Is competition good?

post by toonalfrink · 2019-09-10T14:01:56.297Z · score: 8 (7 votes) · LW · GW · 21 comments

Contents

  What makes a "good" person?
  Which needs lead to altruism?
  When is competition good?
None
21 comments

From Thiel's Zero To One:

The problem with a competitive business goes beyond lack of profits. Imagine you’re running one of those restaurants in Mountain View. You’re not that different from dozens of your competitors, so you’ve got to fight hard to survive. If you offer affordable food with low margins, you can probably pay employees only minimum wage. And you’ll need to squeeze out every efficiency: that’s why small restaurants put Grandma to work at the register and make the kids wash dishes in the back. Restaurants aren’t much better even at the very highest rungs, where reviews and ratings like Michelin’s star system enforce a culture of intense competition that can drive chefs crazy. (French chef and winner of three Michelin stars Bernard Loiseau was quoted as saying, “If I lose a star, I will commit suicide.” Michelin maintained his rating, but Loiseau killed himself anyway in 2003 when a competing French dining guide downgraded his restaurant.) The competitive ecosystem pushes people toward ruthlessness or death.

Scott Alexander replies:

So monopolies’ advantages include being better for employees, more socially responsible, and able to engage in long-term thinking. The classic examples of this (which I don’t think Thiel brought up) are Bell Labs and Xerox PARC. Two monopolistic companies with more money than they knew what to do with started super-basic-blue-sky research centers that ended up creating many of the technologies that shaped the modern world
On the other hand, all of the classical disadvantages of monopolies are still there. Monopolies remove the pressure to do a good job – whether that’s in keeping prices low, keeping working conditions tolerable, or in keeping products and service high-quality. They lower the diversity of an industry, making it more likely to get stuck in an evolutionary blind alley it can’t get out of; they increase the risk of merging with government into a crony capitalism. A wolf sheltered from survival-of-the-fittest for too long becomes a Chihuahua; Amazon sheltered from survival-of-the-fittest for too long becomes the DMV.

And does a mythical take on it:

I don’t think this is one of those issues that’s going to get decisively solved in a few paragraphs. Moloch and Slack [LW · GW] are the new yin and yang, the new chaos and order; their interplay creates the Ten Thousand Things. Err too far towards competition and everyone works themselves to death in garment sweatshops; err too far towards monopoly and everyone sits at a desk filling out forms and backstabbing each other until the lights slowly go out. It’s only in the collision zone between the two that anything interesting ever happens.

This post will attempt to decisively solve it in a few paragraphs.

You have a restaurant. It's a local monopoly, and you're running decent profits. A new restaurant opens down the street. Some of your customers are diverted, so you lower your prices. You can no longer buy that sweet Ferrari.

You have a restaurant. It's a local monopoly, and you're running decent profits. A new restaurant opens down the street. Some of your customers are diverted, so you lower your prices. You have to cancel most of your donations to AMF.

In the first example, we can be reasonably sure that competition increased value. In the second example, we can be reasonable sure that competition decreased value.

So here's a lemma: low competition is a good thing iff the increased profits are spent on something more valuable than distributing it among customers. Or let's put it this way: more resources to people that create above-average value is good. Let's call this type of person a "good" person.

What makes a "good" person?

Let's assume that "goodness" is largely dependent on incentives. There might be some residual factors like nature and habits, but these are generally small variations on the status quo that is dictated by the incentive landscape.

Incentives can be instrumental and terminal, and the terminal ones are usually called "needs". Maslow was a pioneer in this field, but the most up-to-date list of needs that I can find is this 2011 paper. It says:

The idea of hierarchical needs is that, as long as you don't have need i satisfied, you won't really care about needs {i+1, ..., n}. Someone who is struggling to gain respect, won't care as much about autonomy. Someone who is trying to feed themselves, won't care as much about safety.

You have a restaurant. You're hardly getting by. A new restaurant opens down the street. Some of your customers are diverted. You need to survive, so you lower your cost price by secretly dumping your excess waste into the river.

Conversely, even if your needs are satisfied up to i, you will not be able to allow things that threaten these needs:

You have a restaurant. It's a local monopoly, and you're running decent profits. Many people in the neighborhood love and respect you for providing them with this service. You lobby with the local council to make sure no one else can open a restaurant near you.

So an incorruptible person is one that has all of their needs met, but doesn't depend on anything for it. They can always make the moral choice, because no choices are incompatible with the foundation of their well-being.

Which needs lead to altruism?

