## Wednesday, March 30, 2022

Welcome to Math Mutation, the podcast where we discuss fun, interesting, or weird corners of mathematics that you would not have heard in school.   Recording from our headquarters in the suburbs of Wichita, Kansas, this is Erik Seligman, your host.  And now, on to the math.

As I mentioned in the last episode, I’ve recently reread Nassim Nicholas Taleb’s  classic book “The Black Swan” , about the disproportionate role of unlikely extreme events, the Black Swans, in shaping our lives and our history.    Today I’d like to discuss another of the intriguing ideas he discusses in the book:  scalable and unscalable jobs, and which you should choose if starting out your career.

Back when he was in college, Taleb received some advice from a business student:  choose a scalable, rather than a nonscalable, profession in order to become rich.    It’s a pretty simple concept:  a scalable job is one where you are paid for ideas, not hourly labor, and thus can affect many people with a small amount of work.   This contrasts with nonscalable jobs, where you are directly paid for the labor you perform.    An example of a scalable job is a corporate CEO, a derivatives trader, or an author:   in any of these professions, a small amount of work can impact a massive number of people.    On the opposite end of the spectrum, you can think of cases like a dentist or a chef:   your services are inherently delivered one-on-one, and your output is essentially dependent on the time you spend.     Some like to refer to scalable professions as “idea” professions, and nonscalable ones as “labor” professions.

You can see why scalable work has the potential to earn much more money, since it’s a matter of simple math.   If your actions affect one or a small number of people, there is fundamentally less money to go around, since whatever you earn must ultimately come from the people you serve.    If your actions affect millions of people, then there is the capacity to draw in money from many directions; as Taleb phrases it, this can “add zeroes to your output… at little or no extra effort.”   An idea person does the same amount of work no matter how many people it affects.   The CEO gives his orders once, the derivatives trader presses the same button regardless of the quantity traded, and the author writes the book once.     Taleb also glosses over the fact that some professions are kind of in-between:  for example, a chip design engineer at Intel impacts many millions of customers, though that impact is shared with about 100,000 other co-workers, creating a pretty good income potential, though unlikely to make someone super-rich unless they progress high on the even-more-scalable management ladder.

So, was the advice correct, to choose a scalable rather than a nonscalable profession?   Well, it is true that if you go around looking at super-rich people, almost all did it through being in the scalable world.  But be careful:   if you make this kind of observation, you are making a fundamental logical fallacy, confusing “A implies B” for “B implies A”.    If someone is rich, they probably got that way through a scalable profession— but does that mean that if an arbitrary person chooses a scalable profession, they are likely to become rich?   The answer to that is a definite NO.   For every J.K Rowling or Nassim Nicholas Taleb, there are thousands of aspiring authors who barely sell a copy of their book.   (I won’t comment on how the Math Mutation book fits into this discussion.)   The scalable professions are massively profitable for the small number of people who are successful, but what’s a lot less visible are the corresponding masses of unsuccessful aspirants to these careers who failed miserably.

Thus, Taleb points out that the advice he got was not very good, even though he happened to follow it and succeed himself.    In a nonscalable profession, the average worker makes a decent living— in some, like skilled tradesmen, engineers, or doctors, they can be pretty sure of heading towards the upper middle class if they do a good job, even though they are not likely to become rich.   Choosing a scalable profession is like entering a lottery, while nonscalable or mid-range jobs give you much better odds of earning a solid living.   And of course, there is usually the possibility of later moving into management of whatever career path you’re on, if you decide later that you want to gamble on the scalable route, while having a solid profession to fall back on if you don’t win that lottery.

Another interesting point Taleb makes is that the nature of some professions changes over time.   If you look to the 19th century or earlier, being a singer was a nonscalable, labor-type position:  you had to be physically present before a relatively small audience, and repeat that activity every time you wanted to earn money for your music.     Thus many singers across the world could make a living producing music for eager audiences.   Then came the 20th-century revolution in recorded sound.   Once that happened, you could see superstars like Elvis, Pavarotti, or the Beatles become household names— and the majority of the money that in previous years would have been distributed among thousands of local performers ended up in their pockets.   For those who think this situation was unfair to the local singers, think about the effect of the printing press on monks, or of the invention of the alphabet on traveling storytellers.     The truth is, making a job more scalable almost always benefits huge numbers of people who consume the goods or services being produced, while creating an inconvenience for those who had previously profited off the nonscalability of their jobs.

Another interesting point Taleb makes is to look at this concept at a national level.  In the case of the United States, it seems to have been much more economically successful in the past century than the intellectual European nations of, as Taleb puts it, “museumgoers and equation solvers”.    He attributes this to the US’s much greater tolerance for creative tinkering and trial-and-error, which result in the development of new concepts and ideas.   Because the economic benefits of concepts and ideas are scalable, this has resulted in a large multiplier on the money that can be made by US companies in general.    The much-lamented loss of US manufacturing jobs is just a reflection of this shift of focus.   Nike can design a shoe, or Boeing can design an airplane, with a relatively small number of ideas, and subcontract the grunt work to foreign companies.

I wish I could say that I pondered all these insights when initially setting out on my career, but like most of us, I just blundered my way around until I settled into something that seemed good.   It seems to have worked out pretty well for me.    But if you’re at an earlier stage of your life, Taleb’s ideas are worth strong consideration.

And this has been your math mutation for today.

References:

https://www.amazon.com/Black-Swan-Improbable-Robustness-Fragility/dp/081297381X