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The Winner-Take-All Economy And Society

Updated on December 16, 2012

We Live in a Toxic Winner Take All Society

01/22/11

We're living in a world where a growing number of markets are being subjugated to overzealous game theory. There are by far too many markets where the "star" or top performer gets a large and disproportionate percentage of the proceeds. In fact, the top performer often receives more than he or she produces. Classical examples of such markets are in professional sports, the movie star market and the publishing market. Today, all markets are being turned into competitive game theory. It’s no longer strictly relegated to celebrities. In actuality, many markets such as information technology, education and finance, the winner stands to win a much larger prize than any actor, sports player, or writer. This trend has been hyper inflated for several reasons:

1. Technology: National and international distribution channels such as network television, social media, and the Internet makes it easier for an individual to penetrate the market. For example, at one time villages and towns had their own musicians. Now a singer/musician can market his/her work internationally at little cost. While this may at first seem like progress, the result is fewer and fewer will be able to make a living playing music, and the winner will become a millionaire. Losing causes devastating results for the individual. That person most likely spent several years and several dollars on wasted efforts. He or she must then transfer mid-life toward a job that is often ill-suited. He or she will most unlikely discover a talent of the equivalence of his/her music. It's hard enough to find one talent, let alone two. Understand it's not that he or she is a horrible musician, he or she could be in the top 1%, unfortunately that isn't good enough in this market thanks to technological distribution and globalization. This trend is now starting to apply to all industries.

2. Falling transportation and tariff costs: Goods have gotten lighter. It is easier to send computer discs all over the world than books. The Internet has made what was formally many goods nonexistent and in many cases no transportation is required.

3. No infrastructure is required: The Internet has made many brick and mortar businesses now obsolete. In the past, each village would have a few key and competitive retail stores. In the near future, what happened to say the music industry will transcend many industries such as retail. People will purchase goods online, from the comfort of their own homes, from the very best of retail stores around the world. The result being many local retail stores (that sell nonperishable goods) will go out of business. The same pattern emerges, fewer winners (that win huge), more losers, and fewer jobs.

4. Mental shelf space constraint: We have a limit to the number of information we can keep in our head. As a writer in Hubpages, I experience this human condition first hand. Anyone who studies SEO (Search Engine Optimization) knows that the first three web sites listed on a given keyword receive 98% of the traffic. If your site isn't in the top three, you'll most likely experience a ghost town traffic level. The reason why this happens is there is a limit of how much time and information a person can store in their mind before succumbing to an information overload. It's human nature to check what the "winners" have to say first, realize there is no time to find any "hidden gems," and then leave your computer screen. These natural human process hyphens the winner takes all mantras, as many competitors are not even discovered.

5. The weakening of regulations and civil society: At one time, informal and formal rules out a limit on the winner take all markets. Now, like free agents in basketball, the top performers have the leverage to demand high prices.

6. Self-reinforcing processes: This is another way of saying "success begets success." For example, a salesperson does well and gets more customers. That salesperson then through word of mouth and referrals causes a saturation in the market. This virtuous cycle increases the income and power of top performers.

7. First come, first served: Part of the self-reinforcing process. Let's use the example that we used in number six. Let's say a promising young salesperson in that field emerges a few years later through no fault of their own other than being born later. He or she will never succeed because the veteran who came before hogged all the wealth. He or she may even have greater talent than the person who came in first, but he or she will be left with a difficult task of having to dislodge customers from the salesperson who came first. Keep in mind most people would rather stick with what works, even if the quality is slightly lower, rather than change completely. This first come, first serve process is exasperated and widespread due to the Internet. Before Internet times, if someone had a great idea he would get rich, but he would have to hire several "semi-entrepreneurs" to act as franchise distributors to spread his market/idea to other parts of the world. The "semi-entrepreneurs" often became rich as well. Today, that classical distribution method is no longer needed due to the Internet and technology. A single individual can manage and control all of the distribution, hence receiving 100% of the profit and becoming insanely wealthy. As a personal example, the first come/first serve paradigm is a rather difficult pill to swallow when I write on Hubpages. Most of the "juicy" keywords have already been taken by people who claimed Internet real estate long ago, meaning I often have to fight for the table crumb keywords. Once again a familiar pattern emerges: Fewer winners (who win huge), more losers, and fewer jobs.

Consequences of a Winner Take All Society

1. Productivity is down and not utilized: When an individual exerts so much time and effort all but to fall short, get second place, and has no money in his/her pockets so to speak, what we have here is a person who isn't utilizing his/her talents toward productive ventures in the free market economy.


2. Increasing levels of individual incompetence: When people fail to get first place in the growing number of the winner takes all markets, in order to survive they're forced into a less competitive market (such as customer service). The result is they're in a position that is often ill-suited for their given personality, skills, and talents. Natural incompetence is certain to follow.

