"Diversity is our strength" has become a mantra in Western societies, championed as a driver of innovation, economic growth, and cultural richness. But what if diversity, in some cases, fractures markets, stifles mobility, and drags societies back to tribalism? A provocative piece in Aporia Magazine by Arctotherium
https://www.aporiamagazine.com/p/non-linear-ethnic-niches
argues just that, pointing to "non-linear ethnic niches"—sectors dominated by specific immigrant groups—as evidence that diversity can undermine social cohesion more than it strengthens it. From Albanian cocaine smugglers in Britain to Gujarati motel owners in the U.S., these niches reveal a complex reality. Are they a boon or a curse? And why are such ideas fuelling conspiratorial buzz on X and survivalist YouTube?
Non-linear ethnic niches are economic sectors where a specific ethnic group dominates, often with no apparent cultural or geographic reason for their control. Think Cambodians running 80% of Southern California's donut shops, Vietnamese owning over half of U.S. nail salons, or Gujarati Patels controlling 42% of American motels. These aren't stereotypes like Italians owning pizzerias; they're unexpected strongholds, from Koreans in Baltimore's liquor stores to Sikhs driving 40% of California's trucks.
Arctotherium argues these niches form through first-generation immigrant networks leveraging:
Below-Market Loans: Informal ethnic lending, like Cambodian tong tines or Patel family networks, offers cheaper credit than banks, giving immigrants an edge over competitors.
Labour Arbitrage: Family reunification laws allow hiring low-wage relatives from poorer countries, undercutting American labour costs.
Language Barriers: Limited English proficiency creates insular networks, making it hard for outsiders to enter or insiders to leave.
Racial Privileges: Affirmative action and minority business programs, like those kickstarting Cambodian donut shops, provide additional advantages.
Once established, these niches become self-sustaining cartels, with co-ethnic hiring and informal institutions (e.g., calling a business partner "uncle") locking out competition. The result? A fractured market where entire sectors—like Detroit's Chaldean-run groceries or Chicago's Indian-owned Dunkin' Donuts—are inaccessible to outsiders.
Arctotherium's core claim is that non-linear ethnic niches undermine the economic and social benefits of diversity. The standard pro-immigration argument—larger markets, more competition, greater specialisation—falls apart when ethnic groups monopolise sectors, reducing the talent pool and stifling innovation. For example:
Economic Fracturing: In a homogenous 1960s Chicago, anyone could aspire to own a donut shop. Today, with 95% of Midwest Dunkin' Donuts Indian-owned, non-Indians are effectively excluded, shrinking opportunities.
Innovation Stagnation: Cambodian donut shops, reliant on cheap labour and financing, rarely innovate, unlike competitors who might invest in new methods. This benefits consumers short-term (lower prices) but harms long-term progress.
Social Regression: Niches revive kin-based structures, reversing Western progress toward impersonal cooperation. Joseph Henrich's The WEIRDest People in the World argues that Europe's breakout from tribalism came from nuclear families and free association. Ethnic niches, with their clan-like networks, drag societies back to premodern divisions.
The essay draws a stark comparison to India, where caste systems lock every economic niche into endogamous groups, leading to rampant discrimination, small-scale firms, and persistent inefficiencies. In the U.S., niches like Patel motels or Vietnamese nail salons mimic this, creating "cartels" that favour co-ethnics and exclude others, even if less qualified workers are hired.
Who benefits? Ethnic business owners gain protected markets, insulated from broader competition. Co-ethnics find jobs and visa paths, while consumers enjoy lower prices initially. But the losers are significant:
Local Workers: Small businesses, once a path to upward mobility, are now closed to many. The "Patel motel cartel" owns 80–90% of small-town U.S. motels, sidelining locals who might have entered the industry.
Society at Large: Fractured markets reduce competition and innovation, while kin-based networks erode the impersonal trust that fuelled Western prosperity. As niches grow, they risk turning the U.S. into a patchwork of ethnic enclaves, like India's caste-ridden economy.
Immigrants Themselves: Second-generation immigrants often leave niches for professional careers, but ongoing migration sustains these systems, delaying assimilation and reinforcing separation.
Arctotherium warns that without curbing immigration, there's "no upper limit" to niche proliferation, potentially transforming Western economies into preindustrial, clan-based systems—a "700-year regression."
