About Economic Risks and Rewards

In an Wired article with the promising title, “Silicon Valley isn’t a Meritocracy“, Alice Warwick doesn’t take long to make one of the dumbest statements I’ve read in a while:

If the tech scene is really a meritocracy, why are so many of its key players, from Mark Zuckerberg to Steve Jobs, white men?

It almost seems that you could compile an encyclopedia with examples of logical fallacies just by skimming feminist blog posts for a couple of hours. Here, Alice Warwick, let me teach you something.

First, you should have learnt about survivorship bias. Yes, some entrepreneurs are very successful. However, the great majority is not. Since you mention him, Alice, why don’t we spend some time discussing Mark Zuckerberg? Sure, he is a billionaire now, and inspiration to thousands of young men and women who are building their own startup. But do you think those thousands of people will all become billionaires as well? You know, Alice, just because one guy wins the jackpot doesn’t mean that it’s a good idea to spend all your disposable income on lottery tickets.

Mark Zuckerberg dropped out of Harvard to launch Facebook. Great idea, right? Well, it’s a great idea in hindsight. Look what Matt Welsh, one of Zuckerberg’s professors in the Harvard computer science department, had to say:

I thought that social networking sites were a complete waste of time — both for the users and those developing the sites — so I earnestly tried to talk Mark out of squandering his precious Harvard education on such a frivolous endeavor. “You think you’re going to compete against Friendster and Orkut?” was the general outline of my argument. There were already too many social networking sites out there, I claimed, and building yet another one was clearly a waste of time.

Some of you may not even remember Friendster anymore, or Orkut, or MySpace. The point is that Zuckerberg was up against pretty bad odds. The reasonable choice for him would have been not to drop out. If this is too philosophical for you, Alice Warwick, then maybe you remember something from the statistics classes you hopefully took. Let’s say you have a look at Wikipedia’s list of college dropout billionaires.

Wow, look at all those rich people! But not so fast, Alice! There are 30 college dropout billionaires, but does this imply that it’s a great idea to do as they did? I’m quite certain that the number of people who dropped out of college, or didn’t even attend college, and did not become millionaires or billionaires is many orders of magnitude larger than that. Zuckerberg took an enormous risk, but he also reaped astronomical rewards. Does this imply that Silicon Valley is sexist? If you look at all the “losers”, in other words, those who launch a startup and fail, or get nowhere for years, you can only conclude that despite the fact that the few winners are male, the vast majority of losers are male as well.

Women just don’t seem to want to take those risks. They don’t have to, but as long as they don’t, it seems rather silly to claim that the problem is sexism. Feminists cherry-pick their evidence and are either unable or unwilling to reflect over their perception of the world. To repeat: The risk-takers are predominately men, and consequently the few winners are men, but also the vast majority of losers. In Alice Warwick’s world it almost seems as if the wild economic success attained by a very few is not meritocratic just because there is no 50-50 gender split. However, where are all those female CEOs supposed to come from if women aren’t interested in making those big bets, the big gambles that sometimes that lead to great payoffs, but are much more likely to end in disaster?

The more rational choice for Zuckerberg, and Jobs, and many others who succeeded, would have been to continue on their chosen path towards a solid middle-class existence. Shall we use another example, Alice Warwick? Okay, let’s say you’re a professor at an elite university, and one of your first-year students told you he wanted to quit his studies and become a musician. The student is a young lad studying accounting at the London School of Economics, and his name happens to be — Mick Jagger!

This is not a joke. Mick Jagger did indeed study accounting at the London School of Economics. This would arguably have set him up for life. Instead, he took a gamble and became one of the most successful musicians in the world. He’s not Zuckerberg-rich, but with a few hundred million dollars in the bank he is quite a bit more comfortable than the average Joe. In hindsight he made the right choice.

In 1961, his choice was not rational, and there were thousands of boys his age who did the same thing who are now sweeping streets, collecting garbage, or tending bar.

The odds that you’re going to become a wealthy musician are laughably small. Even just getting by as a musician is incredibly difficult. The chance that the startup you’re working on in your bedroom will blow up to be worth billions of dollars is virtually zero, and so is your chance of becoming a tenured professor at Harvard, a successful author, an influential composer, a ground-breaking movie director, a lauded painter, or a star athlete. However, the reason why it’s so often men who end up in exactly those positions is because they do take those utterly irrational risks.

The vast majority will fail. Plenty will waste years if not decades of their life. Many will never recover economically from pursuing their dreams in their 20s and 30s. Yet, a very small and fortunate number does succeed. It’s mostly men who succeed because it’s mostly men who do take those risks. As a society we should be proud of those men–and also of all those who try but fail. I can’t help but think that instead of trying to guilt-trip men and insist that they enjoy some kind of “privilege,” a stronger focus should be on why women tend to avoid those risks.

The answer is of course that they are more risk-averse.

Without risk there is also no reward. This isn’t so bad, because if you don’t take any risks, you also minimize your chances of failure. But, dear Alice Warwick and all you other feminists, doesn’t it strike you as absurd that you do want to have your cake and eat it, too? You don’t want to take any risks, yet somehow society is supposed to turn women into CEOs, superstar programmers, tech billionaires and whatnot, even though they themselves make little effort to take the risks necessary do so?

This article is also available in Romanian.

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