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The Dumb-bell or the Bell?

A Yelp employee made the news two years ago for complaining in an open letter to the CEO about how little she was paid in relation to the high cost of living in San Francisco. “Eighty percent of my income goes to paying my rent,” she wrote.  She was fired and went from the frying pan into the fire. A $1,000 in severance later, after "selling everything I owned — books, movies, clothes, all of my pots and pans and every last piece of furniture" she bought a one-way ticket to New York city where she is employed as a dishwasher.

The knowledge economy can be harsh for those who don't have it.  While it richly rewards those endowed with skill it has little use for those without it.  The result can be a two-tier society California is threatening to become. "Income inequality in California is getting worse," writes CNBC.  It's a dumb-bell shaped distribution.  There are people living the dream and there are people living in cars.

In affluent areas such as Santa Barbara, the cost of living continues to rise while wages stay stagnant, leaving residents struggling to make ends meet. Even many of those with jobs can barely afford to stay in the city they've called home for years, and more of them are now forced to live out of their cars. ... As housing prices in the Bay Area continue to rise and an increasing number of residents turn to cars and RVs as their primary residences, local officials must figure out how to support the growing population while fielding a corresponding rise in complaints about RV communities from other residents, The Mercury News reports.

This income inequality is characteristic of a "star" system where ace programmers or engineers sell "hits" while dishwashers just get by.  Conspicuously missing is the middle.  Instead of reaping the promise of Long Tail,  where ordinary people could provide small volumes of hard-to-find services to many customers the new economy still sees the same few stars hogging all the action.  The "millions of markets of tens" has stubbornly failed to replace a few tens of markets of millions.

If the world seems smaller than before it is because we all go to the same place: buy on Amazon, trade on eBay, search on Google, make friends on Facebook, vent on Twitter and compare services on Yelp.  People have not become differentiated but commoditized. One dishwasher in New York is just the same as another.  The comparative advantages that were once provided by isolation or the expense of search has been annihilated by logistics and information technology.  The niches and cracks where technology promised we could cling don't exist in the smooth carbon fiber skin of a 787.