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Applying sub-Dunbar thinking to super-Dunbar level problems
One common pattern of argument you often see from people who have not been doing too well in life is that they often blame rich/powerful interests for why they have not been successful, or alternatively why a certain social institution does not seem to work in the best interests of all of society. Their thinking is that to fix the problem, all we need to do is bring these rich/powerful people to heel. The problem according to such people is that fundamentally these small interest groups are disproportionately sucking up value from society and to fix this, they need to be punished.
The quintessential example I can think of is the problem with rising rents here in the UK. Rents have been going up faster than wages due to decades of underbuilding and general NIMBYism. Things are not quite as bad as say Ireland or Berlin (thankfully we've managed to not fall for the populist poison apple of rent control) but they're still becoming quite the issue with ordinary couples in London spending close to 40% of their take home pay on just shelter.
Recent regulations putting additional burden on landlords and making it harder for them to generate a profit (e.g. energy rating requirements and the removal of mortgage interest deduction from taxes) have led to them selling, further reducing supply more than demand goes down (renters who buy tend to buy bigger than what they were renting, thus reducing the total amount of supply in aggregate, e.g. a couple living in a 1 bed rented apartment may buy a 2 bed one, thereby reducing rental demand by 1 room but supply by 2 rooms, leading to a net loss of 1 room) which then pushes up prices even further.
This has gotten to the point where there are now over 20 prospective tenants competing over each property, which naturally leads to people having to bid over the landlord's asking price/paying months of rent in advance/submitting references if they want to actually get the place for themselves. This has lead to cries that landlords are "exploiting" poor tenants who have nowhere else to go and that they are capital-B Bad People who society needs to give a stern scolding to so that they go back to acting in pro-social ways.
If you were to point out that the current situation is in part caused by society making it harder to be a profitable landlord and that the correct remedy is to make things easier for landlords to make a profit (the real correct remedy is to build more, but good luck doing that in NIMBYland) that standard refrain is that the landlords are already doing far better on average than their tenants, so why should society do even more to help them out? Indeed, they say, we should be playing the world's smallest violin for such hard done up landlords who have hundreds of thousands of pounds to their name. No, what is happening here is that Landlords are capturing a disproportionately high percentage of the fruits of the labour of ordinary tenants (true, compared to historical values), and the solution is to do something that prevents so much of the hard earned money of your average Joe ending up in their hands, ergo Rent Control.
This type of thinking is something that actually works pretty well when we're dealing with small groups of up to 250ish not very technologically advanced people you couldn't just easily get up and leave for a different one like those humans spent most of their evolutionary history in. In such a group it is very well possible to use social shaming and exclusion to ensure a more balanced distribution of resources instead of having a few people hog it all. The lack of advanced technology means that there are no large economies of scale to the group as a whole (and thus eventually you) from having resources concentrated in a few hotspots rather than being more widely spread out. Thus in a small, sub Dunbar's number sized group, ostracism and gossip about how someone is behaving selfishly is the correct course of action to take for the betterment of everyone.
Unfortunately it fails catastrophically when applied to our modern society. It doesn't matter one bit that landlords are richer than tenants for why the current rental market in the UK is as bad as it is. Every single property could be owned by Elon Musk, right now the richest man in the world, and if he was selling off his portfolio because it was no longer profitable the situation would be just as bleak for renters (no more, no less) as it is right now with many disparate landlords independently coming to the same conclusion. Equally they could all be owned by a mutual fund investing the life savings of the poorest half of the planet and if that fund was leaving the rental market due to poor returns it would cause rents to rise just as much as they are doing now. The outcomes for the tenants are the exact same in each of the three cases.
The idea of shaming and making life harder for the people who are disproportionately capturing the economic surplus in an area to shame them into being more altruistic and thus improve outcomes for all of society just does not work in environments where people have a lot more freedom of association than you would get in a typical pre-industrial society. As we see in the example above, that can often be quite counterproductive.
The correct way to fix the issue in our large, super-Dunbar sized societies is the mirror opposite of the sub-Dunbar solution, namely we need to make it easier for landlords to make a profit so they enter the market (hopefully through building new units, but even switching a house form owner-occupied to "for rent" helps relieve the pressure on rents) and increase supply. The correct metric to look at here if you care about the tenants doing well is not how badly the landlords are doing, of the difference in how much value the landlords get vs the tenants from renting out their units, but quite simply "how much value are the tenants getting for what they pay" with zero reference to the sum total welfare of the landlords. And the way to increase tenant welfare? Increase rental supply in the area that people want to rent so there is competition amongst landlords and tenants are able to command more market power than the mere morsel they have today.
Another example of where sub-Dunbar level thinking fails in modern society can be seen in funding for technological advancement. Modern research and development has large capital costs, which requires large pockets of concentrated capital to progress. In a smallish society of 250 people where nobody can really get away from the others, if one of the members has a large windfall it makes total sense for the members of the society to want its fruits to be spread out for their own benefit.