Non-linear ethnic niches challenge the "diversity is strength" narrative, suggesting it can fracture markets and revive tribalism. They're not a conspiracy—they're a market reality, driven by rational choices in a competitive world.
https://www.aporiamagazine.com/p/non-linear-ethnic-niches
Non-linear Ethnic Niches by Arctotherium
The emerging Western caste system
If you want to join Britain's thriving cocaine smuggling industry, you have to be Albanian.1
One of the few parts of the British economy that has done well since 2008. Source.
There's no a priori reason why this should be the case. Albanians do not have a racial, cultural, geographic or political affinity for Colombian narcotics. A reasonable and informed observer in 2000 would not have predicted that they would come to dominate the industry. Yet such an obsever would have predicted that some ethnic minority would because organized crime is almost always organized along ethnic lines. This is true even when the ethnic minority is less criminal on average than society at large, as with the Jewish mafia in early 20th century America.
This phenomenon isn't unique to criminal enterprises. Chaldeans control 90% of the grocery stores in Detroit. 40% of the truck drivers in California are Sikh, and about a third of US Sikhs are truck drivers. About 95% of the Dunkin' Donuts stores in Chicago and the Midwest are owned by Indians, mostly Gujarati Patels. In New England and New York, 60% of Dunkin' Donuts stores are operated by Portuguese immigrants. 90% of the liquor stores in Baltimore are owned by Koreans. I am not the first, the tenth, or even the hundredth person to notice this. From a 1999 New York Times article titled 'A Patel Motel Cartel?'
America's motels constitute what could be called a nonlinear ethnic niche: a certain ethnic group becomes entrenched in a clearly identifiable economic sector, working at jobs for which it has no evident cultural, geographical or even racial affinity.
I don't mean Italians owning pizzerias, or Japanese people running judo schools. I mean, to use an obvious example, the Korean dominance of the deli-and-grocery sector in New York -- a city where the Chinese run most laundries and Sri Lankans, in case you didn't know this, run most porn-video stores. Or the Arabs in greater Detroit, who have a stranglehold on gas stations, or the Vietnamese who monopolize nail salons in Los Angeles. Farther afield, I could mention London's taxi drivers, sharp-tongued in their big black cars, many of whom are Jews from the city's East End; or the security guards outside New Delhi's more affluent residences, virtually all of whom are Nepalese; or the prostitutes in the United Arab Emirates, who are so often women from Russia.
I don't believe previous writers have really considered the broader implications. The general economic case2 for immigration is that immigration means larger markets and hence more competition, more opportunities for specialization, more economies of scale, and so on. I've covered in the past how substantial international trade3 means this doesn't apply today (small nations benefit from the competition, specialization and scale of the world at large).
The existence of non-linear ethnic niches weakens the economic case for immigration even further. The key point is that immigration fractures national markets. Once a niche is taken over, outsiders can no longer compete in that niche.
There is still competition within ethnic groups inside the niches, but these groups are tiny fractions of the population and often have informal institutions and kinship structures that allow them to act as cartels. In the words of Vishal Shah, a Dunkin' Donuts store owner in Chicago:
"In Indian culture, if it's a friend of your father you still call him uncle," Shah said. "You are family through respect because your parents are friends; everybody's family.
That makes a big difference on a daily basis in business. "We all help each other," said Shah, whose family has six stores. "Whenever someone needs something no one ever said I don't have the time. If your mixer goes down, it's a matter of a couple of phone calls and you know you're taken care of." Likewise, he said, if half his crew gets sick, those same few calls will get him back in business.
What this means is that in vocations taken over by non-linear ethnic niches, modern-day multi-ethnic Chicago has a smaller talent pool to draw from than the smaller but more homogenous4 Chicago of generations past, and the same goes for many American cities.
We can roughly quantify the importance of non-linear ethnic niches by examining levels of co-ethnic hiring in new firms.
By comparison, German immigrants are at 1.8%, British and Canadians at 2.3%, and Italians at 5.2%. Source.
But the chart above significantly understates co-ethnic hiring in cases where the sending countries are themselves multi-ethnic. The correct unit of analysis for the motel industry, for example, is not "Indians" but Gujaratis. For Detroit groceries, it's the minuscule Chaldean minority, not "Iraqis". And while the chart tells you how dependent a given country's immigrants are on these niches, it does not tell you how dominant they are inside them, which is the more important number.5
It's worth looking at some of the more famous non-linear ethnic niches in the US to get an idea of how they operate.
