Someone explain to Alexandria how rich people get rich

The first-term Congresswoman Alexandria Ocasio-Cortez's ambitiously socialist Green New Deal to decarbonize the U.S. economy and create jobs isn't a metaphor for money — although it will require all of yours and much more just to attempt her utopian vision of a carbon-free world in which everyone is staked with a home, food, transportation, higher education, and health care. 

Despite (or maybe because of) a degree in international relations and economics from Boston University, Ocasio-Cortez suffers from a core economic misunderstanding.  In a phrase, it is her belief that the rich have money the poor would otherwise have.  So she has a problem with billionaires.  Hers is the delusion that possesses every socialist, so many of whom believe that the movie Trading Places was a documentary. 

Ocasio-Cortez doesn't understand why so much of the world's wealth is possessed by so few.  The answer is diversity: the diverse distribution of the traits necessary for enormous success.  As might be expected, all the human traits are distributed more or less normally throughout any population — roughly the way grades break out in a large classroom. 

It is the same with most any measure of a population: the majority (more than two thirds, actually) of individuals will score within one standard deviation of the mean (or average) on any measure of humanity, whether it is our height or our hemoglobin, our resting heart rate or our bone density, our general drive or how fast we can run, the strength of our immune system or our longevity — you name the category. 

The normal distribution of human traits also explains why freedom and diversity are so positively correlated — that is to say, the more individual freedom, the more diversity expresses itself in any form of human productivity, from toys to tablets, from art to aircraft, from molly bolts to movies. 

An unusual endowment of several traits is necessary for the creation of great wealth in a comparatively free market: good health and high intelligence, along with four of the Big 5 traits (distilled from Raymond Cattell's 16 Personality Factors).  High scores on openness (that leads to creativity) and conscientiousness (the likelihood of staying on task and following through on commitments) are essential, along with at least enough extroversion to accomplish some networking or collaboration and sufficient agreeability to get along with potential partners and customers.

The recognition that only a small subset of any population scores really high on any of the traits that are most essential to great success explains why the one or two percent most wealthy people are...one or two percent.  But it is a little more interesting than that. 

There is a rule in statistics about combining probabilities that is in a profound sense the beginning of socio-political wisdom.  The Multiplicative Rule states that to calculate the likelihood that two or more events will occur requires the multiplication together of each event's individual probability of occurring.  The commonest easy example is the probability of two consecutive coin tosses both coming up tails: one in four, or 25 percent—the result of multiplying together the 50 percent probability that each coin toss will come up tails (0.5 x 0.5 is 0.25). 

Now apply the multiplicative rule to the odds that any one person will acquire an unusually large measure of the several traits required for exceptional wealth.  Assume good health (an uncertainty in itself), but apply the rule to people that score at the 95th percentile (five out of 100 people) or above on just three of the success dependent traits — say, openness, conscientiousness, and intelligence.   The math — 0.05 x 0.05 x 0.05 = 0.000125 — suggests that little more than one in ten thousand people has that kind of potential, or around 17,000 individuals in the U.S. between the ages of birth and forty.  Obviously, beyond some point (perhaps the age of 40), with increasing age, unmade fortunes are increasingly likely to remain unmade.

The 17,000 are very unusual, as evidenced by how infrequently their level of combined traits actually occurs.  They will make a good living at most any profession to which they commit themselves.  Even if it is just their well-informed time they have to sell, they will work their way into the top one or two percent of American income-earners.  

Of the few people who have the personality traits — not to mention the interest — necessary to devise, develop, and bring to market a successful invention or product, brand, or service that can make them super-rich — most manage to do so because what they devise and offer is scalable, and "everybody" wants their product, to be on their payroll, or to own some of their stock.  (An individual's time is not scalable, although it almost seems to be in the case of the salaries of the CEOs of major corporations or when that defense attorney sends a bill just for thinking about you.)

Unusual cognitive ability and manifestation of the requisite personality traits are essential to, but not exclusively determinative of, great wealth.  There is a measure of time and chance in all accomplishment. 

Without the much maligned one percent who devise, build, and distribute the benefits of our most essential industries (food production, health care delivery, transportation, communication, construction, and service), large populations concentrated in modern megalopoli would not have jobs — wouldn't have socks, for that matter.

But the radical truth about the extent of human diversity appears lost on old and new socialists like Bernie Sanders and Alexandria Ocasio-Cortez as they blame the rich for earning money they seem to think the poor would otherwise have and attempt to herd their fellow Americans toward a Green New Deal.  Their idea of Heaven on Earth is the politics of Hell. 

The author has a master's degree in psychology from Pepperdine University and directs publications at an American school of dentistry. 

