The Talent

Consider two sopranos. One is the finest of her generation; the other, by the judgement of the critics, the hundredth-finest. To an ordinary listener in an ordinary hall the difference between them is faint — a shade more warmth in the tone, a fractionally surer way with a high note, the sort of distinction years of training teach one to hear and most of us never will. Their talents, set side by side, differ by a hair. Their incomes differ by a factor of a thousand. The first sings to full houses at the great opera houses of the world and sells recordings by the million; the second teaches, and sings where she can, and earns the honest middling living of a skilled professional. A hair of difference in the gift; a chasm of difference in the reward. This is the puzzle of the superstar, and it sits awkwardly with much of what the volume of the wage assumed.

The theory of wages in its plainest form says that a person is paid the value of what they add, and that talent, like everything else, earns its marginal product. Fair enough; but it does not begin to explain how a sliver of extra talent can add a thousand times as much value as the talent just below it. To see how, one must look not at the singer but at the market she sings to — at its peculiar structure, which takes the faint gradations of the gift and stretches them into the vast gradations of the purse. The economist who first showed how this stretching works was Sherwin Rosen, in a paper of 1981 that gave the phenomenon its name and its mechanism: the economics of superstars.

Rosen's account turns on two conditions, and where both hold, superstars appear. The first is that buyers want the best, and count lesser talent a poor substitute for it — not a cheaper version of the same thing, but a different and inferior thing. A listener who can hear the finest soprano does not regard two performances by a merely good one as making up for it; quality of this kind does not add up. One transcendent evening is worth more than any number of ordinary ones, and no discount on the ordinary will close the gap. This is what economists call imperfect substitution, and it means that demand does not spread itself evenly across the talented; it crowds toward the top.¹

The second condition is that the best performer can serve a vast market at little extra cost. A soprano singing live can fill one hall on one night; but a soprano on a recording can sing to millions at once, and the cost of pressing the millionth disc is no greater than the first. Rosen called this joint consumption — the same performance consumed by any number of people, the marginal cost of an extra listener near nothing. Put the two conditions together and the superstar is the inevitable result: because buyers crave the best, demand piles onto the top talent; because the top talent can serve everyone, nothing stops it from taking almost the whole market. A singer a shade better than her rivals captures not a shade more of the market but very nearly all of it, and earns accordingly. The reward, plotted against the talent, does not rise in a straight line; it curves upward, gently at first and then steeply, so that near the summit the smallest increment of gift commands the largest increment of fortune.²

The second of Rosen's conditions is the gift of technology, and it has been growing for a century and a half. Before the phonograph, the best singer in the world and the best singer in a provincial town were not really competing, because neither could be heard beyond the room she stood in; the market for song was carved into ten thousand local markets, and each supported its own performers. The reach of a single performance was the reach of a human voice, and within that narrow compass the merely good earned a decent living, for the transcendent could not reach the provincial listener to displace her. What the gramophone began, the radio extended, and the film and the broadcast and at last the stream completed: the demolition of those local walls. Reach expanded until one performance could touch the whole world at once — and as it expanded, the income the very best could command swelled in step, while the merely good, no longer shielded by distance, found their audiences captured from afar.³

Alfred Marshall, whose quasi-rent furnished the last plate, saw the beginning of this and named its cause. Writing in 1890, he observed that men of exceptional ability had lately grown able to earn far higher incomes than before, and that one reason was the broadening of the markets within which their abilities could be applied — improvements in communication letting a person of the first rank exert their gift over a far wider field than their predecessors could reach.⁴ He was describing the dawn of what Rosen would formalise: that the rent on a scarce gift rises not only with the scarcity of the gift but with the size of the market the gift can serve, and that a technology which widens the market widens the rent. The gift need not grow at all. It need only be made to reach further.

It is worth pausing to fix what kind of income this is, in the vocabulary the volume has built. The superstar's vast earnings are, in the strict sense, rent — and rent of the purest kind. Recall the test from the first plate: rent is the part of a payment above what is needed to keep the factor at its work, the surplus over its transfer earnings. Apply it here. What would the great soprano require to go on singing rather than do the next-best thing open to her? Very much less than she is paid — for she sings, by all accounts, because she was made to sing, and would do it for a fraction of the fortune the market hands her. The fortune above that fraction is rent: a surplus extracted not by effort or sacrifice but by the sheer scarcity of a gift that cannot be manufactured, reproduced, or competed away. Her talent is a bottleneck, in the precise sense of the last plate — a thing in fixed supply that others must pass through to get what they want — and it is the most natural bottleneck there is after land itself, for like land it was given, not made.⁵

So the star's premium belongs squarely among the rents. But it belongs to a peculiar branch of the family, and the peculiarity is the whole interest of the case. The rent of land is paid for a thing whose scarcity is fixed by nature and plain to see. The rent of talent is paid for a scarcity that is partly natural and partly, on closer inspection, manufactured — and the proportion between the two is the question on which every quarrel about what stars deserve secretly turns.

