I think you might be missing the author's last point which is that in a competitive field, even a small increase in output can lead to a large increase in payoff.
In his example of getting research funding, it's a step function: either you get funded (y=1) or you don't (y=0), and because you're competing with others, even a small output increase can take you from the 0 side to the 1 side.
i've never thought about how these two things relate to each other: asymptotic productivity of work, and winner take almost all nature of capitalism. seems like a very succinct way of explaining why people work so damned much. i'm actually kind of embarrassed i've never connected the two. it seems to make the argument against it more clear too- if marginal hours worked grow less productive, and marginal improvement to the product is negligible in every day terms, we ought to mitigate that somehow, unless its something people are doing because they love it.
One of the greatest examples for this is the Astronaut program requirements [1]:
1. A bachelor's degree in engineering, biological science, physical science, computer science or mathematics.
2. At least three years of related professional experience obtained after degree completion OR at least 1,000 hours pilot-in-command time on jet aircraft.
3. The ability to pass the NASA long-duration astronaut physical. Distant and near visual acuity must be correctable to 20/20 for each eye. The use of glasses is acceptable.
4. Astronaut candidates must also have skills in leadership, teamwork and communications.
Checking all the boxes on that list isn't particularly hard to do. However you aren't competing with the list.
You are competing with a 29 year old Rhodes Scholar with a PhD in Chemistry, who runs Ultramarathons, ran a 40 person volunteer organization in Kenya during her gap year, and manages a 200 person 50 Million dollar research lab on pluripotent stem cells at Oxford.
Now just change out anything there with whatever would be relevant for your line of work, and thats who you are competing with - give or take.
Mostly is - specifically around hiring and work, so it's relevant to this discussion. It's a highly competitive market for talent where small incremental differences make a big difference.
To clarify, your point is about the nature of competition. Capitalism is but one type of competition. Hiring for astronauts is certainly a competition for resources, but since it is not a flow of transformable resources among a network of profit seeking nodes, it ain't a market.
That is not capitalism. Socialism could have athletic competitions and rigorous selection for public sector programs as well. That is not inconsistent with public ownership of resources.
Capitalism actual doesn't veer toward winner take all. Government does, elections do, etc. Capitalism leads to people voting with dollars so instead of a red or green car being given a vote, the red car may be cheaper if lots of people want it.
Yeah, that's why there is AMD and Intel, NVIDIA and AMD, Apple and Microsoft, Google and Facebook.
> the red car may be cheaper if lots of people want it.
Also see the pharma industry, right? The US government isn't all governments either, in some countries parties actually rule together, compromise and whatnot. And considering getting money out of elections isn't even attempted in earnest, the question really is what is the tail and what is the dog here.
The US government rules as a big power structure. Now Red happens to be on the pinnacle of that, but that doesn't mean Blue has no say in what happens.
It just means things are a lot more "costly" for Blue and/or Blue things (like climate change policies).
But of course in the primary layer a lot of things become infinitely costly for Blue things. (Because they fall under executive rights.) But there are a lot of other layers. (State legislatures/governors, city level issues, and so on.) And though a higher layer can force things on a lower layer, but it's not zero-cost, so usually things settle into an ugly compromise.
Good example. Elections are definitely winner-take-all, i.e. we get red cars or green cars. But under capitalism, I can choose which I want. Elections are not about individual choices.
elections are winner take all in the literal sense (except where you have representative democracy), but to they extent that they are about policy, i wouldn't say its as simple as that.
Great insight! You can see this not only at the macro level (Google winning all of search by being marginally better than competitors), but at the micro level (top employee out of a team of 10 gets the bonus/promotion while everyone else gets nothing), and probably everywhere in between.
What I wonder is: Is this really an intrinsic quality of capitalism? What causes this "winner take most" reward system emerging in some areas of the economy but not others? In many industries, multiple competitors can exist with stability and split market share, and in others, having multiple competitors leads to a blood bath where only one can survive, winning it all.
> Is this really an intrinsic quality of capitalism?
Hardly. The history of capitalism shows that absent government intervention to prop up companies, they rise and fall. When I started out, everyone was a-feared that IBM would inevitably take over the world. Then Microsoft dethroned them, and Microsoft was going to take over the world. Then Apple dethroned Microsoft. And on it goes.
There was Sears that dominated retail. Then Walmart shoved them aside. Now Amazon stepped all over Walmart.
See "The Innovator's Dilemma" by Christensen for a book full of examples.
Let's take Standard Oil. They never had a monopoly - at their peak they had a 90% market share. SO's market share slid steadily throughout the years of the anti-trust trial, and Rockefeller was unable to stem the slide. (The competition figured out how to beat him.)
See "Titan" by Ron Chernow
> pretend
I know what the popular wisdom is. But dig a little deeper and you'll find it is not correct.
> General Motors
was formed in 1908. The Sherman Antitrust Act was in 1890, so GM could not have been the reason for it.
