Big is most often not better

When there is a great divide between two parties, the first rule of diplomacy in seeking solutions is to find common ground. So let’s agree big is bad.

Liberals believe big business is bad. Conservatives believe big government is bad. So we can probably agree that big is bad. That’s a good start.

When we teach doctoral students about managing large organizations, we introduce them to Price’s Law. While you can nitpick over the details, it seems to apply to everything from sports to business and even to politics. You start off with the idea that a few people in any organization do most of the work. That’s the Pareto Principle, which everyone agrees is true. Try organizing a church picnic. You know only a few are going to do most of the work.

Price’s law goes further, stating that the square root of the number of people in a domain does 50 percent of the work. So it’s really more about growth. The idea is that as an organization grows, incompetence grows exponentially and competence grows linearly. This is important to understand the concept that big can be bad.

It’s also important to understand the tendency to argue in absolutes or fallacious constructs. When a conservative points out liberal violence against conservatives, liberals simply point out some incident where a conservative attacks a liberal and calls it even. Both may be true, but one may be an outlier while one a more common occurrence. Both sides play this game. So we can agree both sides make bad arguments.

Now you’d think if a company lost 5 percent of its workforce due to a bad quarter, that they’d lose only 5 percent in productivity. But that’s not the case according to Price’s Law. If many of those 5 percent were top performers, the organization could lose as much as 50 percent of its productivity.

As any organization gets bigger incompetence grows exponentially due to the square root in the Price equation, while competence only grows linearly or more slowly. Now here’s the difference between big companies and big government.

Big companies don’t survive this equation when CEO’s ignore it. In fact, many Fortune 500 companies don’t last 30 years. Survival requires them to make smart decisions. If incompetence gets too high, companies fail.

Government doesn’t have to be as smart. There is an unending supply of money and politicians feeding government incompetence. Unfortunately, it can take longer for incompetent government to fail.

So while we can agree big is bad, you can’t lump all big into absolutes. Big government tends to be worse. Companies at least have mechanisms to fail if they become too incompetent. Government has no such mechanisms. Government can thrive for some time on incompetence.

The capitalist model isn’t perfect. But it is the best system we’ve found that has lifted more people from poverty than any other system in history. Capitalistic economies simply have successful mechanisms for growth.

The socialist model must grow government to function and is wrought with problems. On paper it looks great and there are many fine features. But in application it continually fails without the same mechanisms that make capitalism thrive.

The right wants equality of opportunity. The left wants equality of outcomes. On the surface, equality of outcome seems perfectly rational. Distribute resources equally and everyone will have equal outcomes. But that’s not how the real world works. Everyone doesn’t have the same aspirations or competence. If they don’t have the same ability or the same drive, how is the state going to ensure they do because that’s the only way to achieve equal outcomes.

The recent success of Democrat socialists is evidence that there is less common ground these days and that’s unfortunate. Democrats believe they are creating a big movement and with their socialist candidates successes, maybe they are. But recent polls reveal Democrats are losing millennial and black voters. So they may be creating a big backlash instead.


Phillip Stephens is chairman of the Robeson County Republican Party

Phillip Stephens is chairman of the Robeson County Republican Party