In Defense of Status Competitions

As SpaceX successfully landed their 23 story tall Falcon-9 rocket in upright position, Jeff Bezos, the CEO Blue Origin (a rocket company which performed a superficially similar, but technically much less impressive feat days before), tweeted the following:

Ouch! Within an instance, Bezos became the target of scorn for hundreds of fawning SpaceX and Elon Musk fans who derided Bezos’ “welcome to the club” comment as classless and back handed. Yet as my colleague Andrew noted at the time, “given that space exploration is mostly a billionaire dick measuring contest, petty squabbling is probably the best motivator we could ask for.”

I think this is exactly right, but I will go a big step further. “Dick measuring contests,” more generally known as status competitions, are often called “wasteful,” “zero-sum,” and “inefficient.” Yet even when those labels are technically accurate (and they often aren’t—the private sector space race, for example, is clearly socially useful), another important truth can be simultaneously true: Status competitions are our main, if not only, source of meaning in the universe.

The Anxieties of Affluence

For all the wealth controlled by the three comma club, they turn out to be relatively poor when it comes to status goods. The reason relates to the inherent positionality of status. As in a game of King of the hill, moving up a rank necessarily means someone else must move down one, with the top-most players having the least to grab on to. Climbing from second-from-the-top to “King” is thus exponentially harder than moving from third to second, forth to third, and so on. And for whomever is King, with no one above to latch on to, the only way to truly secure one’s position against the penultimate scourge would be to invent a (proverbial) sky hook.

If not for this zero sum (at the psychosocial level) drama, what would drive Musk or Bezos to invest so heavily in their own (quite literal) sky hooks? Bezos tweet is at least evidence that Musk’s aeronautical successes have gotten under his skin—ahh, the anxieties of affluence. But all that means is one of the world’s most socially productive people has all the more reason to wake up in the morning.

In contrast, for a middle class and median IQ American to broadcast their status relative to their peers they can always buy a bigger house, drive a faster car, learn a new talent, travel to more exotic places, or give more to charity. That is, the space to broadcast ever greater social distinction is seemingly unbounded from the top. This was the nouveau riche mindset of Elon Musk circa 1999, when he bought (and later crashed) a million dollar McLaren F1. But today, as an ennuyé riche multi-billionaire, simply owning an awesome car is old-hat, cheap-talk, something any rich CEO can do. So now he builds and designs even better cars from first principles, incidentally spurring innovation as he literally pushes against the physical and technological boundaries of keepin’ up with the Bezos.

As the McClaren incident shows, for all his self-effacing talk about saving humanity from extinction even Musk is human, and in that humanity ultimately motivated by subterranean vanity. Bezos’ only sin was to let his vanity see the light. At least he punches up.

SpaceX's first attempt at landing the Falcon 9 rocket erupted into a bonfire of vanities
SpaceX’s first attempt at landing the Falcon 9 rocket erupted into a bonfire of vanities

Darwin’s Wedge

Critics of the free market point to these sorts of positional arms races as the downfall of the neoclassical economists’ conception of efficiency. On the one (invisible) hand, competition and exchange can guide the butcher and baker to produce meat and bread for the common good. On the other hand, identical competitive forces can lead nations to the brink of nuclear war, marketing and political campaign budgets to balloon, and large SUVs to pollute the roads due to safety in relative size. That is, individual incentives need not be aligned to the collective good. (As I’ve argued before, classical liberals like Adam Smith understood this full well).

Robert Frank influentially explained markets where individual and collective goals diverge in terms of what he calls Darwin’s Wedge (or what writer Jag Bhalla variously calls “dumb competition” and “spontaneous disorder”). The term comes from evolutionary biology, where wasteful arms races are ubiquitous. In the classic example, deer evolved large, cumbersome antlers because whenever a mutation made a buck’s rack marginally larger he was able to beat out and reproduce more than his sexual competitors, passing on the trait. But since what really matters is not the absolute size of the antlers, but their size relative to the local average, competition over the trait lead sexual selection to favor ever larger antlers up to the point where the marginal benefit of a bit larger antler equaled its marginal cost (i.e. until it was evolutionarily stable).

In economics MB=MC is the mark of optimality, but here it’s clear competition in some sense failed. Male deer must now go through life with awkward bone-branches extruding above their eyes, getting them caught on trees, and generally using caloric resources that might be better spent procreating. Had the ancestors of deer somehow colluded genetically to cap the size of antlers, or else to compete along some other, less handicapping marker of genetic fitness, the entire deer species would in some sense be made “better off” through greater numbers.