Cambodian donut shops
Cambodians run about 80% of the donut shops in Southern California (despite being only 0.17% of the state's population). The Cambodian donut empire got its start with refugee Ted Ngoy, who first learned the trade thanks to an affirmative action program to increase minority hiring at Winchell's Donuts. The Cambodians were able to completely dominate this traditional American culinary sector through a mix of extended family credit and the use of tong tines, an informal lending club. From a 2016 article by Erin Curtis (p. 113):
The Cambodian variation of the arrangement allowed refugees to swiftly receive and pay back money. The loans were tax-free and interest-free, supporting Kolker's assertion that informal lending clubs exist "to save money, not to make it." Perhaps most importantly, they made cash "quickly available to those who couldn't otherwise get credit." As Sokhom notes, tong tines were common for "Cambodians who cannot get a bank loan or did not know how." Being able to, in Lonh's words, "kind of avoid the bank" through personal savings, the help of friends and family, or the support of a tong tine allowed Cambodians swifter access to independent business ownership with lower initial expenditures, fewer long-term costs, and less engagement with U.S. financial institutions.
This ability to borrow money cheaply made financing much easier for them than for their American competitors. Once the business was purchased, Cambodians could also keep operating costs down through informal employment of family labor, allowing them to get around expensive income taxes, not to mention labor laws and regulations—including ones around child labor (p. 115).
Notably, Cambodian donut shop owners are notoriously conservative and invest and innovate very little (p. 117). With access to cheaper labor and financing than their American competitors, they have little incentive to boost productivity. And the Cambodian community of Southern California is too small (65,000 people) and lacks the "culture of improvement" required to generate innovations internally.6 From a consumer perspective, this is fine in the short run (efficiency improvements from cheaper labor and financing get passed on as lower prices), but bad in the long run (there's a hard limit on how much donut shops can improve without innovation). This is analogous to Britain's infamous 21st century de-automation of car washes in favor of immigrant labor.
Patel motels
Gujaratis, mostly with the surname Patel, run an estimated 42% of the hotels and motels in the United States—despite being only 0.3% of the US population (and an even lower percentage back in 1999 when this was first noticed). Their dominance rises to 80–90% of motels in small town America. The Patel motel cartel got its start with an illegal immigrant, Kanjibhai Desai, in the 1940s. The initial attraction for Patels was that motel ownership did not require English proficiency, and as with the Cambodians, Patel motel owners were able to use informal ethnic loan networks and immigrant family labor brought in via family reunification to undercut their American competitors. Patels now totally dominate the hospitality industry in the US outside of the big chains.
Vietnamese nail salons
Over half the nail salons in the US are run by Vietnamese, which rises to more than 80% in California (they are only 0.7% of the US population). Just like the Patels and the Cambodians, Vietnamese immigrants were able to finance nail salons more easily than American competitors because they had access to below-market credit from family and friends.
Pro-immigration conservatives often celebrate the "entrepreneurship" of non-linear ethnic niches as a route to assimilation, but that's getting it backwards. As with the Patels, Vietnamese refugees were attracted to nail salons because they didn't require English proficiency and in fact enabled ethnic separation from core America.7
Vietnamese refugee women are likely to become manicurists because the salon business provides a high degree of autonomy and insulation from an alien—American—culture, language and people.
After the ethnic network was established, Vietnamese owners gained another advantage over non-Vietnamese competitors: better access to workers and training. The language barrier is part of this; once most salon owners spoke primarily Vietnamese, prospective workers had to as well, and cosmetology schools began teaching courses in Vietnamese rather than English. Vietnamese owners and workers could also draw on their ethnic and kinship networks to find each other, avoiding the often cumbersome market hiring process. This plainly goes against the spirit of Civil Rights law in the US, but it's essentially impossible to apply the laws to informal networks, nor has anyone really tried.
Mechanics
As Thomas Sowell would say: prejudice is free but discrimination has costs. In a market economy, refusing to hire from certain groups means leaving money on the table and being outcompeted by entrepreneurs who will hire from those groups.8 Extra-market forces, such as monopoly or fear of the EEOC driving private diversity efforts, can change this—but that's not what's going on here. There is no society-wide push to fill the motel sector with Patels or ensure every nail salon is Vietnamese, and the small businesses they dominate are not monopolies. So how do non-linear ethnic niches work? The common features in all of them are as follows.
They are founded and sustained by first-generation immigrants. This allows niche owners to exploit labor arbitrage through their ethnic and kinship networks in their home countries, and also creates a language barrier that makes it harder to find workers outside the ethnic group and harder for co-ethnics to find work outside the niche. Running a low-prestige small business on tight margins isn't easy, so second- and third-generation co-ethnics often leave.
