themselves a comfortable
lifestyle. They have excess capital. Ten thousand dollars can go into the
stock market, a hundred thousand dollars can go into a small business, a
million dollars can go into a more sizable business, ten million can go into
multiple sizable businesses, etc.

The opportunities for growth scale with the size of your disposable income. If
you take this view, it suddenly becomes stupidly obvious why the one percent
of the one percent makes so much more than the ninety-nine percent of the one
percent: they had more to begin with. I'm all but certain if you zoom in on
the the one percent of the one percent of the one percent, you'll see a
similar disparity.

Unrelated corollary: This also helps to explain both why traditional
entrepreneurs are older, and why tech entrepreneurs tend to be younger: non-
tech leaders spend their lives amassing wealth, techies are so in demand they
get a good dose of it when they're young. Although the acquisition appetites
of behemoths like Google and Facebook certainly don't hurt.

[1] I'm so certain someone will respond to this comment by quoting that one
study where happiness flattens around like $75,000 that I won't even bother
finding it myself.

~~~
kingraoul3
But this analysis doesn't explain the change in the share of income the %1 has
accumulated to itself in the last 30 years.

In other words if this analysis were complete, we would expect to see straight
line growth.

~~~
LanceH
Nor does it track what happened to the 1% from 30 years ago and whether they
are even the same 1% today.

Until this fact is acknowledged, they have no business even bringing up
numbers.

Another possible point of confusion: Maybe the top 1% aren't merely wealthier,
maybe the top .1% is more numerous. Wouldn't that be good news?

~~~
roc
> _" maybe the top .1% is more numerous."_

You may want to rethink that.

------
elsewhen
"The 0.1 percent isn't the same group of people every year. "

This makes it sound like some if not many members of this group are one-time
members who have huge capital gains that calendar year; many of those could be
entrepreneurs who sold their company or those that had a huge gain in some
investment.

~~~
imgabe
I think that makes sense. They're using the IRS list of the 400 richest tax
returns. I think when you're making money at that level you can hire enough
tax attorneys and accountants to make sure your actual taxable income is not
among the 400 highest in the country unless you have some major event like
selling a company. It would make sense then that there's a lot of turnover in
that metric.

~~~
001sky
As a point of math, that's the top 0.0001%

(Or, as a percentage of the workforce: 0.0005%)

------
symmetricsaurus
Lies, damned lies, and statistics!

The differing quantities on the y axes of the graphs make them quite
misleading. In particular between the first and tend second where the first is
a relative increase and the second is in absolute income. This gives the
immediate impression that the 0.01% is pulling ahead of the 0.1% at a high
rate. Looking instead at the last graph we see that the 0.1% is keeping up
kinda OK.

This change in quantities also makes it impossible to compare the first and
second graph at all.

Using graphs is supposed to aid understanding, not impede it.

------
thanatropism
Meh. Two things would be problematic:

1) The composition of the 1%, 0.1%, 0.01%, etc. never changes -- not in
generations. I.e. there's an entrenched aristocracy.

2) Topocracy: people are making money for their social connections rather than
for their personal merits. Nature had an article on this.

[http://www.nature.com/srep/2014/140121/srep03784/full/srep03...](http://www.nature.com/srep/2014/140121/srep03784/full/srep03784.html)

If not [(1) and (2)], then all is well. (It isn't, of course)

~~~
chime
> 1) The composition of the 1%, 0.1%, 0.01%, etc. never changes -- not in
> generations. I.e. there's an entrenched aristocracy.

