Every street dealer thinks he's one season from the corner office
Economist Steven Levitt got his hands on a Chicago gang's actual accounting books — and what he found looked a lot like a Fortune 500 pyramid.
Sudhir Venkatesh, a sociologist at the University of Chicago, spent years embedded with a South Side crack-selling gang in the early 1990s and eventually turned over years of financial records. Levitt and Dubner ran the numbers.
The gang was organized like a corporation. A board of directors at the top split profits from several street-level franchises. Each franchise had a leader and a crew of foot soldiers who actually held and sold the product. The leaders earned around $100,000 a year. The foot soldiers earned about $3.30 an hour — below the federal minimum wage at the time.
They also took on most of the physical risk: arrest, rival-gang violence, and a four-year mortality rate among foot soldiers that Levitt calculated at roughly one in four.
Why stay? For the same reason a film-school graduate takes an unpaid internship in Hollywood: the tournament. Most players earn almost nothing, but a few win enormous prizes, and the prize is visible every day. The corner office exists. You can see the man in it.
Markets run on incentives, Levitt and Dubner argue — but often the incentive isn't money now. It's the credible belief that money is possible later.