The Sovereign Individual - Chapter 8

 

The Revolution in Earnings Capacity in a World Without Jobs

Chapter 8 

"God is not mocked: for whatsoever a man soweth, that shall he also reap." — GALATIANS 6:7

The Big Shift

Major changes in how we produce goods or protect ourselves always reshape society. They change who has wealth and who has power. The Information Age isn't just about computers—it's about a complete transformation in how we live, work, and distribute resources.

In this new age, physical location matters far less. Organizations tied to geography—governments, labor unions, regulated professions—will lose influence. Because governments can no longer control resources through force as easily, their power to redistribute wealth will decline.

Wealth that governments once seized will stay with those who create it. The most capable entrepreneurs and innovators worldwide will accumulate growing fortunes.

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Winner-Takes-All Economics

Globalization means the most talented people in every field will earn exponentially more than everyone else. This mirrors what we already see in sports and entertainment: a few top performers earn vastly more than the rest.

The problem? Success in the Information Age requires high literacy and mathematical skills—and millions lack these basics.

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The American Competency Crisis

A U.S. Education Department study found that 90 million American adults over fifteen cannot write a letter, understand a bus schedule, or do basic math—even with a calculator. As writer Bill Bryson put it: "They couldn't find their way out of a paper bag."

If you can't read a bus timetable, you won't navigate the Information Superhighway. This group—roughly one-third of Americans—forms an emerging underclass unprepared for the digital economy.

At the opposite end sits a small elite (perhaps 5%)—highly educated information workers and capital owners. They are the Information Age version of feudal landowners, except they specialize in production, not violence.

Ammon's Turnip: Why Talent is Rare ⭐

In the late 1800s, German economist Otto Ammon studied why some people succeed while others don't. He argued that success depends on the random distribution of human abilities—like drawing numbers from a lottery.

1. Intellectual Traits

This encompasses all aspects of rational thinking: quick comprehension that allows you to learn fast, strong memory for retaining and applying knowledge, sound judgment for making good decisions, inventive power for creating new solutions, and other cognitive abilities that form the foundation of mental capability.

These traits determine how well you can process information, solve complex problems, and adapt to new situations. Intelligence is the engine, but it's only one part of the machine.

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2. Moral Traits

These character qualities include self-control in managing impulses and desires, willpower to pursue long-term goals despite obstacles, industry in maintaining consistent effort, perseverance through difficulties and setbacks, moderation in avoiding excess, deep regard for family obligations and relationships, unwavering honesty in all dealings, and similar virtues that build trust and reliability.

These traits determine whether someone can be depended upon and will honor their commitments. Ammon noted that a brilliant mind without moral steadiness would often collapse under the weight of poor decisions or lack of discipline. You can be the smartest person in the room and still fail if you can't control yourself.

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3. Economic Traits

This category covers practical business abilities: organizing talent for managing people and resources, technical skills relevant to your field, appropriate caution in avoiding unnecessary risks, clever calculation of costs and benefits, foresight to anticipate future trends and needs, thrift in managing resources wisely, and other competencies that enable material success.

These traits determine how effectively someone can create and preserve wealth. Intelligence tells you what to do. Moral character ensures you follow through. But economic traits determine whether you can turn ideas into money.

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4. Bodily Traits

To these mental traits, Ammon added a fourth category that's often overlooked: physical capabilities. This includes the power to work long hours without fatigue, endurance for sustained effort over time, ability to handle physical and mental stress, resistance to various pressures and temptations, natural vigor and energy, robust good health that supports consistent performance, and other physical attributes that enable sustained achievement.

These traits determine whether someone has the stamina to execute their plans consistently. You can be intelligent, disciplined, and business-savvy—but if your body gives out, none of it matters.

The Rarity of Excellence

Ammon's key insight: these traits are distributed randomly, like a lottery with millions of combinations. The person who scores highly in all categories is extraordinarily rare—perhaps one in a million.

Most people have a mix of high and low scores. Someone brilliant but undisciplined may fail despite their gifts. Someone hardworking but unimaginative may plateau in mediocrity.

