In the U.S., there’s an ethos that we get our jobs—and the status that accompanies them—as a result of our own hard work and intelligence. There’s a sense that meritocracy is the norm and that we earn our economic and social positions, rather than inherit them.

But in taking a closer look at real-world scenarios, Kellogg’s Lauren Rivera finds that the concept of a classless, equal-opportunity society is more myth than reality. More on that this week.

Plus, what happens when businesses try to compete against “superstar” companies.

Milestone as merit

As much as the U.S. promotes itself as a land of opportunity, the nation’s economic inequality is now greater in the country than in many other Western industrialized nations, Rivera explains in a recent podcast. And rates of social mobility have gone down.

“If you look at the very top and the very bottom rungs of the economic radar, they’re particularly sticky,” she says. “Children born to families at the top or the bottom fifths of income distributions tend to stay on those same rungs as adults. And children from families at the top of the economic hierarchy monopolize access to prestigious universities and high-paying jobs.”

This dynamic plays out across young people’s lives—for children two-and-a-half years old through admission into “elite” private schools. In new research, Rivera and a colleague examined the admissions processes at elite pre-K-12 schools in six cities to understand how they evaluate children. The processes were ostensibly structured on the basis of fairness and meritocracy.

The researchers conducted interviews with the admissions officers and found that the various schools followed a similar approach: They screened applicants based on developmental milestones—the social, cognitive, or physical traits children tend to display at certain ages. And one of the traits they explicitly looked for was whether the child was non-disabled and developing in a typical way.

“The amount of overt discrimination on the basis of neurotypicality as well as disability status was shocking in some of the things that people told us,” Rivera says. “Some of our interviewees actually used imagery from the eugenics movement to describe why they were selecting the physical and the cognitive elite that would go on to be a part of these elite communities.”

In other words, the process was set up to identify—and exclude—children who were perceived as having or being at risk of any type of disability.

Catch the full episode in The Inequality Podcast.

Learning from superstars

Regina Wittenberg Moerman misses Bed Bath & Beyond.

The once–Fortune 500 retailer, famous for its ceiling-high inventory and deep discount coupons, succumbed to bankruptcy in early 2023, partly due to its inability to compete with newer retailers like Amazon.

Alas, Bed Bath & Beyond’s fate is hardly an anomaly. Bankruptcy can often be tied to competition from “superstar” businesses, which dominate a market sector due to their size, scale, innovation, and other factors.

To understand the impact of a superstar business on other firms in the same sector, Wittenberg Moerman and her colleagues examined the bankruptcy patterns of thousands of publicly listed U.S. firms.

They found that, overall, businesses that faced the most competition from superstars were 42 percent more likely to go bankrupt than unexposed firms. But several factors, including firm innovation and access to credit, mitigated this negative effect.

“Businesses that don’t figure out how to adjust to superstars are likely to go into bankruptcy,” says Wittenberg Moerman, a Kellogg professor of accounting and information management. “But if you have or can find protective mechanisms, you may not be affected or may even do well.”

Read more in Kellogg Insight.