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

Windows of opportunity open and close just like rivers sometimes freeze in winter

By George ILIEV
CorporateNature Metaphor Series, No 88

You cannot walk on water (unless you are Jesus Christ), but you can walk on ice. And not only walk on ice but you can also have a fair on a frozen river or lake. This used to happen in London on the frozen River Thames, where winter fairs were held at least in 24 winters since 1400 AD. The year 1814 AD was the last time the river froze and a River Thames frost fair took place. 

A frozen river creates a temporary opportunity to walk on it or have a fair, but at the same time denies an opportunity to use the river for other purposes, such as shipping. In similar ways, temporary opportunities open and close in life, business and politics. For example, the window of opportunity for Scottish or Catalan independence seems to be closing. In business, the age of the internal combustion engine opened in the early 1900s to the detriment of the electric motor (which had been the leading contender to power vehicles in the late 1800s), but it seems likely that the electric motor will make a comeback and displace internal combustion in the next decade or two.

You never know when the perfect storm, e.g. a volcanic winter, may freeze over the rivers again, even if it hasn't happened for 200 years. And this will invariably be good for some and bad for others: one man's meat is another man's poison.

Frost fair on the Thames in the 1600s (Source: Wikipedia)