As Ammon wrote:

"Like a lonely mountain peak, or rather like the spire of a cathedral, rise the men of high talent and of genius above the broad mass of mediocrity… The number of the highly gifted is so small that it is impossible that 'many' such exceptional individuals could have been held back simply due to flaws in social institutions."

Translation: True excellence is rare. Society doesn't hold back millions of geniuses—there simply aren't that many.

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Income Distribution: The Diamond Shape

Ammon studied income patterns in Germany and London and found they matched his probability theory. Most people clustered in the middle class, with small minorities at both extremes—very poor and very wealthy.

Modern industrial societies follow this "diamond shape":

• Small wealthy elite at the top
• Large middle class in the center
• Small poor class at the bottom

In London today, there are more millionaires than homeless people.

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The Factory Age vs. The Information Age

The skills needed in the Factory Age (now ending) are fundamentally different from those required in the Information Age. Most people could operate mid-twentieth-century machines. But those jobs have been replaced by smart machines that control themselves.

An entire category of low- and middle-skill employment has vanished.

If we're correct, traditional employment will mostly disappear, replaced by project-based "spot market" work. As researchers Clive Jenkins and Barrie Sherman noted:

"Most unemployed young people have no qualifications whatsoever."

"Qualifications" here don't mean diplomas—they mean technical literacy, analytical thinking, and adaptive problem-solving. These are now prerequisites for economic participation.

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The Bottom Line

The Information Age rewards rare combinations of intelligence, character, skill, and stamina. Those who possess these traits will thrive. Those who don't will struggle.

The question isn't whether this is fair—it's whether you're preparing for it.

Check out the first chapters I posted weeks ago:

The Sovereign Individual 

Finding Balance: The Sweet Spot Between Good and Too Much

 

Finding Balance: The Sweet Spot Between Good and Too Much

Confidence without arrogance

The Sweet Spot: Believing in your abilities while remaining open to being wrong. You speak up when you have expertise, but you also ask questions when you don't. You take on challenges that stretch you without overcommitting to things beyond your capability. Too Far: When confidence becomes the inability to admit mistakes, learn from others, or recognize the limits of your knowledge.

Optimism without complacency

The Sweet Spot: Expecting good outcomes while still preparing for challenges. You maintain hope during difficulties but don't assume success will come without effort. You see opportunities where others see obstacles, but you still do the work. Too Far: When optimism becomes passive assumption that things will work out without your active involvement or contingency planning.

Independence without isolation

The Sweet Spot: Making your own decisions and maintaining your principles while staying connected to others. You don't need constant approval, but you value input and maintain meaningful relationships. You can stand alone when necessary but choose community when possible. Too Far: When independence becomes an inability to collaborate, accept help, or maintain close relationships due to excessive self-reliance.

Skepticism without cynicism

The Sweet Spot: Questioning claims and requiring evidence while remaining open to being convinced. You don't accept things at face value, but you're willing to believe in good intentions and positive outcomes when the evidence supports it. Too Far: When skepticism becomes automatic distrust, assuming the worst in people's motives, or rejecting ideas without fair consideration.

Respect without idolizing

The Sweet Spot: Acknowledging others' achievements and expertise while seeing them as human. You can learn from someone without accepting everything they say. You honor people's contributions without losing your own critical thinking. Too Far: When respect becomes blind worship that prevents you from seeing flaws or thinking independently about someone's ideas.

Loyalty without fealty

The Sweet Spot: Standing by people and organizations that deserve it while maintaining your own moral compass. You support others through difficulties but won't compromise your core values. You're reliable but not servile. Too Far: When loyalty becomes unquestioning obedience that prevents you from speaking up about problems or leaving toxic situations.

Open-minded without gullibility

The Sweet Spot: Considering new ideas and perspectives while applying critical thinking. You're curious about different viewpoints and willing to change your mind when presented with good evidence, but you don't accept everything you hear. Too Far: When open-mindedness becomes accepting any claim without proper evaluation or being swayed by every new argument you encounter.

