Seth Stephens-Davidowitz
speaker
57 appearances
1 recordings
1 series
first heard Feb 2025
last heard Feb 2025
Seth Stephens-Davidowitz’s voice in public audio — every appearance, attributed to the second.
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They analyzed all the data of basically everybody rich in the United States of America, and they concluded that the typical rich American is the owner of a regional business such as an auto dealership or beverage distribution company. That kind of shocked me for multiple reasons.
Hi, Michael Carruthers. Thank you for having me.
But one of the motivations was that I'm a huge baseball fan and any baseball fan knows the story of baseball the last 25, 30 years, which is the explosion of analytics and data analysis to make decisions. So baseball has just totally been transformed by data analytics and
and i'm a data scientist so i've worked at google as a data scientist you know every decision is based on data but it kind of occurred to me that certainly in my personal life uh like i don't really make decisions based on much data i kind of just like do what i think seems about right trust my gut basically and it occurred to me that you know maybe it'll be interesting to explore some of these bigger areas of life so you know
dating, picking a romantic partner, career success, happiness, parenting. What would data tell you about these topics? Kind of a money ball for your life approach to the biggest questions that we face. And also, I knew because I'm kind of in the field of data analytics that there's been an explosion of really credible research in these big areas.
I pretty strongly believe data is a better way.
I kind of came into that with that idea because it's been proven in like every area it's been tested. They've tested judges if they have to decide whether someone on trial is going to commit another crime or should they or is it safe to let him be out, that algorithms are better than judges at doing that.
They found that algorithms are better than principles at deciding whether a teacher should be promoted. They found that algorithms are better at doctors at determining whether someone should be given a test for a heart disease or cancer.
so it's been proven over and over again and all you have to do is look around it's not like people are nailing these big life decisions as is uh you know if you talk about marriage or picking a partner i mean how many people do you know are in terrible relationships or uh divorced multiple times uh how many people do we know who are unhappy and career success.
Certainly many people have struggled to figure out what they should do. So I think it's pretty obvious just looking around that the current approach of using your gut is leading to less than optimal decisions. And then the fact that there's been proof in pretty much every arena that's been tested that data beats gut is more evidence in my favor.
Yeah, so there are these studies where they basically looked at the entire universe of people in the top 1% or even top 0.1%. They analyzed all the data of basically everybody rich in the United States of America, and they concluded that the typical rich American is the owner of a regional business, such as an auto dealership or beverage distribution company.
That kind of shocked me for multiple reasons. I didn't think of auto dealerships as paths to wealth. I didn't know what a beverage distribution company is. But then you kind of dig down the data. They dig down. I dig down to the data as well. And you kind of start understanding what that means and why that is and kind of what it really takes to be rich in the United States.
One of the big points about being rich is that the path to wealth is owning things, not a salary. So among the top 0.1% of Americans, there's about a three to one ratio, people who own versus people who make a salary.
Well, they're not quite as bad as some people think. There are definitely a lot of restaurateurs that are in the top 0.1% or 1%, but it's nowhere near as good as, say, an auto dealership or a beverage distribution company or some other companies.
so what is it what is it about auto dealerships or beverage distribution companies that make them the path to wealth well they actually have legal protections against like against competitors so you can't just start an auto dealership there are kind of laws of who's allowed to do this uh so uh you know one danger of being in business uh i'm an economist so there's something called the zero price condition which is basically if you have profits
someone else will start a business and you're a competing business and they'll kind of charge a lower price and they'll take away all your profits. And that happens a ton in business. I think, you know, people don't realize just how hard it is to actually have a business that's consistently making money. So, you know, legal protection is definitely a good path to making some money.
But there are other businesses that have their own protections that aren't legal. So market research turns out to be a really good business. Just a large percent of people who start market research businesses end up in the top 1% or top 0.1%.
Yeah, they are very low. It's not as crazy as you might sometimes think trying to be a celebrity because there are ways you can dramatically increase your odds. The data also shows. And there have been actually studies of artists and what it takes to be a successful artist.
And usually what separates them is not necessarily the art they've created, that the art is so much better than everybody else's, but they were just much more aggressive hustlers.
So, for example, there have been studies of hundreds of thousands of painters, and they found that the painters who made it traveled widely to every possible gallery, different regions of the country, different countries. Any gallery that would take them, they showed their work there, and eventually they kind of stumble on a big break.
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