Imagine a world where 250 people each have $2,000, but one person suddenly wins a lottery worth $1,000,000,000 (and gets access to goods worth that much, so it's not like the extra cash causes massive demand pull inflation). As a non lottery-winner, it is in your interest to agitate for the money to be distributed equally amongst everyone, giving everyone $4,000,000 rather than letting the winner keep it, even if they protest that they intend to use the money to fund the development of a drug which will add a year onto everyone's life expectancy (most people will take $4M over 1 QALY). Plus, if your society is not technologically advanced, the chances of that drug being successfully developed in the first place are extremely low, even if all the money is spent finding it. It makes complete sense to redistribute the money, the lottery winner will be pretty unhappy about it, but who cares about 1 person vs 249 and anyways that person's survival is strongly tied to the group's success, and he can't just take his money and run elsewhere.
On the other hand if instead of 250 people, your society has modern day technology and consists of 1 billion people each having $60,000 and someone comes into $1,000,000,000 and promises to develop a +1 QALY drug, it makes total sense to let them keep the money. Even if you took it all and redistributed it amongst everyone that's only $1 per person, which is worth a lot less than an extra QALY (compare to the small society case where everyone got $4M instead). Also the existence of modern technology makes it more likely they'll be able to find and manufacture the drug in the first place.
Indeed here is a case where even the famous Egalitarian philosopher John Rawls would have been in favour of the inequality, as his difference principle permits inequalities where their existence is beneficial to the worst off in society as it is here: for a non winner $60,000 + new drug is a better world than $60,001 but no new drug (a crowdfunding effort to raise money to publicly develop the drug isn't going to raise an extra $1 billion if everyone in society has $60,001 vs $60,000; you really need to have the concentration of wealth in the hands of an actor who's willing to embark on this project). The correct course of action for everyone in the super-Dunbar sized society is to let the lottery winner keep his money, the exact opposite of what they should do in the sub-Dunbar sized society.
Given all this, why is it still the case that many people in our modern world are big proponents of sub-Dunbar level thinking? After all, they would all agree with you that we are quite technologically advanced and no longer live in small societies where you can know everyone else who has a significant influence on your life. For most of human history, sub-Dunbar type thinking would have yielded better results for you and yours instead of the opposite, so it sort of makes sense why deep down we default to it so much, but equally for most of human history violence was extremely common and today we're by far the most peaceful we've ever been as a species.
I would say that this aberration is due to a pernicious effect of modern communications technology. We humans have an availability heuristic where we categorize how common something is in the world based on how often we see it. This works quite well when we're deciding between whether there are more yellow berries or red berries in a valley when the last few times we went foraging we saw around twice as many red berries than yellow ones, but it works a lot less well when modern communications deliberately amplifies rare events (after all, you're a lot more likely to hear "man bites dog" on the news than "dog bites man", despite the latter being much more frequent - ironically this is not true at the moment here in the UK due to the XL Bully dogs rampaging around, but the general idea is valid).
As a result of this amplification, modern day humans who are bombarded with media stories of the rich and powerful think deep down in their subconscious that such people are a lot more common than they actually are, and even worse, that such people are in the same 250ish Dunbar "tribe" as themselves (because the frequent updates about such people make one think these are genuine interactions between them and ourselves), in which case it makes complete sense for why they default to their instinctual, limbic thought process and feel that the way to make the modern world a better place for everyone is very similar to the ways that made life better for antediluvian man.
I think there’s a lot of cognitive biases that cause this.
First of all is the “fair” notion. The idea that life is ever supposed to be equal or that people are supposed to get roughly equal amounts of reward and that there’s some ceiling cat to appeal to when someone has “too much” which is actually in practice “has more than ME.” And really, that’s never been reality. In fact, it’s the opposite. If you’re doing more, or providing necessary services, you deserve more. But, that’s not “fair”.
Second is that people always have the wrong idea about just how much work their betters actually do. I’ve seen this when people talk about the CEO. They assume that their work is easy, that they do slacker work and go play golf. Or they assume that it doesn’t take any more intellectual capacity than they themselves have. Again, this isn’t true. Anyone who has run a business— even a small one — can tell you that the business runs your life. Your “vacation” simply means working from a beach instead of an office. Slacking off means working 80 a week instead of 100 a week. You can kiss family time and friend time goodbye unless you can work while hanging around with them.
And it requires serious smarts as well. If you’re not smart enough to understand cultural trends properly, new technologies, regulations, emerging markets, competition, and the entire operation of the business from top to bottom, then chances are you won’t actually have a business in five years. One bad marketing decision cost InBev billions. Misunderstanding digital photography killed Kodak. One reputation killing bad product can tank you. And it’s a constant thing. Technology alone moves so fast that a person who cannot understand emerging technology from day one is at a huge disadvantage. Being too slow to adapt is deadly, but so is backing the wrong technology.
Does the stereotypical CEO work hard? I don't doubt that small-business owners and startup CEOs work hard. But what about CEOs like the head of a big bank or an oil company, where there are profits semi-automatically coming in?