Opportunistic without FOMO

The Sweet Spot: Recognizing and acting on genuine opportunities that align with your goals without chasing every possibility. You're alert to chances for growth but selective about which ones to pursue based on your priorities. Too Far: When being opportunistic becomes frantically chasing every trend or opportunity out of fear you'll miss out, leading to scattered focus and poor decisions.

Patience without stubbornness

The Sweet Spot: Waiting for the right time and allowing processes to unfold naturally while remaining flexible about methods. You persist through difficulties but adapt your approach when it's clearly not working. Too Far: When patience becomes rigid attachment to a single approach or timeline, even when circumstances have clearly changed.

Caution without pessimism

The Sweet Spot: Carefully considering risks and preparing for potential problems while still taking action. You plan for contingencies but don't let fear of negative outcomes prevent you from pursuing worthwhile goals. Too Far: When caution becomes assuming the worst will happen or being paralyzed by potential risks to the point of inaction.

Risk without recklessness

The Sweet Spot: Taking calculated chances that offer meaningful upside while understanding and preparing for potential downsides. You're willing to be uncomfortable but not careless with important resources or relationships. Too Far: When risk-taking becomes gambling with things you can't afford to lose or ignoring obvious dangers for insufficient rewards.

Passion without addiction

The Sweet Spot: Pursuing what you love with intensity while maintaining balance in other areas of life. Your passion energizes you and drives excellence without consuming your health, relationships, or perspective. Too Far: When passion becomes compulsive behavior that harms your wellbeing or relationships, or when you can't function without constant engagement with your passion.

Ambition without greed

The Sweet Spot: Striving for meaningful achievement and growth while being content with enough. You want to improve and succeed but aren't willing to sacrifice your values or harm others to get ahead. Too Far: When ambition becomes insatiable desire for more that leads to compromising ethics, relationships, or wellbeing in pursuit of success.

Honesty without disrespect

The Sweet Spot: Speaking truthfully while considering the impact of your words. You don't sugarcoat important truths but deliver them thoughtfully, with care for the person receiving them. Too Far: When honesty becomes brutal bluntness that unnecessarily hurts people or damages relationships under the guise of "just being honest."

Aspiration without insatiability

The Sweet Spot: Having meaningful goals that inspire growth while appreciating what you already have. You strive for improvement but can also enjoy present achievements and circumstances. Too Far: When aspiration becomes endless wanting that prevents you from ever feeling satisfied or grateful for current blessings.

Intelligence without overconfidence

The Sweet Spot: Using your cognitive abilities effectively while recognizing their limitations. You apply smart thinking to problems but remain humble about what you don't know and respectful of others' perspectives. Too Far: When intelligence becomes intellectual arrogance that dismisses others or overestimates your understanding of complex situations.

Success without ego

The Sweet Spot: Achieving your goals while staying grounded about your role in that success. You're proud of accomplishments but recognize the contributions of others and the role of circumstances beyond your control. Too Far: When success inflates your sense of self-importance, leading to treating others poorly or believing you're infallible.

Adaptable without being erratic

The Sweet Spot: Adjusting your approach based on new information or changing circumstances while maintaining consistency in your core values and long-term direction. You bend without breaking. Too Far: When adaptability becomes constantly changing course without good reason, making you unreliable or directionless.

Learning without cherry-picking

The Sweet Spot: Actively seeking new knowledge and insights while maintaining intellectual honesty about what the evidence actually shows, even when it challenges your preferences or beliefs. Too Far: When learning becomes selectively gathering information that confirms what you already believe while ignoring contradictory evidence.

Brevity without oversimplifying

The Sweet Spot: Communicating efficiently while ensuring your message is complete and accurate. You respect others' time but don't sacrifice important nuance or context for the sake of being brief. Too Far: When brevity becomes reductive explanations that miss crucial details or create misunderstanding.

Simple without vapid

The Sweet Spot: Making complex ideas accessible and focusing on what matters most without losing substance. You cut through unnecessary complexity but retain the essential depth and meaning. Too Far: When simplicity becomes superficial thinking that ignores important nuance or reduces rich concepts to empty platitudes.