They are in low-prestige, low-margin sectors that used to be major avenues of upwards mobility for Americans and in which there is no inherent reason9 for one ethnic group to dominate. Note that this is distinct from an ethnic group becoming prominent in an industry because its traits make them well-suited to the industry (e.g., black dominance of the NBA, Chinese dominance of Chinese restaurants).
The fact that these sectors are small and don't have much prestige is what allows them to be dominated. The main reason people run motels, small grocery stores, gas stations, nail salons, and donut shops is money—not prestige, status or any other intangible. (This comes across very strongly in the history of the Cambodian donut niche I've been relying on: several owners express contempt for the industry but say it's good money.) And this means that once undercut, non co-ethnics stop trying to enter. Initial advantages can quickly snowball into complete dominance, at which point maintaining the niche is much easier than establishing it in the first place.
They establish dominance through a combination of below-market-rate extended family loans, exploiting labor arbitrage between the US and countries of origin, labor networking within the group, and racial privileges.
The single most important reason non-linear ethnic niches can dominate some sectors of the economy is below-market-rate loans. Small businesses tend to have tiny profit margins, so getting better terms on financing is a huge advantage. Every single article on a non-linear ethnic niche mentions how important credit from extended families and informal ethnic networks is. Americans do not typically have such credit at our disposal: we don't have ethnic networks and our families are tiny relative to most of the world. Formal sources of credit, like banks or the Small Business Administration, are prohibited from favoring specific ethnic groups—except where they have mandates to favor non-whites in general. We are dependent on society treating us fairly as individuals.
A second advantage these niches have is wage arbitrage between the US and their countries of origin (Vietnam, India, Cambodia, Iraq and so on). American immigration law favoring family reunification and hence chain migration enables this by allowing individual employers to engage in arbitrage outside the requirements of labor visas like the H1-B (it is socially difficult for family members or co-ethnics to change jobs, especially since they often can't speak English). In the words of Padma Rangaswamy:
The dominance of South Asians in the Dunkin' Donuts franchise industry in the American Midwest can be explained with reference to many of the classic theories of niche formation—the desire of immigrants for self-employment, contribution of family members, access to cheap labour and informal funding, and group solidarity. But its unique trajectory of rapid growth and success owes as much to the selective nature of U.S. immigration policy. Its origins lie in the post-1965 immigration of skilled professionals who first bought into the business. It grew as a result of the legitimate use of the family reunification law which permitted the early immigrants to sponsor less-educated relatives and employ them in the business. However, the labour of unauthorized immigrants and continued chain migration of family members have contributed most significantly to the profitability of the businesses, and enabled South Asians to continue to dominate the field.
The same individuals are vastly more productive in the US than in their home countries.10 This means that part of the difference in wages between what they would have earned at home and what they earn in the US can be pocketed by the employer. In any case, their total compensation includes getting to live in a First World country (with free public education) and having a path to citizenship, which is effectively a subsidy from American tax-payers to the employer, who doesn't have to pay these costs.11 American small business owners are left at a disadvantage, since they do not typically have family in enormously poorer countries.
The third advantage non-linear ethnic niches have is the various racial privileges that non-whites enjoy in the US.12 The Cambodian donut shop empire began with affirmative action. And in addition to below-market credit from the ethnic network, non-whites are entitled to below-market loans from government programs designed to promote non-white business ownership and benefit from government contracts set aside solely for non-whites.
In fact, getting access to these racial privileges is what motivated the creation of the Asian-American US census category in 1980. Indian small businessmen lobbied the census bureau to group them with East Asians (who were at the time classified as Orientals) rather than whites to benefit from these programs. While racial privileges don't explain the formation of niches (why concentrate in motels when these privileges13 apply so broadly?), they do help ethnic networks muscle out white competitors to begin with.
Once ethnic dominance is established, it is easy to sustain because co-ethnics have the enormous incumbent advantage of labor networking within the group. Employers finding workers and workers finding employers is challenging, and being able to focus the search on co-ethnics massively facilitates the process. And because there's usually a language barrier between first-generation immigrants and Americans, it's harder for non co-ethnics to work inside the niche and there's less incentive for co-ethnics to defect from the cartel. This is psychologically self-reinforcing: the more dominant a group is within its niche, the less likely outsiders are to imagine themselves entering it and the more likely insiders are to imagine themselves staying put.