Erik Torenberg on Status, Elites, and Managerialism

A great series exploring the interwoven evolution of these areas

Erik Torenberg has a series of recent posts that are well worth exploring. They are difficult to excerpt as they are informationally dense. I highly recommend reading the whole thing in all of these cases.

I will snip out a few key ideas and pithy quotes below.

I.

In The Hypocrisy of Elites he explores how elite hold expensive beliefs as another version of competing with one another similar to how they buy expensive things. These expensive beliefs come at the expense of others and in particular the lower class in many cases as the unintentional burdens that result from them fall disproportionately upon the non-elites. As he says, “This is the ultimate luxury belief: wanting average for everyone else while wanting the best for ourselves.”

II.

In Burnham, Elon, and The Revenge of Entrepreneurial Capitalism he introduces managerialism, which is the ultimate result of forces that maximize principal-agent problems. He explains the concept as,

Managerial capitalism, by contrast, is defined by the split between ownership and control — on both the founder and investor side. Instead of owners having direct control, you have layers of intermediary managers (e.g. board of directors, executive teams, hired CEOs) who are running the company on behalf of the shareholders and original owners, but who also have different incentives as a result of having less ownership. They may be more short-term driven than long-term driven, for example, since they are incentivized by their salary instead of their equity ownership.

The knock-on effects are deep problems:

Managerialism has other unique downsides as well. Managers, consciously or unconsciously, are more likely to create invisible problems to justify their job. Or worse, they prevent real problems from being solved in order to preserve their scope. They are incentivized to do so: If someone is in charge of a problem, and that problem is solved, they no longer have a job. So the perverse incentive is to expand the scope of the problem for which they are the solution. Success looks like having more and more problems that justify the department getting bigger and bigger every year. These bureaucracies, because they are optimizing for their own survival, end up selecting for loyalty over competence, which means they get worse and worse every year. This describes both big corporations and big government. 

The upshot becomes circular capture theory. Not only do companies capture their regulator. Government captures companies as well.

III.

How Elites Abandoned the Masses develops further the false humility that modern elites exhibit. This is an extension of elite hypocrisy. Not only do they presumably advocate for policies they themselves would never adopt and that burden other groups, they trap others into believing that low expectations are a virtue or norm. They have created a confusion between kindness and virtue.

Herein lies the distinction: there is a deep difference between being nice and being good. Being nice and non-judgmental may seem like the nice thing to do, but it has real costs….

And yet again, a deep hypocrisy is at work:

The new elites say: You don’t need religion, religion’s dumb. You don't need family, family’s oppressive. You don’t need marriage, marriage’s sexist. You don’t need your relationship even, it’s holding you back. You don’t need kids, you’ll hate being a parent. You don’t need to send kids to gifted programs, it won’t make them better anyway. You don’t need to work harder, everyone else should work less hard.

You don’t need to do any of those things, but which of those things do the elites do? All of them.

III.

The installment Class Divides and Political Realignments shows how the evolution of elitism has created big fissures in society with strong segregation between elites and non-elites. But it is not as might be commonly assumed a left-right separation. Rather it is a division characterized by cultural and political taste and engagement.

Subsequently, we’ve seen the new lower class cease to participate in American civic culture, while the new upper class has become increasingly isolated from and ignorant about mainstream America.

…

As a result, these elites have come to run the nation: they shape the culture, the politics, and the economy. Increasingly, they also don't have any clue about what ordinary American life is like, since they haven’t experienced it.

…

The cultural differences between the classes used to be minimal, but now they are significant. The elite and the masses watch different shows, eat different food, and care about different things. 

There is much more along these lines in the post. The implications lead very naturally to the topic explored in the following post.

IV.

As explained in How Status Signaling Evolved, elites can no longer distinguish themselves by what they consume as modern economic progress has brought so much wealth to the masses (consumption equality I would call it). Now elites need to use “inconspicuous consumption and conspicuous production”.

In regards to the former (inconspicuous consumption):

While the middle class today buys luxury cars, fancy handbags, and expensive watches, the elite class buys inconspicuous goods like education, health care, and child care.