Leadership without dominance

The Sweet Spot: Guiding and inspiring others while empowering them to contribute their best thinking. You provide direction but create space for others to grow and lead in their own areas of strength. Too Far: When leadership becomes controlling behavior that micromanages others or requires them to suppress their own judgment and initiative.

Marketing without charlatanism

The Sweet Spot: Effectively communicating the genuine value of what you offer while being honest about limitations. You highlight strengths without making false claims or manipulating people's emotions inappropriately. Too Far: When marketing becomes deceptive practices that oversell benefits, hide problems, or manipulate people into decisions against their interests.

Connection without dependence

The Sweet Spot: Building meaningful relationships while maintaining your individual identity and capabilities. You enjoy others' company and support but don't lose yourself or become unable to function independently. Too Far: When connection becomes codependency that limits both people's growth or creates unhealthy reliance on others for basic emotional regulation.

Luxury without excess

The Sweet Spot: Enjoying quality and beauty in life while maintaining perspective about what constitutes enough. You appreciate nice things but don't define yourself by possessions or constantly upgrade for no meaningful reason. Too Far: When luxury becomes conspicuous consumption that wastes resources, creates financial stress, or becomes the primary source of identity and satisfaction.

Saving without hoarding

The Sweet Spot: Being prudent with resources and preparing for the future while still investing in current needs and meaningful experiences. You're financially responsible but not afraid to spend on what truly matters. Too Far: When saving becomes compulsive accumulation that prevents you from enjoying life or investing in opportunities that could improve your situation.

Praise without flattery

The Sweet Spot: Recognizing and acknowledging genuine achievements and good qualities in others while maintaining honesty. Your positive feedback is meaningful because it's earned and specific. Too Far: When praise becomes empty compliments designed to manipulate or please rather than genuinely recognize merit, making your feedback meaningless.

Safeguards Against Overthinking

 

I regularly go on weekly fasts from anything that's beginning to control me— sugar, YouTube, even certain thought patterns I catch myself spiraling into. The moment I notice I'm reaching for something compulsively rather than choosing it consciously, it becomes a clear sign that my thinking and productivity are also degrading unconsciously in the background. When we're not in control of our inputs, we lose control of our mental clarity.

Clear thinking—connecting past, present and future coherently—is how we turn intentions and lessons into progressive and positive actions aligned with our goals. Having removed YouTube (video scrolling) I feel I removed a burden on my brain! The constant stream of quick dopamine hits was fragmenting my attention span and making deeper work feel unnecessarily difficult.

But I'm eager to share a paragraph finely written by Michael Singer that captures why we feel almost overwhelmed with choices and decisions—and why it can be so hard to continually make choices that align with what we want or have planned:

The inside of one's psyche is a very complex, sophisticated place. It is full of conflicting forces that are constantly changing due to both internal and external stimuli. This results in wide variations of needs, fears, and desires over relatively short periods of time. Because of this, very few people have the clarity to understand what's going on in there… As a result, we find ourselves struggling just to hold it all together. But everything keeps on changing—moods, desires, likes, dislikes, enthusiasm, lethargy. It's a full-time task just to maintain the discipline necessary to create even the semblance of control and order in there. — The Untethered Soul

Singer's insight explains why good decision-making feels so exhausting. We're not just choosing between external options—we're navigating the internal weather system of competing desires, fears, and impulses that shift throughout the day. The key isn't trying to control this complexity, but developing practices that create space between these conflicting forces and our actual choices.

Here are three safeguards that directly address this challenge:

1. Movement Without Distraction

Regularly make time to walk without your phone, run without music, or cycle in silence. The physical side-effects strengthen your immune system, but the core benefit is returning home to your work or project feeling lighter, more certain of what you want to do—or DON'T want to do—for that project, decision, or week.

2. Daily Writing

You don't need to write books or essays, but simply writing what you are thinking and feeling consistently will build clarity over time. This directly addresses Singer's observation about the difficulty of understanding "what's going on in there."