Leave 1% out of this. Any couple making 150k each fits in that. That means
anyone with a college degree, 15-20 years of experience, and senior managerial
position. Also included in this are doctors, lawyers, and engineers. There is
a lot to be said about mobility and meritocracy but I don't think you get to
be a senior engineer or doctor solely because your parents were.

~~~
gbhn
> I don't think you get to be a senior engineer or doctor solely because your
> parents were.

True enough. But yet... I'm a senior engineer. My parents were in the medical
profession. I had a lot of help going to school (not all paid for, but I
graduated without significant debt). I was encouraged in my study and shielded
from a lot of disruptive factors by a stable home life, which in turn is
related to the stable financial situation my parents had. I'm not disavowing
responsibility -- I worked hard! But I'm also conscious that that happened in
an environment that was specifically and consciously tuned (thanks, Mom and
Dad!) to enable me to do it.

------
downandout
In general, each dollar one has makes it easier to obtain the next dollar.
That's what this chart shows - wealth accumulation accelerates as wealth
grows. The rich aren't necessarily doing anything wrong to achieve that effect
- it's just how a capitalist system works.

If society finds this type of inequality to be objectionable, then it is
society's responsibility to implement laws and policies that encourage those
holding the money to reinvest it in a way that gives others access to that
capital.

~~~
film42
Exactly. When you have more capital, you have more opportunities to invest.

I remember a good friend of mine who's quite wealthy was talking to my
brother-in-law and I at lunch. My brother-in-law had recently closed on a
house he was intending to flip. My friend then said to my brother-in-law,
"Next time you see an offer like that come through, call me. I can get you
that money within 24 hours." Somewhat stunned at with my friend's offer, I
then realized that the more capital you have, the more investments routes you
have to your disposal.

------
forgottenpaswrd
I wouldn't call it "investment money". Have you seen the graphs going
down(tech bubble burst 2001 and 2008). I will call it "Money press printing
money", or

"let's save those that make poor decisions in the past so they don't bankrupt"
money,

"let's give this people free public money at 0% interest rates so they can
lend to the public at high interest rates" money.

"privatizing the profit, making public the loses" money.

Those people had basically sh#t as assets, but the central banks bought their
sh#t with good money so they do not collapse the economy. The bailouts mean
the public is underwater now and revolutions are coming all around the planet.

The problems are not solved, those that make bad investments have been
rewarded taking money from those that create wealth.

But everything has a limit, Japan is paying 56% of their taxes in debt payment
and growing. China bubble is bursting soon.

------
paul_f
This sounds like a typical power law distribution. Nothing really unusual or
unexpected about that.

~~~
cowsandmilk
the time series shows that the distribution has changed over time. It is this
change in distribution that people are opposed to.

~~~
lotharbot
A lot of people are opposed to there being a distribution more extreme than
their _emotions_ tell them is reasonable.

Consider what most Americans say the "ideal" level of wealth inequality would
be: [http://danariely.com/2010/09/30/wealth-
inequality/](http://danariely.com/2010/09/30/wealth-inequality/) and
[http://www.slate.com/articles/news_and_politics/politics/201...](http://www.slate.com/articles/news_and_politics/politics/2010/09/theoretical_egalitarians.html)

Now consider how much wealth inequality there would be in an excessively fair
society: [http://www.daemonology.net/blog/2011-01-10-inequality-in-
equ...](http://www.daemonology.net/blog/2011-01-10-inequality-in-
equalland.html)

Clearly, people are determining their "ideal" without doing the math. This
makes it hard to take their opposition to "this change in distribution"
seriously as well.

------
FD3SA
I'm actually really looking forward to the day that technical people become
more financially literate. There's a reason why Elon Musk is such an
unstoppable force in the business world. Technical people have such a deep
love of science and tech that they sometimes forget about the economic and
political realities of modern western societies: capital rules all.

Understanding and managing time and capital is the most important task any
individual is faced with in the western world. As I've said many times, every
single person reading HN most likely undervalues their time, and ends up
severely miscalculating their opportunity costs as a result. The nature of
capitalism is such that taking risk is the only path forward, regardless of
how many failures it results in.

As the commenters above have noted, very few become billionaires by working 9
to 5 for someone else. Work for yourself, and with equals (as co-founders).
Never work as an employee. If you need to contract your services out, do it as
a consultant on a milestone or hourly basis. Take absolute control of your
time. No overtime, no crunch time, no favors.