That is, going back up-thread a bit, it's still clear that capitalism intrinsically encourages monopolistic behavior, and that "government intervention propping up companies" is not the cause.
In fact, I would go so far as to say that even if there were no capitalistic tendency toward actual monopolies, it would still have the same winner-take-all problem, merely due to the prospect of a "winner".
I'm not sure on what basis you're claiming that free markets prevent monopolies, but even if they do, free markets self-destruct. Once corporations in a free market have enough money to start influencing politics they use it to start regulating in their favor and the market ceases to be free. You can regulate to prevent that, but then the market isn't free, yet again.
It's also a bit myopic to view companies as a binary monopoly/not monopoly. A company with 90% market share isn't a monopoly, but has most of the downsides of a monopoly, and likely is a monopoly within subsets of the market.
Free market forces don't prevent it from getting close enough to cause a problem (if that's even possible under capitalism- the problem we're talking about is due to the attempt to gain a monopoly, not having one). I couldn't care less what Standard Oil's maximum market share was, you're arguing an irrelevant technicality.
My point is, again, that in this case the prospect is what causes the problem.
The "problem" was that kerosene prices dropped 70% under SO.
The real problem was that Rockefeller was rich, and then (like today) a lot of people just can't stand the idea that others are rich.
If you're really interested in going beyond soundbites and understand what was happening, I really recommend Chernow's "Titan". Chernow actually agrees with you, so you can't argue his book is unfair. Chernow's opinions, however, are not congruent with his presented facts in the book. He's just so convinced of Rockefeller's evil nature that he is blinded by his own narrative :-)
> The real problem was that Rockefeller was rich, and then (like today) a lot of people just can't stand the idea that others are rich.
dont you think its kind of upsetting when someone could improve someone's life drastically without any (practically speaking) detriment to their own. obscene wealth is upsetting to me, and i know lots of people who have it, and i dont hate them. so its not about the person, per se. i just find it extremely unfortunate, knowing first hand how things could be different, in an almost pareto improvement way.
right now there is someone who will die because they cannot afford proper medical care. the is almost certainly someone with a lot of money, doing nothing with it, that could fix that at no cost to themselves. thats a little upsetting right?
Neither of those are the problem I'm referring to, which should be obvious based on the thread we're in...
But to spell it out, the problem is that the winner-takes-all aspect encourages people to overwork themselves or their employees, despite the diminishing returns that brings.
Maybe you're just so convinced of capitalism's good nature that you were blinded to what we were talking about in the first place? ;)
I think you're inventing a problem. I don't know many capitalists or employees who believe they must work themselves to death because of some presumed winner-take-all aspect. In fact, I don't know any.
Few define business success as erasing all competition. Success is making a good profit.
> Let's take Standard Oil. They never had a monopoly - at their peak they had a 90% market share.
Out of curiosity in calibrating your definition of "monopoly", can you give an example of a monopoly (past or present) together with an estimate of their market share? Thanks.
Isn't Christensen one of those thought leaders who are paid by megacorps to spread Gramscian false consciousness and make the masses think capitalism really isn't so bad?
I suspect that in industries with strong network effects, the winner-takes-most system is most prevalent, as say, one additional unit could mean stealing three units away from competitors in the long-term.
yes i wonder about that too. i never thought of myself as someone interested in economics, but i guess thats where you'd look for answers to why some markets are weighted towards winner take all and some aren't. my guess off the top is that it has to do with how easy it is to switch between two competing products, and how economies of scale work in the industry. if there is a big economy of scale, and its easy to switch between competitors, i think that makes for the biggest winner take all scenario.
I think the more fundamental connection is that when goods are perfect subsitutes for each other, under perfect information you always choose the "cheaper" good (where "cheap" is defined by whatever metric you're using).
Somewhat ironically, this fact actually has connections to the concept of dual variables in constrained optimization problems, the theory of which was largely developed in the Soviet Union for use in central planning.
asymptotic productivity of work, and winner take almost all nature of capitalism. seems like a very succinct way of explaining why people work so damned much
A myth of capitalism is that the donkey can reach the carrot hanging from the stick if they work harder, that "almost all" can be won by those who are being driven to work more hours. However, this doesn't take into account that there are at least as many carrots-on-sticks as donkeys, and that carrots are cheap.
Well personally I've come from a family where hardly anyone make a productive decisions, where nobody had a college degree, and a tiny portion are even middle class. And now I'm 22, self-taught, and make $70k a year in the Midwest. And I did get there by working endless hours and catching the carrot, repeatedly. I think the truth of how these things go is probably somewhere between where your typical anti capitalist and your typical social Darwinist would expect it to be.
>I think the truth of how these things go is probably somewhere between where your typical anti capitalist and your typical social Darwinist would expect it to be.
neither is true. Having capital means you will blow it a good portion of the time. Control is illusionary, just as it was for Sears, IBM, and Microsoft.
In his example of getting research funding, it's a step function: either you get funded (y=1) or you don't (y=0), and because you're competing with others, even a small output increase can take you from the 0 side to the 1 side.