At a recent dinner party, Schumpeter got talking to a wildly successful young man who was downright miserable. He was on the very fast track at a very big hedge fund. His friends, however, were making even bigger bucks in artificial intelligence, a field which he was convinced would soon consume his own industry. Among the company he keeps, the bright lights of finance shine less brightly than they used to, causing his own star to dim. Our protagonist was experiencing one of capitalism’s most powerful forces. He was in the throes of status death.
The modern worker is status-obsessed. (Unsplash)
The modern worker is status-obsessed. Even the bosses of giant companies find time to post on LinkedIn, a social network that functions as a forum for gloating. If management gurus agree on anything it is that individuals care deeply about their relative standing within their firm. When it is said that a business succeeds because of its corporate culture, what is often meant is that status is prudently distributed within its walls.
Yet our age is one of status death. Capitalism’s status-industrial complex has been upturned, as institutions such as universities and newspapers that once conferred prestige lose their power to do so. Complaints from those who feel status-mugged are increasingly commonplace. In a guest essay in the New York Times this week, a television writer whined about the decline of his once-glamorous occupation. “The biggest winners of the American economy fear they’re sinking fast,” announced a headline in the Washington Post.
Few firms think more about status than makers of handbags. Yet they, too, have been swept up in this wave of abasement. The share prices of LVMH and Kering, two French luxury-goods giants, have fallen steeply this year. Knight Frank, a posh British estate agent, compiles its own index of luxury goods such as fine wine and contemporary paintings. Its value began falling in 2022.
The luxury industry’s failure to benefit from the monumental increase in stock-market wealth over the past few years is not the puzzle analysts say it is. During the 2010s its largest brands grew fat selling merely expensive goods to the affluent, rather than very expensive ones to the extremely rich, making its products accessible to the point of being undesirable. The woes of Nike, a sportswear brand, can likewise be attributed to excessive egalitarianism, since it has prioritised leisurewear at the expense of elite sportswear. The violent reaction to Ferrari’s first foray into electric vehicles can also be understood the same way: the rise of cheap Chinese EVs has shattered that industry’s veneer of exclusivity.
Wall Street has developed various techniques for rationing declining status. Its banks, which are no longer the apex predators of finance, neatly separate their workers into the “back”, “middle” and “front” office, so that everyone knows their proper place. Woe betide the first-year analyst who turns up in a shiny Hermès tie he has not yet earned with his sweat. Banks also maintain an intricate currency of fictional titles to allow those being stripped of status (for example, those being “promoted” from “managing director” to the professional dead-end of “vice-chairman”) to pretend otherwise. Goldman Sachs, a bank whose ability to remain the top adviser on mergers for decades owes much to its carefully cultivated status, continues to use the title of “partner” long after it ceased to be a partnership.
Silicon Valley, by contrast, likes to think of itself as a classless place: its scruffy coders work in open-plan offices building products anybody can use. But is there any industry whose workers are more fearful of status death? While a lucky few at the white-hot centre of the AI labs muse publicly about how they should wield god-like power, ordinary software engineers panic that the technology will make these former masters of the digital universe obsolete. When Valley-types call themselves “investors” nowadays you are left guessing whether they are making a fortune pumping fuel into AI rocket-ships or desperately trying to keep sickly software unicorns alive.
The anxieties that accompany rapid technological change have thus far benefited the AI labs. Workers are incentivised to over-use the technology, if that means their bosses consider them an AI-literate asset rather than an AI-illiterate cost. Yet misunderstanding the awesome power of status is among the AI industry’s greatest risks. The pride with which its bosses have talked about white-collar job losses is an error born of a failure to appreciate how much workers wish to avoid a diminution of their standing. Some of its weirder folk consider AI an inevitable, even “worthy” successor to humans—a sort of species-wide status death. Such cosmic cuckoldry will make them even less popular.
President Donald Trump is the grim reaper of status death. His attacks on universities and the media have done much to damage their standing. Mr Trump, however, must also be aware of his own status mortality. Becoming arguably the most powerful—and certainly the best-paid—president in American history will make leaving office a truly huge demotion. The downgrade from president’s son to ex-president’s son is even greater, which is presumably why Mr Trump’s eldest two are furiously striking business deals with all manner of companies that could benefit from proximity to the White House. The logic of self-enrichment thus owes much to the logic of status death.
Falling upwards
Status death is not all bad news, however. The fear of it can be a spur to great things. The nauseating feeling that one has arrived late to a party that has almost finished has caused generations of entrepreneurs to leave and start another. Your columnist’s dinner companion has since quit his job, in search of more money—and, crucially, higher status.