Understand the system we operate in, and optimize for it. Don't be sucked in
by stupid hype, marketing, "culture", free pop, ping pong tables, personality
cults, or any such nonsense. Your time is worth just as much as the CEO's.

I'm hoping that once the tech world wakes up to this reality, we'll start
exerting far more influence over big corps, big finance, and big government.
This is the only way we can really change the world for the better. Not by
being employees to big corps, but by running the show.

The Hacker mentality espouses efficiency and ingenuity. It's nigh time we
applied this to our lives. It's not enough for me to do it on my own, everyone
here needs to do this so that we can collectively exert influence to enact
real change.

P.S. I know it may be hard to herd cats, but I've seen the community here
rally around many great ideas. I want gigabit fiber everywhere, renewable
energy cities, preventive genetic medicine for all, and colonies on Mars. Why
haven't these happened? Because the people in charge have no vision, and are
caught by the institutional quagmire of a country established 300 years ago.
Just because this is the way it is, doesn't mean that it will always have to
be this way.

~~~
pilom
> I've seen the community here rally around many great ideas. I want gigabit
> fiber everywhere, renewable energy cities, preventive genetic medicine for
> all, and colonies on Mars. Why haven't these happened? Because the people in
> charge have no vision, and are caught by the institutional quagmire of a
> country established 300 years ago.

I would argue that those things haven't happened because no one (including us
technical people) have developed business models for those activities.

~~~
jimmytidey
Landing on the moon was a big success, fundamental science too, and both
without a business model.

One particular lack of vision stems from being hypnotised by the notion of
markets.

------
adambard
TL:DR; The richest rich are much richer than the least rich rich, and becoming
richer still.

I'm kind of struggling to find the personal relevance of a story reporting
churn within the top 1%.

~~~
jerf
Because of the rhetoric being used in the political arena. If "the 1%" almost
entirely changes every year, well... what's the problem with that? You're
always going to have a top 1%. Don't we _want_ it to have a significant amount
of turnover? Indeed, these numbers sound perhaps a bit low, if anything (is it
really _that_ unstable up there? That's not obviously good to me.). If it's
not the same people all the time, it's not obviously useful to be talking
about them as a distinct group.

Maybe it _is_ useful. But it's something that goes from almost self-evident,
to badly in need of being established.

On the other hand, the idea that a small handful of people have concentrated
such vast wealth that they've disenfranchised the rest of us, a handful that
is a great deal less than "the 1%", is actually a wildly more potent political
story. Even this here libertarian type might be open to some significant
actions taken to ensure that such concentrations of wealth are ameliorated, as
a key part of my personal libertarianism is that monopoly busting is a key
useful function of government, and I'd consider this to fit in, if it is true.
It's still something that needs establishing, though, not mere assertion.

One has a hard time not imagining the .001% cackling with glee as the press
focuses on "the 1%"; it still leaves them lost in crowd of millions, hardly
singling them out for any treatment, while the 1% itself is peopled with a
significant number of people who apparently worked their way up the ladder,
however briefly that may have been. That doesn't sound like a good set of
people to target, if there's no actual "institution" there.

And now, let me reiterate my first sentence; this is because of the political
rhetoric being used. If it wasn't for that, this would be a relatively
uninteresting question. But if it's going to become essentially part of the
platform of one of the major parties, it's worth examining for truth value.

~~~
sigil
The evidence we have so far points to a higher churn rate the closer to the
top you are. According to this [1], the top 1% had a churn rate of > 50% over
a decade, while the top .01% had a churn rate of > 75% over the same period.
The "Fortunate 400" mentioned by the article is something like the top .0001%,
and had a churn rate of 99% over two decades.

I'd love to see deeper analysis though. What does the churn rate look like as
a function of top percentile size? Do the choice of endpoint years matter
significantly? Also, as you ask, what might be the optimal churn rate
economically?

