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Musings Report 2019-44 11-2-19 What are the Consequences of Incentivizing Sociopaths?
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What are the Consequences of Incentivizing Sociopaths?
"Sociopath" is a word we now encounter regularly in the mainstream media, but what does it mean?
Here is a list of 16 traits, many of which are visible in lionized corporate and political leaders and entrepreneurs. One key trait is a lack of moral responsibility or conscience; the sociopath feels no remorse if he/she takes advantage of people or exploits them.
Sociopaths are masters of superficial charm, using their high intelligence to instill confidence, and are adept at massaging or misrepresenting reality up to and including outright lying to persuade others or get their way.
Like all psychological syndromes (manic depression, autism, bipolar disorder, etc.), there is a wide spectrum of sociopathological traits, some of which may offer some adaptive benefits (and hence their continued presence in the human genome). In other words, an individual can have a few of the traits in greater or lesser proportions.
Thus the modern BBC Sherlock Holmes (played by Benedict Cumberbatch) describes himself as a "high-functioning sociopath" (though many contest this diagnosis of the original Holmes in Arthur Conan Doyle's stories).
Anyone who has read Walter Isaacson's biography of Steve Jobs can readily see manifestations of some of the 16 traits in Jobs: his famous "reality distortion field," his refusal to accept that he'd fathered a daughter, his lack of empathy, his wild emotional swings (from verbal abuse to weeping), his dietary extremes, his charm, so quickly turned on or off, his uneven and often distant parenting, and so on. His obsessive-compulsive behavior was also on full display. Yet Jobs is lauded and even worshiped as a genius and unparalleled entrepreneur. Was this the result of his sociopathological traits, or something that arose despite them?
My own conclusion is that Jobs lucked into meeting the independent-minded, empathetic engineering genius, Steve Wozniak. Without Wozniak, Jobs would never have made the leap from eccentric tinkerer to the Apple I and then the Apple II. Without Wozniak, Jobs could well have remained an erratic eccentric in Silicon Valley with interesting friends, many of whom he would alienate and then make up with. Jobs' mix of sociopathy and mono-maniacal focus on design were not enough on their own to guarantee entrepreneurial success.
The ledger of costs and benefits of Jobs' output is weighted in favor of the global benefits of the products he shepherded to market and the hundreds of billions of dollars in sales and net worth he generated while CEO of Apple. Though narcissistic in many ways (with the resulting negative effects on many of his intimates), Jobs was clearly focused on creating "insanely great" products that would benefit customers and users. Despite his sociopathological traits, there is no evidence he set out to deceive anyone with the objective of exploiting their good will or belief in his vision to skim billions of dollars from unwary investors.
But the ledgers of others manifesting sociopathy are far less beneficial, as the billions of dollars they generated were in essence a form of fraud.
The rise and fall of WeWork is a recent textbook example of sociopathy reaping enormous financial gains for the sociopaths without creating any actual value. There are plenty of media accounts of the founders' excesses (including the goal of becoming the world's first trillionaire), some of which we might have expected to raise flags in the venture capitalists, board members, etc., who invested in the company, but these traits were overlooked in the rush for all involved to garner billions of dollars in fees and net worth when WeWork went public.
This example (among many) strongly suggests that sociopathy is incentivized in our socio-political-economic system, and sociopathic "winners" are often lionized as epitomes of ambitious success even though the success came at the expense of others and did not create value for anyone but the sociopath and his/her inner circle.
There are a number of consequences of this systemic incentivization of sociopathy. Correspondent Tom D. recently summarized the core dynamic and consequence:
"I’ve been a successful business owner, but I’m not a sociopath--I deliver value to my customers, my investors, and I don’t move forward if I see anyone being substantially hurt by my actions.
My peers and I look at organizations such as WeWorks, see the rewards reaped by the sociopathic leaders, and realize we are at a constitutional disadvantage working within such a system.
I could never conceive of taking a $700-900m payday at the expense of investors for whom I've generated no value whatsoever.
I simply could not do it.
If “out-sociopathing" the sociopaths is what it takes to “succeed” in todays business climate--I’ll fail.
So I don’t try.
From the sociopath’s standpoint, that’s probably a feature not a bug--one that helps keep effective competition out of the marketplace.
I wonder how much of civilizational decline is simply due to good people accepting their lot and opting out."
If the system incentivizes conscience-free sociopaths more than it incentivizes those creating real value, the system will eventually fall into the equivalent of Gresham's law ("bad money drives out good money"): the con-men and fraudsters will drive out legitimate entrepreneurs.
If we look at recent IPOs and compare them to the Apple IPO, is seems we've already reached that point. Apple went public as a highly profitable company. Uber, Lyft, Beyond Meat and WeWork (if their IPO fraud hadn't been revealed) are all unprofitable, in some cases losing billions of dollars with little prospect for eventual profits.
