[HN Gopher] Success to the successful
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Success to the successful
Author : vitabenes
Score : 63 points
Date : 2023-05-21 18:31 UTC (1 days ago)
(HTM) web link (riskmusings.substack.com)
(TXT) w3m dump (riskmusings.substack.com)
| derbOac wrote:
| Also known as the Matthew Effect:
|
| https://en.m.wikipedia.org/wiki/Matthew_effect
| m463 wrote:
| aka "the rich get richer and the poor get poorer"
| varjag wrote:
| The rich could well be getting richer but the poor don't
| appear to be getting poorer.
| whack wrote:
| > _One of the most salient archetypes of our current period is
| called "success to the successful," which fairly well describes
| twenty-first-century capitalism or the late stages of the board
| game Monopoly_
|
| It seems a stretch to describe this as "One of the most salient"
| archetypes. This would only be true if "resources" are "one of
| the most salient" factors for success. If two companies are
| almost identical in every other way, then sure resources are a
| great tie-breaker. But if one company is significantly better
| than the other in some way, I would expect that company to
| overcome a resource-deficit. See Google winning search over other
| earlier and larger search engines. Facebook winning social media
| over other earlier and larger social networks. OpenAI leading/co-
| leading the AI race despite being outgunned by so many other
| companies. AMD surpassing Intel in valuation despite an enormous
| financial deficit a decade ago.
|
| In fact, an abundance of resources can actually negatively impact
| success. See the resource curse:
| https://en.wikipedia.org/wiki/Resource_curse . Highly relevant in
| big tech companies that are so much slower and bureaucratic
| compared to startups. Today's world might possibly be the most
| startup friendly in history - there is far more VC financing
| available than ever before for any company that can demonstrate
| any form of competitive advantage in a lucrative market.
| Financing that provides just enough resources to avoid being
| handicapped, but not so much that startups are lulled into
| complacency the way more established companies are.
|
| It's easy to pick one model that seems intuitive, and use it to
| make sweeping statements about "twenty-first-century capitalism".
| In the real world there are many different models all operating
| at the same time, and the one that is most intuitive may not be
| the most salient.
| sublinear wrote:
| Missing from the diagram is when success of A is mismanaged and
| all its resources get slowly redistributed to C through Z in
| fragments until one of them becomes the next A.
| skybrian wrote:
| One limiting factor is that everyone dies eventually. (With
| current technology, anyway.)
|
| Organizations may or may not live on. Most businesses have
| shorter lives than people, but some have lived longer.
|
| Sometimes they change so much that they might as well be a
| different entity.
| WalterBright wrote:
| [flagged]
| nick__m wrote:
| Bureaucracy:
|
| Success at achieving goals => budget gets increased
|
| Failure to achieve goals => budget gets increased
| [deleted]
| cjohnson318 wrote:
| That's one way to oversimplify it.
| WalterBright wrote:
| Now that you know about it, you'll start seeing it
| everywhere.
| sharemywin wrote:
| I don't see anything about bundling, monopolistic pricing
| power, cartels.
|
| I have a question why is there such a thing as union busting
| but not trade association busting?
| WalterBright wrote:
| Unions are all about setting up a cartel to fix prices, and
| have the full backing of the law. When companies try that,
| they get busted for collusion.
| keenmaster wrote:
| More like "socialism" air quotes wink wink:
|
| Success at achieving surreptitious, non-explicit goals (e.g.
| funnel wealth to government cronies) => budget increase
|
| It's for the people ;) :D
| [deleted]
| lasfter wrote:
| Are you not thinking of capitalism as it exists today?
|
| Wanton military spending, bank bailouts, corporate tax cuts,
| etc. seem to be very common when money can buy legislators.
| keenmaster wrote:
| As true and as insidious as that is, the problem is much
| worse in allegedly "socialist" countries historically. Note
| that I am not really including Western Europe in my
| definition of socialist, even though they have larger
| social programs than the U.S. Having a democracy lowers the
| degree of shamelessness with which funds for a social
| benefit like free daycare or universal healthcare can be
| used for things other than their ostensible purpose with no
| consequence and for a long period of time. It's all
| relative. Americans sometimes make bad analogies to their
| own government ("are we really that much better than X")
| and take for granted how our government avoids a lot of
| egregious abuses that you'd find in socialist
| dictatorships, regardless of which party is in power.
|
| Of course I'm speaking only of internal politics - American
| foreign policy is another can of worms and we don't even
| have complete information to properly assess it. Are we
| secretly propping up a dictator who is slaughtering his own
| people? Who knows, maybe we'll find out when that
| information is declassified in a few decades, or never.
| austinl wrote:
| In U.S. policy debate, this is also known as "winners win". In
| other words, if a resolution passes Congress successfully, the
| proponents of the policy are more likely to be able to pass
| another piece of legislation. Whether or not this is actually
| true in Congress is debatable.
|
| However, there are other systems where winners-win is more clear-
| cut. For example, college athlete recruits want to go to programs
| that are already successful (thereby increasing the likelihood
| that the team will continue to be successful), or F1 teams that
| do well in the constructors championship get a sizable payout
| (which helps them to continue winning).