[1] [http://www.treasury.gov/resource-center/tax-
policy/Documents...](http://www.treasury.gov/resource-center/tax-
policy/Documents/Income-Mobility-1996to2005-12-07-revised-3-08.pdf)

~~~
adamc
What percentage of the 1% ever "churn" into the 0.01% at all? Churn makes it
sound like it might be random, but I don't think that is demonstrated.

~~~
sigil
If the 1% don't churn into the 0.01% when it loses 75% of its members, then
where do the replacements come from?

I agree though, longitudinal studies are the most interesting.

------
stygiansonic
One of the graphs displayed[1] really should have a logarithmic y-axis,
especially since it's evidently being used to demonstrate relative growth.

1\.
[http://cdn.theatlantic.com/newsroom/img/posts/Screen%20Shot%...](http://cdn.theatlantic.com/newsroom/img/posts/Screen%20Shot%202014-03-29%20at%209.23.25%20PM.png)

------
holograham
this isnt new news. This has been brought up before.

They question really should be "is this bad?" I have yet to see a compelling
argument on why income disparity is bad.

Unless you are stealing, scamming, or otherwise breaking the law to obtain
enormous wealth then you deserve it. You are providing a good or service to
the economy and are rewarded appropriately. If someone else can do it better
than they reap the reward. Competition ensures that only the best deliverers
of value are making the money. I am sure someone will cite some bankers
<insert other regulated market here> raking in money with barriers to entry
that are artificial...but that 99.99% of the time means that they lobbied the
US Govt for regulations which protect them.

~~~
gjm11
> Unless you are [...] breaking the law [...] [y]ou are providing a good or
> service to the economy and are rewarded appropriately.

Not necessarily. You are providing a good or service to _someone_ but it isn't
necessarily doing any good to "the economy".

An example: You are a successful hedge fund manager. You and your team of
quants have a bunch of ingenious strategies for predicting the stock market,
spotting arbitrage opportunities in derivative prices, etc. You successfully
help your investors to get rich, for which they pay you very handsomely. But,
for the most part, what you're enabling them to do is get rich _at the expense
of other market participants_. If you weren't doing your job, the net value of
the equities and derivatives markets would be pretty much exactly the same;
it's just that it would be parcelled up a little differently.

For the avoidance of doubt, I don't think there's anything wrong with any of
that. Our hypothetical hedge fund manager isn't doing any net harm to speak of
either. (There might be a bit of net good, through increasing liquidity and
helping the market do its information-aggregating thing, and a bit of net
good-or-harm depending on exactly who the fund's investors are.) The point is
just that what a hedge fund manager is being rewarded for is _making a
particular set of people rich_ in what's largely a zero-sum game, not _doing
any net good_ overall.

Another example: You study baseball or American football and get very good at
identifying undervalued players. You offer your service to a major team. They
get some bargains, win a lot of games, and pay you a big pile of money. All
very well, and again for the avoidance of doubt I don't think there's anything
wrong with this -- but you've benefited one set of people at others' expense.
The overall quality of play hasn't changed (the pool of players is the same
and you haven't done anything to make them play better), you've just enabled
one team to get a bigger slice of the same pie.

Note that none of this requires artificial barriers to entry, or crime, or
even anything unethical. It's just that what you get paid for is benefiting
_the people who pay you_ and often the easiest way to do that is by moving
value to them from elsewhere, rather than creating it anew.

~~~
holograham
Everyone loves to cite Hedge Funds. I am no hedge fund expert but you mention
a few benefits that they do provide...liquidity and information aggregating
(which has derivatives such as market signalling) are very much benefits to
society. What good is a stock to anyone if there isnt a liquid market to sell
into (and yes the buyer should make money on that transaction). A personal
hunch is that some hedge funds are breaking some laws but largely the hedge
fund industry provides a net benefit to the economy. The stock market and
futures markets are NOT zero sum games. They provide capital, incentive
structures, and a host of other benefits to both businesses AND everyday
people (like you who has a retirement fund with lots of assets that pass
through hedge funds). Businesses can (and do) grow and appreciate your assets
(and hedge fund assets), etc etc.

