Merit, Luck, and Disruption

There’s a book coming out by Yale lawyer and economist Daniel Markovits which I am eager to read — “The Meritocracy Trap: How America's Foundational Myth Feeds Inequality, Dismantles the Middle Class, and Devours the Elite.” It comes out September 10th. Here’s part of the blurb for the book — see if this sounds at all familiar:

Today, meritocracy has become exactly what it was conceived to resist: a mechanism for the concentration and dynastic transmission of wealth and privilege across generations. Upward mobility has become a fantasy, and the embattled middle classes are now more likely to sink into the working poor than to rise into the professional elite. At the same time, meritocracy now ensnares even those who manage to claw their way to the top, requiring rich adults to work with crushing intensity, exploiting their expensive educations in order to extract a return.

Until the book comes out, I’ll have to satisfy myself with things like the following preview-copy-inspired rant from last week’s “Pivot” podcast with Kara Swisher and Scott Galloway, a show I can’t recommend enough. The following quotes are from Galloway, who — once he gets going — is a ball of fire:

. . . since the 1950s, the number of people who go from the lowest quintile to the highest quintile has been cut in half. This notion of meritocracy is very dangerous. It’s dangerous for a few reasons. Standardized tests — the SAT? — the term “standardized” is total bullshit, because kids who come from families that make more than $200K a year on average score 240 points higher than kids from families that register less than $40K per year. . . . universities have more students from the top 1% of income-earning households than from the bottom 60%. So, the notion that we live in a meritocracy is not only totally incorrect, it’s dangerous. And the reason it’s dangerous is it creates this general gestalt that if you aren’t successful, if you aren’t a millionaire, in the United States, that you’ve fucked up. And every day we get reminders on our social feeds of all the cool toys and fabulous people that our friends are playing with and hanging out with, and it’s layered with this icing that we live in a meritocracy, so if you aren’t on a yacht partying with the Kardashians . . . it’s your fault.

Galloway’s extemporaneous thoughts bring to mind Jim Collins’ work on corporate functioning, in which good leaders accept luck (both good and bad) as part of life. As a result, good leaders do not blame or brag or cause wild gyrations if bad or good luck occurs. They recognize that a lot of what happens is due to luck — a combination of forces they can’t control and either benefit from or struggle to deal with. That’s why so much of business is about risk mitigation.

Galloway believes people can mistakenly credit their good luck to their wit, charm, intelligence, or tenacity. We’ve all seen where this leads in extreme cases — people feeling they can flout the rules to get their kids into the best colleges, for example, just because they were lucky enough to land a lucrative role on a popular television show. To them, good luck in one area means permission everywhere.

People with talent, wit, charm, intelligence, and tenacity still rise or fall largely due to luck. Galloway — who was born in California — acknowledges the role of luck in his success:

I’m guilty of it, too. . . . I’m constantly boasting about my background, and where I ended up, because I’m very proud of it. But here’s the reality. Being born a heterosexual white male in 1964 was literally the luckiest lottery ticket. Because what did it mean? It means you came into the University of California in the ‘80s where you got into an amazing university for free. It means you got to graduate into the greatest economic creation in the history of mankind, where more wealth was created within a 7-mile radius of SFO airport in 7 years than in all of Europe since World War II. It literally meant you were caught in the greatest updraft in history, and I think for a long time, a lot of us, including myself, credited our success to our character and our grit, not recognizing, “You know what? We just got really, really lucky.”

This is perhaps the most important thing to recognize in our current moment. Our culture is behaving as if rich is good and poor is bad; as if struggling people are morally deserving of their struggles, while rich people deserve to disrupt and destroy.

Concentrated wealth and power makes luck more important than ever, something that probably drives some of the behavior we see around preprints and other efforts to improve the odds of success. In the excellent new book, “Rockonomics: A Backstage Tour of What the Music Industry Can Teach Us about Economics and Life,” Alan Krueger writes about the gutted middle and the superstar culture in music (and life):

. . . luck matters for success more than ever. . . . Bill Gates might have been Bill What’s-his-name if Gary Kildall and Digital Research had agreed to the terms IBM first offered them for developing the operation system for the new personal computer in 1980. . . . good luck and bad luck play outsized roles in the rock and roll industry, much as in life itself.

The more I think about this, the more of a fundamental problem this conflation of luck and merit seems to me. It can make lucky people feel validated in anything they do — entitled, in other words. For instance, entitled people — those who sit or feel they sit atop the meritocracy — have shown little compunction about disruption. They create algorithms that keep poor people and minorities down. They revel in their own sexism, because — they feel — their wealth and privilege equates to merit, which grants permission through superiority. They invent business models that have led to reducing the number of professional journalists by half, cratered local news coverage, reduced the accountability of government officials at all levels, and enabled corruption. They’ve rejected social norms, believed they can create currencies, and allowed their inventions to be used to subvert democracies worldwide — yet remain unmoved by the death, chaos, and pain their actions or inactions inflict. After all, they haven’t been just lucky — they sit atop the mythical meritocracy.

I’ve started to feel that “disruption” has become a hobby of the entitled, one swept up with the abiding notions of the meritocracy. After all, who is ostensibly being disrupted? Well, only those who deserve to be disrupted because they are weak — you know, journalists, editors, local store owners, local restauranteurs, cab drivers, machinists, the less educated. When people crow about disruption, you can almost feel the joy in the callous power of the idea. Disruption has become an economic attack on the middle by the lucky — and it’s not the only one, as Galloway notes in a further elaboration of his rant:

The greatest redistribution of wealth in the history of mankind has been happening for about 30 or 40 years, and that’s the redistribution of wealth from poor, young people to older, rich people in the form of capital gains tax cuts, mortgage tax deductions, and then the ultimate transfer, Social Security. . . . We need to have a serious readjustment or re-leveling from the transfer of wealth from young and poor people to old and rich people that has taken place . . . because it has really punctured any meritocracy notions.

It was encouraging to see recently dozens of CEOs on the Business Roundtable add nuance to the “shareholder value” mantra that has driven corporate behavior for decades. They have articulated a longer list of goals corporations should pursue simultaneously:

• Delivering value to our customers.
• Investing in our employees.
• Dealing fairly and ethically with our suppliers.
• Supporting the communities in which we work.
• Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate.

The focus on “long-term value” for shareholders echoes the recent emergence of the Long-term Stock Exchange (LTSE), which I wrote about here. Publishing a list like this gives lawmakers, lawyers, and citizens new leverage over corporations, who now have to justify their actions on five fronts, rather than the single front of shareholder value.

I’m looking forward to reading Markovits’ book in a couple of weeks. I hope it adds to the lights being shined on such faulty cultural practices and ideas, including the notion that success is due to merit, which has led to a dangerous cultural appropriation of “disruption” — and the bad habit of considering disruption a virtue.

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