The self-made man has always played a profound role in the American imagination. Horatio Alger wrote stories of plucky, lower-class strivers who made their way in the world by dint of honesty and hard work. Hollywood has fetishized the underdog since movies were invented. And for years, the business world offered real stories too.
But the modern rise of the Harvard dropout (or New York University or UCLA), complicates that story. Today’s founders are long on brilliance, but short on hardship. It’s difficult, after all, to become a computer prodigy without a computer.
For millions of low-income people, it’s getting harder to build something from nothing. In order to drop out of Harvard, first you have to get in.
There’s something missing from the foundational stories of this new group of self-made men (yes, they’re mostly men). Where earlier generations’ formative experiences revolved around paper routes and pathos, today’s prototypical founding story involves an upper-middle-class childhood, early access to a computer, and an elite education”- even if that education was abandoned.
The rags-to-riches story is fading
Statistically as well as anecdotally, true American rags-to-riches stories are getting rarer. Class mobility, as defined by the percentage of children who earn more than their parents, has been in a state of mostly uninterrupted decline since the 1940s. American economist Raj Chetty found that only about half of the children born in 1980 have surpassed their parents’ income. In 1940, that number exceeded 90 percent.
Of course, most successful entrepreneurs have earnings that vastly outstrip their parents’. In fact, they outstrip the earnings of nearly every human in history. In by-now-familiar statistics, the rate of income growth at the top levels of earning in the US have far outpaced growth at the bottom segments (in the 1980s, it was the other way around, according to research by Thomas Piketty, Emmanuel Saez and Gabriel Zucman). Last year Oxfam International found that more than 80 percent of earnings went to the top 1 percent of the world population.
That so many of today’s new billionaires mostly come comfortable backgrounds is emblematic of a broader concentrating of wealth in the US According to recent Federal Reserve data, the median family’s net worth had not recovered its pre-recession value by 2016, while the top 10 per cent gained double digits since 2007.
This is not a lamentation of the comfortable childhoods of corporate leaders. In some ways, the American myth of the up-from-nothing elite was always mostly imagined. The likelihood that a child today will rise from the lowest to the highest quintile of earnings, is less than 10 percent.
How technology is spawning billionaires
It is, of course, not the fault of tech’s young luminaries that the economy has shifted toward technological skills. Even as it’s boosted Americans’ standard of living, the rapid pace of innovation has made education an increasingly important factor in determining income, a trend that in turn has exacerbated rising inequality. Overall educational attainment in the US is rising, but nearly 70 percent of the adult population has still never graduated from college. That’s even though higher education has increasingly become a prerequisite for white-collar work. The college wage premium, or what bachelor’s degree holders make compared to high school graduates, has skyrocketed since the 1970s and now hovers at about 50 percent, near-record levels.
The real ‘digital divide’
The so-called “digital divide” between rich and poor households, has reinforced the gap between haves and have-nots. Despite the pervasiveness of personal computing, poor kids today are less likely to have access to the programs that could help them develop early coding genius. According to Pew Research Centre data, 87 percent of households with an income of $75,000 or higher use broadband at home. But for households making less than $30,000, it’s only 45 percent.
Besides barring the path for talented people of limited means, a widening chasm between the rich and everyone else also presents political problems. Witness mounting anger at tech companies in cities like San Francisco and Seattle. The Seattle city council voted to levy a punitive per-worker tax on Amazon and other large employers in response to the area’s growing homelessness problem. Seattle officials relented, but tensions still simmer beneath the surface nationwide, threatening to boil over in unpredictable ways.
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