Your second example is dead wrong. Identifying undervalued resources is an
enormous efficiency gain in a market. They lower their cost structure while
keeping quality high. It ensures that top athletes salaries are in check
because they truly need to be twice as good (or 10x as good) to be paid
millions of dollars. Which makes game tickets, jerseys, etc affordable to more
fans who in turn buy more tickets, fan paraphernalia, etc. Yes indeed the pool
of players is set (at all of humanity) but the wealth generated from quality
entertainment is not capped (or capped at the leisure money of a market).
Those sports leagues are always looking to expand their market and keeping
costs low is one major strategy to that.

~~~
gjm11
I agree that liquidity and information aggregation are benefits to society. I
just don't think that they're what a hedge fund is getting paid for, and don't
see any particular reason to think that the pay of hedge fund managers is (or
should be) justified by those benefits.

I didn't say, didn't mean, and don't think, that the stock or futures markets
are zero-sum games. I think that _some things that happen in those markets_
are very close to zero-sum.

And, for the avoidance of doubt, I am not objecting to the existence of hedge
funds nor to (most of?) what they do.

It is unclear to me how the activities of our hypothetical sports talent-
spotter actually have the beneficial effect you describe. If she works for
team A (and not for team B) then what happens isn't necessarily that A gets
equally good players by spending less; more likely A has a fixed budget and
gets better players, while B spends the same as before and gets worse players
(because more of the good ones are now being taken by A). The overall quality
of play stays about the same -- the teams, collectively, have the same
players. The overall spending stays about the same -- each team has whatever
budget it has. It's just that A is now doing better relative to B.

I'm sure there is a bit of overall benefit. For instance, the talent-spotter's
activity slightly drives up the relative compensation of the better players,
which means more correlation between pay and performance, which might
eventually mean slightly better selection of who gets into professional sports
in the first place, which would actually lead to better play overall. And
perhaps making A do better relative to B means that in future A will have more
budget and B less, and maybe that benefits everyone somehow. But this all
seems like second-order stuff, and again it isn't what the talent-spotter is
being paid for.

------
rebelde
I wonder how many of the products and services of the top 0.01% he used in
creating that article. My bet: he used MS Word on a Mac, using Google at the
very least.

His next article could be about how the products of the 0.01% people have
enhanced his life.

~~~
jimmytidey
It doesn't immediately follow from the fact that 0.01% people have made
fantastic contributions that they should have disproportionately so much more
money than the average person.

It seems intuitive (but not logically certain) that the person who has made
the greatest contribution to the world should be the richest. But by how much
isn't really clear.

What would happen if Bill Gates was the richest man in the world and had $50m,
instead of billions. All the incentives scale. I don't think he'd have said
'screw this, I'm not making Word for less than $2 bn'. Sure, inequality is a
fair way to reward hard work and brilliance, but what level?

Looking at it another way, sure Bill Gates is a fantastically insightful and
driven guy with great business acumen. Is he 100,000 times better than the
average person though? Because he's earned 100,000 more than the average
American.

Warren Buffett makes the point that if he was born in Bangladesh he would
probably be as poor as he was when he was born. Circumstances matter.

I realize you don't say it explicitly, but the implication of what your
comment is that they is some kind of cosmic justice that made Larry Page or
Steve Jobs billionaires. There isn't. The right level of remuneration is a
moral question, not a feature of the natural order. If you really think these
people deserve these huge concentrations of wealth, why not more? How amazing
could Windows have been if we'd just paid Bill Gates another $50 billion?

~~~
mh_yam
I tend to believe that people are paid commensurate to the degree of value
they create. Bill Gates, in my opinion, has created much more than 100,000
times the value of what an average American creates. That doesn't mean he is a
better human being, just that he has contributed far, far more.

