the close loser consequences of a winner take all system

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“For all its cruelties, civilization is precious, an experiment worth continuing. It is also precarious: as we climbed the ladder of progress, we kicked out the rungs below. There is no going back without catastrophe. Those who don’t like civilization, and can’t wait for it to fall on its arrogant face, should keep in mind that there is no other way to support humanity in anything like our present numbers or estate.”

Ronald Wright, A Short History of Progress

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1. a) The free market is the form of economic organization most beneficial to human society and for improving the human condition.
2. b) Free markets can flourish over the long run only when government plays a visible role in determining the rules that govern the market and supporting it with the proper infrastructure.

Saving Capitalism from the Capitalists

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In short, you cannot escape power, regardless of your station in life.

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A winner-take-all society creates a shitload of losers. Yeah. I called them losers. So, let’s talk about these losers and why, well, they lose a bit more than just losing out on the ‘win.’

America during the industrialization phase has always been more of a winner-takes-all system. That didn’t mean there wasn’t some social mobility (upwards in income brackets) just that the top has always been disproportionate to the bottom. That mobility ‘dream’ still exists, but it has become a bit tougher. In addition, what is new is that this disparity between those win and those who ‘lose’ has spread so widely across society (education, business, sports, etc.) and now the top prizes have become absurdly spectacular. That alone, the lure of the extraordinary prizes, distorts the market dynamics, in particular, people’s choices. What I mean by that is many people begin thinking of life, and career development, as like playing the lottery – do the right things, work hard, gain some skills, focus relentlessly on the goal, and the extraordinary prize is attainable. The thing is life isn’t like a lottery and often you can be extraordinary in skills, do all the right things, be relentless in the pursuit, and not win. Someone else takes it all and you, well, are a loser twice over – in the effort expended against an unattainable prize and not winning the prize. Psychologically, this sucks. For example, it’s not that education doesn’t provide value (it does), it’s just that if the education systems seem rigged to disproportionately benefit the elite, anything below elite appears not worth the time and effort.

Think about it a bit. Top talent gets wasted. What I mean by that is if ‘exceptional’ wins the highest prizes, most of the truly talented people ‘lose’ with diminished paths to wealth and opportunities. I believe it was William Goode who called this “the failure of the somewhat less popular.” And while it is true that wealth doesn’t appear out of thin air and that it must be produced, wealth accumulation has become the head of a long tail of producers. And in a winner-take-all system the majority of the people who strived for the top prize are ‘failures’ residing somewhere on the long tail.

• ** note: jostling with the truly exceptional are the uber competitive psychopaths, run-of-the-mill psychopaths, and the silver spoon class.

To be clear. A society in which the principle of a level playing field is replaced by a forcible insistence on equal outcomes is not a particularly healthy society (equal is not the same as equitable). But attempting to reduce inequality and increasing opportunity is important if we seek a healthy society. I would argue market forces are ‘fair’ if they assume some properties of ‘proportional to effort’ because asymmetrical distribution of wages-to-effort only disenfranchises attitudes toward hard work and effort. Please note I do not suggest it needs to be symmetrical or equal, only proportional. My point is that psychologically a shitload of talented people begin questioning whether it is worth it to put in their best effort.

 “The most difficult issues of political economy are those where goals of efficiency, freedom of choice, and equality conflict. It is hard enough to propose an intellectually defensible compromise among them, even harder to find a politically viable compromise.”

James Tobin

In addition, the consequences of this “most people are losers” system is we often get inefficient outcomes (or less than optimal) when people make career choices based on despair that the system will not serve them well at their best. The system, in today’s discussion, is a winner take all of which only the exceptional, skilled or connected (or psychopaths), truly are compensated well. Everyone else gets paid either less than their true value/skill potential or, well, less. To be clear, in many industries ‘losers’ can still receive high wages, the point is that most of those ‘losers’ in these careers could have achieved a better money & happiness & meaning combinations in another job in another industry. The pay may be good, but the job is just a job. That doesn’t bode well for a healthy society.

It gets a bit worse. In a winner-take-all world the idea of taking big risks for big gains to do big things that would truly be beneficial to business, society as well as the individual, no longer exists. Why? The only ones who would take the big risks, with the big returns, would be those with the lowest probability of ‘winning.’ The best-of-the-best, and exceptional, and psychopaths of course, will seek to split the difference and aim for the 51% to win. In a winner-take-all society there is no reason to take a big chance if your only objective is to win. I would be remiss if I didn’t point out society is the loser in this case (in fact, I believe it is a variation of a multipolar trap).

Which leads me to we need to fix this (and I think it can be).

Even in the current situation the problem suggests grounds for hope. If inequality and poor distribution of opportunities is an inescapable byproduct of a system that provides exceptional incentives for exceptional performance and less good incentives for even the best-of-the-good performance, we’ve decided it’s a system problem; not a people problem. In fact, we can just stop doing those things. Ok. Realistically that means things like public policies, in combination with business policies, aimed at these problems could limit the disparity in rewards which would seem, as a consequence, to open up more opportunities for more talented people. In other words, there would not have to be a tradeoff between fairness, effectiveness and efficiency, in fact, I would argue there is no tradeoff at all – just benefit. But we cannot expect some invisible hand to resolve the economic and social flaws of a winner-take-all system. In fact. Since the forces that create these markets appear to be getting stronger, it is likely that left unaddressed our current problems will only get worse – exceptional rewards will become even more absurd, the disparity between even the best-but-not exceptional and exceptional will widen farther and let’s not even talk about how far behind the competent become. It may feel impossible to change the system, but clearly winner-take-all markets demand adjustments. And, yes, we can adjust the levers of capitalism to encourage better use of the system. Solutions exist and we should be able to steer our most talented people to more productive meaningful tasks. This burden should not be taken on solely by the government nor solely by business, but by everyone. Let’s leave winner-take-all to lotteries and create a society makes everyone who learns and works a winner. Ponder.

“I was taught that the way of progress is neither swift nor easy.”

Marie Curie