Of the needs listed, I imagine that "respect" is the one that is most important for making people altruistic. It seems to me that respect is mostly a matter of fitting into the values that your local culture celebrates. Now this could be owning a Ferrari, or it could be donating to AMF.

A culture can be seen as an agent, with its values being its operating system. A culture which values altruism will do better. This is one way in which altruism tends to make you better off: it will make you gravitate towards the people that value it too, surrounding you with altruistic people. This is a Darwinian process: altruistic cultures win, and cultures that win grow. Those that are invested in it grow along with it. But your investment only pays off when you are actually valued by the culture. This is, in my model, why people care about altruism at all.

When is competition good?

You have a restaurant. It provides you income. People love and respect you for it. Working in the kitchen gives you a sense of mastery. You're free to do it your way. A new restaurant opens down the street. Without your restaurant you are as good as dead, so you compete to the death. You dump your waste into the river, use the cheapest ingredients that are super toxic, put out annoyingly flashy ads for your restaurant. If all else fails, you are ready to have your opponents killed.

You have a restaurant. It provides you income, but you could opt for a basic income programme instead. Your local community has a culture that values unconditional love. It also cares a lot about consequentialist utilitarianism, and by fitting in that belief system you get your respect. You get a sense of mastery out of your hobbies. A new restaurant opens down the street. You find that customers like it better. You put some effort into upgrading your service, but to no avail. You congratulate the owner and thank them for improving upon your work. You set off to find a new job that creates value. The kind of value that your community recognizes.

21 comments

Comments sorted by top scores.

comment by An1lam · 2019-09-10T16:15:23.187Z · score: 6 (4 votes) · LW · GW

FYI: Robin Hanson has two recent posts (first, second) on a very similar topic.

comment by Alexei · 2019-09-11T19:59:30.271Z · score: 5 (3 votes) · LW · GW

So an incorruptible person is one that has all of their needs met, but doesn't depend on anything for it. They can always make the moral choice, because no choices are incompatible with the foundation of their well-being.

This actually goes to the very heart of Buddhism (and probably a few other religions). Well done. ;)

comment by toonalfrink · 2019-09-12T17:55:55.645Z · score: 2 (1 votes) · LW · GW

Most likely that's where this intuition can be traced back to

comment by Richard_Kennaway · 2019-09-10T14:31:51.703Z · score: 5 (6 votes) · LW · GW

You have a restaurant. It pays you a reasonable income, and there is no real competition, so you have no reason to put any effort into improving it. A new restaurant opens down the street. Now you need to take your business more seriously. You improve the menus, the decor, the advertising. The other restaurant is doing that too. More custom comes to the neighbourhood, because now there are two good restaurants where there was only one indifferent one before.

There are a lot of stories one can make up.

comment by toonalfrink · 2019-09-10T14:41:34.794Z · score: 3 (4 votes) · LW · GW

Right. You can make up a lot of just-so stories, but the one you came up with falls neatly into the categories I'm trying to explain.

In this case, being altruistic doesn't satisfy any need at all. There's no pressure because you're not penalized in any way for a shitty restaurant. That's why I make an exception for respect, in the sense that I claim that respect can be a driving force behind altruism even if other needs (like reduced income from being outperformed) are lacking.

I suppose any need ought to be considered when building incentive structures. Just using income will not always lead to the best outcome.

comment by Richard_Kennaway · 2019-09-10T14:56:35.794Z · score: 4 (3 votes) · LW · GW

Yes, this is an illustration of one of the ways that competition can be good. Better things get done and made, that might not have been without the spur.

comment by Raemon · 2019-09-11T21:20:47.723Z · score: 4 (2 votes) · LW · GW

I have some disagreements with the framing here, but generally appreciate this as a discussion prompt – figuring out when competition is good is quite important.

I have some cached thoughts on this that I originally posted over on the EA forum. Crossposting here for now:

Competition in the EA Sphere

A few years ago, EA was small, and it was hard to get funding to run even one organization. Spinning up a second one with the same focus area might have risked killing the first one.

By now, I think we have the capacity (both financial, coordinational and human-talent) that that's less of a risk. Meanwhile, I think there are a number of benefits to having more, better, friendly competition.

