Economic Mobility

“Started from the bottom now we here.

Started from the bottom now the whole team f’n here.”

Drake – Started From The Bottom

Josh and I are sitting in a rooftop lounge overlooking Hong Kong Island. We’re joined by a friend who recently moved to the country. He’s a former Goldman Sachs investment banker now working at a local hedge fund. We’re discussing what it’s like to live and work in different parts of the world. I asked some standard “quality of life” questions about Hong Kong:

  • What do most people do for work?
  • Was the mean and median income?
  • What is the cost of living? How much does it cost to rent an apartment?

The answers weren’t surprising. The area is very wealthy. Many of Hong Kong island’s residents are US or UK ex-pats working in finance. An even smaller number of ultra rich Hong Kong families own many of the office buildings, hotels, malls, and banks that make our view so spectacular.

The cost of living in Hong Kong is quite high. A modern 600 sqft apartment rents for about $27,000HKD/month ($3,600 USD)1. A good education is also expensive. International schools are the institutions of choice because they offer an education recognized around the world. Enrolling a child at one of these schools costs about $210,000HKD/year ($28,000USD). To get “priority consideration for enrolment”, you must purchase a refundable bond of $2,000,000HKD – $10,000,000HKD ($266,666 USD – $1.33M USD).


The tuition alone is nearly equal to the average annual income of a Hong Kong family. But that wasn’t enough to keep the exclusive classroom spots…exclusive. The added bond requirement screens out everyone but the wealthiest of families.


Growing up, my family was of very modest means. I attended a public high school. In university, I relied on academic scholarships to pay my tuition. I worked 30 hours/week while studying to pay for food and housing. My family’s net-worth qualified us as Poor2 by Canadian standards, but our income ranked us as Lower Middle Class. Because of this, I didn’t qualify for government student loans.

I was fortunate to get a world-class education in Canada despite my family being in the lowest 20% of net worth. That stands in stark contrast to what we saw in Hong Kong. After graduation, government grants provided the capital my partners and I needed to start a business. Social programs like Employment Insurance (EI) provided a safety net in the event our business failed. Luckily it succeeded, and I now enjoy a life very different than the one I had growing up.

The ability to move in social standing is called Economic Mobility. In layman’s terms, it’s a measure of a person’s “financial opportunity” in life.

In Canada and many Scandinavian countries, economic mobility is high. A person’s financial position is largely self-determined. In countries like the US and China, however, your economic standing is highly correlated with that of your parents.


It turns out that there’s a positive correlation between economic mobility (financial opportunity) and income equality. If the income gap is small, mobility increases as more people have access to the best education and employment options. If the income gap is large, it’s more likely that generation over generation, the rich will stay rich and the poor will stay poor.

Governments use programs like personal income taxes and transfers (such as social assistance, unemployment insurance, and old age security) to reduce income inequality. But this is a contentious issue. Too much redistribution and the highest earners effectively work for the masses. Too little redistribution reduces financial opportunity for the majority of the group.

It stands to reason that the ideal redistribution is one that achieves highest opportunity for value creation by the group.

This got me thinking: “How can I increase financial opportunity for others?”

Thankfully, income redistribution isn’t the only way to create financial opportunity. After all, the goal of redistribution is simply to create an environment that maximizes overall opportunity.

So maybe the question is “How can I remove obstacles to value creation for as many people as possible?” There are countless ways to do this. Here are a few ideas, along with some startups in each space:

I think this is the best area for me to dedicate a lifetime of work. I’m grateful to have benefitted from an environment that maximized my odds of success at the expense of taxpayers. But income inequality is increasing in most countries around the world. Many billions of people don’t have the same opportunities. Anything that increases the odds for others to create value at scale would have a massive impact.


1. Apartment rentals on Hong Kong Island
2. Canadian Income and Net Worth Quintiles Circa 2007

Name Quintile Individual Income Family Income Household Net Worth
Poor Lowest 20% Less than $10,700 Less than $36,600 Less than $14,200
Lower Middle Class Lower 20% $10,700-$20,300 $36,600-$58,600 $14,200-$92,400
Middle Class Median 20% $20,300-$33,100 $58,600-$82,200 $92,400-$244,300
Upper Middle Class Higher 20% $33,100-$53,400 $82,200-$115,600 $244,300-$656,700
Rich Highest 20% Greater than $53,400 Greater than $115,600 Greater than $656,700