| rippercushions wrote:
| For to every one who has will more be given, and he will have
| abundance; but from him who has not, even what he has will be
| taken away.
|
| -- Matthew 25:29
|
| https://en.wikipedia.org/wiki/Matthew_effect
| Nanana909 wrote:
| To me, the authors opening remark seems misleading at best. But
| of course criticisms of capitalism must begin by ignoring their
| hypotheses under a different or past regime:
|
| > One of the most salient archetypes of our current period is
| called "success to the successful," which fairly well describes
| twenty-first-century capitalism
|
| The implication being this is some new facet of our modern
| society, and not a part of past ones.
|
| I can't think of a time period, especially when considering a
| global scale, when the authors claim of "success to the
| successful" was not true.
|
| In fact, I would say it is less true than ever before. Note that
| this isn't the same as saying it does not apply now. Before the
| internet what opportunities existed for someone in say, rural
| Africa, to teach themselves skills to obtain success. Now?
| Marginal, sure, but absolutely present.
| nine_k wrote:
| Indeed. Older societies ossified the success to a scale
| unimaginable under liberal capitalism. While it's not
| pronounced in the US due to its genesis, it's still well
| visible in the Old World. "Q: How to become wealthy in the UK?
| A: Try to be born to a family whose progenitor gained royal
| favor during the Norman conquest."
| codexjourneys wrote:
| Essay author here. Success-to-the-successful is a real
| feature of our current economic landscape, more than in the
| semi-recent past (yes, ancient feudal societies were way
| worse). Here's Harvard Business Review:
|
| "... we find that large corporations are more and more likely
| to maintain their dominant positions, while small
| corporations are less and less likely to become big and
| profitable." Link: https://hbr.org/2019/08/the-gap-between-
| large-and-small-comp...
|
| Here's economist Austan Goolsbee in The New York Times
| highlighting growing corporate concentration even pre-
| pandemic: https://www.nytimes.com/2020/09/30/business/big-
| companies-ar...
|
| These are success-to-the-successful trends.
|
| Disruptive shocks (like when Google created a truly better
| search technology and dethroned AltaVista in the late '90s,
| or when the US gov broke up AT&T in 1984) can change those
| dynamics. That's how Kodak, despite having lots of resources,
| lost dominance and eventually failed: they didn't have the
| right _non_ -monetary resources (innovative culture and
| support for change) at a critical time, so disruptive shock
| toppled them.
|
| Anyway, thanks for reading!
| hurtuvac78 wrote:
| A lot of people find moral value in a meritocracy. This "success
| to the successful" shows the limits.
|
| A lot of people would agree that if someone is 5x smarter and
| work 5x more than someone else, then making 25x more money could
| be fair.
|
| My intuitive take is that our system rewards those people with a
| lot more than x25... this article seems to go in the same
| direction.
|
| If that is true, is it morally fair? What would be fair? Do we
| even care about fairness?
| andrewlgood wrote:
| This is what Malcolm Gladwell wrote about in his book, Outliers.
| His examples are more insidious as they can happen based on non-
| success based criteria such as birth dates.
| dmje wrote:
| I constantly ponder this as I look around my home town. We're in
| Cornwall and so house prices have gone fairly batshit to the
| extent that local teachers (in fact, local GPs too) can't afford
| rents or house purchases.
|
| Meanwhile, a patch of land sold a few years back for PS1m. On it,
| the developer built a block of retirement flats. There are maybe
| 30 of them. They each sold for north of PS500k. The property
| owner also charges PS20k per property per year for "maintenance".
|
| It's simplistic but he's basically printing money. Out of his
| PS15m turnover he had to spend PS1m on the land, maybe PS1m on
| building the flats - so PS13m clear profit, and an annual of
| PS600k.
|
| So then he goes on and buys the next piece of land for PS2m, this
| time makes a clear PS30m, annual of PS1.5 etc etc.
|
| So, yeh, success to the successful. Who needs teachers or GPs
| anyway, right?
| dvt wrote:
| > It's simplistic but he's basically printing money.
|
| Upvoted you, but I disagree. This is classic survivorship bias.
| You see the 10% of cases where this works, and you don't see
| the 90% of cases where the owner goes into crippling debt,
| can't sell the land, can't sell the condos, or vacancies are at
| 50%+. There's no such thing as "printing money" in capitalistic
| markets and it's naive to think there is. I'm not an efficient
| market hypothesis guy, but markets _tend to be_ efficient.
|
| There are cases of problematic monopolies (e.g. telecom
| companies, energy distribution, steel, Google advertising, "too
| big to fail" banks, etc.) and maybe you could argue those
| actually do print money, but, imo, that's far and few in
| between.
| waboremo wrote:
| Where are you getting 90% failure rate for those with access
| to enough wealth to easily sweep up $1m land + development
| costs for several buildings?
|
| I can buy that for average folk, as they often do not have
| the expertise (nor the wealth to access the expertise)
| necessary to make better decisions for their business. For
| those substantially wealthier, it doesn't really make sense
| but maybe you're privy to more sources here that I would love
| to dive into.
