Tech billionaires like Bill Gates, Mark Zuckerberg and Elon Musk are not only among the richest people in human history. They are also extremely powerful - socially, culturally and politically. While this is partly a reflection of the social status that our society generally attaches to wealth, it is not the whole story.
What's even more important than wealth itself is that these billionaires in particular are considered entrepreneurial geniuses who display a unique level of creativity, courage, vision and expertise in a wide range of subjects. Add to that the fact that many of them control key communication channels, most notably the major social media platforms, and you have something that is almost unprecedented in recent history. The image of the rich, brave businessman who changes the world can be traced back at least to the "robber barons" of the Gilded Age. However, one of the main sources of the contemporary popularity of this ideal is the novel "Atlas Rebels" by Ayn Rand, whose protagonist John Galt strives to reshape capitalism with the power of his idealism and will.
Although Ayn Rand's novel has long enjoyed cult status in the minds of Silicon Valley entrepreneurs and libertarian-leaning politicians, the influence of its central archetype is not limited to those circles. From Bruce Wayne (Batman) and Tony Stark (Iron Mean) to Darius Tanz in the TV series Salvation, wealthy, tech-savvy innovators saving the world from impending disaster have become an inescapable part of our popular culture.
The power of the wallet
Some individuals will always be more powerful than others, but how much power is too much? Power used to be associated with physical strength or military prowess, but today it refers more to what Simon Johnson and I call "the power of persuasion", which, as we explain in our book Power and Progress, rests on status or prestige. The higher your status, the easier it is to convince others.
The sources of status vary considerably across societies, as does the extent to which status is unequally distributed. In the United States, status became tightly linked to money and wealth during the Industrial Revolution, and income and wealth inequality rose dramatically as a result. Although there have been periods when the state has intervened to try to reverse this trend, American society has always been structured around a steep hierarchy of status. This structure is problematic for several reasons.
To begin with, the constant struggle for status, and the persuasive power it brings, is largely a zero-sum game, because status is a "positional asset." More status for you means less status for your neighbor, and the steeper the status hierarchy means that some people will be happy, while many others will be unhappy and dissatisfied.
Moreover, investments in zero-sum activities tend to be inefficient and excessive compared to investments in activities that do not have this characteristic. Is it better to spend a million dollars on gold Rolex watches or on acquiring new skills? Both investments may have real value, the beauty of the watch compared to the pride of acquiring new knowledge, but the first investment merely signals that you are richer and more conspicuously spendthrift than the others. The second, on the other hand, increases your human capital and can contribute to society. The first investment is mostly zero-sum, while the same cannot be said for the second.
Even worse, the initial investment can easily get out of hand, as everyone invests even more in conspicuous consumption to stay ahead of the crowd. Commentators often wonder why someone with hundreds of millions of dollars would ever want hundreds of millions more. There are few things you can't afford if you already have $500 million, so why aim for billions? Because "billionaire" represents a status rank. It is not the purchasing power that matters, but the prestige and power that that status brings in relation to others. In the "wealth as status" state of mind, the mad race of the ultra-rich to amass even more wealth becomes inevitable.
Dictatorship of dilettantism
There are both evolutionary and social foundations for linking the power of persuasion to status and prestige. After all, it is rational to learn from expert people on an individual level, and it is logical to associate expertise with success.
Moreover, this type of learning is good for communities because it facilitates coordination and adoption of best practices. However, when status becomes associated with wealth, and wealth inequality becomes too great, the foundation supporting expertise begins to crumble.
Consider the following thought experiment. Who is more skilled at carpentry - a good, master carpenter or a hedge fund billionaire? It is natural to choose the former; but the more wealth brings status, the more importance will be attached to the views of hedge fund billionaires, even in carpentry. Or take a more contemporary example. Whose views on free speech carry more weight today, the views of a tech billionaire or a philosopher who has been on the subject for a long time, whose evidence and arguments have been subjected to the scrutiny of other qualified experts? Millions of people on Xu implicitly chose the former. The deeper we are drawn into the "wealth as status" attitude, the more we will accept the supremacy of the tech billionaires.