Writing forces you to translate the swirling mess of internal experience into coherent language. The act of choosing words makes you choose between competing thoughts and emotions. Over time, patterns emerge. You start recognizing which internal voices represent genuine insight versus anxiety, past conditioning, or momentary mood fluctuations.

3. Deep Breathing as Mental Space

It's almost tragic how we underestimate the power of breath. When you're frustrated and angry, if you had a video recording of your breathing, you'd be starkly surprised how shallow and constrained it becomes right before you rationalize, fight back, or make reactive decisions.

Deep breathing doesn't eliminate the conflicting forces—it creates space around them. This is why professionals make daily meditation their routine. Feelings like spotlight pressure, public speaking nerves, and anger thrive when our breathing is constrained, because shallow breathing signals to our nervous system that we're in crisis mode, making clear thinking nearly impossible.

When you breathe deeply before making decisions, you're not just calming down—you're creating the physiological conditions where you can observe those internal conflicts rather than being hijacked by them.

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There are many other safeguards, but this week, see how you can practice one of the above. The goal isn't perfect control over our internal complexity—that's impossible and exhausting. The goal is developing the clarity to make choices from a centered place rather than being swept along by whatever internal force happens to be loudest in the moment.

This is how we nurture clear thinking and productively utilize our hours and attention on things that move us forward.

Cancelo Alvarez 

Adversity as Competitive Advantage

Being good at something doesn't promise rewards. It doesn't even promise a compliment. What's rewarded in the world is scarcity, so what matters is what you can do that other people are bad at, writes James Clear.

In my six active years in the financial markets, I have scrutinized my biggest losses, and this is what they reveal:

The business arena is competitive, filled with people overcoming challenges every day. It's the incredibly difficult challenges that give us the opportunity to pull ahead. In a competitive world, adversity is our friend. The harder it gets, the better chance you have of insulating yourself from the competition.

It's like a marathon race: before you can break away from other runners, you have to survive what they cannot survive — a steep hill, a faster pace, weather conditions, etc. You do not break away when it's easy; you break away, if ever you do, when it is hardest for everyone else, including yourself. But, having insulated yourself from failure before, you feel pain, you feel the blows of big losses, but you are not paralyzed by them into inaction. Because you've turned them into a friend. That is, you are more prepared and capable of enduring longer periods of suffering.

I arrived at this observation distinctly while reviewing an investment I made in the commodities market, where I was shaken out with a large loss before the investment proved successful. We'll create another analogy for what it means to be 'shaken' out.

It's more like a large filter, a wall that seems impregnable to inexperienced eyes. If you have run or cycled competitively before, you will understand how difficult the process is: a steep hill will leave you out of breath, a fast pace will force you to walk later on, and hot weather will exhaust you. In business and sports, we face similar challenges. Leverage, which means risking big to win big, will threaten your financial stability. One loss can send you back to your grandmother's house, with little to nothing. Losing months will cause self-doubt and relapse into negative thinking patterns, even relapse into negative lifestyle habits.

But both runner and entrepreneur need to survive these challenges in order to break ahead into victory or profitability. Without risking big, how can you ever break free of relying on JOBS (Just Over Broke)? Without a fast pace, how can you ever get the gold medal?

You have to start by identifying the unspoken rules in your situation. What constraints do others face, and how can you turn those into strengths? Shane Parrish challenges us to introspect.

Cancelo Alvarez

Training Ourselves to Notice Peace

 

Reading time: 2 minutes

You've noticed, surely, how often we take for granted untroubled breathing until we get the flu and air has to negotiate its way in—or how often we take for granted freehand writing until our hand is bandaged from an acute cut. I'm not arguing that we should be kneeling down every hour thanking the heavens for good breathing or writing, but I'm observing something even more underappreciated: peace of mind.

Many philosophers and spiritual writers who made names for themselves agree on this truth:

Life is full of problems. 

On any given day, a typical person is wrestling with a problem in their mind, triggering uncomfortable feelings: lingering anxiety, spotlight pressure, one-way decision, regret that drives away sleep, agony.

