The Value Proposition of Elites, or Why You Should Feed Me More Fudgesicles

Dearest friends,

I zoom around the world like Pac-Man around his maze, eating up pellets. And I have to ask, where do the pellets come from? Do they fall like mana from heaven? How do they obtain their marvelous roundness? Why do they taste like corn puffs? What sorcery empowers the big pellets to give ghostbuster powers? If I were a natural philosopher, I could answer such questions.

Let’s see what Edmund Burke has to say.

“A sermon from a noble duke, or a noble marquis, or a noble earl, or baron bold, would certainly increase and diversify the amusements of this town, which begins to grow satiated with the uniform round of its vapid dissipations. I should only stipulate that these new Mess-Johns in robes and coronets should keep some sort of bounds in the democratic and levelling principles which are expected from their titled pilpets.”

Or, in short, the aristocracy exists to undermine the basic values of our proud English Englishmen. Wonderful. Why even keep them around? Tradition? Tradition is lovely, but it doesn’t explain the value proposition in the first place. If time tells us anything, people told “because it is” will inevitably tear down the old ways. Burke’s argument is also rooted in property rights and the rightful place of people in society. We’ll get back to that one… another time.

For now, the value proposition.

If you’ve hung around this sphere of blogs, sometimes known as the Weblogoball, you may know of the notion of value transference. There exist projects which societies embark on – the usual stuff. Building factories, constructing dams, selling hot dogs, cloning orphans to harvest their organs, selling heroin, opening the Hellgate to Hai’lac’nox, the Pain Dimension, where our dark masters reside, milk delivery services, and maybe hanging the Christmas decorations.

As such, professionals and especially executives do not produce themselves. They coordinate production activities and take a portion of the proceeds. If you want to build a house, you’d rather have ten construction workers than ten civil engineers. Ten nurses will usually be more useful than ten doctors. But there can be no large or complex projects without coordination. The price you pay for that coordination is the skim, the value transferred for not directly productive activity. Yet Marx raises an excellent objection. Much of the time, this coordination is not done by the controlling interests themselves, but by a class of paid managers.

Furthermore, many jobs that are often done by the genteel have no relation to value transference at all. Take art and writing, two things often done by the rich. Not only is there no productive activity to siphon off of, the person is doing the work themselves. Anything produced there is done by the elite. They paint. Now, one might object that art is bohemian and is thus somewhat marginal. It’s a fair objection. But there is another elite vocation which also does not engage in value transference. It is academia. Not only is academia not bohemian, it is at the very heart of aristocratic culture. Ausonius was made consul for being a great professor. As Bourdieu noted, it is the font of honor. While, legally speaking, the sovereign is the font of honor, the actual granting or sale of a title to a graduate of a noble college is not happening arbitrarily, but within a pool of talent which the universities have already curated. Your ticket is punched. Here in Freedomia, we lost the titles but kept the system.

The next notion is that elites need to be paid off so that they don’t cause trouble. People of higher social status, by nature, are able to muster resources through their connections and prestige. Therefore, jobs need to be made for them and money given so they don’t maraud. In this model, the elite is a sort of stationary bandit, and the price paid to them is a bribe to not cause chaos. I think there is also much to recommend this as a factor in elite compensation. However, it holds more true in early stages of development, where the elite remains of a martial character. That is not to suggest the elite of today are totally disarmed – lawfare remains a valid concern. But most of them, if left alone, are unambitious nerds, more likely to hot glue a figma than to be a hotspur. If there is danger, then more of it lies with the frustrated will to power of the middle class and their agitprop protests. Antifa will bike-lock your head.

How are products made? They are made through labor. This is the input of the workers. But, as Ayn Rand noted, brute muscle alone cannot make a railroad. A railroad is not only muscle, blood, and iron, but also ideas, the concept of the railroad itself. This is why another name for the professional class is the creative class. What white collar professions do is provide the inputs of the mind, not the body. Mind and thought, not muscle and blood. Products require designs.

The academia sits at the center of elite culture in many civilizations because it stands as the symbol of thought itself. Why are elites often early adopters of new trends? Because they’re innovative. Because they’re new thoughts. Elites broke with the ancient tradition of nursemaids to start breastfeeding. This didn’t work out so well with small, flat chests. So infant formula was invented, and became a stunning success. Early infant formula killed babies. In this day and age, infant formula has become so safe and cheap that it has been adopted by the masses. Naturally, this means the elites have abandoned it to go back to breastfeeding. The more things change…

What does this mean? Ideas push out the long term production frontier. They make society more productive in the long run. So long as the civilization lasts, the idea never stops paying. The contribution of an elite may never exceed what they receive as compensation during their lifetime, but over the history of a state, it might. In that sense, the production of an elite is not the same as the production of a worker, since it may require many generations to pay back the investment, and it goes on long after the person has expired. In the short run, they can be said to be parasitic. In the long run, sometimes not. So what is the correct time horizon to judge their contribution on? And how should they be paid? Should they be paid based on how much they add while they live, or how much they add to the overall wealth of humanity in the long run? R&D labs are cost centers, but a nation that doesn’t encourage its corporations to conduct research falls behind. Across many settled societies, you keep seeing social classes arise. There’s a reason for that, and it’s not just “humans are assholes”. If it was a total waste, then more egalitarian tribes would not have been supplanted by settled hierarchical civilizations.

