I was going to write my own original piece about the winner-takes-all economy, but first I did a Google serach and came up with a Prospect Magazine article which does an excellent job explaining winner-takes-all markets and why they are more prevalent in the modern society.
The acting market is a great example of a winner-takes-all market:
Take the film industry. At any time there are only a few actors who can command millions of dollars to appear in a new film; only a few who are household names across the western world. The second rank comes far behind them in earning power, and behind them trail the resting members of the profession, scraping by on waitressing and the odd commercial. The range of income is extreme; distribution is an extraordinary pyramid with a tiny tip and a wide bottom.
The phenomenon applies to more ordinary professions as well. The ultra-libertarian Russell Roberts recently blogged about real-estate agents, and he missed the opportunity to point out that real estate sales is a winner-takes-all market. The median real estate agent income is pretty low. According to a NY Times article, "From 2002 to 2004, during one of the hottest real-estate markets in American history, the median income for Realtors actually fell — to $49,300 from $52,200."
The article then explains how real estate sales, like other sales professions, is winner-takes-all:
As in most sales professions, whether the product is diamond rings or crack cocaine, the people at the top of the pyramid make an awful lot more money than those down below. It's just that the base of the real-estate agent pyramid grows significantly during a boom."
Top real estate agents are surely making several hundreds of thousands of dollars per year.
This goes hand in hand with my previous blog post about the marketing economy. Sales is a marketing activity, and the growth of the marketing economy coincides with the growth of the winner-takes-all economy.