The cultural rise of winner-take-all-ism in America has reached a dangerous and self- defeating extreme.
Can the nation once again come together in a common interest or is divisiveness too great?
The following article was originally published in “What I Learned This Week” on July 27, 2017. To learn more about 13D’s investment research, please visit our website.
Back in March, with Uber engulfed in scandal after scandal, we wrote the following about CEO Travis Kalanick: “In an era when ‘winner-take-all’ dynamics increasingly dominate the digital economy, is it it any surprise one of Silicon Valley’s greatest disruptors would be infected by a ‘win-at-all-costs’ culture?”
Of course, Kalanick would be pushed out of the company three months later, blamed for cultivating a myopic, if not abusive, fixation on victory over common decency.
Whether corporate governance, politics or cultural touchstones like sports and entertainment, winner-take-all-ism has grown ever-dominant over the American mindset. And this shift underlies many of the central issues facing the country and its markets. To name just three: the relentless, destabilizing imperialism of tech giants; the opioid crisis created by the predatory practices of pharmaceutical companies; and the crippling collapse of bipartisanship in Washington.
Twenty years ago, John Kenneth Galbraith recognized Darwinism was escalating in America, warning in Harvard Business Review: “The larger social effects [of a winner-take-all society] are not good.” Which begs a question central to predicting market outcomes: Is a backlash against winner-take-all-ism coming or will its continued rise further compromise America’s political, economic, and cultural leadership?
Galbraith was not the only prominent economist to spot the incoming Darwinian tide. In fact, his HBR article was written in response to Robert H. Frank and Philip J. Cook’s seminal 1995 book, The Winner-Take-All Society. Today, the book’s intro reads near-prophetic:
“Winner-take-all markets have already wrought profound changes in economic and social life. And because many of the forces that create these markets, [primarily globalization and technology], are intensifying, even more dramatic changes loom ahead. Some of these changes are for the better… But winner-take-all markets also entail many negative consequences…[They] have increased the disparity between rich and poor. They have lured some of our most talented citizens into socially unproductive, sometimes even destructive, tasks. In an economy that already invests too little for the future, they have fostered wasteful patterns of investment and consumption. They have led indirectly to greater concentration of our most talented college students in a small set of elite institutions. They have made it more difficult for “late bloomers” to find a productive niche in life. And winner-take-all markets have molded our culture and discourse in ways many of us find deeply troubling.”
Few arenas of American life better reflect the cultural primacy of winner-take- all-ism than sports. As legendary broadcaster Howard Cosell was known to say: “Sports is human life in microcosm.” The proliferation of performance- enhancing drugs throughout the 1990s and 2000s demonstrated the corruption of a win-at-all-costs mentality. The NFL’s systematic suppression of concussion research showed profit growth trumping morality, loyalty and employee safety. However, the shift is far more culturally fundamental than just the actions of noted bad actors.
The NBA’s Philadelphia 76ers provide a clear example. Over the past four seasons, Sixers fans have endured an historic run of futility, the team winning only 75 of 328 games. Worse yet, this futility was by design. Starting in 2013, GM Sam Hinkie — an analytics devotee and Stanford MBA with a stated admiration for the titans of Silicon Valley — dismantled a good, but not great core of young players in order to “tank”. The logic went: championships are won by superstars; your best shot at a superstar is at the top of the draft; and your best chance at the number one pick is losing.
Such deliberate team evisceration sustained for multiple seasons is unprecedented in the history of American sports. In turn, many in media’s old guard saw Hinkie’s strategy as sacrilegious — a blatant insult to the competitive spirit of the game, or as Deadspin writer Tom Ley put it, “a Godless abomination.” And in practice, fans hated it as well — the unprofessional product on the floor each night meant Sixers attendance and TV ratings were near-worst in the league.
However, on NBA draft night last month — the team picking first for the second year in a row — the chant of appreciation rang loud and clear: “Trust the Process.” To Hinkie and the many that still revere him even a year after his resignation from the organization, everyone is a loser except the team holding up the trophy at the end of the season; therefore losing on purpose is justified.
Another cultural pillar, movies, has followed a similar progression towards winner-take-all-ism. Five of the top ten highest-grossing films of 2016 were kids movies. The remaining half are strikingly homogenous: four comic-book adaptations and a Star Wars movie, all with plots driven by one superhuman winner (the protagonist) and one loser (the antagonist). Going back two decades, such homogeneity is absent. In 1996, the top 10 films included two romantic comedies, a courtroom drama, and a natural disaster movie. Only one movie, “Independence Day”, clearly aligns with today’s winner-take-all blockbuster paradigm.
When formative cultural institutions like sports and movies revere winner-take-all-ism, is it any surprise business and politics reflect the same? Tellingly, Vanity Fair anointed Ayn Rand the most-influential figure in the tech industry last year, surpassing Steve Jobs. Meanwhile, Donald Trump has declared Rand his favorite author. Silicon Valley and the Trump Administration agree on little — that is, except a governing philosophy. In Rand’s words: “Man exists for his own sake, that the pursuit of his own happiness is his highest moral purpose, that he must not sacrifice himself to others, nor sacrifice others to himself.”
Relentless wage stagnation; rampant consolidation across American industry; neglected infrastructure decay: Frank and Cook foresaw the escalating consequences of winner-take-all-ism more than two decades ago. Yet, political and business elites have failed to adequately respond, no doubt in part because of greed, but also because the culture has embraced winner-take-all-ism instead of demanding change.
So the question remains: Are we at the peak of winner-take-all-ism in America? According to those loyal to Adam Smith’s invisible hand theory, “impersonal market forces” should “channel the behavior of greedy individuals to produce the greatest good for all.” However, decades into the escalation of winner-take- all-ism, any faith in self-correction appears ever-more farfetched. This is why, in a follow-up book published in 2011, The Darwin Economy: Liberty, Competition, and the Common Good (see WILTW January 28, 2016), Frank claimed Darwin would supplant Smith as the accepted “founder of economics”:
“Darwin’s view of the competitive process was fundamentally different. His observations persuaded him that the interests of individual animals were often profoundly in conflict with the broader interests of their own species…Far from creating a perfect world, economic competition often leads to ‘arms races,’ encouraging behaviors that… cause enormous harm to the group.”
Meaning, the economic progression won’t self-correct, therefore the “harm to the group” must grow so acute the cultural pendulum swings and the people force change. If President Trump fails in his promise to deliver “wins” to the white working class, if wages continue to stagnate, if the only countermeasure Silicon Valley luminaries can come up with is Universal Basic Income — a fundamentally flawed idea in an automating world in which the declining dignity of work underlies populist anger — the “losers” that constitute the majority will retaliate against free markets, voting against them.
Put simply, winner-take-all-ism is unsustainable in a world of democracy and the more influence it has over economics and culture, the more inevitable a reckoning becomes. That day is coming — evident this week as the Democrats unveiled a new party platform, which anointed antitrust intervention as a top priority. And when the backlash begins, heightened regulation and restrictions on competition will create a vastly different world.
This article was originally published in “What I Learned This Week” on July 27, 2017. To subscribe to our weekly newsletter, visit 13D.com or find us on Twitter @WhatILearnedTW.
