The Matthew Effect

“For to everyone who has will more be given, and he will have abundance;
but from him who has not, even what he has will be taken away.”

The Gospel of Matthew 25:29, Revised Standard Version

Economists call it the Matthew Effect or the Matthew Principle. Columbia sociologist Robert K. Merton used the former when he coined the term[1] by reference to its Biblical origins.[2] The more pedestrian version asserts that the rich get richer while the poor get poorer.

According to the Matthew Effect, social capital is better caught than taught, better inherited than achieved. That notion is borne out by current economic and demographic data[3] showing that the only children with a statistically relevant shot at experiencing a better standard of living than their parents are the ones born with a silver spoon in their mouths — or, as David Graeber says in Bullshit Jobs, the ones “from professional backgrounds,” where they are taught essential social capital mindsets and skills “from an early age.”[4]

Statistics are susceptible to ideological manipulation, but bell curves conceptualize trends into observable laws of societal thermodynamics. The Matthew Effect bell curve says it’s harder to get to the top by following the Horatio Alger path:  you’re starting too many standard deviations out; your odds are too low. On the other hand, if you start in the center (you’re born into the top), odds are you’ll stay there.

That might depend, however, on how long your forebears have been members of the club. Globetrotting wealth guru Jay Hughes has spoken and written widely of the concept of “shirt sleeves to shirt sleeves in three generations.” According to the aphorism, if the first generation of a family follows the Horatio Alger path to wealth, there’s a 70% chance the money will be gone by the end of the third generation, which means the social capital will be gone as well. That first generation might defy the odds through hard work and luck, but odds are they won’t create an enduring legacy for their heirs.

guy in a suit driving a tractor

My own law career was an exercise in another folk expression of the Matthew Effect:  “you can take the boy out of the country but you can’t take the country out of the boy.” (No, that’s not me in the photo — I just thought it made the point nicely.) My career finally hit its stride when I created a small firm serving “millionaire next door” clients — farmers, ranchers, and Main Street America business owners who became financially successful while remaining in the social milieu where they (and I) began. Nearly all of those families created their wealth during the post-WWII neoliberal economic surge, and are now entering the third generation. I wonder how many are experiencing the shirt sleeves aphorism.

Curiously, my transition out of law practice was also dominated by social capital considerations — in particular, a social capital misfiring. I had a big idea and some relevant skills (i.e., some relevant human capital — at least other people thought so), but lacked the social capital and failed to make the personal transformation essential to my new creative business venture.[5]

rocky field

In fact, it seems the Matthew Effect might be a larger theme in my life, not just my legal career. In that regard, I was surprised to find yet another one of my job stories in Bullshit Jobs. This one was about a townie who took a job as a farm laborer. His job included “picking rocks,” which involves tackling a rocky field with a heavy pry bar, sledge hammer, pick axe, spade, and brute strength, in an effort to remove the large rocks and make it tillable. I’d had that job, too. I was a teenager at the time, and it never occurred to me that it might be “completely pointless, unnecessary, or pernicious” (Graeber’s definition), which is how the guy in the book felt about it. In fact, when I told my parents about my first day of picking rocks over dinner, my dad was obviously so proud I thought he was going to run out and grill me a steak. Obviously I’d made some kind of rite of passage.

Picking rocks is just part of what you do if you work the land, and there’s nothing meaningless about it. I enjoyed it, actually — it was great training for the upcoming football season. I can scarcely imagine what my law career and life might have been like if I’d felt the same way about my first years of legal work as I did about picking rocks.

The Matthew Effect has far-reaching social, economic, legal, and ethical implications for the legal profession, where social capital is an important client- and career-development asset. Next time we’ll look at another lawyer who, like David Boies, rose from humble origins to superstar status, and whose story brings a whole new set of upward mobility issues to the table.

 

[1] Merton was originally trying to describe how it is that more well-known people get credit for things their subordinates do — for example, professors taking credit for the work of their research assistants — the professors enriching their credentials at the expense of their minions’ hard and anonymous work. Merton might just as well have been talking about law partners taking credit for the work of paralegals, law clerks. and associates.

[2] As for why “Matthew” when the other Synoptic Gospels (Mark and Luke) have the same verse, I suspect that’s in part because Matthew is the first book in the New Testament canon, but it may also substantiate a derivative application of Merton’s law made by U of Chicago super-statistician Stephen Stigler, known as the Law of Eponymy, which holds that “No scientific discovery is named after its original discoverer.” I.e., later arrivals collect the accolades the” original discoverer” never did. In that regard, Mark’s gospel is believed to have been written first, with Matthew and Luke’s coming later and deriving from it. That would make Mark the true original discoverer. That this economic phenomenon is not called the “Mark Effect” is therefore another example of Stigler’s law.

