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Originally Posted by guy44
Interesting post. I'm going to talk baseball now because, well, I like baseball. Tell my if I've got your thinking down:
The Yankees are your top 5%. They can afford to engage in large risks because they always have more money. They can give bazillions to mediocre pitchers like Wright who've only had one good year - there's a small chance he'll have it again, but even if he doesn't, the Yankees have the money to go out and get another pitcher to take his place.
A team like the Padres has limited resources and, while not destitute, must avoid high-risk, high-reward strategies. They needed a centerfielder last year, but couldn't afford someone like Carlos Beltran, because he costs too much. Sure, adding him to the team has a small but real chance of making the Padres better than the other teams in the NL East, thus allowing them to make the playoffs and collect additional revenue to cover his cost...but that's too high a chance. The Mets, who have the money to ignore a worst-case scenario with Beltran, then signed him for way more than the Padres could ever hope to offer.
In summary, NY sucks.
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FYI, Yankees rule, they're just going through a rough spot.
More to the topic, I think the above baseball example could be sumamrized as such:
Those who have the most wealth are better able to absorb the impact of having a high-risk venture not pay off. This helps increase the income disparity, because as you gain wealth you are better able to take the high risk/high reward ventures. For instance, in the OP's example someone with a year's worth of living expenses in the bank will be better equipped to take the opportunity that will potentially pay 200k because he won't need to worry about monthly expenses as he already has those covered. So someone already with more capital is just able to build, and on and on.
Also, in real life many of the potential high-risk opportunities also require some starting capital which those in the lower income brackets don't have to spare.
So it isn't just that those who lack aren't properly analysing risk, but they are either less equipped to deal with the negative impacts from risk going bad or aren't able to make the initial investments necessary to take part in those risks.