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Social compounding (a.k.a. the rich get richer)

The Wisdom of the crowd

The world is pretty complicated. It would take us eons to map out the cause and effect of all that has ever happened in the universe. To actually live and navigate the world in the present, we rely on shortcuts that get us approximately the right answer - typically things that have worked well in the past. One such shortcut is our reliance on the wisdom of the crowd.

If a person has already done the hard work to figure out some truth in the universe, we can benefit from this work and reward the actor for their contribution to humankind. Each person that finds the hard work valuable compensates the actor for their contribution and shares this truth with others till it becomes commonplace knowledge.

So in general, we default to rewarding the people who can consistently produced correct models of the world - physicists and mathematicians who are able to explain the laws of the physical world, or artists and entertainers who are able to anticipante our innermost wants and desires.

Why this can backfire

The problem is that humans are pretty finnicky. What we actually want isn’t static, and is dependent on what other people want as well. People almost never make choices independently - the world has too many choices to be able to do this.

We’re not sure what we really want from the world. The drive is not necessarily to experience the best life has to offer, just what everyone else is experiencing. In short, we don’t want to miss out on life.

However, when people rely on each other to make decisions, tiny random fluctations (in popularity for example) can blow up, generating enormous long term consequences. Once a social agent gets a small advantage over other agents, that advantage snowballs into something much larger that keeps the engine of advantage rolling. This is known as the cumulative advantage, social compounding or more colloquially, the Matthew Effect where the rich get richer.

How this has backfired

In a music experiment by professors at Columbia, groups of people on the Internet were tasked with ranking the likability of a list of songs. The participants were split into multiple groups. Participants in the control group were shown just a directory of songs and an option to download and like a song. Other groups of participants were segregated into ‘music worlds’ where users were additionally shown the number of downloads of a song in that world. These ‘music worlds’ started out the same, but quickly diverged as differences in song-popularity emerged between the different groups.

Knowledge of which song other people found to be popular heavily influenced participants’ decisions of what they thought was popular. The long run success of a song in the experiment depended sensitively on the decisions of a few early-arriving participants. These decisions were then amplified and locked in by the social compounding process. And, because the particular individuals who play this important role are chosen randomly and may make different decisions from one moment to the next, predicting which song would be popular in a music world was essentially impossible.

You would think that success in a social sphere amounted to just predicting the preferences and needs of the millions of people participants in your market. But this assumes that when people make choices, they do so independent of other people. If one object happens to be slightly more popular than another at just the right point, it becomes even more popular still.

As we are social creatures, this phenomenon rears its head in all kinds of places from income equality, to the concentration of power in a few and the hardening of class stratification, to the growth of corruption.

The Principle of Cumulative Advantage @ thwink.org

“The Principle of Cumulative Advantage states that once a social agent gains a small advantage over other agents, that advantage will compound over time into an increasingly larger advantage”

Is Justin Timberlake a product of Cumulative Advantage @ NyTimes

“Our desire to believe in an orderly universe leads us to interpret the uncertainty we feel about the future as nothing but a consequence of our current state of ignorance, to be dispelled by greater knowledge or better analysis.”
“But even a modest amount of randomness can play havoc with our intuitions. Because it is always possible, after the fact, to come up with a story about why things worked out the way they did — that the first “Harry Potter” really was a brilliant book, even if the eight publishers who rejected it didn’t know that at the time — our belief in determinism is rarely shaken, no matter how often we are surprised.”