Inequality on Tinder and more
How has the Internet created winner-take-all markets?
"On Tinder, the top 20% of men are competing for the top 78% of women ... The Gini coefficient for the“ Tinder economy ”is 0.58, which means that it has higher inequality than 95% the world's national economies"
🍍 This was one of the coolest tweets I read in 2019, but looking further than its ridiculousness, it made me think deeply about similarities between the disparity on Tinder’s attention economy and real-world economies. What are the common points between them? What are the root causes of the inequalities? Will this inequality trend increase or decrease? Lemme try to answer those in this post.
First off, What is the Gini coefficient?
If someone asks me “What did you learn in your Public Economics class?”, Gini coefficient is probably the only thing that I still remember. Basically, it is an indicator used to compare income inequality between countries. The Gini coefficient is calculated based on percentages of the population divided by groups and the corresponding percentages of wealth owned by those groups.
In theory, the values of the Gini index range from zero to one. Zero expresses perfect equality, everyone is as wealthy as anyone else. Conversely, a value of One (or 100%) indicates maximal inequality - a single citizen owns all the assets of the economy.
In practice, the actual Gini values of economies usually fall between 0.2x - 0.6x.
Fun fact: Countries with the highest Gini coefficients (the most unequal ones) are usually located in Africa or South America, the top three are: South Africa, Botswana, and Namibia. In contrast, the countries with lowest Gini values ( the most “egalitarian”) are countries in the former Soviet-bloc e.g. Czech, Ukraine, Slovenia, or Northern Europe like Norway, Sweden, Denmark, Belgium, and Ireland. Source: World Bank.
The Gini index on Tinder vs in real life.
🍉 With the "Tinder economy", instead of assets, the top 20% of the male population possesses the favor of 78% women, which results in a Gini index of 0.58. A number that reminds us of a fairly familiar rule - the 80-20 rule, aka Pareto rule.
Considering the global economy, the disparity gap in terms of wealth among different classes is larger than the match inequality on Tinder many times. One simple reasoning is that it’s virtually impossible for a user to have more than 1 million matches on Tinder, but in terms of assets, many people can earn more than 1 million dollars on a monthly basis.
Currently, the richest 1% owns 45% of all humanity’s wealth, while the bottom 64% of the world's population accounts for only 2% of global wealth. It will be even more shocking if you zoom more closely at the richest 1%, look at the top 0.000001% richest - with only 26 richest people, their fortune put together are greater than half of the world's population - 3.8 billion people combined.
In my opinion, whether on Tinder or in real life, inequality is an inevitable trend. In the future, it can only follow a single trend that is up to the right.
The causes lie in technological advances, most importantly the advent of the Internet. 🕸 Let’s see why
How have the Internet been accelerating inequality?
🥝 First off, let's go through two following examples to see how the Internet has driven income inequality over a past few decades.
Imagine you are a student who wants to find a math tutor. Before the Internet era, you only had a few options limited by the number of math teachers available around your area. No matter how good their teaching methods were, you must accepted that. However, in the Internet era, you can choose the best-of-the-best teachers in your country to learn.
Why do you need to cycle a few kilometers to a house of a decent or sometimes mediocre teacher as I did in the past while you can sit inside your house, air-conditioner turned on, eating snacks and still being taught by the best? The convenience doesn't stop there, you can also control your teachers "like a boss", make him repeat hundreds of times the part that you don't understand, force him to speed up to x2. or simply skip all the redundant things that you already know.
Similarly in the opposite direction, if you are a teacher, no matter how good you taught, before the advent of the Internet, your market was just around the local neighborhood where you lived. With the Internet as a new distribution channel, your market now is the entire globe. Furthermore, recording technology and the Internet have turned teaching from an unscalable activity into a scalable one. In the past, you had to teach in person - one class at a time, now you only need to record your lesson videos once to be able to serve thousands of people, anytime they want, you no longer need to be physically there to serve your students.
🍌 Okay, here is another obvious example. Imagine you want to be a singer. Even if your voice were as good as of Adele, if you were born in England in the 18th-19th century, let alone before that, it was very unlikely that your fame could grow beyond your local tea rooms. Similar to the previous example, even in case you actually became famous nationwide, there was also no way for you to monetize your voice in a scalable manner.
