Understanding Opportunity

In a recent post I did some thinking about opportunity and how we tend to confuse opportunity for one person with opportunity for everyone, overlooking the way systemic effects may overpower individual effects. This post looks more into the nature of opportunity itself; it is less about power and systems and games and more about what opportunity means to us and how it functions in our lives and political ideas.

Merriam-Webster defines opportunity as "a good chance for advancement or progress", but this definition does a poor job of capturing the word's political-economic implications. When we talk about opportunity, I would argue instead that we are talking about "the ability to succeed." But beyond this broad definition there is not a lot of agreement between different political persuasions.

There are several questions that can help us figure out what we are talking about when we talk about opportunity and "the ability to succeed." I start off asking, what is success and who do we see as successful people? Then I explore how likely we are to succeed. Finally, I examine what it takes to get there: how is success achieved? And how do we enourage it as a society?

What is success?

Success is a complex concept, but we can think of it terms of a number of handy ethe (I had to look that plural up): I'll call them White Picket Fence, Zuckerberg, Horatio, and Beating the Joneses. These ideas of success are from a purely economic standpoint; there are other, critically important factors that I do not consider here at all.

White Picket Fence is the idea that everyone who works hard is entitled to a decent middle class life. It's a common formulation of The American Dream. Success here is defined as reaching an acceptable median standard of income and achieving an acceptable quality of life. Part of the idea is that it's available to anyone and everyone--it's your door prize for being American, working hard, and playing by the rules.

Zuckerberg is the idea that you can not just succeed but... succeed. That you can blow everything else out of the water, because nothing is holding you back. The key to the Zuckerberg conception of success is that there are no limits, and that individuals are free to compete and to win, in ways that have never been known before, because it's better for society if they do. Not everyone will succeed, but that's ok--either because the winning ends up benefiting others (e.g. through new inventions) or the chance of being astronomically rich provides a crucial incentive for everyone.

Horatio is the idea that succeeding means doing better than your parents or your current situation. It's most closely aligned with the dictionary definition of opportunity--the idea of improvement and advancement. It measures your success relative to your past success--how you have advanced over time. It also has the most to do with the idea of a meritocracy, which will be discussed more below.

Beating the Joneses is the idea success means doing better than other people. It defines success as being above average, it's it's a relative measure it depends more than anything on the success of everyone around you. Of these models of success, it's at once the most social, small-minded, and maybe the most realistic in terms of what really motivates us. It may have implicit meritocratic assumptions ("I drive a bigger car because I'm smarter and do a better job at work.") or it may not ("I drive a bigger car because my parents were rich.").

While these visions of success are limited to economics (meaning they are only concerned with money and "stuff") they are nevertheless revealing. They can get us started thinking about what our goals are for our society. When we argue that having a large middle class is good for a country, we are arguing for the White Picket Fence idea of success. When we argue that tax rates on the rich are too high, we are arguing in favor the Zuckerberg idea. When we support first-generation college student subsidies, we support Horatio.

There are countless policies, laws, and economic forces that help shape what kind of vision of success is ultimately realized, and for whom. On an individual level, we can think of these things as affecting our chances of success.

How likely are we to succeed?

We often think of opportunity, and whether it exists in a society, in a sort of binary mindset: either on or off, nothing in between. Either you can lift yourself up by your bootstraps or you can't. Either you can get rich or you can't. Either a black man can go to Harvard and become President of the United States or he can't. The ability to do something is an important concern. But it can be a gross oversimplification.

Success is much better understood as a probability. It makes a big difference whether your probability of success is 10% or 100%, whether your chance of getting a job is 3% or 30%, or your chance of getting into a top school is 5% or 50%. If it is 50%, you are competing in with one other person; if it's 5% you are competing with 19. Do we want to live in a country where one person gets to be rich, one person gets to be middle class, and the other 8 people are poor?

