Luck And Success

Robert H. Frank points out a study on how outside forces can affect success:

The sociologists Duncan J. Watts, Matthew Sagalnik and Peter Dodds carried out some of these experiments, which Mr. Watts described in his superb 2011 book, “Everything Is Obvious* (*Once You Know the Answer).” Their work focuses on online markets, but it has much broader implications. It suggests that although market success does depend on the quality of a product, the link is extremely variable and uncertain. Even the best contestant in a product category may fail, and even the worst one sometimes wins. And for an overwhelming majority of contestants in the intermediate-quality range, they found success to be largely a matter of chance.

The researchers invited subjects to a temporary, experimental Web site called Music Lab, which listed 48 recordings by little-known indie bands. In the control version of the experiment, subjects could download any of the songs free if they agreed to give a quality rating after listening.

The average of these ratings then served as an “objective” rating of each song’s quality in subsequent versions of the experiment. In the control group, subjects saw no information other than the names of the bands and the songs, so their individual ratings were completely independent of the reactions of other participants.

Those independent ratings were extremely variable. Some songs got mostly high marks or mostly low marks, but a substantially larger number received distinctly mixed reviews.

The researchers then ran eight other versions of the same experiment. In each, Music Lab displayed two new pieces of information: how many times each song had been downloaded by others, and the average rating it had received so far. Participants in these groups thus received easily digestible feedback on which songs that others in their group were listening to and how much they liked them.

This social feedback produced sharply higher inequality in song ratings and download frequencies. In each of the eight groups, the most popular songs were far more popular, and the least popular songs far less popular, than their counterparts in the control group.

There was also enormous variability in the popularity rankings across the eight groups, and in the fates of songs with a given objective rating. The song “Lockdown,” by the band 52 Metro, is a case in point. Ranked 26th out of 48 in the objective ratings, it finished at No. 1 in one of the eight groups, but at No. 40 in another.

The most striking finding was that if a few early listeners disliked a song, that usually spelled its doom. But if a few early listeners happened to like the same song, it often went on to succeed.

The point made by Nick Hanauer that middle class consumption creates the great wealth of "job creators" is somewhat highlighted by this type of study.  The greater inequality that results from a mass consumption product which hits big is somewhat akin to winning the lottery.  The way an Amazon comes to dominate a market creates a small number of fabulously wealthy winners, and their spending and investment just won't have the same impact on the economy as thousands of smaller winners would.  It is another case for redistributive taxes, in my opinion.