The Wealth of Humans, Part VI: Superstars

<Part I, Part II, Part III, Part IV, Part V>

It’s tempting to ask, what’s really different about this time? Isn’t this the same story we’ve heard every time some new advance comes along? It’s the nature of technology to destroy some jobs, and enhance and create others; that’s creative destruction and it’s always been with us.

While I’m generally sympathetic to this sort of ‘Ecclesiastical’ thinking (nothing new under the sun), I do think there are signals that this time really is different in important ways.

I don’t believe Avent touches on this in the book, but what I see as one of the big differences is the prevalence of what’s dubbed The Superstar Effect (pdf). This is most plainly evident in certain industries, like music, film, and televised sports: industries that are based around the transmission of information, or where, to quote from the paper, ‘the costs of production do not rise in proportion with the size of the market’. In the case of information transmission, such as film, television, or recorded music, the marginal cost of distribution is virtually zero. Furthermore, these types of goods have the characteristic of being ‘non-rivalrous’: just because I purchased The Wealth of Humans doesn’t prevent you from buying it also (so you should!).

Another key feature is imperfect substitution in these markets. Buying 10 cheap sponges could be the equivalent of buying 1 good sponge: the good one lasts ten times as long as the cheap sponge, but beyond that there isn’t much difference; they function as perfect substitutes. But watching 10 episodes of Home Improvement doesn’t add up to one episode of Breaking Bad.  Consequently, demand increases more than is proportionate to the degree of quality. To quote again from the paper, ‘If a surgeon is 10 percent more successful in saving lives than his fellows, most people would be willing to pay more than a 10 percent premium for his services.’

When markets have both of these features, non-rivalry and imperfect substitution, the superstar effect comes into play: one or a few players can capture outsize shares of the market. Think of the acting abilities of the average Hollywood star; they aren’t thousands of times better at acting than the people you see on TV, but being just slightly preferable to the average consumer means those stars make huge gains.

Technology, via replication, is what allows non-rivalry. And again, historically this has been most evident in industries based around transmission or communication of information. So it’s quite likely the Digital Revolution will continue to exacerbate this problem by rendering more and more industries subject to replication. Furthermore, technology will continue to reduce the marginal costs of production in many other fields so that they also can also expand more than proportionally. One example could be programmers; in the deep learning market, the good being designed is multi purpose. Once you have your program, you can apply it to all sorts of problems at little additional cost; DeepMind didn’t need to be reworked from the ground up each Go match it played, nor will it have to be totally redesigned for its next endeavor. 

Or consider remote surgery. The best surgeons will be able to service vastly expanded markets, rendering the services of all but the most skilled surgeons largely unnecessary. So I could see superstar effects taking hold in many more industries.

This is one big reason why I think the changes brought by the Digital Revolution aren’t some temporary phase. The very structure of many job markets has the potential to be fundamentally transformed to dramatically favor only the best. And if this comes to pass, what happens to the rest of us?

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