White Crow

The second idea I’d like to talk about, based on the book ‘Black Swan’, is that of the non-scalable and the scalable, better known as ‘Mediocristan’ and ‘Extremistan’ in the book.

I’m going to describe it the same way Mr. Taleb did because, after all, ‘why say something badly when somebody else has already said it better’?

The best way to understand these two concepts is to consider two groups of average people of about a thousand each. In the first group we add up all the weight of the entire group. Then we add another person to the group, but this person is the absolute fattest person in the world. How much of the total weight of the group will be captured by the fat man? Probably no more than ½ a percent. This is something, but far from everything.

Now take the second group of people and say that all their money has been added together, after which we add the richest person in the world. How large a percentage of the money in the group will belong to Bill Gates? In all likelihood it will be more 95% of the total wealth.

The first example above is of that which is non-scalable (in that there is an upper limit that one person can have or control), while the second example is scalable (in that there is no such upper limit).

In a non-scalable world you can draw conclusions from a general set of people, but this is a great deal harder in a scalable world, as you never know when the next person (or event) that comes along will throw all your former predictions completely out of whack.

In terms of work it also means that a small percentage of people can control a large percentage of the wealth. This is all fine and dandy, except if you’re not one of those people. Scalable work (like writing, acting, singing and portfolio management) is great if you’re successful, but it’s pretty terrible if you’re not. Non-scalable work, on the other hand (like accounting, dentistry, teaching and cooking), might not make you as rich overall, but gives you a much greater chance of at least being well off. After all, how ever good you are, you can only do so much work in a day and must leave the rest for the others in your industry.

What’s more, most of the world works in this scalable fashion (like the stock market, for instance). It normally gravitates towards a certain average, but then sometimes these disproportionately large outliers hit and completely screw up all possible predictions. You don’t want to be at the wrong end of one of those, as it might well be the last time you’re at the wrong end of anything.