naked capitalism

Submitted by Thomas Forest

Outliers: The Story of Success
Malcolm Gladwell, Little Brown and Company, (2008)

Have you read Fooled by Randomness by Nassim Taleb? Malcolm Gladwell has, “(Fooled by Randomness) is to conventional Wall Street wisdom approximately what Martin Luther’s ninety-five theses were to the Catholic Church.” And Taleb has been reading Gladwell. For example in the notes on Chapter 10 Taleb makes reference to The Tipping Point and to Gladwell’s 1996 essay discussing the non-linear physical properties of ketchup, “Tomato ketchup in a bottle- None will come and then the lot’ll.” (Incidentally, Malcolm Gladwell is something of an authority on packaged tomato products. His description of the evolution of grocery store spaghetti sauce on YouTube is not to be missed.) Strangely the connections between the authors’ work extends even to their dust jackets. At least from my uninformed perspective Christopher Sergio seems to have completely ripped off Allison Warner’s jacket design, or maybe it’s the other way around.

In Chapter 10 of Fooled by Randomness, Loser Takes All- On the Nonlinearities of Life, Taleb asks the question, “While it is hard to deny that (Microsoft’s Bill) Gates is a man of high personal standards, work ethics, and above average intelligence, is he the best? Does he deserve it? Clearly not… Most of Gate’s rivals have an obsessive jealousy of his success. They are maddened by the fact that he managed to win so big while many of them are struggling to make their companies survive.” Right. Haven’t you asked yourself this question? Come on, what gives with Bill Gates? Why is he such an outlier? Is it just Talebian randomness? In Outliers: The Story of Success Malcolm Gladwell takes up this specific question, as well as the general version. Why are some people such enormous winners? Is it something intrinsic to them or is there something more? Gladwell asks (he really does ask) why have you never heard of Chris Langan? What, apart from fabulous wealth, did Rockefeller, Carnegie, Weyerhaeuser, Gould, Field, Morgan, Pullman, and Armour share? What is the most important non-athletic characteristic of professional Canadian hockey players? Why were 19th century Appalachians so fantastically quarrelsome? Why are these people outliers? What is going on?

The answer from Fooled by Randomness is grim, except perhaps for those readers who were clinically depressed before they picked it up. We are Chance the Gardener careening through life around open manholes with speeding taxis missing our knees by inches… until we are crushed in our living rooms while cautiously assembling a flat-packed bookcase from IKEA according to the manufacturer’s detailed instructions. Our lives ebb and flow according to some hideous Pareto distribution, and it is just as well only a few depressed people understand the mathematics. We should all hunker down with a copy of Seneca’s Letters from a Stoic.

In contrast, Outliers succeeds, in Gladwell’s typical narrative salad style, as a balm on the psyche of the constitutional optimist. Have you seen that black and white image of the two faces in profile that suddenly turns into a cup, and then back into two faces, and then you realize you can make your brain look at it either way? Gladwell does something similar, but different. When I was young and unencumbered by material things I lived by the tracks. One morning a train was parked on them loaded with large brightly colored metallic objects. I stood staring at the train trying to make sense of the apparently random pattern of lines formed by the intersection of the silhouettes of the train cars and their cargo. I stood there longer than I like to admit. And then all the lines miraculously resolved themselves into a train loaded with automobiles. The point here being that unlike the faces and the cup image, once I saw that the train was loaded with automobiles the random pattern of silhouettes was irrevocably ordered, crystalized. In similar fashion, in Outliers Gladwell displays his talent for putting together crystalizing explanations. He looks at life from a weird perspective and then points out the order in the randomness, thereby irrevocably reordering our understanding of reality.

Gladwell’s explanation of the quarrelsome nature of Appalachians is a good example of his ability to crystalize the logic behind a puzzle. My mother’s people are multigenerational Appalachians, and the family history was always been inexplicable to me. When I was eight years old, I asked my grandfather why he decided to enlist to fight in World War II. He told me that he had gotten into a scrape with a man (a “feller” as my grandfather told it) and that man’s brothers were out hunting around the neighborhood to kill him. However, my grandfather was able to sneak past the brothers and got home, where his mother hid him in the barn under some burlap sacks. Rising early the next morning, his mother had him lie down on the floor of the back seat of the car and then drove him to Bristol to the Army recruiter’s office. “Ah,” you are thinking, “one of Grandpa’s tedious stories.” But not in this instance, rather this story is a typical fragment of a family history composed of dozens of similar episodes. From my youth I have been puzzled by why these people were so touchy and violent, but as Gladwell shows, the explanation for their chaotic history is not something in the water or a genetic defect. In Outliers he irrevocably reordered my understanding of their behavior.

Must our hands shake as we tear open the box from IKEA? Are we really stuck with a Pareto distribution? Taleb tells us they should and we are, but Gladwell replies by reaching out to offer hope. He does not dispute Taleb’s point that we are ruled by non-linear distributions, but shows us that we need not always be fooled by them. What, after all, gives with Bill Gates? Gladwell shows that he exists at the intersection of the extreme ends of two non-linear distributions. As Taleb notes, you are more likely to win the PowerBall Lottery three times than you are to find yourself in similar circumstances, but if you read Outliers you’ll at least understand the Story of Bill Gates’ Success, and maybe if you are as lucky as me, you may even understand why your relatives are so crazy.