Optimally Boring

But alas, genes are selfish. As the famed selfish gene raconteur Richard Dawkins himself once wrote:

In a typical mature forest, the canopy can be thought of as an aerial meadow, just like a rolling grassland prairie, but raised on stilts. The canopy is gathering solar energy at much the same rate as a grassland prairie would. But a substantial proportion of the energy is ‘wasted’ by being fed straight into the stilts, which do nothing more useful than loft the ‘meadow’ high in the air, where it picks up exactly the same harvest of photons as it would – at far lower cost – if it were laid flat on the ground.

And this brings us face to face with the difference between a designed economy and an evolutionary economy. In a designed economy there would be no trees, or certainly no very tall trees: no forests, no canopy. Trees are a waste. Trees are extravagant. Tree trunks are standing monuments to futile competition – futile if we think in terms of a planned economy. But the natural economy is not planned. Individual plants compete with other plants, of the same and other species, and the result is that they grow taller and taller, far taller than any planner would recommend.

And how lucky we are that this is the case! I am grateful for hemlock forests, flamboyant peacock tails, and even moose, the silly looking cousin to deer. Were it not for the playing out of these so-called wasteful competitions, instead of a world of immense biodiversity and wonder, life on Earth would consist in a hyper-efficient photosynthesizing slime spread thinly across the globe.

Indeed, the self-defeating hunt for relative fitness, including social (and sexual) distinction, is responsible for bootstrapping literally every one of our perceptual and cognitive faculties, including our ability to appreciate aesthetics. If not for positional arms races around sexual selection, for instance, it is unfathomable that beauty would exist at all. All creativity, when not strictly for survival, is rooted (in the sense of ultimate causation) in status games. Even the fact that I’m writing this right now.

Beyond biology, the same story explains the artistic and cultural diversity created by market societies. While there are no doubt those who think the classical era represented a pinnacle of cultural achievement, a stationary point at which we should have made every effort to hold in perpetuity, this is nothing more than the golden age fallacy. Instead, the greatest classical musicians were only great because they superseded their predecessors and contemporaries by chasing the same ephemeral distinction as Elon Musk and the white-tailed deer, and as such were contributing to a self-defeating cultural churn that baked-in its own impermanence. This holds true today, as dozens of musical and artistic genres have been invented, grown steadily popular, and then “mainstream” and stale as their social cachet dries up.

Ironically, it is often those who are most critical of neoclassical economics that still seem wedded to its narrow and lifeless conception of optimality. Rather than moving beyond the Samuelsonian allocation paradigm to one based in creation, innovation and discovery, they thus double down on the dangerous illusion that positional status competitions can be easily muted or improved on by a central planner (the “design economy” referred to by Dawkins). While there’s obvious merit in blocking literal arms races, tweaking the tax deductibility of marketing expenses, and so on, I always worry whenever I read calls for a general luxury tax, or other excoriations of variability in the type and quality of consumables.

In the extreme, this thinking is what underlied the Marxist-Leninist ideology that transformed Mao’s China into a literal “Nation in Uniform.” A bit earlier in history it also motivated the Soviet government’s attempt and failure to make the luxury goods used by the petite bourgeoisie available to one and all. Rather than try to “eliminate” bourgeois values, in contrast, a capitalist society is healthy precisely because it enables a nation of rebels and the inequality that implies.

Resistance is Futile

One thing neoclassical economics did get right is non-satiation. Humans can never be fully satisfied: not with our mates, not with our station in life, nor with this final draft. However, this is not because we have neat, monotone preferences, but rather it’s because relative status has shaped every corner our psyche.

Buddhism rightly teaches that this dissatisfaction, called dukkha, pervades all of existence. As Buddha supposedly once said, “I have taught one thing and one thing only, dukkha and the cessation of dukkha.” But why? If resistance is futile, why not embrace it. Satisfaction is over-rated anyway. What person has ever achieved any kind of success or excellence without being tortured by anxiety, stress, or self-consciousness?

Of course Buddhists, like Stoics, would presumably question my definition of success. Maybe if we all meditated daily and simply learned to lower our expectations we’d learn to be satisfied with poverty. Yet we ran that experiment and we self-evidently were not.

Rather than be zen about our lack of zen, even Buddhist practices have ironically become (or was it not always?) their own dimension for pursuing social distinction. Don’t forget, Veblen’s magnum opus on status goods was called “The Theory of the Leisure Class,” and what could be a greater advertisement of belonging to the leisure class than the ability to sit absolutely idle for hours out of every day.