Yet it is hard to believe that wealth can be a perfect measure of merit or wisdom, let alone a useful substitute for authority in areas such as carpentry or freedom of speech. Moreover, wealth is always somewhat arbitrary. We can debate endlessly whether LeBron James is better than Wilt Chamberlain was at the height of his basketball career, but when it comes to wealth there is no comparison. While Chamberlain's fortune at the time of his death in 1999 was estimated at $10 million, James' net worth is estimated at $1,2 billion.
There are few things you can't afford if you already have $500 million, so why aim for billions? Because "billionaire" represents a status rank. It is not the purchasing power that matters, but the prestige and power that this status brings in relation to others
These different outcomes are not determined by each player's talent or work ethic. Rather, it will be that Chamberlain lived in a time when sports stars were not paid as much as they are today. This is partly due to technology (everyone can watch James today thanks to television and digital media), partly due to changes in norms (paying superstars hundreds of millions has become more socially acceptable), and partly due to taxes (that the US still has a top marginal income tax rate above 90%, James would have less money and the country would have less wealth inequality).
Similarly, if the technology sector had not become so central to the economy, and if it had not been driven by such a strong winner-takes-all dynamic (which is partly the result of choices in the way markets are organized), today's tech tycoons would not have become so rich. The fact that Gates and Musk are taxed less does not make them wiser, but it certainly made them richer, and therefore more influential in the current "wealth as status" system.
Power corrupts
Such figures also profit from an even more dangerous dynamic that Simon Johnson and I explore in Power and Progress, using the example of Ferdinand de Lesseps. Lesseps achieved enormous status in late 19th-century France, where he was known as the Great Frenchman, thanks to his success in building the Suez Canal despite long-standing British opposition. Lesseps had a vision and showed great skill in convincing politicians in Egypt and France that international maritime trade would become very important. But he was also extremely lucky: the technologies necessary to build a barrier-free canal (which was initially impossible due to the amount of excavation and work involved) were developed just in time to save the project.
After this success with Suez, Lesseps gained enormous prestige. However, how he used his new status serves as an instructive example. He became reckless, pretentious and overconfident, forcing the Panama Canal project in an unworkable direction, which ultimately led to the deaths of more than 20.000 people and the financial ruin of many, including his own family. Like any form of power, the power of persuasion can make a person vain, unrestrained, destructive, and socially awkward.
Whose views on free speech carry more weight today, the views of a tech billionaire or a philosopher who has been on the subject for a long time, whose evidence and arguments have been subjected to the scrutiny of other qualified experts?
Lesseps' story remains relevant because it clearly reflects the behavior of many billionaires today.
While some of America's richest people don't use their wealth-acquired status to influence key public debates (like Warren Buffett), many others do. Bill Gates, Elon Musk, George Soros and others have no qualms about voicing their opinions on issues that matter to them. Although it is easy to welcome such contributions when we agree with them, we should resist the temptation.
It is reasonable for society to use the knowledge and wisdom of those who have expertise in a certain field, but it is counterproductive to enhance the status of those who already have too much (and are working very hard to increase it).
Another way
Of course, it's not entirely the billionaires' fault that American policies encourage massive inequality (although they certainly lobby for policies that have that effect). However, they should be held accountable if they abuse the enormous status that wealth affords them in the face of growing inequality. This is especially true when they use their status to advance their own economic interests at the expense of others, or to polarize an already divided society with provocative rhetoric or status-enhancing behavior. If irresponsible billionaires already have undeservedly large social, cultural and political influence, the last thing we should want is to give them even bigger public platforms – for example, in the form of their own social network, as Musk now has through his ownership of X . Instead, we should strive for stronger institutional mechanisms to limit the power and influence of the already privileged, as well as rethink the tax, regulatory and consumer policies that have created such huge disparities in the first place.
However, the most important step will also be the most difficult. We need to start a serious conversation about what we should value and how we can recognize and reward the contributions of those who do not possess enormous wealth. While most people would agree that there are many ways to contribute to society and that achieving success in one's chosen profession should be a source of personal satisfaction and the respect of others, we have neglected this principle and risk forgetting it altogether. And that is a symptom of a deeper problem.
The author is a professor of economics at MIT
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