I write this to remind us to realize and cherish those moments in a day where we feel at peace with ourselves, with our circumstances, with our life.

We cherish these moments by being present—taking a short walk around the garden, even at work, especially at work. Spending a few minutes looking out of your window, noticing things: children, beggars half-inside waste plastic bags digging for scraps, a dog basking in the sun.

We cherish peace of mind by being present because, really, we do get lost in our problems—they consume every fiber and neuron of our body. They suffocate us.

That's why we must make it a point to catch up with our normal, carefree breathing by being present and grateful. Because ultimately, we're not chasing peace of mind—we're simply training ourselves to notice its presence.

Other Readings:
The Quiet Power of Gratitude
An Op-ed from DUCT Rivers 

Sam Madlala 

Blog 85/95

A News Letter -- Surviving The Middle

 

On Playing the Long Game

“You don’t need to be the fastest learner. You need to make your mind up about the few things that you really want to do, and execute with a much longer timeframe than most people. There isn’t much competition left after the first few years. After a decade, it almost feels lonely.”

— Orange Book

A reminder that the real edge comes not from talent or speed, but from time. Time is the great filter. If you can stick with your craft long enough, what once felt like a competition becomes a quiet path with fewer travelers.

On Mastering the Middle

“People only root for others at two times: First, when they’re at the beginning of the race. Second, when they finish. Neither is when you need it. So, you have to master the middle. The boring, exhausting, soul-crushing middle. That’s where the winning happens. On your own.”

This quote hits hard. Everyone shows up to clap at the start or the finish. But mastery is earned in that quiet, thankless stretch in between — where no one is watching, and nothing is glamorous.

On Embracing the Silent Struggle

“In any difficult pursuit, there’s a tough middle where motivation fades. The ability to ‘go dark’ — to block out noise, turn inward, and embrace the silent struggle — is a powerful advantage. Flow and resilience come when you stop explaining yourself and just keep moving.”

— Sahil Bloom

To “go dark” is to stop performing for the world and start performing for yourself. It’s a shift from needing applause to needing truth. The greatest work happens when you no longer need to be seen — only to move forward.

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THE DIP — Book by Seth Godin

Almost everything in life worth doing is controlled by the Dip.

And then the Dip happens.

• The Dip is the tough stretch between starting and becoming great — a grind that looks like a wall but is really the way through.
• The Dip is the maze of bureaucracy and paperwork you have to get through just to register your business — policies, forms, and red tape that test your will before you’ve even begun.
• The Dip is the long stretch between beginner’s luck and real accomplishment.
• The Dip is the set of artificial screens set up to keep people like you out.

Successful people don’t just survive the Dip. They lean into it. They push harder, adapt, and change the rules. Recognizing you're in the Dip doesn’t mean accepting it quietly. The Dip shrinks faster when you work it down with intent.

Thanks for Reading -

Cancelo Alvarez 🇿🇦

You Are Not This Moment

 

Hey,

I know right now everything feels overwhelming — like the ground beneath you has shifted. But I need you to remember something: you are not this moment.

You are not their opinions.
You are not your mistakes.
You are not your salary.
You are not broken.
You are becoming.

Yes — things didn’t go the way you planned.
Yes — you said things you regret.
Yes — they looked at you differently after.

But no — you didn’t lose your worth.

You’ve been underestimated before, and you rose.
You’ve been misunderstood before, and you found clarity.
You’ve been bruised before — but never broken.

And that fire you feel right now? That ache in your chest, that rage in your gut?
That’s not destruction.
That’s direction.
It’s your higher self whispering: “This is not where we stop.”

There’s power in your anger.
There’s vision in your silence.
There’s a new chapter forming — and you get to choose the tone.

So take this moment.
Sit with it.
Cry if you need to. Scream if you must.
Then stand up — chest open, eyes forward.
Not because it’s easy.
But because it’s yours to claim.

You’ve worked too hard. You’ve grown too much. You’ve endured too much to fold now.

They may not know who you are.
But you do.
And that’s enough.

So breathe.

And begin again.

With fierce love,

Cancelo Alvarez