There are two common elements of economic superstars. First, there is a close connection between personal reward and size of the market. Second, there is a tendency for market size and reward to be skewed to the most talented people in the field.
Read the paper.
- Another way to describe this observation is that tournament like fields with asymetric and convex payouts favor high-variance strategies.
- Superstars grow (or at least stay superstars) because advantages accrue to the leader.
- More generally, the Pareto principle applied means the rewards are always skewed.
- How people get rich and income inequality reveals how quickly this can happen due to technology.
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Fields that exhibit tournaments with asymmetric and convex payouts favor high-variance strategies (variance from the benchmark mean).