~~~
jimmytidey
Do you really think Bill Gates created equivalent value to 100,000 Americans?
Bear in mind that if he hadn't created Windows, something similar would have
taken its place - just as likely something better.

I've never seen a discussion of Microsoft that said its achievements are due
to engineering genius. Definitely they must have had a great production line
for software, but the reason Microsoft is Microsoft is that it secured itself
a monopoly. That isn't adding any value.

But even if Bill Gates did add 100,000 times more value than the average
American, it doesn't logically follow that he must be paid 100,000 times more.
You might easily argue (I would) that the last million you pay to him doesn't
make any difference at all to his happiness or motivation, and it could be
much better spent else where.

~~~
johngalt
> _Do you really think Bill Gates created equivalent value to 100,000
> Americans?_

No. Not equivalent, in fact he created vastly _more_ value than 100,000
Americans. Probably on the order of millions.

> _Bear in mind that if he hadn 't created Windows, something similar would
> have taken its place - just as likely something better._

How does this prove your point? If something better were available then there
would be someone else rich that doesn't deserve it right? What do you envision
here? A world where thousands of engineers mobilize to build software who's
value will be determined later by committee?

> _The reason Microsoft is Microsoft is that it secured itself a monopoly.
> That isn 't adding any value._

For 10 years MS was dominant. Now the cracks are showing. MS has made plenty
of engineering strides, and has some of the best executed backwards
compatibility of any OS ecosystem. Again it hasn't captured even a tenth of
the value it created.

> _But even if Bill Gates did add 100,000 times more value than the average
> American, it doesn 't logically follow that he must be paid 100,000 times
> more._

The more value generated by an endeavor, the more people will be motivated to
follow. Could you imagine the sorry state of software if it was only a
$100million/year industry?

Everyone along the chain benefited. Not just MS's customers, but also their
shareholders and employees. BGates got rich by the unanimous agreement of all
the parties involved. Show me any alternative arrangement that could possibly
be better?

> _You might easily argue (I would) that the last million you pay to him doesn
> 't make any difference at all to his happiness or motivation, and it could
> be much better spent else where._

He's not keeping it under his mattress. Money by itself does nothing. Like
most rich people he immediately looked for other possible investment
opportunities. Finally he turned over the bulk of it to direct charity
(including that last million). Where could this have gone 'better'?

~~~
jimmytidey
What I'm advocating is not that a committee that determines the value of
software, but that government does take an interest when a likely monopoly
starts reporting really usually enormous profits.

> Bear in mind that if he hadn't created Windows... An alternative vision is
> one where a plurality to vendors are in a competitive market where standards
> allow OSes to interoperate. In such a market, the Windows product would not
> have been nearly so lucrative.

>He's not keeping it under the mattress I understand that money circulates,
but clearly it's benefits mainly accrue to the owner of the money. If it
really did flow around benefiting everyone as you suggest we could just give
all the money to one person and it would make no difference. There would be no
profit motive at all if money really worked like this.

>Finally he turned over the bulk of it to charity I think that's extremely
wise and very generous of him. I also think that it should tell you something
about how he feels about his fortune. However, I don't really want to live a
world where individuals can become so unreasonably wealthy, and then we cross
our fingers and hope they give most of it away. Just like we don't want to
live in a world where tax contributions are voluntary.

Ultimately for me there would only be sufficient inequality to persuade
everyone to contribute as much as they can. That means paying some more to
some very talented people to persuade them to work hard. Some people might end
up 10 times richer than others, perhaps more, but no one has to be motivated
by being paid 1000 times average salary.