| _dain_ wrote:
| Even when you own the land it's hard to get anything built.
| Planning permission, legal disputes, nimbys, nimbys,
| nimbys. Developers take on a lot of risk when they do this;
| they might end up owning a very pretty parcel of land that
| is a pile of shit in business terms, because they
| effectively aren't allowed to do anything profitable with
| it. Therefore, in the cases where it does work out, the
| profit is high. It has to be, to justify the whole thing.
| That's what "risk-adjusted rate of return" means.
|
| Btw this is why it's always "big developers" in the first
| place; they _have_ to be big, because they have to spread
| out this risk over a large number of ventures, and have
| easier access to credit. Planning restrictions drives
| consolidation in the construction /real estate industry
| because it raises the level of risk above what smaller
| companies can endure.
|
| That's why it's so maddening to hear nimbys say they're
| opposed to profiteering big developers, and that loosening
| of planning regulations would be some kind of handout to
| them. Precisely the opposite is the case. They're unwitting
| agents of regulatory capture.
|
| Jeremy Clarkson's farm show is an accidental documentary
| about this. See here: https://twitter.com/NuclearBeacon/sta
| tus/1630617164536332303
| dmje wrote:
| I think to be clear - firstly it's a hot topic in
| Cornwall not because of nimby-ism but because the
| developments are all pitched at hyper wealthy
| individuals, whether retirement individuals with PS500k
| to spunk on a 1-bed per my example or people from outside
| the region who are buying holiday homes at similarly
| inflated values. I don't think anyone locally would say
| "don't build", instead it's "please build for locals"
| (where "local" = normal locally employed person).
|
| Secondly, my point is kind of more general. I think if
| anyone with reasonable intelligence were given PS1m they
| could make fairly reasonable profits in fairly short
| time, possibly from land or maybe from other investments.
| Of course there are risky investment strategies that
| could easily see them losing the lot but in general I
| think you'd be hard pushed to not find some level of
| success given this initial starting point.
| [deleted]
| dvt wrote:
| Maybe 90% is a bit dramatic, but the spirit of my post is
| that, even with $1m, you won't be printing money any time
| soon.
| [deleted]
| Supermancho wrote:
| > This is classic survivorship bias.
|
| The analysis is not looking at the probability of the
| situation occurring (where survivorship would apply). The
| formula is applied, where it can be. The observation is
| pointing out the Success driving success paradigm in action.
| dvt wrote:
| But there's plenty of cases where success drives failure
| (look at Bezos' Fire Phone as a low hanging fruit example,
| or more recently at Branson's Virgin Orbit), so, again,
| it's classic survivorship bias, as there are plenty of
| counter-examples.
| Supermancho wrote:
| > But there's plenty of cases where success drives
| failure
|
| That's a separate issue, under different conditions. Land
| development is the most common way to grow wealth,
| historically. It's mostly a matter of probability
| consideration and access to capital. It's not no-risk,
| but it's low risk until you start building.
| dvt wrote:
| > It's not no-risk, but it's low risk until you start
| building.
|
| Building is kind of.. the whole _point_. And risk
| profiles vary. For example, I 'd rather build/invest in a
| startup rather than buying land where I may or may not be
| able to build anything profitable over the long term.
| Development also has a very long horizon, tying up
| liquidity in the process.
|
| Saying "just buy land bro, making money is ez" seems like
| a very TikTok Investor kind of take.
| doctor_eval wrote:
| It is odd to point out the relatively minor failures of
| massively successful people.
|
| It is only because they are successful that they are able
| to afford to take these risks and the fact that these
| failures did not materially diminish their wealth speaks
| to the truth of the archetype.
| dvt wrote:
| > speaks to the truth of the archetype
|
| The archetype claims that success breeds success, and
| this is categorically false, apart from a few exceptions
| (e.g. monopolies, collusion, etc.). The fact that even
| literally the richest person on the planet couldn't make
| a cellphone project (that he himself spearheaded)
| successful is a clear counter-example to the archetype.
| Your point that he didn't go broke afterwards is imo
| unrelated. I will agree that success _definitely_ lowers
| risk profiles, but does not necessarily impact future
| success.
| pphysch wrote:
| A lot of words and yet somehow none of them are "feedback", the
| well-accepted term for this concept:
|
| https://en.wikipedia.org/wiki/Feedback
| thedudeabides5 wrote:
| So success is increasing returns to scale, basically.
| aj7 wrote:
| "... A receives more resources from a (presumed) finite pool of
| resources, so B therefore receives less"
|
| No. If A is a big enough success, money can get thrown at a bunch
| of B's. Resources can INCREASE. Most B's will be unsuccessful.
| pc86 wrote:
| Resources will always be finite even if they increase over
| time. Won't A always receive more resources than any one B (if
| you're looking at them as individual companies)?
| gretch wrote:
| No because people allocate resources based on future
| expectations of success.
|
| Look at Tesla market cap (a measure of resources allocated)
| vs Toyota and look at how many cars they sell.
|
| Tesla definitely didn't start out winning, but people saw the
| potential and started allocating resources away from old car
| manufacturers.
|
| If this model actually held then no one would have ever bet
| on them.
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