3. Horrible labour allocation: This happens as most persons are far too optimistic regarding their probability of being successful in the growing number of winner takes all fields. This leads to too many persons pursuing careers in such fields, a negative both for society and the individual, as the overwhelming majority can never succeed in reaching the uppermost pinnacles (or for that matter even being able to make a decent living in these fields).

4. Greater inequalities in wealth: This is self-explanatory. As the winners get everything and the losers get nothing, greater inequality in wealth is a given.

5. Legalized theft: The winner getting paid the most isn't what truly bothers me. I'm a capitalist, not a communist. However, I do have issues with the winners, who through entitlement by virtue of being winners, feel that they have the right to steal from the "losers." The "losers" who brought the show of American Idol to financial success deserve to be compensated for their part just as much as the winners. With a winner take all societies, we essentially pass on the pay the loser would receive and siphon it off to the winner. This is theft.

6. Crime/cheating increases: With the stakes being so high in what is essentially all or nothing duels that is of life and death (win: get rich, lose: in debt and poor), people will increasingly resort to unethical, immoral, and criminal means to get ahead.

7. We create monarchy/dynasty families: In our winner take all society, not only does first place get all the cash, but he or she makes enough money to span across several generations. Can you imagine how frustrating it must be from the perspective of the guy who arrived in second place? Not only does he get zero cash for his efforts, but he must watch the guy in 1st place get all the money, along with his undeserving family for centuries after the event took place.

8. The winners become employers, and hire losers (REAL losers), thus increasing levels of organizational incompetence: In my hub, Globalization in World, I explain how Globalization in the end punishes individual success. Mostly because employers seek out the cheapest wages. Talented workers are too expensive to hire, so failure is sought. The employer won't risk hiring his top ten competitors who he or she formally defeated to reach his/her comfy chair. No, he or she would rather see them stuck working at McDonald's so they can degrade their skills, while he or she solidifies his/her position. The irony is that in the pursuit of a winner take all society, we're actually creating a system of incompetence rather than excellence. Unless you're in the top 0.01% of your given field, your ambition will most likely hurt you, rather than help you.

Solutions To The Winner Take All Economy And Society

I deliberately forgot to include the ninth and final consequence of a winner take all society. The ninth and final consequence will inadvertently bring the only natural and probable solution. The ninth consequence is complete and total economic collapse. We’re experiencing this consequence today. This is caused by a lack of demand existing in the market. As the few winners feel more and more entitled to the proceeds over the numerous losers, who will buy the services and products from the winners? You see, we need several "losers" to support the income of a winner, but if the losers are beaten down so far until the point they have nothing left to their name, then nobody is buying from the winners. The result is economic collapse. The flawed system will destroy itself, and hopefully like a Phoenix rising from the ashes, we will have a much better tomorrow. While others despair, each day I take news of the falling economy with glee. I see much greater opportunity in a falling economy than in the maintenance of a defunct system. My only concern is the economy isn't crashing fast enough. Come on, crash already! Burn baby burn! Economic Inferno!

-Donovan D. Westhaver

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    • B. Leekley profile image

      Brian Leekley 5 years ago from Kalamazoo, Michigan, USA

      This article was so interesting and insightful that I shared it with my HubPages followers and on Twitter and Facebook.

      Is the winner take all situation a choice or an unavoidable consequence of the Internet and other developments in technology?

      My own experience was that from 1977 to 2005 I owned and ran a one-person mail order used book business, at first using a shop as my base and then dealing from home. At first I sold books by mailing out sales lists and quotations and placing classified ads in a trade journal. Later I sold through such online sites as a alibris.com and eBay.com. For years I stayed just barely in the black and managed to squeak by. I retired from the business when I realized that over and over again the books I was trying to sell were readily available online for less than what I paid for them. I was competing with booksellers all over the world, including amateurs just selling their personal books that were no longer of use or interest to them, not to make money to live on and to maintain a business but just to get some extra pocket money, having purchased the books for personal use and gotten that use out of them. If I had had tinhe capital, I could have upgraded my stock and focused on truly uncommon and in demand books, but I didn't, so I didn't.

      Many of my antiquarian bookseller colleagues still in business are up against it. They face not only what I did but also e-books, online owner to owner book exchanges, print on demand publishing, and so on. Those making a go of it have good business sense, have good community sense, know books in their niche, and had and have the money for a good location, quality stock, and effective marketing.

      Luckily for me I went under just when I got old enough to retire. Unluckily for me, I had a hand to mouth business so now have a hand to mouth retirement income.

      I don't see what different way of organizing society would have changed those causes and consequences. Affordable, good, honest health care like they in Canada would have been, and would be now, a big help. Anything else?

      What is to be done? If your predictions come true and you raise the banner of a movement for a better world, what will be your why-what-how mission statement?