Mostly it seems to be the work of a king to me. The king doesn't work hard. But the king is the final authority, he makes decisions between war or peace, he deals with the Papacy, he arbitrates between feuding nobles, he directs that royal funds be spent on bridges or cathedrals, he creates institutions... All 'work smart' stuff rather than 'work hard' stuff. Nobody has the power to make him work hard because normally things are going well and he's the boss.
Fortune 500 CEOs aren't working bone crushing hours the way a small biz CEO might. (More on that second part later).
But, being an F500 CEO is incredibly hard.
I had the opportunity to meet and interact with one at the F500 I worked for in my mid 20s. This was a non-trivial interaction that occurred because a series of events led me to being on this big strategic thrust planning team that the CEO was half-personally overseeing. Another series of events led to a bunch of us being at the HQ on a Saturday. Right before lunch, the CEO walks into the main "war room" and literally rolls up his sleeves to help out. He was there all day. In that setting, everyone was talking with everyone at some point or another and the various "ranks" that usually created some deferential distance were not as palpable. It was easy to talk to the Big Guns, so I just sat down and started talking with the CEO.
The conversation can pretty much be summed up like this:
TollBooth: "So .... what do you actually do?"
F500 CEO: Chuckling, "I make about four decisions per year and, the rest of the time, am on call to answer questions that the board and wall street investors have. That's the easy part. I'm basically a financial psychotherapist. The first part is way harder."
TollBooth: "Why?"
F500 CEO: "Because those four decisions dictate the 16 - 20 decisions I can possibly make for the next 4 to 5 years. If I make the wrong ones this year, we, as a company, have fundamentally worse options in the out years."
TollBooth: "So, just make good decisions this year"
F500 CEO: "Well, yeah, that's the goal. But these 4 or so decisions I make rely on, without exception, massively incomplete information that I then have to use as part of a decision making model that incorporates what I think our competitors are going to do, what the market will support, and what won't cost us customers. All of those things are interdependent and you can't really say which one comes "first" in the decision making chain. It's like hitting a half dozen moving targets that are all moving in random directions - if you time it right, you can blast three of them at once, and that's a really great year. If you don't, you miss everything and it looks to outsiders like you were shooting randomly."
TollBooth: "Why are we doing this strategic thrust thingy right now?"
F500 CEO: "Because I screwed up one decision two years ago and I think I can salvage it with this. If I can't, I probably am gone 2 years from now."
I'd add one personal/emotional level consideration to this; you have to live with the uncertainty and lack of control leading up to and following making these four big decisions each year. One thing I learned in my first technical sales engineering team was that a sales process might be long, but you can sort of see it developing day to day and week to week. So, you can reduce your overall anxiety by just doing the next obvious thing in the process, even if that thing is banal (scheduling a follow up meeting, asking for a how-to guide review, whatever). A good analogy is training for a sports meet. You put in the work day in and day out, and then, all of a sudden, it's the big payoff day / week and you go out and get it (or don't). All your nervous energy along the way, however, you can divert into the training (or the development of a sales cycle in this case).
The CEO can't do that. There's no training cycle that builds up to something. It's literally four decisions made on four different days across a year. I think he could, and did, think about the decisions a lot before he made them. And I also think he probably had a team of smart people digging through a mountain of data and projections. But, like he said / I wrote above, these decisions had really incomplete information - you can't brute force your way through them even with a million spreadsheet runs. And, there isn't really a way to test and the iterate - you're calling out a new direction for the Battleship and you have to live with it until you hit the iceberg or don't. (Sorry for throwing in another unrelated metaphor)
I think the personality type that ends up as an F500 CEO definitely isn't "work like a dog 16 hours a day" but is, instead, "Be comfortable with weeks and months of utterly not knowing. Then pull the trigger." Is that hard work? You tell me.
Returning to small/medium CEOs working crazy hours. In my experience, that's 90% of the time a failure mode of a founder type CEO who can't give up micro levels of control and build the durable systems you need to scale. I've been in tech startups where the founder was very much the engineering genius type but then there came a time where the best answer was to "hire the MBAs." Everyone's life got better. Everyone made more money. The founder saw their big dream flourishing, albeit without direct control.
Great write-up, thank you. I knew a CEO of a big bank, and I think the biggest barriers to making good decisions were:
For example, there's a shareholder meeting and one of the directors tells you "Bank X used to be #5 retail bank in the country 4 years ago and now it's #8, while Bank Y, your closest competitor, grew from #6 to #3". This basically means you are already on your way out, so let's rewind the time.
There's a board meeting and your trusty advisory office has prepared a memo for you that shows that you'll soon lose your #5 spot in the ranking of retail banks. Your chief retail officer of course has a slide deck that explains that this is a temporary setback mostly driven by a big drop in car sales this year. What do you do?
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Very interesting commentary. I personally think it's 'work smart' stuff but the meaning of what you say does extend beyond anything a two-word platitude can cover.
Reminds me a little of my experience in crypto, few decisions, lots of stress, lots of waiting on events. Easy things that are difficult to do. Of course, much less money at stake.
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