------
cpwright
The article starts out saying that this group (the top .01%) has income that
is flying away from everyone else. As with most of these articles decrying the
income distribution, there is the implication that there is something
nefarious about this. At the end of the article, however, we learn that there
is a lot of churn in the .01% from year to year, which indicates that some
people are making a lot of money, but they aren't always the same people. I
doubt that most years they are hurting terribly, but it is still a very
different picture than the same people earning that much money year after
year.

~~~
vannevar
_I doubt that most years they are hurting terribly..._

They wouldn't have to 'hurt' at all, in fact they could experience personal
records for income every year, year after year, and still drop out of the top
400 (or top .01%), since it's a sliding scale.

------
kingkawn
This is missing the point I think of the original distinction between 1% and
99%. The people below the cutoff live in a state of economic vulnerability
that is ever-accelerating. The people above the line do not. If the goal was
to critique power itself then yes the further divisions are necessary. I have
not gotten a sense though that this is about ending inequality itself, but
rather in limiting how far one should be allowed to fall in a civilized
society, and how responsive a democratically elected government should be to
the majority of the population's needs.

------
jedberg
I've been thinking about this for a while. Last I checked, to be in the top 1%
in the US you had to have about $250K of annual income. In the Bay Area,
pretty much anyone who holds the title of Director or VP (and even Senior
Manager at some places) at any sizable tech company makes that much, if not a
lot more. So if you work at one of those companies, you might think your
Director is doing well, but you probably don't think of them as insanely
wealthy.

~~~
sokoloff
Because they probably aren't insanely wealthy. They just have a high income,
and probably have high expenses as well.

Insanely wealthy, to me, is the condition of having assets that throw off net
income that puts you into the top 1% of income before you've worked 200 hours
in a year. (You might have to work a bit to oversee and manage the assets, but
it shouldn't represent anything like a work-a-day job.)

~~~
JackFr
The big problem with the article is that the author conflates wealth and
income, and switches back and forth willy-nilly, so as to render all of his
claims -- without further clarification -- meaningless.

------
briantakita
I just read this eyeopening little novel
([http://marshallbrain.com/manna1.htm](http://marshallbrain.com/manna1.htm)).
The premise is America evolving technology + wealth/income inequality vs
another state evolving technology + all citizens have "shares" (thus
ownership) & relative wealth equality.

~~~
JimboOmega
I keep seeing this "meme" \- the "Star Trek Eutopia" vs. the massive
inequality ("Elysium" being the usual fictional example).

What's interesting is that this argument ignores the "apocalyptic" scenarios I
see in other contexts. They typically revolve around increasing scarcity,
societal collapse due to depleted resources, etc.

They overlap only in one place; I've seen one "apocalyptic' one that argued
the stratification of society means that collapse will occur because the
rich/powerful are isolated from feeling the effects of the scarcity until it's
too late.

But regardless; we can't have both - one where the earth's resources are
depleted, and another where the bounty is so great everyone can enjoy a middle
class standard of living, often without economically useful employment.

~~~
briantakita
Great idea. I wonder if we could commission such a book...

------
oskarth
What about the 1% of the 0.01%? Is there any reliable data on that? Who's to
say the same thing isn't happening there?

~~~
stackcollision
At first I thought you were joking, but then I realized that's actually a
really good question.