For the talent is genuinely scarce — but is it scarce enough to explain the reward? Here the account of the superstar acquires a second author and a darker tone. In 1995 Robert Frank and Philip Cook argued that many of the markets in which superstars flourish are not quite the pure quality-markets Rosen described but tournaments — contests in which reward depends not on how good one is in absolute terms but on how one ranks against the rest, and in which the prize for ranking first is enormously greater than the prize for ranking second. In a tournament, a hair's breadth of advantage takes the whole purse. The winner need not be twice as good as the runner-up, or even perceptibly better; she need only be adjudged first, and the structure of the prize does the rest, converting an imperceptible edge into an unbridgeable gap in pay. And if the edge is that small, then what decides who has it may be very small things indeed — a lucky break, a timely champion, an early lead that gathered its own momentum.⁶

There is, moreover, a second scarcity at work beneath the scarcity of the gift, and it is frankly manufactured. The public's attention is finite; only so many performers can be famous at once, for fame consists precisely in being known to nearly everyone, and nearly everyone has room in their head for only a handful. The slots are few, and what fills them is not talent alone but the machinery that directs attention — the marketing, the gatekeepers, the recommendation engines, the herd instinct by which we attend to what others are already attending to. Two near-identical talents may meet utterly different fates, one swept into the small circle of the famous and the other left outside it, not because the first was better but because some early advantage, magnified by the dynamics of attention, carried her through a door that then closed behind her. The rent she earns is in part a rent not to her gift but to her position — to the occupancy of one of the few scarce slots in the public mind.⁷

That attention feeds on itself — that success breeds success — is not a metaphor but a measurable fact, and one experiment has caught it with unusual clarity. In 2006 a team of social scientists built an online music market, filled it with unknown songs, and split their thousands of participants into separate worlds.⁸ In some worlds people chose songs knowing nothing of what others had chosen; in others they could see how many times each song had already been downloaded. Where choices were private, the songs sorted themselves by some rough consensus of quality, and the sorting was much the same from world to world. Where choices were visible, two things happened: the outcomes grew far more unequal — the hits more enormous, the failures more total — and they grew unpredictable, so that the same song might be a triumph in one world and a flop in another, its fate decided by the small accidents of which copies happened to be downloaded first and then snowballed. Quality still mattered; the very best songs rarely flopped and the very worst rarely soared. But across the wide middle, where most songs and most performers live, success was largely manufactured by its own early momentum.

The pattern had a name long before the experiment measured it. The sociologist Robert Merton called it the Matthew effect, after the verse in the gospel that promises that to those who have, more shall be given — the tendency of early advantage, in science and reputation and sales alike, to compound into a lead far out of proportion to its origin.⁹ The lesson reaches well beyond music. Wherever attention is visible and feeds on itself — which now means very nearly everywhere — a large part of who becomes the superstar is settled not by the magnitude of the gift but by the accidents of early advantage, amplified into permanence. And a rent assigned by luck and momentum is harder to defend as earned than a rent assigned by merit, even when, as here, real merit is somewhere in the mix.

What, then, is the star's vast premium — the honest wage of a rare gift, or the inflated prize of a manufactured tournament? The honest answer is that it is always both, and inseparably. The talent is real; the pleasure it gives is real; and a market that delivers the finest soprano to millions at the cost of a stream is doing something genuinely efficient, spreading a scarce excellence as widely as it can be spread. The premium that calls such talent forth and sorts it to where it is most valued is not simply a distortion to be deplored; much of it is the proper rent of a scarcity worth paying for. Steelman it fully and it is formidable: the reward signals where rare ability lies and draws it into use; it repays the long investment of becoming excellent; and it reflects a real and widely shared gain, the joy of the best made available to all.¹⁰

And yet the bounds are as real as the defence. The magnitude of the premium is set far more by the structure of the market than by the magnitude of the talent: by the craving for the best, the cheapness of reproduction, the winner-take-all shape of the purse, and the luck of the early break — none of which is a measure of desert. A great deal of the reward is pure rent in the unflattering sense, a surplus far above what the talent would have required to show itself; and pure rent on that scale draws a familiar waste behind it — the swarm of aspirants who pour into the tournament chasing a prize only a few can win, most of whom will spend their best years losing. It is a dissipation the volume will meet again, in its own right, three plates on.¹¹ And the machinery that assigns the scarce slots of fame is owned by someone — the label, the studio, the platform — who takes a cut of the rent for controlling the reach, so that part of what looks like the reward of talent is the toll of whoever stands at the gate of attention: a figure the volume will return to when it reaches the platforms near its end.¹²

So the premium cannot be praised or condemned whole. It must be read, case by case, for how much of it is the clean rent of a valued and genuine scarcity and how much the extractive rent of a tournament and a manufactured position — and the reading is hard precisely because the star really is gifted, and the gift really is scarce, and the structure that inflates the gift's reward hides behind the gift itself. The argument over what the talented deserve is, at bottom, an argument over that proportion.¹³