A few reasons for I think competition is good:

  • Diversity of worldviews is better. Two research orgs might develop different schools of thought that lead to different insights. This can lead to more ideas as well as avoiding the tail risks of bias and groupthink.
  • Easier criticism. When there's only one org doing A Thing, criticizing that org feels sort of like criticizing That Thing. And there may be a worry that if the org lost funding due to your criticism, That Thing wouldn't get done at all. Multiple orgs can allow people to think more freely about the situation.
  • Competition forces people to shape up a bit. If you're the only org in town doing a thing, there's just less pressure to do a good job.
  • "Healthy" Competition enables certain kinds of integrity. Sort of related to the previous two points. Say you think Cause X is real important, but there's only one org working on it. If you think Org A isn't being as high integrity as you'd like, your options are limited (criticize them, publicly or privately, or start your own org, which is very hard. If you think Org A is overall net positive you might risk damaging Cause X by criticizing it. But if there are multiple Orgs A and B working on Cause X, there are less downsides of criticizing it. (Alternate framing is that maybe criticism wouldn't actually damage cause X but it may still feel that way to a lot of people, so getting a second Org B can be beneficial). Multiple orgs working on a topic makes it easier to reward good behavior.
    • In particular, if you notice that you're running the only org in town, and you want to improve you own integrity, you might want to cause there to be more competition. This way, you can help set up a system that creates better incentives for yourself, that remain strong even if you gain power (which may be corrupting in various ways)

There are some special caveats here:

  • Some types of jobs benefit from concentration.
    • Communication platforms sort of want to be monopolies so people don't have to check a million different sites and facebook groups.
    • Research orgs benefit from having a number of smart people bouncing ideas around.
  • This means...
    • See if you can refactor a goal into something that doesn't actually require a monopoly.
    • If it's particularly necessary for a given org to be a monopoly, it should be held to a higher standard – both in terms of operational competence and in terms of integrity.
    • If you want to challenge a monopoly with a new org, there's likewise a particular burden to do a good job.
    • I think "doing a good job" requires a lot of things, but some important things (that should be red flags to at least think about more carefully if they're lacking) include:
      • Having strong leadership with a clear vision
        • Make sure you have a deep understanding of what you're trying to do, and a clear model of how it's going to help
      • Not trying to do a million things at once. I think a major issue facing some orgs is lack of focus.
      • Probably don't have this be your first major project. Your first major project should be something it's okay to fail at. Coordination projects are especially costly to fail at because they make the job harder for the next person.
      • Invest a lot in communication on your team.
comment by Raemon · 2019-09-11T21:12:36.805Z · score: 4 (2 votes) · LW · GW
You have a restaurant. It's a local monopoly, and you're running decent profits. A new restaurant opens down the street. Some of your customers are diverted, so you lower your prices. You can no longer buy that sweet Ferrari.
You have a restaurant. It's a local monopoly, and you're running decent profits. A new restaurant opens down the street. Some of your customers are diverted, so you lower your prices. You have to cancel most of your donations to AMF.
In the first example, we can be reasonably sure that competition increased value. In the second example, we can be reasonable sure that competition decreased value.

Just flagging that I know people who would disagree strongly with this framing, fwiw.

comment by Wei_Dai · 2019-09-11T21:51:16.493Z · score: 5 (2 votes) · LW · GW

(Edit: This was in response to a previous version of Raemon's comment. See his explanation below.)

It's frustrating to see a comment like this because I can't guess why those people might disagree strongly with this framing (I can think of a few possibilities but none of them seem very likely), and I'm not sure if you're open to being asked to explain. May I suggest that in similar situations in the future to add a few words saying why they would disagree, or if you didn't want to do that right now, at least whether you'd be open to explaining more if people want to know, like "feel free to ask for more details if you're interested" or "please don't ask me to explain". I could just ask you to explain anyway but then more negative emotions might follow if the request is either ignored or explicitly denied.

(Hopefully this doesn't come across as too harsh or demanding, but I figure you probably don't intend this effect on others and it's a good idea to let you, and others who may write similar comments, know about it.)

comment by Raemon · 2019-09-11T22:00:24.408Z · score: 4 (2 votes) · LW · GW

First: I accidentally quoted the wrong section (all three paragraphs were relevant, with the final "we can be reasonably sure the second example decreased value" being the most relevant bit). Not sure if that changes the rest of your comment. I've now updated the OP.

The most important bit of information I intended to communicate here is not the particular reasons to disagree with the framing, but simply the fact that there exist prominent LW who would not agree with the "we can be reasonably confident that the second restaurant ends up canceling their AMF donations decreases value."

I understand it being frustrating to not get to understand or discuss the reasons why, but it seems important for it to be a socially acceptable move to say "hey, your blanket statement does not apply to me, or to people I know of" without having to take time to explain why.

