Free Markets Provide the Best Feedback

The alternative is feedback from whomever has the most guns

Naval:

Marc Andreessen summarizes this nicely as “strong opinions, loosely held.”

As a society, if you’re truth-seeking, you want to have strong opinions but very loosely held. You want to try them, see if they work, and then error-correct if they don’t.

But instead what we get is either strong opinions strongly held—which is the intolerant minority—or we get weak opinions loosely held—which is this compromised model where no one really takes the blame, no one gets credit, no one gets to try the way that they want to, and everybody can then fall back on, “Real communism hasn’t been tried.” Although, in that case, real communism has been tried; it just hasn’t worked out well.

As a digression, one of the common critiques I hear people say is, “We need to move to a post-capitalist world. Capitalism isn’t working.” OK, what is your alternative? Usually this is where people start fumbling because there aren’t a lot of choices.

When you’re trying to figure out how to divvy up credit, divvy up resources and reward people for their work, you have two choices: feedback from free markets and reality—and the best model for that is money—or feedback from people, which is where communism ends up, which is a group of people who decide that you did the best work.

Now, who decides you did the best work? Someone has to be in charge of doing that, and invariably that ends up being the biggest thug.

I don’t think that it’s an accident that every communist country degenerates into a dictatorship. Communism never seems to actually be run by a distributed majority of the people. It always ends up being run by a bunch of people who are taking charge.

It’s just human nature that if I get to decide who gets the gold, it’s going to go to my friends, family and the people that I like. And that’s invariably what ends up happening.

Either you need an objective function to carve it up—and money is the known objective function—or it becomes all subjective. And if it’s subjective, then who’s to say you’re carving it up instead of me? We’re just going to decide based on who has more physical force, who has more guns.

Brett:

What we say on the side of free markets is that we’ve extracted coercion out of that decision-making process. No one is forced into purchasing a service or undertaking an agreement.

The only time that force is applied is when the government gets involved. The people at the top then say, “This is the best decision and you will have to agree with it; otherwise, there’s going to be a man with a badge and a gun turning up at your door.”

All that we’re saying when it comes to the free market is that the individual gets to decide without being coerced. Now, I could be wrong, but why shouldn’t they try and make mistakes? It’s the only way to make progress.

The only way to error-correct is to actually try something else.