Customer Reviews

Winner-Take-All Society

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The basic premise of this book is that the U.S. has too many markets where the "star" or top performer gets a large percentage of the proceeds. Examples are the sports market, the movie star market and the publishing market; The reasons given are;

-Technology. National distribution channels such as network television make it easier for an individual to penetrate the market. For example, at one time villages and towns had their own musicians. Now a singer can make a CD and sell it nationally.

-Falling transportation and tariff costs. Goods have gotten lighter. It is easier to send computer discs all over the world than books. CD's are lighter than phonograph records

-- Mental shelf space constraints. We have a limit to the number of items we can keep in our head..."the amount of information we can actually use is thus a declining fraction of the total information available."

-Weakening of regulations and civil society. At one time, informal and formal rules limited the winner take all markets. Now, like free agents in baseball, the top performers have the leverage to demand high prices.

-Self-reinforcing processes. This is another way of saying "success begets success." For example, a sales person does well and gets bigger customers. A person does well and the word of mouth referral causes them to saturate the market. This virtuous cycle increases the income and power of top performers.

The author argues that winner take all markets are not good for society. People are unrealistically optimistic about their own chances of winning "a prize." Thus they are siphoned off from other productive endeavors.

This book was helpful to me in understanding today's economy and job market. If anything, the winners are doing better than ever today, long after the book was published. Just take a look at the latest article on CEO salaries.

This book is very well written, presenting an argument questioning some of the assumptions that the neo-classical economists make regarding human behavior. While I formerly thought that the outcome of a free market is always socially optimal, I cannot resist the conclusion after reading Frank that some regulations are necessary to divert us from our tendency to engage in arms races for relative status into other more productive activities. The book presents a sound argument for why popular culture has degraded so, and why some people make grossly large incomes, explaining each not on sociological grounds, but rather in terms of the increasing scope and competitiveness of markets. It is not technical in style, so even an Econ B.A. like myself can understand it in its totality (or anyone else, for that matter). The book promises in the beginning to demonstrate who there is not necessary a trade off between equity and efficiency, and in the end, it delivers. More than anything, if you look at the salary of an NBA player and question, "Is his jumpshot really worth $50 million/year? Are we paying him for something that is socially valuable?" then this book is for you. Frank's answer to that question is NO, and that incomes like those induce people to make erroneous career choices (like students who opt for playing hoops over studying math). The result of the free market then, is wasted talent that could have been useful in another application. MIZZOU ECON RULES!

The first half to 2/3 of this book makes some very good points that have escaped most of the popular discussions of economic issues. The authors point out, persuasively in my opinion, that certain industries and professions have "winner-take-all" characteristics that pervert the usual reward/punishment consequences of free-market economic policies.

The markets for which the authors have the strongest evidence of "winner take all" characteristics are presented earliest. As the book goes on, however, it falls into the same pattern of thousands of books before it: the authors have made one important and interesting observation, and they proceed to claim that virtually everything in the world that they disapprove of can be accounted for by this one observation. They assume, without plausible evidence, that the declines in education and popular culture are the direct consequence of winner-take-all markets. In a couple of cases they even admit that the evidence for winner-take-all characteristics in a particular industry or occupation is scanty or even nonexistent. But that doesn't prevent them from offering further arguments and policy recommendations based on the assumption that every one of these markets is dominated by winner-take-all distortions.

By the end of this book, where the authors make policy recommendations, they come close to leaving reality behind. They make these recommendations based on the assumptions that the **entire economy** is dominated by winner-take-all characteristics - a proposition for which they offer no evidence whatever. It is hard to escape the impression that their goal in writing this book was to justify a more socialistic economic policy on the part of the government, rather than to evenhandedly examine and explain an important issue.

In short: read the first of half of this book, because it makes a lot of worthwhile points and observations. Read most of the rest if you're retired or have a lot of free time. Skip the last chapter, with their policy recommendations.

Frank and Cooks book, The Winner Take All Society, forces us to reconsider our position on the inherent good of the free market in light of newly emerging forms of destructive, albeit free, competition and growing income inequality. Written in the vein of a thinly veiled rebuke of the moral and social decline of the American economy and society, the book appears to focus too much on specific individuals, and merely states a few implications for society as a whole. In my mind, what the authors posit as the verities for individuals and corporations under a winner take all banner just as readily applies to the nation and ultimately, the world. Taking their arguments one step further, advances in high technology, such as the internet and telecommunications, have increased productivity, transformed labor markets all over the world, and created uniform standards for goods and services that can now be consumed anywhere in the world. In effect, technology has made the world a similar, smaller place. Thus, what is true economically in America now is most likely true elsewhere, though cultural differences still remain.

While winner take all markets can, with the aid of technology, make the goods and services of the few available to everyone in the world, they also have many negative consequences. Winner take all markets magnify the consequences of first mover advantages, making it difficult, if not impossible, for those late to the competition, be they corporations or countries, to establish themselves. Winner take all markets continue to increase the disparity between wealthy, industrialized countries of the North and the impoverished, besieged economies of the South. Winner take all markets continuously lure our most talented individuals into socially unproductive and often individually and socially destructive tasks. Many of the worlds economies already invest too little for the future, be they nations struggling to develop (such as those on the African continent), or fully industrialized nations (such as the United States), and the growth of winner take all markets has encouraged wasteful patterns of investment and consumption. Finally, winner take all markets have the proven ability to undermine what is in the best interests of our culture and society, and given the terrifying ability of winner-take-all markets to rigidly engender and enforce conformity, standardization, and one-upmanship, this growing phenomenon can only be counter-productive and disruptive to the efforts of indigenous peoples to maintain and preserve their fragile and threatened cultures.