Image: Global News via YouTube.

The first-term Congresswoman Alexandria Ocasio-Cortez's ambitiously socialist Green New Deal to decarbonize the U.S. economy and create jobs isn't a metaphor for money — although it will require all of yours and much more just to attempt her utopian vision of a carbon-free world in which everyone is staked with a home, food, transportation, higher education, and health care. 

Despite (or maybe because of) a degree in international relations and economics from Boston University, Ocasio-Cortez suffers from a core economic misunderstanding.  In a phrase, it is her belief that the rich have money the poor would otherwise have.  So she has a problem with billionaires.  Hers is the delusion that possesses every socialist, so many of whom believe that the movie Trading Places was a documentary. 

Ocasio-Cortez doesn't understand why so much of the world's wealth is possessed by so few.  The answer is diversity: the diverse distribution of the traits necessary for enormous success.  As might be expected, all the human traits are distributed more or less normally throughout any population — roughly the way grades break out in a large classroom. 

It is the same with most any measure of a population: the majority (more than two thirds, actually) of individuals will score within one standard deviation of the mean (or average) on any measure of humanity, whether it is our height or our hemoglobin, our resting heart rate or our bone density, our general drive or how fast we can run, the strength of our immune system or our longevity — you name the category. 

The normal distribution of human traits also explains why freedom and diversity are so positively correlated — that is to say, the more individual freedom, the more diversity expresses itself in any form of human productivity, from toys to tablets, from art to aircraft, from molly bolts to movies. 

An unusual endowment of several traits is necessary for the creation of great wealth in a comparatively free market: good health and high intelligence, along with four of the Big 5 traits (distilled from Raymond Cattell's 16 Personality Factors).  High scores on openness (that leads to creativity) and conscientiousness (the likelihood of staying on task and following through on commitments) are essential, along with at least enough extroversion to accomplish some networking or collaboration and sufficient agreeability to get along with potential partners and customers.

The recognition that only a small subset of any population scores really high on any of the traits that are most essential to great success explains why the one or two percent most wealthy people are...one or two percent.  But it is a little more interesting than that. 

There is a rule in statistics about combining probabilities that is in a profound sense the beginning of socio-political wisdom.  The Multiplicative Rule states that to calculate the likelihood that two or more events will occur requires the multiplication together of each event's individual probability of occurring.  The commonest easy example is the probability of two consecutive coin tosses both coming up tails: one in four, or 25 percent—the result of multiplying together the 50 percent probability that each coin toss will come up tails (0.5 x 0.5 is 0.25). 

Now apply the multiplicative rule to the odds that any one person will acquire an unusually large measure of the several traits required for exceptional wealth.  Assume good health (an uncertainty in itself), but apply the rule to people that score at the 95th percentile (five out of 100 people) or above on just three of the success dependent traits — say, openness, conscientiousness, and intelligence.   The math — 0.05 x 0.05 x 0.05 = 0.000125 — suggests that little more than one in ten thousand people has that kind of potential, or around 17,000 individuals in the U.S. between the ages of birth and forty.  Obviously, beyond some point (perhaps the age of 40), with increasing age, unmade fortunes are increasingly likely to remain unmade.

The 17,000 are very unusual, as evidenced by how infrequently their level of combined traits actually occurs.  They will make a good living at most any profession to which they commit themselves.  Even if it is just their well-informed time they have to sell, they will work their way into the top one or two percent of American income-earners.  

Of the few people who have the personality traits — not to mention the interest — necessary to devise, develop, and bring to market a successful invention or product, brand, or service that can make them super-rich — most manage to do so because what they devise and offer is scalable, and "everybody" wants their product, to be on their payroll, or to own some of their stock.  (An individual's time is not scalable, although it almost seems to be in the case of the salaries of the CEOs of major corporations or when that defense attorney sends a bill just for thinking about you.)

Unusual cognitive ability and manifestation of the requisite personality traits are essential to, but not exclusively determinative of, great wealth.  There is a measure of time and chance in all accomplishment. 

Without the much maligned one percent who devise, build, and distribute the benefits of our most essential industries (food production, health care delivery, transportation, communication, construction, and service), large populations concentrated in modern megalopoli would not have jobs — wouldn't have socks, for that matter.

But the radical truth about the extent of human diversity appears lost on old and new socialists like Bernie Sanders and Alexandria Ocasio-Cortez as they blame the rich for earning money they seem to think the poor would otherwise have and attempt to herd their fellow Americans toward a Green New Deal.  Their idea of Heaven on Earth is the politics of Hell. 

The author has a master's degree in psychology from Pepperdine University and directs publications at an American school of dentistry. 

Image: Global News via YouTube.