However, fortunately for Adele, the advent of the Internet era more than 200 years later changed everything. With the foundation based on a highly interconnected network of fiber optic cables stretching across the oceans and the ubiquity of cheap smartphones, laptops - made in China in every corner of the world, the Internet has become the ultimate distribution channel to bring millions of Adele fake versions in the form 0 and 1 to fit neatly in our pocket, readily waiting to whisper the voice of the British diva at any given time we want. While in reality, the real Adele might be drinking lemon tea with honey in her house somewhere in London with a sore throat.
Naval Ravikant encapsulated the gist of the idea demonstrated in these two examples in his quote:
"Technology democratizes consumption but consolidates production.
The best person in the world for anything, gets to do it for everyone."
🍓 Now, let go back to the our starting point, inequality in Tinder’s attention economy.
In the past, our parents' market of dating partners was usually bounded in a specific area where they lived. Dating people who lived outside the radius of your village or district was already considered fairly out of reach.
No matter how hot you were back then, your attractiveness could only reach a limited number of audience in your physical territory. However, in the age of social media, apps like Instagram, TikTok are serving as a great amplifier to broadcast your beauty globally to thousands even millions of people. Tinder, like many other social networks, is expanding the size of the "dating market" for each of us. Inevitably, the prettiest, hottest individuals will receive more attention than what the ones of previous generations got in the past.
If attention is considered as an asset, then the Internet is accelerating attention inequality in our society
🌽 Winner-take-all markets.
The Internet's "scalability" and "worldwide reach" have been creating many markets in which the best take all, leaving the rest competing for such a tiny leftover part of the pie. The best singers, the best companies, the best solution providers ... will dominate then reap the majority sum of the market’s profit.
Naturally, as a user, we always want to find the best solutions. Users are only interested in the search engine with the fastest, most accurate search results, the video platform where the majority of video creators are, the social network with the highest number of participants, e-commerce sites where most buyers, sellers are selling, the streaming movie and music sites which have the largest collection of movies and music tracks, etc. So basically almost all markets on the Internet are “Winners take all markets” by nature.
It would be utterly boring to eat at the same restaurant or wear the same outfit for 365 days a year, but you can definitely use Google, Youtube, or Facebook every single day for many years without getting bored.
Furthermore, the scalability of software thanks to its near-zero variable cost. It costs virtually nothing for a copy to be made on the Internet.
Ultimately, all of these features* converge to generate the inevitable outcome of growing income inequality in favor of people who are working in those monopolies. People might complain that software engineers are outrageously overpaid but it becomes reasonable when we take into account the potential impacts on millions or sometimes billions of users of their decisions. Some might even argue that the best engineers are severely underpaid.
For example, Instagram only had 13 employees who were serving more than 30 million users at the time before it was acquired by Facebook for $1 billion. Such a mind-blowing ratio of user per headcount would be impossible without the leverages of technology and the Internet.
Fortunately for all of us, dating is not a winner-take-all market. This difference comes from the unscalable nature of individual interactions.
Mark Zuckerberg can lead products that are serving a billion people at once but it’s virtually impossible for him to date with 10 women at the same time let alone a billion. Therefore, although attention inequality in dating has increased significantly compared to the pre-Internet era, when it comes to actual dating and marriage the Gini index is always limited at a certain threshold, unlike the extreme distribution of income inequality.**
Interestingly, as we go further down the funnel from attention seeking to dating to marriage, the Gini coefficient will be reduced and eventually approach zero. Why? I'll let you answer this for yourself as a fun puzzle. The hint is located right at the beginning, just pay a little attention and you’ll see it. :D
That’s all for this week.
Thanks for reading, and see you soon,cheers!
Minh Phan 👋
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* This article from London Business School is probably the most comprehensive list I could find regarding the reasons why tech markets in general are winner-take-all.
https://www.london.edu/think/nine-reasons-why-tech-markets-are-winner-take-all
**Extremetian vs Mediocretian
Winner-take-all markets have a long tail distribution instead of the normal - bell-curve distribution. Nassim Taleb analyzed intensively about these two polar of distribution in his book Black Swan.
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Images by Klawe Rzeczy via Behance.