Why "the 1%" exists

published Jan 20, 2020

It's not because of an evil conspiracy.

I am going to tell you a secret that will probably evaporate any resentment you have for successful people.

We often hear about "the 1%" owning a ton of wealth. This is clearly true. But the conversations about the subject often carry the implication that they are somehow "evil", or it's that nasty capitalism which causes the 1%, and so on and so forth.

This is a very popular myth. You are about to see it vanish in front of your eyes.

First off, you must understand: making money is a specific skill, just like playing basketball, swimming, soccer, teaching, etcetera. If you are good at making money, it's practically a certainty that you will have a lot of money by default. That's just how it is.

Second thing you must understand: skills are never evenly distributed. Any random schmoe from the street is not going to be born with the skill to play NBA-level basketball. In fact, just about a tiny, tiny fraction of people (way less than 1%) get to play basketball in the NBA. To be quite specific: skill distribution follows a Zipf curve, with very, very few people having a lot of a specific skill, and most people having little or none at all. If I may use a sort of clichéd analogy here: evolution does not stop at the neck.

Still with me?

OK, here's the revelation: just like basketball stars, there also exists a top fraction of people who make money like you can't even imagine. They study and understand finance, business, economics, law and many other essential areas needed to create wealth, maintain it, and multiply it. And, just like you ask yourself "how does that Michael Jordan make 3-point shots look so easy?", you'll ask yourself exactly the same thing about these types of people highly skilled at making dough. While you're actively working for your salary, they are out there setting up businesses or managing assets that make money passively for them... which sounds real easy until you try it.

What's more: capitalism has nothing to do with it. If these people found themselves in a Communist State, they would probably still make money (perhaps not as much) by using the methods commonly favored by communists (fraud, extortion, violence). Sure enough, capitalism enables these people to be more productive when exercising their skill — capitalism in general makes everyone richer — but you must also remember that "the 1%" also existed in Communist States (they were all in the government in organizations named like "Politburó", of course).

So there you go. Now you know why there is such a thing as "the 1%", and how it does not involve any sort of evil or conspiracy at all — it's just a simple matter of skill distribution.