Chasing Accumulated Advantage And The Matthew Effect

Inequality is not just a recent invention. Since the dawn of man, humanity has been split into the haves and the have-nots.

What has stood out to ancients and contemporaries alike is that those who are successful often become even more successful. This idea is referred to as The Matthew Effect, which references a passage in The Bible that says, “For all those who have, more will be given, and they will have an abundance; but from those who have nothing, even what they have will be taken away.”

On top of that, it was quickly realized that those who are slightly better end up with the majority of the rewards. And those that are slightly worse end up with next to nothing. The rich get richer and the poor get poorer.

Success often begets success, no matter how small. New opportunities for investment and growth open up as a result of being slightly, which can lead to more success and other opportunities further down the line.

As with compounding behavior, small wins — when repeated often — often snowball into truly massive advantages.

As James Clear puts it: “Those who maintain small advantages, whether due to luck or hard work, gradually accumulate the bulk of the rewards.

Be Better (But Just A Little Bit)

You don't have to be a world-class performer to succeed. Nor do you need to be 10X as good as your competitors in order to win a client. As everyone knows, you only need to be 0.01 seconds faster than the fastest runner in order to win the Olympic gold in the 100 meter dash.

In these cases, you capture 100 percent of the victory by being 1 percent better, 1 second faster, 1 dollar cheaper or scoring 1 point higher. Being just a tiny bit better doesn't confer just a tiny reward, but the entire reward. Being 1 percent better or faster means the difference between getting the entire reward and getting nothing at all.

It's good to be a winner. And to win, you only need to be slightly better.

When you're applying for a new job, odds are you have to go up against a bunch of other applicants. As you go through the interview process, more and more applicants will be rejected until only you remain. The company is convinced they picked the best candidate. However, do note that you didn't need to be three times as good as any of the others. In order to win, you only had to be slightly better than everyone else.

This effect occurs again and again in the world around us. In a lot of competitive spaces, being marginally better than everyone else is the biggest competitive advantage you can have. If your book is slightly more engaging than others, guess what? You'll probably sell more than others. If your product offers slightly more and better features than the competition, users and customers will flock to you.

And once that small advantage has been used, you'll probably find that you're in an even better position to succeed compared to the rest of the field. To paraphrase Matthew, “Those who succeed shall succeed more.”

Success leads to success because small advantages compound.

One Small Advantage Leads To Two...

What begins as a small advantage gets bigger over time. The rich get richer, the successful get more successful, and the famous get more famous still. This effect is what's known as “accumulative advantage.”

In what James Clear calls the 1 Percent Rule, the majority of rewards in a field will go to the people, teams, and organizations that maintain a 1 percent advantage over the alternatives. You don't need to be twice as good to get twice the results. You just need to accumulate small advantages again and again.

As a matter of fact, some of the world greatest performers, athletes, entrepreneurs, inventors, and intellectuals didn't start off as superstars. Sure, some of them were prodigies but the majority of them had one thing in common: Early in life, they were slightly better than everyone else.

Let's say you're a precocious 5 year-old kid. You just completed a school district-wide math test and you did really well. Perhaps your parents helped you study in the weeks leading up to the test. When the results come in, you realize you scored within the top 1% of all students and are eligible to be put in an advanced program for gifted students. You get extra lessons in math, get extra homework, and get more personalized instruction. You flourish under the extra workload and genuinely enjoy the process. You once again score high on standardized testing, which allows you to sit in on high school or college-level math classes. You continue taking classes and diving deeper into the esoteric field of mathematics, achieving a bachelor's degree at age 14.

It is important to note that the story above doesn't cover some big-brained prodigy with an IQ of 160. You were just a kid who did exceedingly well on a single math test. Just because you were slightly better than everyone else during that first test, you were given extra opportunities for growth. Which then inevitably lead to new opportunities further down the line.

This is how most geniuses and world-class performers started out. They somehow gained a slight edge over the competition, which then lead to new opportunities opening up. They met a mentor, got put in extra classes, built up a bit of a network, or managed to make a modest amount of money. These small advantages then started to snowball, compounding into bigger and bigger advantages. Their mentor put them in touch with his network, extra classes lead to higher test scores and more personal tutoring, having a bigger network lead to coming across new business opportunities, and that modest amount of money was used to build a bigger, more competitive business.

The margin between good and great is narrower than it seems. Small advantages lead to opportunities for growth, which then lead to further growth and new opportunities in turn.

Not only that, but being successful in area of life makes it more likely to be successful elsewhere. It was easier for Arnold Schwarzenegger to become the Governor of California than it will be for you or me. After all, I'm not a 250lbs bodybuilder and Hollywood star. Because of his relative success in one domain, it was easier for him to move over to a different domain (marrying a Kennedy also didn't hurt). Same goes for Donald Trump, who was able to leverage his fame and brand during his election campaign.

Why do you think so many former top-CEOs or athletes are able to put ‘Best-selling Author’ in their bios? Because of the fact they were success in one domain (business/sport) they were able to leverage that fame and reach in order to promote their (usually ghostwritten) books to the public.