[3] See, e.g., the “Fading American Dream” graph and the “Geography of Upward Mobility in America” map in this NPR article.

[4] The phenomenon has been widely reported. See this study from Stanford and our trio to new Meristocrats from a few weeks back:  Richard V. Reeves and his book Dream Hoarders and his Brookings Institute monograph Saving Horatio Alger (we looked at those last time). The second was philosopher Matthew Stewart, author of numerous books and a recent article for The Atlantic called The 9.9 Percent is the New American Meritocracy. The third was Steven Brill, founder of The American Lawyer and Court TV, author of the book Tailspin: The People and Forces Behind America’s Fifty-Year Fall–and Those Fighting to Reverse It and also the writer of a Time Magazine feature called How Baby Boomers Broke America.

[5]  I’ve told that story elsewhere, and won’t repeat it here, but if you’re interested in more on this issue, a look at that particular social capital disaster might be illustrative. See my book Life Beyond Reason:  A Memoir of Mania.

Rebel Without A Cause

Continuing with David Graeber’s analysis of Eric’s job experience from last time:

“What drove Eric crazy was the fact that there was simply no way he could construe his job as serving any sort of purpose.

“To get a sense of what was really happening here, let us imagine a second history major–we can refer to him as anti-Eric — a young man of a professional background but placed in exactly the same situation. How might anti-Eric have behaved differently?

“Well, likely as not, he would have played along with the charade. Instead of using phony business trips to practice forms of self-annihilation, anti-Eric would have used them to accumulate social capital, connections that would eventually allow him to move on to better things. He would have treated the job as a stepping-stone, and this very project of professional advancement would have given him a sense of purpose.

“But such attitudes and dispositions don’t come naturally. Children from professional backgrounds are taught to think like that from an early age. Eric, who had not been trained to act and think this way, couldn’t bring himself to do it.”

James-Dean-Rebel-Without-A-Cause-Movie-PosterLike Eric, I couldn’t bring myself to do it either — although it was not so much that I couldn’t, it was more a case of not knowing how. I was bright enough, had a knack for the all-important “likeability factor” with clients and colleagues, and worked with lots of clients and other professionals who were members of the Red Velvet Rope Club. But like Eric, I remained on the outside looking in, and I spent a lot of time feeling envious of others who fit in so easily. Those dynamics dogged the early years of my law career. In time, a general sense of inadequacy became depression, which I compensated for by nursing a rebel-without-a-cause attitude.

My experience didn’t have to be that way. Consider, for example, the story of super-lawyer David Boies. Like Eric and me, Boies was also born to working class parents and grew up in a farming community, but that’s where the resemblance ends. Chrystia Freeland introduces him this way in her book Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else (2012):

“As the world economy grows, and as the super-elite, in particular, get richer, the superstars who work for the super-rich can charge super fees.

“Consider the 2009 legal showdown between Hank Greenberg and AIG, the insurance giant he had built. It was a high-stakes battle, as AIG accused Greenberg, through his privately-held company, Starr International, of misappropriating $4.3 billion worth of assets. For his defense, Greenberg hired David Boies. With his trademark slightly ratty Lands’ End suits (ordered a dozen at a time by his office online), his Midwestern background, his proud affection for Middle American pastimes like craps, and his severe dyslexia (he didn’t learn how to read until he was in the third grade), Boies comes across as neither a superstar or a member of the super-elite. He is both.

“Boies and his eponymous firm earned a reputed $100 million for the nine-month job of defending Greenberg. That was one of the richest fees earned in a single litigation. Yet, for Greenberg, it was a terrific deal. When you have $4.3 billion at risk, $100 million — only 2.3 percent of the total — just isn’t that much money. Further sweetening the transaction was the judge’s eventual ruling that AIG, then nearly 80 percent owned by the U.S. government, was liable for up to $150 million of Greenberg’s legal fees, but he didn’t know that when he retained Boies.”

What did Boies have that Eric and I didn’t?

Well, um, would you like the short list or the long?

Boies is no doubt one of those exceptionally gifted and ambitious people who works hard enough to get lucky. I suspect his plutocrat switch was first activated when his family moved to California while he was in high school, and from there was exponentially supercharged by a series of textbook upwardly mobile experiences:  a liberal arts education at Northwestern, a law degree from Yale, an LLM from NYU, joining the Cravath firm and eventually becoming a partner before leaving to found his own firm.

