Wednesday, December 12, 2012

Capital Allocation: Delusions of Galt

The mostly off-stage hero of Ayn Rand's Atlas Shrugged is John Galt, purportedly an engineer, but actually an evil magician who plots the destruction of human civilization out of pique. His magical powers include conjuring electric power out of the air, creating invisibility shields, and a variety of other handy plot drivers.

Today's Plutocrats can't do any of those magical things, though most of them are pretty handy with a spreadsheet. In their own minds, though, they are Galt and more. They are the job creators, the masters of technology. What they actually do, aside from bribing and hustling government officials, is allocate capital. That is a very important job, and a far from trivial one. It also has enormous rewards for those who chose, or guess, correctly.

Given those immense rewards, and the resultant sycophantic bubbles they live in, it's pretty easy for them to convince themselves that they were indispensable. In reality, though, I suspect that there are millions more who could easily have replaced them. Steve Jobs, Bill Gates, and Mark Zuckerberg won their respective tournaments, but if they had died suddenly at an early age, it is nearly certain that someone else would have accomplished something very similar to what they did. Ditto for all the robber barons, oligarchs, and plutocrats.

So is their role so crucial to society that we can't afford to deprive them of political power, or some of their cash? Their role is crucial, I think - we don't have any better ideas for efficient allocation of capital. But I don't think somewhat higher taxes is going to make the species disappear.