The successful become more successful. Therefore, the number one focus should be to have a bunch of small successes in rapid succession. It's not unlike compound interest. The more iterations you have the better, and the earlier you start, the faster the compounding will do the work for you.

From that position of success, more doors will open. Success will be easier to come by. Winner start to accumulate advantages that make it easier for them to win in the future.

Build Your Advantage

Humans naturally favor past success. Something inside of us is wired to admire people who've succeeded in the past. In times past, they became the leaders of our tribe. Now, they become superstars.

Watching from a distance, superstardom seems unreachable. Whether they be Hollywood actors, Silicon Valley CEOs, best-selling authors, or social media influencers, these superstars stand far removed from the average Joe on the street. We believe there's no way we could attain success of their level.

Therefore, we ascribe superior skills to them. We believe they must be more intelligent, more talented, stronger, faster, or more disciplined. Or, depending on who you talk to, their success must be because of them having more money, having useful connections, or them coming across opportunities that the rest of us don't have access to. And they'd be mostly right.  

Most people who succeed had more money, more useful connections, and had access to more opportunities for growth. Once someone becomes semi-successful, cumulative advantage holds that that person will continue to be successful. Humans naturally favor past success. Winners want to associate with other winners.

Have you ever wondered why so many Hollywood stars, billionaires, entrepreneurs, politicians, and athletes are friends? It's not just nepotism, believe it or not.

Advantages accrue highly unequally. One only needs to look at the Forbes 500 list for confirmation. In 2018, the richest 26 people in the world held the same amount of wealth as the poorest 3.5 billion people. [1]

The world we live in is filled with effects that cause a huge inequality of outcomes. In what Nassim Taleb calls ‘Extremistan’, the world is ruled by events produce distributions with very large or very small extreme values. Effects skew massively in one direction or the other. People have either billions of dollars or very little, to the point that it becomes a rounding error on a billionaire's net worth. Almost all social matters are from Extremistan.

In Extremistan (and our daily lives), marginal differences in talent yield massive rewards. The superstar effect, where a handful of people receive the vast majority of outcomes, is meritocratic—that is, those with the most talent, even if they’re only slightly more talented than their competitors, get the spoils.

If a plucky Silicon Valley startup has a software application that has slightly more features that the competition, more people will flock to their product. There will be more revenue and investors will be more interested in showering you with dollar bills. As the business makes more money, they'll be able to invest in hiring new employees and building new features. In doing so, they increase the lead they've got over their competition. For new customers, the value proposition becomes even better when compared to competition, leading to even more sales and revenue.

This cycle continues again and again. More money leads to more employees, which leads to more competitive advantages, which leads to more customers, which leads to more money, which then leads to more employees and competitive advantages.

Soon, one company has an insurmountable competitive advantage compared to the competition, what is called a ‘moat’ in Silicon Valley-speak.

The same can happen on a personal level. A writer who scores a bestseller will often continue to put out bestsellers. If one author hits the best-seller list, then publishers will be more interested in their next book. When the second book comes out, the publisher will put more resources and marketing power behind it, which makes it easier to hit the best-seller list for a second time.

Even with children, small advantages accumulate and compound. When researching the correlation between children’s success in acquiring reading skills and future competence in reading and learning, this was once again confirmed.

Keith Stanovich, who specifically researches the Matthew Effect at the University of Toronto, found that early success in acquiring reading skills usually leads to later successes in reading as the learner grows. Conversely, failing to learn to read before the third or fourth year of schooling may be indicative of lifelong problems in learning new skills.

This is because children who fall behind in reading would read less. Those who were skilled would continue to read (since they found it easy/enjoyable), leading them to have put in more reps than their peers who struggled. This further increased the gap between them and their peers. Later, when students need to "read to learn" (where before they were learning to read), their reading difficulty creates difficulty in most other subjects. In this way they fall further and further behind in school, dropping out at a much higher rate than their peers.

Regardless of what domain you're in, it pays to be slightly better than your peers. What's more, the earlier you can get a small advantage, the better. Whether you're trying to be a better writer, build the next billion-dollar startup, or to get your kid to read, remember that small advantages compound into truly massive ones.

1% Better

As we've seen, those who are slightly better rule their respective fields and industries. And often, the winners only need to be 1 percent better than the competition in order to stand out.

When you are improving your process, organization, culture, team, yourself, or whatever it may be, you just have to be 1 percent better to win. People or organizations tend to think a huge margin is required to be competitive or be very competitive. This is not the case. You just have to be slightly better at something.

The best strategy then to kickstart the flywheel is to focus on “the aggregation of marginal gains,” which is the philosophy of searching for a tiny margin of improvement in everything you do. Even if you only improve by 1% per day/week/month, it eventually starts to add up and will lead to exponential growth.

Be 1% better, that's all you need to have an advantage. Then grow it further.

The best get better, the rich get richer, and the successful get more successful.

Now go build up your accumulated advantage.

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