In this case my own answer of "am I up for being asked" is "you can certainly ask, and I may or may not get around to responding." Although I can say briefly that possible reasons here include 'you might not think AMF is net positive, or you might think the general practice of donating to things like AMF is not a good strategy.'

comment by toonalfrink · 2019-09-12T18:01:31.815Z · score: 7 (3 votes) · LW · GW

Replace AMF with any organisation for which this statement becomes obviously true. If none such organisations exists, I'm curious.

comment by Wei_Dai · 2019-09-11T22:32:39.541Z · score: 5 (2 votes) · LW · GW

Not sure if that changes the rest of your comment.

Yeah, the new quotes at least makes it clearer what they're disagreeing with.

exist prominent LW

This was unclear because you just said "people".

who would not agree with the “we can be reasonably confident that the second restaurant ends up canceling their AMF donations decreases value.”

Because of the way you quoted, I had no idea this was the disagreement. Hypotheses I generated included that they disagreed with the monopoly dynamics being described, or the right way to frame monopoly economics.

I understand it being frustrating to not get to understand or discuss the reasons why, but it seems important for it to be a socially acceptable move to say “hey, your blanket statement does not apply to me” without having to take time to explain why.

What about situations like this one, where the commenter just makes a mistake? (One could imagine an even more consequential mistake like saying or implying, for example through misquoting, the opposite of what one intended.) How does that get fixed if there's a norm that people can say something without explaining why (which would discourage others from asking for explanations)? (I'm not necessarily proposing a solution here, just flagging this as an issue.)

In this case my own answer of “am I up for being asked” is “you can certainly ask, and I may or may not get around to responding.”

I think this, if explicitly stated, is better than nothing.

Although I can say briefly that possible reasons here include ‘you might not think AMF is net positive, and you might think the general practice of donating to things like AMF is not a good strategy.’

Even a brief explanation like this would be super helpful.

comment by Raemon · 2019-09-12T01:29:52.296Z · score: 3 (1 votes) · LW · GW

I generally agree with the "more explanation is better, all else being equal". A background belief that has me less-than-fully-enthusiastically agreeing with you is that a stronger norm of "always include explanations and caveats like this" has a decent chance of causing people to not bother writing things at all (esp. if they're on a busy day).

I guess I also just thought it was totally fine for you to ask me for additional information (and I'm updating that it may be more common than I thought for the OP phrasing to make people feel like they couldn't ask).

comment by Wei_Dai · 2019-09-12T02:55:25.040Z · score: 5 (2 votes) · LW · GW

A background belief that has me less-than-fully-enthusiastically agreeing with you is that a stronger norm of “always include explanations and caveats like this” has a decent chance of causing people to not bother writing things at all (esp. if they’re on a busy day).

What about either:

  1. Give at least a short explanation unless you're really busy, or
  2. Use your best judgment of how much explanation to include, but keep in mind that if you include none at all, you might cause a bunch of people to waste time and feel frustrated trying to figure out what you mean or why you think what you think.

they couldn’t ask

Not so much that I couldn't ask (i.e., there's a rule or norm against asking in that situation) but rather that I didn't want to ask (i.e., the possibility and uncertainty of being ignored or denied makes cost-benefit seem to favor not asking). (I only did speak up because I thought it was an opportunity to affect more than this one instance of the situation.) What about an additional norm of, "if no explanation is included, at least say a few words about whether or not you'd be open to providing an explanation upon request"?

comment by Wei_Dai · 2019-09-12T06:20:07.794Z · score: 10 (4 votes) · LW · GW

I tried to introspect more on why I'm often reluctant to ask for explanations, and came up with these reasons. (But note some of these might just be rationalizations and not my real reasons.)

  1. I already spent quite some time trying to puzzle out the explanation, and asking is like admitting defeat.
  2. If there is a simple explanation that I reasonably could have figured out without asking, I look bad by asking.
  3. It's forcing me to publicly signal interest, and maybe I don't want to do that.
  4. Related to 3, it's forcing me to raise the status of the person I'm asking, by showing that I'm interested in what they're saying. (Relatedly, I worry this might cause people to withhold explanations more often than they should.)
  5. If my request is ignored or denied, I would feel bad, perhaps in part because it seems to lower my status.
  6. I feel annoyed that the commenter didn't value my time enough to preemptively include an explanation, and therefore don't want to interact further with them.
  7. My comment requesting an explanation is going to read by lots of people for whom it has no value, and I don't want to impose that cost on them, or make them subconsciously annoyed at me, etc.
  8. ETA: By the time the answer comes, the topic may have left my short term memory, plus I may not be that interested anymore.
comment by Raemon · 2019-09-18T20:40:30.403Z · score: 3 (1 votes) · LW · GW

All of these make sense. Again, I'm generally pro-more-explanation all things being equal.