I don’t deny that meditation can be incredibly useful for reducing and controlling the stresses and anxieties of civilization. But if you’re a fan of meditation you should also not deny nor feel shame in the bourgeois half of your BoBo paradise. You are not above consumerism or hedonic treadmills. On the contrary, you are a leading light, an early adopter, an innovator in waste.

Otherwise, a monomaniacal focus on achieving nirvana (the state when all attachments and dukkha have melted away) simply becomes an agent-centric example of the social planner’s protoplasmic conception of optimality. At the same time, I recognize the futility in my own attempt to disillusion you, dear reader. As Mises wrote, human action is predicated on “the expectation that purposeful behavior has the power to remove or at least to alleviate felt uneasiness.” It just turns out that that expectation is as mistaken as it is incorrigible.

So meditate if you have to, but don’t be afraid to day dream a little, too. It may fill you with anxiety, and it definitely won’t make you happy, but later in life you just might find yourself building a spaceship to Mars.


Low-cost access to space is a game-changer

In my previous post on SpaceX and its rocket ambitions, I argued that low-cost access to space would be revolutionary in the same manner that ocean navigation or rail roads were revolutionary, giving the global economy a broader scope of activity and greater access to resources. I intended to leave it at that, but recent new is just too topical to pass up.

A few days ago Elon Musk announced that SpaceX will start building satellites in house, and their first project is to build a constellation of satellites orbiting at 750 miles altitude (which is fairly low, for a satellite) to provide broadband internet access to the entire globe, and also serve as an internet backbone. Many satellites just communicate with ground stations, bouncing messages back and forth between the Earth. If I understand Musk’s comments correctly, it seems like these satellites will communicate with each other in orbit too, passing signals among themselves as an internet relay competing with the undersea fiber optic network. The benefits of such a system over the current fiber networks are: global coverage, that signals travel faster through space than through fiber, and satellites are less likely to get hit by fishing trawlers or attacked by sharks.

A reasonable skeptic would ask at this juncture though whether anyone has tried this before, and what their success was like. The answers to those questions are “Quite a few”, and “Total failure”. The Iridium constellation cost over $5 billion and went through bankruptcy. Today the satellites are still in orbit but provide mostly just expensive cellular phone and paging services. The Teledisc constellation (which sounds very similar to the proposed SpaceX plan) failed before even getting off the ground, despite funding from Bill Gates and a Saudi prince. Globalstar went bankrupt shortly after launching its constellation, and the successor entity continues to downsize and cut costs. SkyBridge LLC failed so completely it doesn’t even warrant a Wikipedia entry, and its spectrum allocation was sold to WorldVu which hopes to launch satellites in 2019. (Hope springs eternal)

So given that every previous attempt has gone bankrupt, why should we get excited about this one? Well, the answer returns to the economics. The physics of bouncing signals between satellites is well understood – everyone loves their GPS network and DISH Television has may fans. It’s the economics of providing the very large constellation necessary to power high-bandwidth, low-latency data coverage to the entire globe that’s been the problem to date. Specifically, the launch costs of reaching orbit are ridiculous. As I mentioned previously, the Space Shuttle cost between $1-2 billion per launch, and the expendable rockets offered by Boeing, Lockheed Martin, and Arianespace cost hundreds of millions per launch too. Each of the above failed ventures represents billions of dollars in launch costs.

SpaceX meanwhile has brought launch costs down significantly, even before achieving reusability. The Falcon 9 costs $61 million per launch, and the Falcon Heavy when it goes operational later this year will be only (“only” is a relative term in space flight) $85 million per flight for the most capable rocket launched from the United States since the Saturn V was retired. The next biggest rocket, the Delta IV Heavy from Boeing, costs 900% more per pound – $375 million for half the cargo. If SpaceX does achieve reusability later this year, costs should drop by another 50% immediately, and eventually as much as 90%. Furthermore, it’s very likely that conservative commercial and military satellite customers will not want to take a chance on a “used” rocket immediately, and will continue to pay full price for a couple years to get new ones, letting SpaceX fully pay off their rocket on the first launch and then launch their own satellites on the following flights for just the cost of fuel and operations. Combined with the constantly falling costs of electronics (Thanks Moore’s Law!), SpaceX’s venture should have a much lower cost basis than any previous attempt.

This new satellite venture is just the first taste of what low-cost access to space will bring. In the years to come, especially as SpaceX solidifies what its pricing will be post-reusability, you should expect more announcements of companies and projects that finally deliver the thriving space economy that in the 50s and 60s was expected to be just around the corner. Now I think it finally is.