It'd be interesting to see a breakdown that took the top 1% of successively
smaller chunks until we see just how small we can get until the chart starts
to flatten out. But then again, maybe the author has already done that and
just didn't feel it was important to mention. Maybe 0.01% is the point at
which the disparity stops being so gigantic. E.g. the difference between the
0.001% and the 0.01% is not nearly as stark as the difference between the
0.01% and the 0.1% like we see on that second chart.

~~~
danielharan
Wealth distribution follows a power law, so I'd expect the difference to be
even more pronounced. The same with income as well.

------
AndrewKemendo
Where is all this leading? Is someone leading some kind of action to change
this or are we just gazing at the issue making ourselves all feel terrible? Is
it worth changing?

It seems like this situation is pretty historically standard anyway yet there
is progress on all counts.

------
microcolonel
What a moronic idea, that a thousandth of a population can actually have a
statistically significant effect on the entire population.

Equally moronic is the assumption that wealth is finite at any given moment,
and that it can be evenly distributed, this seems very close to entirely
false.

Junk journalism is driving unnecessary divisions in the U.S. culture, where it
seems people used to have respect for achievers rather than resentment, and
they would actually aspire to do better so they could spend that wealth the
way they saw fit.

Not a day goes by without another story of resentful abuse toward people by
mere association with "the 1%"(which we've already discussed to be an absurd
idea). For example, there was a story on HN not too long ago about police
brutality in the bay area toward people who seemed to local cops like the same
kid billionaires they see on TV, as though living where some tech giants came
from makes you somebody so terrible they deserve to be locked in solitary for
a day after asking basic questions to their captors.

How is the U.S. ever going to move forward if they carry nothing but hatred
for people who happen to be capable of investing? Whether by personal growth,
or by accident of birth, these are the kinds of people they should be seeking
sincere help from, rather than trampling on their rights over petty coin.

We can all go on the internet and well up all the irrational hatred we want,
pick your poison. You can go be a radical feminist on the internet and you'll
spend hours building irrational hatred for men. You can go join radical
transgender group and spend hours building irrational hatred for the majority
of the human population. You can go on the internet and be a radical religious
person(not going to bother being specific here) and justify all sorts of
horrible atrocities in your mind. But if you personally hate the fairly normal
people that occupy these lots in life, regardless of their personal merits, be
they "the 1%", or men, or people with heterosexual relationships, or people
who don't agree with your religious views, then you're a monster. You're not
even self-serving, you're destructive to everyone including yourself.

~~~
unclebucknasty
Americans generally venerate the wealthy and aspire to be wealthy themselves.
The bitterness you're describing is primarily attributable to the very real
sense that the game is rigged.

Just as "urban" and "welfare" have become stand-in buzzwords for poor African-
Americans, so has the term "1%" become a phrase for, not just the wealthy, but
for those among the wealthy who have gained at the expense of others through
financial engineering and other schemes. For instance, these same people grew
fabulously wealthy by wrecking the economy and not a single one received
punishment. In fact, everyone else bailed them out and they went right back to
the same schemes and obscene paydays.

Then, there's the general truth that, while people are working harder, wages
are effectively stagnant for many and an increasingly larger share of the
rewards are accruing to a shrinkingly tiny percentage of the population.

So, I think it's a naive false argument to blame people for "hating the rich".
What they really hate is being pimped.

------
sharemywin
The jump from 15% to 20% for capital gains should have some effect on that.

~~~
throwaway812
How? They still have gobs of principal lying around making gains. Unless you
mean it will help enable more progressive taxation and income redistribution
via the federal government?

------
spo81rty
So the 0.01% would be something like only 30,000 people or families.

------
for_i_in_range
It still bothers me they call it "Income Inequality".

------
Eleutheria
Innocence.

When people in the 1% prints a trillion dollars a year and hand it over to his
cronies, it has nothing to do with working hard and having accumulated capital
to invest and grow wealthy.

It has to do with theft, in a grand scale.

------
bmmayer1
"Income Inequality" is a complete misnomer in this case because even according
to this article, the wealth gains are made from investment income ("And it's
this investment income, rather than ordinary earned income, that's creating
this extraordinary wealth gap").

Increased investment income is a good thing because it points to investment
income for everyone else, too: your grandma's pension, your 401(k), your stock
portfolio. This is just evidence of the pie getting bigger, not a small
handful of robber barons running off with everyone's money, as this amusing
"1%-er" talking point is always presented to be.

~~~
pr0zac
Asking because I don't understand the thought process involved in these posts.
Are you purposely choosing to ignore things like the first graph that shows
more than 60% (almost 80%) of people having a net negative change in income
over the last 30 years or just not understanding what that graph means?