The question is what the norm should be when more explanation trades off against "people bothering to write the comment in the first place". My first comment here was something I easily might have not bothered to write in the first place if I had felt obligated to write up anything more than a quick "hey, your 'we statement' here doesn't apply to everyone."

In this particular case, it's possible that it was net negative to write my OC because it was sufficiently unclear that people didn't even know what part of the text I was referring to. So I'd endorse at least being more clear about what I was objecting to.

But I'm pretty hesitant about norms that say "if you're going to engage at all, you have to engage a lot."

(see my reply to Christian for some more context)

comment by Raemon · 2019-09-16T19:41:49.749Z · score: 3 (1 votes) · LW · GW

I appreciate you writing up your reasons here, sorry for not replying for a few days.

I think I have more thoughts but am trying to focus more on coding right now and may not get back to it another few days.

(people seem split on whether a comment like this is helpful or not, I think ideally if we implemented reacts I'd have just responded with a "thinking about it" react or something)

comment by jp · 2019-09-12T01:07:42.133Z · score: 3 (2 votes) · LW · GW

FWIW I dramatically misinterpreted what the "people" disagreed with and did not think "AMF is better than a restaurant" was the claim that would be contested.

comment by ChristianKl · 2019-09-16T06:44:51.849Z · score: 2 (1 votes) · LW · GW

I don't seem why it would be important to have such a social standard on LessWrong. We already have a problem of people on LessWrong being discouraged from writing post because they expect to get criticism that isn't helpful to them.

I rather have social standards on LessWrong that do enforce quality norms in criticism then encourage people to voice criticism without providing arguments.

comment by Raemon · 2019-09-18T20:34:33.721Z · score: 3 (1 votes) · LW · GW

Huh, I hadn't originally been thinking in terms of criticism (I thought of it more as a minor factual correction, which, I dunno maybe also counts as criticism, but of a different sort)

Reflecting a bit more though – there's some context I just realized I'd been acting on implicitly, but which is among the more explicit moderation policies that LW has:

The LW frontpage guidelines say: "present your own perspective, avoid trying to represent group consensus." This is not an ironclad rule, but it is something you should be hesitant about – in particular because it's easy to misrepresent what other people think by accident (due to typical mind fallacy etc)

I'd have had a very different response if toon had said "In the first example, I'm reasonably sure that competition increased value. In the second example, I'm reasonably sure that competition decreased value." (compared to the original, which said "we can be reasonably sure")

None of this is something I actually had that strong an opinion about (the reason I didn't put much effort into my initial comment was because this wasn't actually that important to me, I just wanted to quickly flag that the "we" didn't speak for everyone, and I think minor factual corrections, and minor norm violations, shouldn't require much effort to flag).

That said, I've updated that (obviously, in retrospect), if I write a quick off-the-cuff comment it's not obvious to anyone else why it's short. I'll at least think a little more about it before posting next time, but probably won't be radically changing my personal policy.

comment by jmh · 2019-09-11T13:35:18.606Z · score: 1 (1 votes) · LW · GW

Two observations.

I think you use "value" in a confusing manner. If value is the nominal price then value increases or decreases only if total income increases or decreases. If value is used in the sense I think you generally mean, then that is a largely (overwhelmingly largely IMO) subjective judgement and it's not clear if buying the car or making the donation a superior outcome.

Additionally, I think the conclusion, seems to needs something said about what the new restaurant owner and workers are doing. If we're in a zero-sum game then it really should be a wash. If, as generally accepted, markets tend to be positive sum games then we have a case of a smaller share of a larger pie (that is some of the employees will now eat at the first restaurant where as they could not before as they were unemployed, or making less money).

The other observation is about network effects. It used to be that businesses, particularly restaurants type businesses I think, used think they needed to be away from other restaurants. It was a form of spacial competition for demand. But that view has fallen to reality. We we that proximity to other competitors is not that bad and can actually increase total demand for all on the supply side. That seems to be driven by network type effects. Think about the dinning/club districts in cities, shopping mall and their food courts.

Of course there are limits but the simple model of competition don't really seem to capture the real dynamics of market competition.