Venture capital folks explain this by noting that the flood of central bank credit-money-creation has generated trillions of dollars of liquid capital seeking "the next big thing" that will "disrupt" existing models and therefore generate billions in profits.
This pinpoints one key source of the incentivization of sociopaths: central banks' creation of trillions of dollars of conscience-free capital seeking a quick profit anywhere on the planet, by any means available.
Conscience-free capital is an easy mark for a conscience-free sociopath. It's a marriage made in heaven, a perfect match.
Those who have a conscience are essentially squeezed out of the system. The choice is unsavory: either play and lose or opt out.
I have written about "opting out" since 2009, since it was one of the few options available to commoners in the final decline of the Western Roman Empire. If we feel we're at a systemic disadvantage, i.e. the system is rigged against us, opting out makes much more sense than sacrificing oneself in a fruitless battle to stay alive in a system that incentivizes amoral sociopaths.
If we consider what generates outsized success in our rapidly changing economy, we find a variety of factors supporting "winner take most" asymmetric gains. As economist Michael Spence has observed, those who develop new business models earn outsized gains because new forms of capital and labor that are scarce create the most value.
Many of these new business models disintermediate existing models, obsoleting entire layers of middlemen and management.
Netflix is a good example: the move from mailing CDs to streaming content obsoleted cable companies. Now Disney is disrupting Netflix by launching its own streaming service at $6.99 a month, offering content that cable subscribers had to pay $60+ a month to access via a "premium" cable add-on, most of which they didn't even use.
In contrast, WeWork sold itself as a "tech innovator" when in fact it was simply a commercial real estate enterprise, leasing large spaces and chopping them up into small spaces with common areas and a few services.
How does our system incentivize sociopathy? By focusing exclusively on short-term gains reaped from IPOs (initial public offerings) and by blindly seeking "the next disruptor that will generate billions," the system is easy prey for charming sociopaths who can tell a good (if not quite truthful) story.
The amoral sociopath with the story attracts amoral sociopaths in venture capital, banking and politics, as these fields are all focused on short-term, outsized, quickly skimmed gains, regardless of the consequences to investors or society at large.
What would change this incentivization of sociopathy? Limiting the VC-IPO flim-flam machine would be a start, but given Wall Street's dependence on these profits and the millions the Street gives to political campaigns, this is politically unfeasible. Any such regulation that reaches Congress will be watered down or larded with loopholes.
There may be no way to excise the incentives for sociopathy, because the incentives all favor the sociopaths' most fertile ground: amoral, conscience-free greed; short-term gains, regardless of consequences, and a preference for flim-flam, rigged games and The Big Con PR over substance.
As long as central banks create and distribute trillions in conscience-free credit to conscience-free financiers and corporations, the incentives for sociopathy only increase, and the incentives for everyone else to opt out increase proportionately.
Highlights of the Blog
The Political Parties and the Media Have Abandoned the Working "Middle Class" 10/31/19
Has California Lost The Mandate of Heaven? 10/29/19
Will MMT Work as Intended, Or Will It Trigger the Collapse of "Money"? 10/28/19
Recent Interviews on a Variety of Topics 10/27/19
Best Thing That Happened To Me This Week
Family visit with my brother and sister-in-law.
From Left Field
It’s the End of California as We Know It -- the myths burn too....
The 1% grabbed 82% of all wealth created in 2017--and in 2018, 2019...
Does Philanthrocapitalism Make the Rich Richer and the Poor Poorer? -- yes...
Hillary Is a Russian Asset: Democrats trying to revive ‘collusion’ must want Trump back in the White House.
"How Wearisome Eternity”: A review of ‘Capital is Dead’ by McKenzie Wark
They Pledged Your Tuition: An Open Letter to UC Students -- the ugly underbelly of the higher-education racket/cartel....
Revamped Lanai hotel ready to welcome guests — starting at $2,700 a day-- nice to see Larry Ellison aiming squarely at the .01% market...based on "wellness"... oh, barf....
The End of Accountable Government Is Close at Hand. Julian Assange and the CIA
I Was a Physician at a Federally Qualified Health Center. Here's Why I No Longer Believe Government Health Care Can Work--worth a read, if you set aside ideological biases...
The Toxic Bubble of Technical Debt Threatening America:
Climate change will soon expose a crippling problem embedded in the nation’s infrastructure. In fire-ravaged California, it already has.
It Will Take More Than Lower Mortgage Rates for a Housing Rally-- the lower the rates, the more unaffordable housing becomes...
The U.S. Only Pretends to Have Free Markets: From plane tickets to cellphone bills, monopoly power costs American consumers billions of dollars a year. -- Amen, Pilgrim! Tell it like it is...
"Those who do not move, do not notice their chains." Rosa Luxemburg, via David DeGraw
Thanks for reading--
charles |
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