The key to inconspicuous consumption is that it should be invisible to everyone but those in the know. Inconspicuous consumption is also difficult to emulate without a lot of knowledge or money. After all, the purpose of inconspicuous consumption is signaling high status to other high status people without arousing the envy of the masses.

A classic example of this is when a Harvard alumni says they “went to school in Boston”. They’re signaling to elites that they also attended Harvard while simultaneously avoiding “outing” themselves as a Harvard alumni to those of lower class. They’re aiming to signal high status and humility.

This is one example among many of elites pursuing and framing their accomplishments in ways that are hard for normies to notice — let alone replicate — while still being legible to other elites.

And the complementary latter (conspicuous production):

Since elites want to highlight their moral superiority, conspicuous production serves as a way to distinguish themselves from non-elites who can’t afford to know or care about the negative environmental consequences.

Whole Foods is a good example. Shopping at the grocery store chain signals you care about animal rights, environmental consciousness, and more broadly, being an informed and conscientious member of society. (Except when the founder advocates for capitalism, but never mind that.)

Conspicuous production hits that sweet spot — it signals the person is enlightened enough to care about an issue and rich enough to do something about it.

He then explains how these subtleties in distinction make for a much more difficult status mobility and force an over supply of signaling. The upshot is that at least in the old world you knew where you stood. In today’s world you must constantly assert and reassert this through expensive signaling that has socially destructive results—somewhat my interpretation tying these together.

V.

As a conclusion to the series he returns to the concept of managerialism including a Professional Managerial Class (PMC) and that There's Just Too Many Damn Elites.

Part of the argument here is that there has been an opportunistic transition for the PMC from working class to social justice rhetoric. This is partially helpful to the PMC as it deflects from flaws they would like ignored. But there is another way it is very helpful—it gives jobs to all the many, many elites our society has produced.

The problem with having too many elites is that we don’t have enough cushy jobs for them. As the number of elites expands, there's a growing pressure to find roles for them so that they can keep their luxurious lifestyles. Thus, the state steps in to create roles for these excess elites that are  appropriate for their status. The state can’t create jobs for all of them, so the private sector is expected to step in as well, hence the explosion of administrative jobs in companies. 

…

One signal of intra-elite conflict is an emphasis on credentialing. In the old days when the majority of the elite youth could expect to inherit their parents’ wealth and status, they didn't bother to go to university. But in the wake of elite over-expansion, we watch them now fight for credentials as a way of distinguishing themselves.

Activism is a natural outgrowth of this signaling battle.

Malcolm Kyeyune has an interesting thesis around all this: He noticed that many jobs in the professional class — academics, journalists, activists, bankers, consultants, middle-managers — lack clear accountability. They claim to hold others accountable but have little accountability themselves, neither to the market nor the electorate. The most ambitious people sometimes self-select out by becoming entrepreneurs. Conversely, bureaucracies attract people (on average) who conform, which means that these bureaucracies become increasingly run by people who prioritize conformism over quality. You see this in Corporate America too, where the organization is increasingly influenced by HR and PR. 

As you read this post you might notice some additional reoccurring themes. Notably these paragraphs ring familiar:

When activists advocate for new rights, they’re also implicitly advocating for a permanent cast of managers to monitor the implementation of these new rights. This is why some of the problems the multi-billion dollar activist class was created to solve will in fact never be “solved”. It’s a challenge of incentives: people are less likely to solve a problem if solving the problem means losing their jobs.

The PMC of course wants to retain high-paying jobs as consultants and communicators — And for many years, companies could get away with a bit of excess in the name of social impact (and good marketing). But with increased interest rates and a deteriorating macroeconomic environment, these roles are increasingly harder to justify. 

He concludes:

This is where we come full circle to where we began this piece. This is a unique phenomenon in that even Marx and Adam Smith probably couldn’t have anticipated it: it's neither the customer nor the owner of the capital calling the shots. Surprisingly, it’s not even the state calling the shots. Instead it’s a new managerial force colluding across the private and public sector, accountable to neither the electorate nor the market, all trying to maintain their high-status and high-paying jobs in an increasingly brutal labor market. 

Torenberg is an engaging, deep thinker. This series in particular was very rewarding. I strongly encourage you to read it all.