Quite literally, in winner-take-all competitions, the rules really are there are no rules. As such, these competitions lead people to do very crazy things. When large payoffs are at stake and there is a very real certainty of the loser(s) getting absolutely nothing for their effort, contestants have powerful incentives to spend money to enhance their chances of winning, and have little or no moral compunction to exercise restraint and sensibility in their behavior. This is especially the case where unfettered, free competition is the rule and covenants and/or regulations to ensure orderly, equitable markets are not the norm.

Thus, there seems to be an inverse, negative relationship between investment in these all or nothing competitions and their (social) value to the larger group. As the pace of investment, size of the investment and the risk associated with the investment in the winner take all competition increases, the social and economic value of the competition steadily decreases. While these investments look justifiable from the individuals or nations standpoint, especially if there is a considerable chance that the individual stands to win, and win big, the concomitant dueling that these investments fuel almost always appears excessive from the standpoint of the society. As such, these all-or nothing competitions have led to a plethora of economic versions of military arms races between individuals, corporations and nations.

Although one could surmise much of the content from experience and simple common sense, I generally found the book to be a straightforward and thought-provoking read. Yet, many of the examples demonstrating the extent to which such competitions have infiltrated all aspects of our economic life, as well as the often ridiculous, comical and increasingly desperate attempts by individuals to thrive in these all-or-nothing environments, profoundly scared and disturbed me. The authors could have done away with the last chapter, a rehashing of the same old remedies to the problem, and written a much better ending which could have summarized the main points of the book and discussed their implications, going forward, for all participants in the new global economy.

In conclusion, these all-or-nothing competitions have steadily become the only game in town. Yet, I seriously doubt that these dangerous economic games are really worth playing.

This book would make a fantastic 30 page essay. It covers very important ideas and backs them up with analysis and examples. But then it starts to repeat itself, and bring out too many examples without new ideas.

This book basically says that the rat race is harmful and we should constrain spending, because happiness isn't really what we have, but what our neighbor has; therefore, by creating incentives to spend less, we can create a trickle-down effect of less consumption and have more time and less coarseness in culture. The only problem is that the authors--as bright as they are--do not spend much time explaining exactly how a consumption tax would work. One gets the feeling that they felt going into specific details was inappropriate for a mass-market book. Along the way, we also learn about fun variations on game theory, the predecessor to Paris Hilton, and some prescient warnings on steroids. Despite the negative comments about lawyers in the book, I enjoyed it very much. The author reminds his readers, through facts and research, to be more humble and to remember that because the number of top positions is few in the U.S., it cannot be the case that all our dreams will be realized. While depressing on the surface, one may wish some of the participants on American Idol had read this book before appearing on national television.

The author posits that markets of fixed size and involving zero sum winners (i.e., more inputs do not necessarily expand a market's size such as that for lawyers litigating anti-trust cases) where only 1 (or a very small number of players can win), have been growing and as a result that the top players, relative to everyone else, have seen their relative incomes grow. He cites, as examples of such players, movie stars, major league sports players and litigators at top law firms.

He makes the case that this is not socially beneficial for a number of reasons. One is that it leads to an over allocation of human resources to these fields. This happens as most persons are far too optimistic regarding their probability of being successful in such fields whereas, in reality, few would be. He provides considerable empirical evidence for the cast that such over optimism does exist. This leads to too many persons pursuing careers in such fields, a negative both for society and many of these same individuals as the overwhelming majority can never succeed in reaching the upper most pinnacles (or for that matter even being able to make a decent living in these fields).

In addition, these type of markets lead to great inequalities in wealth, too much conspicuous consumption and far too few resources allocated to public goods (i.e., schools, roads, etc.). With respect to the last item his argument is weak in that he does not make as strong a case for how increasingly inequality and conspicuous consumption lead to decreased spending on public goods.

The above arguments, in general, are novel and, more or less, logical. Where the book is weak, however, is in respect to the "solutions" proposed to remedy this problem. The author recommends implementing a more progressive income tax structure as a means of reducing the incentive to enter such markets. The main problem with this is that it would have to be raised significantly, from its current about one-third of top income earners income to, say, two-thirds (the author cites no specific numbers). This does not seem feasible, however, given the current political climate. In addition, raising the top rates does little to reduce the optimism most aspirants to these professions have in being able to make it to the pinnacles of these fields. Hence it does not tackle the true source of the misallocation problem.

Brilliant book, though the practical outlines of reversing the trends that drive our society towards a winner-takes-all-society may not be easy, or simply feasible. The argumentation is very solid and based on different literature, which makes the bibliography equally interesting. Though the numbers are outdated, one can only see that in current society the numbers for the winners have only - and extremely - augmented. Which proves the book was right but the ideas haven't made the political agenda.

Robert Frank is a top-notch economist who consistently writes interesting and important books about capitalism, modern human societies, and human behavior. This book is a must read for anyone who wants to understand how things currently work in our country, and why so few people make it so big and so many others don't make it at all.

Although this book is a little outdated, the authors make a convincing case as to the spiraling salaries of Fortune 500 CEO's, sought-after-free-agent-superstar-athletes, box-office movie stars and the like. Winning begets winning, that's the gold standard of life. "In order for top CEO's to capture their full economic value, a second factor must also be present-namely, there must be open competition for their services." For what high level profession doesn't this rule apply? Pursuit of success is intrinsically woven into the tapestry of this nations fabric and history has always been faithful to the winner; thus, the past is a recording of HIS STORY! It's unfortunate that vanity prevents so many people from accurately assessing their talents, but I don't think it calls for the reshaping of national policy as the authors suggest.