As I wrote about in my recent post, we cannot ignore the structural aspects of success. School is a good example because there are clearly a limited set of outcomes (admittance) that qualify as a certain level of success (to a top school). It is important that anyone in the USA can go to a top school, but it is probably more important that everyone in the USA cannot go. If you dismiss the aggregate aspect, you miss out on a critical determinant of what success is and what it means for a society. Thinking of success in terms of probability can help us see those systemic effects in individual terms--it helps us see some of the implicit difference between Zuckerberg and White Picket Fence, for example.

Of course, the probability of success is not the same for everyone, and we need to better understand which aspects of success are structural and which are individually based. While there may be a limited number of admittance slots, some students are clearly more likely than others to get into the most prestigious schools. Some people are clearly more qualified for certain jobs. Merit and ability and a million other factors also play a role in success. But how much and in what way?

What does it take to get there?

The idea of success implies an attempt, an achievement arrived at through some means or another. You do not just wake up one morning and find yourself successful--it has identifiable causes.

One of those causes is luck, of course, but other causes of success are more determinate. You might be a brilliant, risk-taking entrepreneur and design something very useful that everyone wants, and in exchange they might give you enough of their money for you to be successful. You might study hard and work hard and provide a good deal of value for your employer. You might have a well-to-do family that made sure you did your homework and had tutors and got into the best college and got you in the door for an interview at a prestigious firm.

Opportunity as conceived of today in America is intimately connected to the idea of merit. The idea of a meritocracy, though originally intended as a distopian satire, has caught on as a sincere ideal precisely because it is a good thing when capable, motivated people can succeed in a society. Otherwise, why would anybody care about being motivated or capable? Although few people would probably turn down a winning lottery ticket, the visions of success listed above turn on deserved reward, not arbitrary benefit. This is a good thing, and I think it is much better than holding comparatively undeserved respect for an aristocracy.

But Young's original critique of the idea of meritocracy (previous link) still stands. Young argued that we could end up with a solidified ruling class built on arbitrary definitions of merit that are hardly fairer than divine right: a new aristocracy based on whose kids went to the best prep schools, or based on whose kids did not grow up raised by absentee fathers and gangs on the street corner.

Young argues (as I understand from his article; I haven't read Rise of the Meritocracy) that we need to have a broad, accessible vision of success. That even if we can conceive of a completely fair selection process for success, it is dangerously possible to have outcomes of such a system that are anything but fair. If we have an economy where everyone takes a test and the top 10% of people get great jobs and the other 90% of people end up working work fast food, fairness does not get us very far. We would have built a system that fails to incentivize the majority of people.

You may counter that fairness be damned, society still needs some kind of selection process. We would not watch much pro basketball if NBA teams were required to give anybody who tried out a spot on their starting lineup. We prefer our leaders to be competent and hardworking and our scientists to have a clue. We can't just give jobs to whoever wants them--many of them require smart, capable people.

Of course we need a selection process. But the current process is problematic it is in many ways not set up to incentivize people for absolute success--and absolute success is what matters more for society. Businesses want people with certain definable skills, not just someone who is better than somebody else. We want leaders with integrity and competence, not simply a leader who is not as bad as some other guy. Relative comparisons do matter, but not nearly as much. Selection can be fair without it doing a good job of incentivizing real achievement, because our chances are based on relative criteria: if I know I have to be the best to succeed, I might be less motivated than if I instead have to have a high level of competence.

Looking at society more broadly, it seems to make sense to structure an economic system so that individual success is achieved by the creation of public value both now and in the future. This is the whole idea behind the invisible hand. However, a given individual's relative success matters little to the society as a whole--the absolute level of success, as measured by education and skill and competence and motivation is far more important. If we want to have an economic system with opportunity, we need individual freedom and meritocratic individual incentives, but we also need a system that rewards people for absolute performance and achievement and not only relative achievement.

Everybody Wins

Everyone loves the Olympics. Normal human beings, through their otherworldly persistence and talent and physique, are transformed for a few weeks into a vast pantheon of gods, each lording over his or her small, specific domain. Three medals are awarded, but there is only is only one winner: the best out of billions.

