Luck, the Butterfly Effect, Capitalism, & Taxes

It’s always strange to realize how much a small instant can change our lives.
I think of many famous actors, and they probably don’t know the junior casting agent that advocated for them to be auditioned which lead to super stardom.

So many people’s life have been incredibly influenced by small actions of someone they may not even know.

I remember applying to Shopify in 2011. I was working in politics at the time so my LinkedIn was as plain and boring as possible. You don’t want to attract the attention of the other party’s “Opposition research” team. (Most “scandals” or most weird news you hear about a politicians past on the news was most likely fed to the media by someone’s Opposition research group).

At the time in my application I told them how they needed to integrate shopify with WordPress. I got an email back telling me they looked at my Linkedin and didn’t think I was a good fit. I hadn’t even thought of my LinkedIn when I applied. I focused on my cover letter and answering their questions. I didn’t even reply back challenging that either. A year later I was at WordPress VIP and was tasked with reviewing the new Shopify WordPress plugin for security and performance concerns. The very one I had essentially been told I was not good enough to write.

It’s strange because that tiny thing, my linkedIn profile has in a way had a huge impact. If I had been a Shopify employee at that time, I would have had stock options that would be worth millions. It’s interesting how tiny decisions can have huge impact. I know it’s the butterfly effect and it’s been “proven”, but still, thinking about it in actions in ourselves and for others makes it so mesmerizing. And just so we’re clear, I’m not hung up about not having gone to Shopify. I have had a great career and I’m financially comfortable.

Now, let’s imagine the flip side of this. A small action by someone else, or by ourselves could have incredibly negative impacts on our lives or the lives of others.

The wheel of chance is not just one of fortune. A chance encounter at a store can catch you COVID no matter how diligent you may try to be. A missed appointment for sickness can cause a spiral of debt.

This is something I’ve mentioned often, what chance has made yours is not really yours. But also, it’s all just chance. Sure the actions we do can help us spin the wheel more or fewer times. But it’s still chance.

As much as we as a society see folks like Gates, Bezos, Buffet, as smart folks. They aren’t really. There are thousands, if not millions of people who are smarter. What those people were was lucky.

You perhaps don’t believe me, so read this article. tl ;dr if 90% of an outcome is skill and 10% chance. If you have 10 000 people applying for 10 positions, on average only 8 of the 10 most skilled people will make it. If something is, more realistically ratio of 75%-25% then, the top 10 in terms of skill only have a 50-50 chance of getting picked. That’a not to say they aren’t skilled, just that their luck is what tipped the scale.

The ramifications of this are wide and should lead to far less inequity in the world. I’m not saying everyone should have exactly the same things and work shouldn’t be rewarded. But let’s face it, after 100 million in the bank….. you’ve received more than enough for your skills. The rest was just chance, OR, even more likely chance, skill, and taking advantage of others.

Now that I’m not in gov I can say random things like, The tax rate on capital gains should be the same as work income (I know I probably could of said stuff like this because of the way the policies are written, but I’d rather not).

It’s insane to be that someone making $500 000 from investments gets taxed only 1.5% more than someone making $45 000 from working (Federally [15% vs 33% / 2]).(1)Okay, it’s slightly more complex than that because it’s the income that is calculated at 1/2 and not the tax rate, but that should mean that it’s usually less than 1.5%. But again individual situations will vary. https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html

The investment is really just a bonus for having money. It’s a luxury of having been able to have early lucky breaks. I know all the alleged economics thinking behind this, but if there’s something that’s been proven true in the last 100 years is that economists don’t really know what’s going on.

Now after raising capital gains taxes and instituting a wealth tax for fortunes over 10 million (2)Yes yes, I know all about the alleged risks of people just moving money offshore, etc etc, we should just do something similar to the Americans and if you want a Canadian citizenship, you need to file Canadian taxes and you’ll pay a certain minimum % (over a certain amount, let’s say 250 000 a year) to keep that Canadian citizenship
If you don’t want to pay those taxes, you’re welcome to renounce your citizenship.

Of course, this wouldn’t be one of my blog posts with a sort of tie in to basic income. A guaranteed basic income (not universal) would enable people to weather those bumps and would help make it so people can keep spinning that wheel of chance. We need to decide what our values are as a country. I think the Pandemic has made it clear that not everyone starts on the same footing and not everyone has the same privileges, and we should greatly question the reasons behind that while still rewarding top talent.(3)Also, yes I know I only have enough Economics knowledge to be dangerous and just like folks who have no background in Computer Science shouldn’t opine on the future of AI I should probably stfu. But you know…. I’m human

Footnotes   [ + ]

1. Okay, it’s slightly more complex than that because it’s the income that is calculated at 1/2 and not the tax rate, but that should mean that it’s usually less than 1.5%. But again individual situations will vary. https://www.canada.ca/en/revenue-agency/services/tax/individuals/frequently-asked-questions-individuals/canadian-income-tax-rates-individuals-current-previous-years.html
2. Yes yes, I know all about the alleged risks of people just moving money offshore, etc etc, we should just do something similar to the Americans and if you want a Canadian citizenship, you need to file Canadian taxes and you’ll pay a certain minimum % (over a certain amount, let’s say 250 000 a year) to keep that Canadian citizenship
3. Also, yes I know I only have enough Economics knowledge to be dangerous and just like folks who have no background in Computer Science shouldn’t opine on the future of AI I should probably stfu. But you know…. I’m human

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