Bryan Caplan  

Big Break Theory

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People often hope for a "big break" - a large, durable improvement in their situation.  An unknown actor landing a major role in a big-budget film is the classic example.  But big breaks seem to be everywhere: getting your first tenure-track job, becoming the new protege of the boss, or marrying someone way too good for you.

Once we accept that big breaks are common in reality, economists' next task is to explain how they're possible in theory.  The top three models:

1. Discontinuity of the world.  The simplest story claims that opportunities are extremely discontinuous.  As a result, the gap between your best option and your second-best option is often large.  So when market forces change, some people predictably experience benefits that seem all out of whack with the size of the shift.

2. Imperfect information.  A subtler story says that while opportunities are fairly continuous, discovery of opportunities is costly and haphazard.  For some people, of course, the crucial missed discovery is that, given their skills, they should be grateful for what they have.  For most people, however, the reality is that there are many better ways to spend their lives... if only they could pinpoint them - or convince others that they're deserving.  Sadly, though, it takes a lifetime to uncover even a tiny fraction of your opportunities in this world.

3. Rationing.  This story says that big breaks happen because markets don't clear.  Sometimes the reason is government regulation.  Think about winners of each year's Diversity Immigrant Visas: from Third World poverty to First World luxury by the luck of the draw.  On a smaller scale, think about all the people praying for a rent-stabilized apartment in Manhattan - or an old-fashioned union job. 

Still, the reason doesn't have to be government.  Social norms impede market-clearing too.  Think about the hundreds of qualified applicants for every position in mortgage-backed securities or construction in 2010.  Wages stayed high, but even interviews were almost impossible to find.  The same goes, of course, for gender-role norms.  Imagine a major war leads to a low male/female ratio.  If social norms don't adjust in men's favor, there will be a shortage (in the technical supply-and-demand sense) of men.  Women who still manage to marry on traditional terms enjoy a big break.

How important are these three stories?  I say that #1 is rarely relevant; any appearance of extreme discontinuity in the world is just a reflection of our ignorance of the world's countless intermediate possibilities.  #2, in contrast, is always relevant.  Even in a fairly simple society, the number of conceivable arrangements of resources is vast, and life's too short to explore more than a handful.  #3, finally, varies widely in relevance.  The more market-oriented and less tradition-bound a society is, the less #3 matters.  But I've yet to hear of a society where #3 wasn't a big deal.

Am I too quick to dismiss #1?  I think not.  Heart-broken youths gravitate to such stories.  But everyone older and wiser wisely avers that there are lots of good fish in the sea.  And if #1 isn't even true for matters of the heart, how could it be true for matters of hard-boiled business?


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COMMENTS (8 to date)

"Once we accept that big breaks are common in reality ..."

I believe that stories telling of big breaks are much more common than big breaks themselves. This is because media (and the agents comprising media) get more rewards for conveying stories that people like to hear than for conveying stories which fail to uplift.

Your classic example, "An unknown actor landing a major role in a big-budget film", will be told and retold many times. It is such a safe and pleasing story to tell that writers competing for front-page coverage might even be tempted to make it up. Whereas the more common story of an unknown actor who failed to get a role in a low-budget film will probably not be retold in any medium outside a small circle of family and friends.

I suppose a study of big breaks should first be careful to remove media bias from the database of big breaks.

loveactuary writes:

I don't think 'big breaks' is a great lens through which to view the world ... it reminds me of the story of Blade of Grass on the fairway, who thinks she is so special because the golf ball landed on her and not one of the other billion blades of grass nearby. But one blade of grass was going to be hit no matter what, since the ball was struck, and it's just a coincidence that it was her particular blade.

In the same way, that big-budget film was going to hire some no-name at some point, you're just looking at it from the micro view of the fortunate applicant. Bosses need proteges always and statistically it was unlikely that any one person got picked, but it was certain that someone would get picked.

Alex Nowrasteh writes:

As a subpoint to 2: People with desirable traits haven't figured out how to signal well. Those who partner with poor signalers reap a windfall.

Dan Hill writes:

A lot of big breaks are in reality the culmination of a process I call "ten years to overnight success" (a plan which I am pursuing in my own writing career).

To build on Richard O. Hammer's point, the media love to tell these stories. They usually leave out the ten years part though because "Man Succeeds After Years of Hard Work" works as a story about as well as "Dog Bites Man".

Justin writes:

You've left out my favored model-- hindsight bias and the role of outliers in high-prestige positions.

Most "big breaks" are not really big breaks in the sense of being radically better than the second best option. The unknown actor that gets a major role in a big-budget picture is probably good enough (and hard-working enough) that he would have landed a role in a critically acclaimed independent film or a breakthrough role in some television drama in relatively short order. The professor that gets a tenure track job at State U probably would have been offered a tenure track job at a different university. The student that gets a coveted slot in their dream college would probably do just as well as a bigger fish in the smaller pond of their second choice. Looking back on it, people remember the breaks they actually received-- the breaks they would have received had their "big break" not materialized remain invisible.

For particularly high-prestige positions, there are substantially more people that would be very good at them than there are positions to fill. There have clearly been more than 44 Americans over the past 224 years that would have made excellent presidents. There are almost certainly more than 32 people at any point in time that would make very good head coaches in the NFL. There are far more than 500 people that are qualified to be the CEO of a Fortune 500 company at any point in time. Given that, by definition, whoever happens to hold one of those positions has been very lucky to get there. It is likely a series of breaks over many years that leads to one person getting the highly coveted position and another just missing out (though still having a very successful career).

ajb writes:

But Justin's argument seems the inverse of Bryan's. Even though the runners-up for major positions are just as good or perhaps only infinitesimally worse than the winners of the searches that lead to the CEO positions, top acting jobs, or NFL head coaches, those plum positions are almost winner-take-all in terms of their rewards. Hence, to be chosen to those positions are really "big breaks." It doesn't help to be told that the person with a comfortable life as a third tier actor is just as good as the one who makes millions a year and gets to win an Oscar. The more segmented the job market, the greater the income inequality, and the tighter the rationing, the more it's about "big breaks."

Rocky Frisco writes:

A little research will show you that most lottery winners are deep in debt only a few years after their "big break." If you aren't prepared for it, a "big break" will turn out to be a case of terribly bad luck.

Peter H writes:

Rocky,

Lottery winners are a poor example in that they are selected for habitual gambling (at extremely poor odds no less) and poor money management. I'm not sure that any other "big break" has a comparable sampling pool.

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