Humans, companies and trees race to the top - with some unintended consequences

CorporateNature No 152

By George ELIOT

1. COMPETITION LEADS TO A "RACE TO THE TOP"

Free market competition in capitalism creates a "race to the top" just like trees in a forest race to outgrow their neighbours and reach the top of the canopy, in order to maximise each individual tree's access to sunlight. This is clearly a very resource-intensive and energy-intensive process: 

- humans have to constantly develop new skills;

- companies have to innovate and iterate their products and services;

- and trees need to grow heavy trunks to reach higher and higher.

2. CARTELS CAN LIMIT COMPETITION TEMPORARILY

Trees are unable to strike a deal to limit the height of every tree in the forest, thus leaving everything to natural competition. While humans and companies could agree such a deal amongst themselves but it would result in a temporary and unstable equilibrium (as the video below about baggage carousel crowds and competing trees shows): everybody would have a strong incentive to break the pact. Furthermore, anti-monopoly laws forbid such cartel agreements in the corporate world.

3. GOVERNMENTS CAN LIMIT COMPETITION PERMANENTLY

One key stakeholder that can actually impose such levelling rules is the government. For example, the Chinese Government banned private for-profit tutoring of school subjects for school-age children in July 2021, thus putting a cap on the competitive pressure on parents (and students) to constantly upskill their children.

4. HOW "RACE TO THE TOP" BECOMES "RACE TO THE BOTTOM"

Why do we often see unbridled capitalism as a "race to the bottom" when it should in principle be a "race to the top"? Most human and natural systems function as a "winner-takes-all" game in the immediate enviroment of the winning person, company or tree. So while the successful individuals race to the top, they cast a shadow on those left behind, thus relegating them to the second or third division - which can be seen as pushing them towards the bottom. As a result, in the perception of an external observer, the big pool of players who are "pushed to the bottom" cannot outweigh the smaller pool of winning players who race to the top.

Why Trees Are Taller Than They Need To Be

Capitalists are fruit pickers: they only take a cut. Communists and pig farmers take it all

Capitalism resembles picking fruit. Communism resembles slaughtering animals.
CorporateNature Metaphor Series No 124

1. FRUIT TREES & CAPITALISM 
We plant trees and crops in expectation of a return on investment. When we pick the fruit of a tree, we are taxing the tree a percentage of its accumulated carbon and sugar, year after year. Yet, the tree preserves whatever growth does not come in the shape of fruit. This resembles the capitalist system where different people takes a cut at various levels but there is still an incentive for the tree to keep producing.

2. LIVESTOCK & COMMUNISM
When we slaughter farm animals, this is extreme taxation: we impose a 100% tax on the growth of the animal and take everything that the animal has accumulated, including the animal's life. This resembles the communist system where all surplus is expropriated by the state. No wonder that communist regimes collapse as people have no incentive to either produce or not to waste resources.

3. COMPARISON
Ironically, a vegetarian diet of eating fruit is capitalist, while eating meat is communist. Capitalists seem to be good at "milking" the goose that lays the golden eggs, while communists go for the jugular and bring both the goose and the golden eggs to an abrupt end (while promising a bright future).

Livestock
(image source: Wikipedia)