That's what tournaments like the Olympics are designed to do: find the best. They do this through various designs--single elimination brackets, round robin play, point differentials. Each participant works their way towards a single goal, and after every game or match they are sorted according to strict rules for winning or losing. But regardless of the format, one winner remains. That's how tournaments are designed.

Tournaments are built to find a winner, but in terms of numbers they are much better at creating losers. And that is not even counting the "implicit losers" like you and me--and all the people around the world that don't even try to compete. Imagine if we all had to participate in the Olympics: if everyone in the world had to run the marathon, swim the 400 butterfly, and attempt to lift barbells over our head. It would be a mess.

The tournament format of the Olympics works because competing is optional. If that was you in the pool barely making it back to the wall, how excited would you be every four years?

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Just like their Michael Phelpses and Dream Teams, Americans are proud of their Horatio Algers and Mark Zuckerbergs. It's great to live in a society where anyone can become rich with a bit of luck and a dabble of hard work. The word "opportunity" fills us with warm fuzzies and epic trumpets at the same time. It's so fair.

But there's a distinction that doesn't get made often enough, between anyone and everyone. Anyone can become rich, but can everyone become rich? What if you get your bit of luck and put in your dabble of hard work... but so does the other guy. What happens then? Does the wealth just split down the middle? Or does the person with the extra smidgen of luck (or the one short a few scruples) end up grabbing it all?

Sure: in a sense everyone, or mostly everyone, has become rich--relative to Americans 100 years ago or a rural farmer in India. These are absolute terms. And the bar is set rather low. In relative terms, measuring the gap between members of society, it's another story. American income is more unequal now than any time since the great depression (see this excel file); wealth is worse. Further, since the 1980s we things have been getting worse for many people even in absolute terms (see this pdf report).

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The rules of our economy are far less clear than the 100m dash. We don't have to run the same direction, we are allowed to carry other people or trip them, it takes far, far longer. But the Olympic metaphor is a useful one, because it's useful to think of an economy as a system of rules that produces certain outcomes. We know this intuitively; for example, we care about how much the government levels the playing field or holds us back. Depending on how we believe certain rules work, we have different ideas about which rules should exist.

What we tend to overlook is the fact that we are all playing together, and, like a tournament, the rules of the game often dictate that our individual level of performance is irrelevant. What matters instead is how we perform relative to others. It doesn't matter if you scored 99% if everybody else got it perfect, if you broke last year's world record if everyone else breaks it more.

Sure, for some things individual performance is fine--if you are cooking your dinner for yourself, for example. But if you want to be a chef--if you want to cook for economic gain--your ability to do so is determined not solely by how good your food is but by a host of other factors as well. These factors (the number of restaurants, the number of other people competing to be chefs, the ease of opening a new restaurant) are not something you control, they are not something any other person controls directly, and they may not be something anyone even could control.

My purpose isn't to conduct a detailed analysis of the restaurant industry, however. I am arguing that our economy, like the Olympics, functions according to a set of rules. Those rules may be as immutable as the laws of physics or the amount of gold currently present on earth. They may be clearly defined but socially determined laws, like the amount of taxes you pay or the fact that you generally aren't allowed to steal things.

BUT--and this is my real point--there are also rules that we understand far less well and may not even realize exist. Causes and effects that are only dimly aware of. These rules are often complex: they depend on giant masses of people each acting in their own way. Such things are what economics tries to study--but as any economist will readily tell you, the tools and scope of economics are extremely limited.

To really understand the distinction between "every" and "any", between the Olympics and, say, a yoga retreat, we need to understand how wealth and resources move around an economic system: to "follow the money" in its weblike complexity. Does wealth spread out or concentrate? Does it flow toward or away from power? Can everybody be a winner? Or does one person's loss necessitate another's gain?

Such questions will be the subject of posts to come.