Signals are imperfect and individuals with greater ability than their signals convey to employers become entrepreneurs. Empirical analysis of two longitudinal samples of U.S. and U.K. residents supports the model’s predictions that (i) entrepreneurs have higher ability than employees with comparable signals, (ii) employees have better signals than equally able entrepreneurs, and (iii) entrepreneurs’ earnings are higher and exhibit greater variance than employees’ with similar signals.
Some people think that inequality is a big concern and we should try to share the rewards of economic growth more equally. Other people have different views — that if you earned a lot of money you should get to keep that. I think you can reasonably have a debate about that. I think what much of our work shows is, however, that there are certain programs where there really shouldn’t be a debate because they pay for themselves and reduce inequality in the process. Those tend to be programs targeted at kids.
The Army would dispatch a few of its members to drive canvas-covered trucks – sometimes as few as two of those trucks – in looping convoys that would create the impression (sorry, the “illusion”) of an entire infantry unit being transported.
Most geniuses—especially those who lead others—prosper not by deconstructing intricate complexities but by exploiting unrecognized simplicities.
Have a good weekend.