The ‘Matthew’ Effect: The Engine of Inequality
- December 8, 2017
- 5-Minute Read
We live today in a very unequal world, while some have luxury yachts others are not sure if they will eat today—and this is not some diet fad. While some people get PhDs others don't learn to read or write. So what's wrong?
This might get some people mad and others happy, but this is a very uncanny observation about the world.
You might have heard of this passage of the christian bible:
“For whoever has will be given more, and they will have an abundance. Whoever does not have, even what they have will be taken from them.” — Matthew 25:29
Basically, it describes the following: “the rich get richer and the poor get poorer.”
The sociologist Robert K. Merton originally coined the term ‘Matthew Effect’ mainly to describe how eminent scientists got even more “eminent”, while the relatively unknown researcher did not, even when their work was similar.
The Matthew Effect can be used to describe phenomena in Education, Computer Science, Economics, Astrophysics... The Matthew Effect describes cumulative advantage.
- Stars with huge mass get even more mass and the small objects that surround them get swallowed up;
- The earlier someone starts practicing something and the longer they stay true to their goal the more opportunities they will have to expand their skill;
- Bigger websites grow faster than small ones—sad;
- Famous celebrities get even more famous;
- The more money someone has the more money they can make through investments—even more sad;
- The more learned a person is the faster they can learn; etc.
Of course, all of these examples have one thing in common—they have limits.
Nothing can grow forever, no one can learn everything there is to be known, and certainly no one can have all the money in the world—an economy of one person doesn't quite is an economy.
The Matthew Effect or Cumulative Advantage is a very interesting observation about nature and the world. But we need to be practical here. Who cares if the sun will reach its limit and run out of its fuel in some billions of years and kill everyone. We need to talk about money, everyone loves to spend money.
If the amount of money you earn is equal or less than you need to survive, you will not have surplus money to invest, so you can only financially grow by improving your own personal money-making capabilities. Studying, getting a better job, etc.
Now, if you do make more money than you need to survive, the excess money can be now invested, then your money, luckily, begins to compound with your investments returns. Boom! You rich.
Not so fast. Everything has resistance, if you are skilled at investing certainly you can outplay the resistances and despite of them come out on top.
Nothing is simple in life, if life was simple you wouldn't need a 100-billion-node neural network between your ears... and still need computers to do some dirty work. So, not only you need to have money to invest, you need to be good at dealing about business with people, problem solving, abstract thinking, creative thinking (101 ways to separate people of their money), and of course arithmetic.
So when you finally get rich you are very proud of your accomplishments, it obviously is your reward for so much diligent work and nobody else deserves it but you. So what you do? You get more money, because that is your life now, you became a money-making machine.
The problem is that people get touchy when their businesses, even though successful, are harming the economy or the environment. And by economy, they are harming other people, because that is what an economy is, people.
Capitalism is great, by far the best system available, but it has flaws, and one of them is this: people will buy what they want, and not always they need what they want. Many many times what they need is not what they want.
People not always need a better, more expensive smartphone, they certainly want it. And they do whatever they want with their money, there is nothing stopping them, except the right education, tons of good books and other things that some people also don't want, but certainly need.
Business people are here to fulfill all your desires, well, more like your most profitable desires.
The thing is, the choice of where our money goes is ours, so we should choose wisely, because companies invest billions and billions of dollars trying to convince us that we need something when we don't actually need it.
Yay, ahem... The Conclusion
Cumulative advantage is everywhere, there is nothing we can do, but we can choose what we feed the beast. We must choose wisely. We are in a very strange moment in history, there are huge threats looming in the distance—global warming, artificial intelligence, etc—and any misstep can lead to disaster. Don't think for an instant that the machines will not use cumulative advantage for their benefit.
Perhaps, what our leaders lack is understanding, they are so good at telling people what to do, but many don't seem to understand what needs to be done. It is very awkward to see so much abundance in the world and still see people without access to food and education. If people rule in a democracy shouldn't it be logical that educated people rule much better? Don't they realize that reality shows are harming the world?
Well, digress we did ay. Thank you so much for reading.