Winners and Losers
by Joseph Rowlands

There's one conversation I've had over and over with different people. There are many starting points, but the ending point is the same. They present a belief that if the world had a large number of much smarter people, the people who are currently doing well would end up paid less and in more menial jobs. The basic fear is if suddenly we were inundated with geniuses, even the successful among us would end up forced to do menial labor for low wages.

The belief revolves around a zero-sum view of the world. If suddenly there were bountiful geniuses, they would take our jobs and we would be left with nothing. An average engineer may make good money today, but if there were too many smart people, all of the jobs would go to them. The belief assumes the number and kind of jobs would stay the same, and the only difference is who you'd have to compete with for the jobs. With more geniuses at the top of the pyramid, everyone else would be pushed down to lower rungs.

There are significant problems with this view. First of all, with many more smart and talented people, completely new endeavors become possible. Many products or projects are limited by the amount of talent you can get. If a computer firm can only hire a few key engineers, they have to fill up the project with less qualified people. And to build the product, they need to scale down the project so that the team that they have hired can actually build it. But if there was an abundant supply of extremely qualified and productive people, the kinds of projects would change. Maybe projects would be completed sooner, allowing a faster adaptation to changes in demand. Maybe new innovations would lead to new products. Maybe more complex products could be built whereas before they didn't exist.

And this effect would be widespread. Productive capability across every industry could increase. New technologies could be invented, modified, adapted, combined, etc. Wealth would grow fast, and new opportunities would arise. We see some of this already in the engineering world. As new tools are created, the work it takes to build a product shrinks over time, allowing more complex products and a larger variety of them.

So the idea that the job market would stay the same, except that now you would have to compete with people much better than you makes little sense. With new people comes new opportunities, and your productive capability hasn't changed. An influx of geniuses would create more jobs.

A second problem with this view that a bunch of smarter people would make us all losers is what Ayn Rand called the pyramid of ability. It suggests that super productive people (at the top of the pyramid) make us all far more productive. When people invent new technologies, or create new products like an iPhone that create an entire industry around them, their productive genius raises the productivity of all of the people who work below them.

Consider trying to live in isolation from the rest of the world. You may try to be self-sufficient. Perhaps you will succeed and survive for awhile. But while you may work very hard, your total productivity is small. In a larger society, your productivity increasing far beyond what you can do in isolation. That productivity gain is not due to working harder, though. It is working more efficiently.

Some may object and say that this is a result of free trade, division of labor, etc. And certainly all of that is true. But Rand makes the point that most productive people in society do not figure out themselves how to be productive. They follow directions. They get hired by people who can and do figure out the most productive activities. They create the tools necessary for you to do your job. They invent the technologies, shape the products, gather the capital, hire the team, provide direction, and on and on.

In other words, people in a higher position than us are not a drain on our wealth. They are a cause of our productivity. To give a more concrete example, there are engineers who do far more than their specific, individual contributions on a project. These engineers clarify ideas, solve problems, delegate work efficiently, develop new methods or tools, and generally increase the productivity of the people they work with. If someone figures out how to solve a complex problem and explains how each component of a design can be built to work together, they make the people working on those components far more productive by allowing new or better functionality.

The pyramid of ability needs to be recognized because good people increase the productivity of those around them. And when your productivity is enhanced, so is your compensation. The more value you produce, the more value you can demand. Having good people is not a threat to your productivity, it is an enhancement of it. And those projects that fear having too good of people, because the project leads fear they will lose out to them, are significantly hindered.

A third flaw in the belief that more smart people are a threat is the law of comparative advantage in economics. This law addresses a widespread fear in international markets. What happens if one country is so productive that they are able to build every product cheaper and more efficiently than some other country. It is said they have an absolute advantage in everything. Doesn't this rule out the possibility of trade between these countries? Why would the superior country trade with the inferior country if they can make the products cheaper? And in the larger market, why would other country trade with the inferior country when they could trade with the superior one?

The law of comparative advantage points out that trade is still beneficial. While the country with an absolute advantage in everything can make build anything better than the other country, they can still benefit from trade. The superior country could more of its resources on producing what it has the largest advantage in, such as a rich country building airplanes. The inferior country could produce something that it is relatively better at producing (relative to other things that it could produce), such a food. They can then trade food for airplanes.

The airplane making country can maximize its profits by building something that is difficult for other countries to build, and trade for other goods. They can get more from building airplanes than they would get if they made the food themselves. Other countries can trade food for airplanes, getting access to something that would cost them much more to make themselves. Since they are better at making food, they can make a lot of food and trade it for airplanes. The point is that by focusing on what each country does best, there is a larger amount of wealth created. And with trade, each can be better off than they otherwise would.

A different example is a doctor and a nurse. A doctor may be more skilled in every way than a nurse, able to deal with every problem more intelligently and efficiently. But it still makes sense for the doctor to hire a nurse to take care of any of the responsibilities the nurse can handle. This frees the doctor to do the tasks that only he is capable of doing. He can deal with many more patients this way. And this increases the overall productivity. If he did all of the tasks, the nurse would not be able to duplicate his work so the total number of patients would be decreased. Dividing the labor in this way increases total productivity, and both parties gain in the process.

This suggests another reason why productive people should not be viewed as a threat. Instead of a genius coming in and replacing you, doing the exact same work, it makes more sense for him to do what he alone can do and hire you to do what you are capable of. Each person gains from maximizing their productivity. They also gain from figuring out how to utilize the talents of others, maximize their productivity, and create a mutually beneficial relationship.

Despite these three powerful reasons why smart people would be a benefit to our lives, it is still very easy to think that it would only work in some cases, but in general they would just take all of our jobs and we would be left with nothing. And consequently, talented people are a threat to our livelihoods and we benefit from ignorance.

This is nonsense. Being the top dog in a backwards and ignorant world is worse than living in an educated and wealthy world. It is often pointed out that Kings in past eras never dreamed of the abundant prosperity that we all enjoy today. Running water? Electricity? Air conditioning? The internet?

The money that you make in a job is dependent partly on your own productivity, but also on the productivity of everyone else. If people can't afford your productivity, you won't make very much money. When wealth is abundant and widespread, the value you create is better compensated. And your own productivity would be increased with more talented people in the world, not decreased. Instead of believing that we would be losers in a wealthier and more talented society, we need to recognize that we would gain enormously. Instead of fearing talented people, we should honor them for their contributions to our lives.

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