That’s impressive enough, but there’s more to his story:  somehow along the way he was transformed into the kind of person who belongs — in his case, not just to the 9.9% club, but to the 0.1 %. Yes, his human capital was substantial, but it was his personal transformation that enabled him to capitalize (I use that term advisedly) on the opportunities granted only by social capital.

And now, if the 9.9 percenters we heard from a couple weeks back are correct, the pathway he followed is even more statistically rare (if that’s even possible) than when he travelled it — in part because of an economic principle that’s at least as old as the Bible.

We’ll talk about that next time.

Nose Pressed Up Against the Glass

nose against the glass

You’re on the outside looking in. What you want is only a window pane away, but it might as well be on Mars. Novelist Maria E. Andreu captures the feeling:

wuthering heights“There is a wonderful scene in the 1939 film version of Wuthering Heights… in which Heathcliff and Catherine sneak on to the grounds of the Linton house at night. The Lintons, the rich neighbors, are having a grand party. Heathcliff and Catherine watch through the window, unseen. It’s exactly what’s meant by ‘nose pressed up against the glass,’ watching but not being able to participate.

“You can see a lot in their faces as they watch the others dance. Catherine, the daughter of a landed ‘gentleman,’ gets a look that lets you know that she’s intrigued, beginning to want to let go of her wild childhood and take her place in the Lintons’ world. Healthcliff, the servant who adores Catherine, knows that even if he could stop being poor, he would never belong there. He will always be watching from outside the glass.”

Nose pressed up against the glass — it’s an enduring image in literature and in life. Ms. Andreu continues:

“I’ve thought about this scene a lot. I’ve used the image in my writing. It illustrates how I’ve felt sometimes, able to see ‘the good life’ but not able to live it. Most of my life, the Heathcliff in me has weighed heavy inside my heart.”

But then one day the magic happened, and suddenly she found herself transported to the other side of the window pane:

“Yesterday, I got a rave review for my novel that comes out in a month and a half. In my email, I got an invitation to a launch party for another author’s book. I packed to go to a book signing and remembered I needed an extra outfit for an industry cocktail party and the ‘members only’ dinner afterwards with people from my publishing house.

“If that’s not being inside the party, I don’t know what is.

“Someone has opened the door of the party for some fresh air, seen me lurking, and extended a hand of friendship to let me in. It is an unbelievable feeling. I live a life of impossible splendor, of magical beauty, of infinite luck. And I am so deeply grateful.”

We’d feel the same way, if we ever got so lucky. (Assuming we’ve been working hard enough to get lucky — here’s The Quote Investigator on where that saying came from.)

hard work luck

In economic terms, the distance between Heathcliff and the Lintons is a matter of social capital. Ryan Avent, author of The Wealth of Humans, distinguishes between human capital and social capital. Human capital, he saredys, is a particularly focused and useful form of knowledge that an individual gains through education, hard work, experience, on-the-job training, etc. It’s the hard work part of the formula. Social capital, on the other hand, is the opportunity part, and it’s not just personal, it’s cultural. Avent says it’s “like human capital… but is only valuable in particular contexts, within which a critical mass of others share the same social capital.”

red velvet rope 2

For those not already in the social capital club, converting human capital into social capital requires upward mobility. Ms. Andreu’s upward mobility moment was getting her “members only” invitation — official permission to duck under the red velvet rope and join an exclusive gathering where she could schmooze the “others [who] share the same social capital.” Heathcliff, on the other hand, never got his upward mobility moment. As a result, there wasn’t just a glass window pane between him and the Lintons, there was a glass ceiling.

625-01092012

Nose pressed against the glass… glass ceiling… we’ve heard those expressions before. Nowadays, another glass metaphor has entered the economic lexicon:   the “glass floor, which protects the upper middle class against the risk of downward mobility.” (My emphasis. The quote is from Dream Hoarders:  How the American Upper Middle Class is Leaving Everyone Else in the Dust, Why That is a Problem, and What to Do About It by Richard V. Reeves.)

Hoping to move up? Afraid of moving down? These days, it’s hard to do either. And if you’re hoping to move up, there’s one additional, elusive element required for membership in the red velvet club:  the notion of identity — the need to be the kind of person who belongs there. In this short video (click the image below), Michael Port, author of the bestseller Book Yourself Solid, asks, “What makes [red velvet rope people] who they are?” He answers that it’s “their quality, their characteristics, their personality — things that are innate, are part of who they are as people, not necessarily their circumstances.”

red velvet rope

We’ll be looking lots more at upward mobility and social capital in the weeks to come.