Secondly, many elites never produce anything. The value proposition is extremely high variance. Medicine had provided little of value for centuries. Then, with the invention of vaccines and penicillin, the whole profession was made profitable in an instant. It was undoubtedly worth it, but you wouldn’t know it from the first few millennia. Instead, you would come away saying that a significant portion of the gentry was upkept doing what was essentially voodoo. To borrow the expressions of a certain volatile Med, the payoffs of elites lie in Extremistan, while the payoffs of workers lie in Mediocristan. Workers are governed by physical limitations. Even a very strong and able miner can’t mine exponentially more coal than his neighbor. Markets are very, very good at pricing the labor of workers. The pay of workers around the world tends to be similar. The income of a Chinese machinist is not too different from an American one, but our corporate overlords are too cheap to pay extra.

Contrast this with elites. Some ideas they come up with solve previously eternal human problems. Hunger has been banished. Disease mostly destroyed. Some ideas are basically neutral or pointless, like pet rocks. And some ideas are actively harmful and corrosive to the host society. In that respect, elites resemble venture capital investments. You lose money almost all the time, but sometimes you hit that unicorn, and you make enough to make the whole enterprise worth it. And venture capital is not investing in staid, predictable industrial expansion, but is looking for the disruptive ideas that will change the world.

If we pay people based on their expected value times a certain multiplier for profit, then the pay of workers is easy to calculate. But the pay of elites? Difficult. If their payoff function lives in Extremistan, then the expected value must be dominated by the small probabilities of massive payoffs, the tails. And we have few means of assessing how likely these tails are, or how big the jackpots will be. So you can’t price out the “proper” pay for an elite the way you can for ordinary workers. The payoff function is too fuzzy. Two different capitalists might assess the productivity of a coal miner differently, but the valuations will still be in the same ballpark. Creative work? Not so much.

This is why the incomes of elites vary so wildly across time and space. Cross the pond, and every job makes a different amount. Many jobs pay far less. The tax structure for capital is different. Every payoff scheme is different. Is a doctor so much the worse for living in Germany? Is an industrialist a better industrialist if he lives in Ireland and not the mainland? Have America’s rulers become far smarter and more competent since 1950? In modern America, we expect scientists to make peanuts and to coast on the great prestige of their work. But in 19th century Norway, scientists ruled the roost. Wealth, power, and knowledge were concentrated into one set of hands. And so, the masses instinctively recognize there is something unseemly about the rising wealth of the 1% and their masters, the upper class. Because there is so much fuzz and uncertainty about the expected value of these things, getting paid more or less is just a matter of manipulating cultural conventions and norms. Elites write blank checks to themselves.

If you’ve got that kind of power, it’s best to write a low number, so that all will consider it reasonable, and to take one on the chin if you make a mistake. Often, what makes people mad is not the size of the checks, but the lack of consequences for bad ideas. People are perfectly okay if a CEO makes $100 million shoring up American industry. It’s seeing a CEO golden parachute out of a burning building that really pisses them off.

Especially since, as you ascend, money is not money. That is, money does not represent the same thing. For the bulk of society, money is the means by which they sustain themselves. It’s resources to eat. Their share of their productivity is what Marx would call the necessary labor to reproduce labor. Most people live paycheck to paycheck, and every dollar is another dollar to buy Stardollars coffee and pumpkin spice corndogs. Once you reach the upper middle class, you achieve satisfaction of these life needs. Money is no longer about getting another Margaritaville machine. It’s not about stuff. It’s about power. It’s shares of ownership of the means of production. It’s influence bought from politicians. It’s points in the game of prestige. As such, absolute pay doesn’t really matter that much. Relative pay matters, because relative pay and relative wealth is what determines your rank in the pecking order. This adds another fuzz factor to calculations. What they’re getting isn’t stuff, it’s power. It fills a different psychological need from the income of workers.

Was I supposed to set up a Pac-Man analogy? Eh. It’s an overrun. We’re behind schedule. Give me a million dollars and I’ll provide one, maybe. Probably. There are a lot of risk factors on my risk factor chart.

“Engineers like to solve problems. If there are no problems handily available, they will create their own problems.” “Work is for losers. A winner says ‘That’s on my list’ and never commits to a deadline.” – Bob the Builder, probably

Or maybe it’s all bollocks. Give me fudgesicles. I deserve it, since I am such a big value creator. Productivity = The Bigs.

Hates Mondays, meetings, and Monday meetings,
Monsieur le Baron