Individual Success, Totalitarianism, and the Power Curve Formula

In reading this article about the failure of Communism, I am reminded of why totalitarian systems must fail. Totalitarian systems are all based on the hubristic notion that someone, somewhere knows the mind of God, not as a matter of general rules for individual decisions, but as a matter of a specific natural order for the "greater good." The totalitarian claim to power rests totally on faith in a given set of decision-makers and their moral character. Communism, National Socialism, Islamicism, and all other totalitarian systems are, at their core, moral codes, but are not about individual decisions. These moral codes insist a specific elite must decide what is best. They define a "natural order." Each has its own specific formulation of the "greater good" and who is best equipped to see it, but they are all, at their root, elitist, putting some people above others. These elites feel justified in killing those who disagree with them (and any amount of innocent bystanders) because they are protecting the natural order and their view of the greater good. The more effective others are at proving these elites wrong, and their natural order upside down, the more important it is that these critics be destroyed. This is why totalitarian systems are ultimately destructive instead of productive. Totalitarian elites must punish everyone who criticizes them. Whatever their natural order, the elite decision-makers are still human. They all make mistakes. When they do, everyone who is intelligent enough (and brave enough) to recognize and call attention to these mistakes must be silenced for the elites to maintain their fiction of superiority. One way to recognize totalitarian, elitist viewpoints is by how vehemently elites attack those who challenge their natural order, demand absolute faithfulness to the party line, and turn on each other when failure occurs. Elites never say, "Sometimes I am right. Sometimes I am wrong. Back me because I am more often right than my rivals." Elites always say, "I am right. Those who oppose me are evil because they are attacking the natural order of things. They must be punished." How is the Western system of personal freedom different or better? Don't we think our system of representative democracy and free enterprise is "right?" Doesn't freedom propose its own natural order? No, it is a repudiation of a natural order. It admits that no one knows what is right or who is right. It admits that we don't know absolutely beforehand who can make the best decisions. Economic and political freedom is value free regarding the "order" behind what decisions are made and who should make them. It embodies only the simple idea that the majority of average people can, if they are left free, recognize what works and what doesn't if not before the fact, at least afterwards. Furthermore, it recognizes that people can make mistakes regarding who makes good decisions and who doesn't, but that if we are free we can correct those mistakes over time. This system of freedom is uniquely set up to reward those who prove over time to be right and punish those who prove to be wrong, but ideally, it rewards them after the fact. Individuals take their own risks to each uncertain rewards. If they are right in taking the risk, they are rewarded for it. It is this system of compounding rewards, multiplying the rewards for the best decision-makers and best ideas to create what I call the power curve: the huge rewards for the few who most improve the lives of the many. This difference is easiest to see in economics. In totalitarian systems, the elites who have the power make the real economic decisions. When many of those decisions prove to be wrong, the many are forced to suffer the consequences. Those who point out the failure of the system must be killed to protect that system. Ultimately, the most intelligent and creative people in society are not utilized by the system. They are silenced or destroyed. In a free system, we are each able to place our own "bets" on who has the right ideas. We place a bet whenever we take a job, buy a product, or invest in a stock. Some of these decisions work. Our work proves to be rewarding. The products we buy prove to be worth the price. The stock price we invest in goes up. Some of these decisions don't work, but, because we are free, we can leave bad employers, stop buying bad products, and sell a stock that goes down. We correct our past mistakes and learn to make better and better decisions over time. A consensus emerges about which products are the best but that consensus is dynamic. It is always changing. Each new decision allows people to change their opinion. No one is locked in at any time. The incentive is to put the last battle, won or lost, behind you and work on the future. Sure Betamax lost the VCR wars, so what? Who cares in the era of the DVD and DVR? The "blue-ray," "high-def" wars are upon us and a new generation of winners waiting to come to the forefront. In making our personal decisions, we are rewarding people, other individuals like ourselves. We reward those who make the best decisions about the future. We in turn are rewarded for our own good decisions. Over time, those business decision makers who have been successful in the past, attract the best employees, more customers, and more investors. If we are successful ourself, we attract better employers, better positions, and more power. Past success compounds itself, but only as long as we are successful. As they say in the investment game, past performance is no absolute indicator of future success. Some people who have been very successful in the past (Ken Lay), make terrible decisions and those who "bet" on them lose. While others, like Warren Buffett, make the right decisions year after year, decade after decade. These people compound their success, multiplying it times itself over and over again. This is the multiplying effect that creates the power curve. The more a decision-maker is right, the more often people bet on that decisions-maker to be right in the future. This gives successful decision-makers more and more resources. These resources magnify the productive power of their decisions. If they continue to make good decisions, they attract more people into their network and get more resources. In the end, you have the organizations that are thoroughly networked into our society, touching everyone's lives: Microsoft, Apple, Wal-Mart, or, in their own way, Haliburton. The formula of the power law (and therefore of the power curve) is "y=axb," where "b" is the exponential power of multiplying a number times itself. This is what happens in all free systems (a) which provide a huge range of positions (x). The result is an exponential rise in the productive of their efforts (y). In the world of mathematics and science, from which the power law is adapted, what I call the free system (a) is called the constant. In a social network, this system has to be stable enough for people to understand its rules. This constant must provided the dependable rule of law and guarentee certain freedoms. Though your position (x) determines your place on the power curve, you and everyone positions can change. Unlike a class system, the components that define a position are determined by personal decisions, not assigned by the system itself. Decision-makers can change and start making bad decisions. Or they can simply die like Sam Walton, the founder of Wal-Mart, died. (I don't invest in Warren Buffett's company, Berkshire Hathaway, simply because of Buffett's age.) Success formulas fail when they reach certain limits or the climate changes. Not all components of a position are not scalable. As all organization grow larger, they become slower and less effective at adapting. Every successful formula is temporary. Past performance is no indication of future success. But in a free system, though winners are temporary, the system is constantly creating more new winners. Winning positions are always available. This isn't a zero-sum game. A single Kmart fall, but Wal-Mart, Costco, and Target can all rise together. More new winners make us all wealthier. The fact is the CEOs, those at the top of the corporate ladder, ever more frequently lose their jobs because the system continually recognizes failure while it creates new winners. When what worked is the past stops working, it is quickly abandoned, one way or another. However, these retired CEOs go on to start new businesses or even get called back to their old jobs when their replacements fail. In this system of freedom, everyone's focus on the past is limited to worry about what it means for creating a better future. People aren't killed when they fail. Everyone gets a second chance as long as they want to play. F. Scott Fitzgerald may have wrote, "There are no second acts in American lives," but he was wrong. The specific result is uncertain for any given organization, individual, or any given decision. We all rise and fall with each key decision, like ships bobbing up and down on the ocean. But the result is certain for the system as a whole. The water rises. Some ships may sink, but society itself becomes richer in every way: richer in our knowledge, richer in our productive capacity, richer in our comfort and life span, richer in our culture, richer in every way. This is the power behind the power curve. When people say that a population is "not ready for democracy," they can mean one of two things, one wrong and the other right. First, they can mean that political and economic freedom itself must be reserved for the elites, because only the elites can make good decisions. In my opinion, this view shows an inherently distrust in the system of freedom itself. However, "not ready for democracy" can also mean that a given population is so conditioned to political totalitarianism that, even in a free system, elections lead inevitably to a period of one party rule. History provides evidence for this point of view, but history also shows that as long as government power is limited and basic political liberties are protected, especially economic freedom, every population eventually bootstraps itself into political pluralism.