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Conor McGregor knows the rules of winner-takes-all economics

Over the past few days, I’ve been haunted by Conor McGregor’s face. He is sitting on the mat after his defeat in Las Vegas, dazed. He is looking into the distance, apparently trying to take it all in. Obviously he is exhausted, having been almost strangled a few seconds earlier. The bravado is gone. He is humbled.

But for me there is something else in his eyes: the realisation that everything has changed. Conor is a clever man and he understands the enormity of the defeat. It is not just a sporting defeat, it is much greater.

McGregor probably understands commerce, celebrity and reward better than any Irish sportsman. He gets our modern world where money, fame, social media and hype intersect. He grasps that in the modern economy the “winner takes all” and if you are not the winner, you are the loser.

In a winner-takes-all market, the guy or the girl at the top takes all the rewards, making multiples of the second place, who makes multiples of the third place and so on. However, once you fall out of the top 10, you barely feature.

This concentrated reward structure has long been evident in sports and entertainment. Take, for example, tennis. There are hundreds of brilliant tennis players on the global tennis circuit. Only the top 10 or so players are known, and these garner enormous rewards.

Imagine how good you have to be to be the world’s 50th-best tennis player? Yet you are sleeping in the Premier Inn, struggling to make a few quid and flying Ryanair to tournaments, despite the fact that you are probably the best player in your country of your generation.

But – and here’s the big but – you are not the best. You are fractionally less good at serving than Nadal, minutely less good at the baseline than Federer, but that fraction is the difference between winner and loser. You are the most talented loser that ever lost, but this is the point.

In winner-takes-all markets, you are brilliant but just not brilliant enough.

McGregor knows that the whole show is based on him being the best in the Octagon. The pay-per-view fees, the huge endorsements, the own-brand whiskey, the limos, the clubs, the notoriety and, of course, the money are based on Conor being a winner.

Was it recognition that this may all be slipping away that was on his mind as he gazed pensively into the distance on the canvas last Sunday morning?

For many years, these winner-take-all dynamics – defined by small differences in performance giving rise to large differences in rewards – were largely limited to the music and sports industries but, in the past two decades, these same characteristics have jumped into all sorts of professions.

We now have superstar lawyers, commentators, chief executives, advertising gurus, photographers, chefs, tattoo artists, hairdressers, novelists, historians, poets, architects, kitchen designers, gardeners, fitness instructors, orthodontists and grind teachers who command far higher salaries, wages or commissions than their peers – despite the fact that the absolute differences between the superstar and the rest may be actually quite modest.

‘Superstar creep’

The proliferation of technology is one of the main reasons for what could be termed “superstar creep” where it is now so much easier for one individual or one product to be marketed to the many. And because the rewards from being number one have become so enormous, it is a self-reinforcing process.

Consider a libel case. The difference between winning and losing is so enormous that it is worth your while employing the best barrister rather than the third-best one. So the best one, the one with the most successful track record, gets all the business.

Similarly for a grind school teacher. If the difference between 580 points and 600 points is a (perceived) career-changing opportunity for the pupil, parents will pay up. The same goes, on a much bigger scale, for chief executives and corporate warriors of all hues.

This process becomes embedded and, in no time, inequality becomes obvious as some people pull ahead and the rest are left behind.

We can see this in the US. The incomes of the top 10 per cent have surged since the 1970s and reached almost 50 per cent of all income by 2007, the highest level on record.

Most of this change has been driven by dramatic change in the fortunes of the top 1 per cent, whose share of the pie has risen from 8.9 per cent in 1976 to 23.5 per cent in 2007.

Real incomes

Meanwhile, the share of the top 0.1 per cent has more than quadrupled, from 2.6 per cent to 12.3 per cent over this period. Average real incomes per family in the US grew by 32.2 per cent from 1975 to 2006, but if we exclude the top 1 per cent from the calculations, this figure falls to just less than 18 per cent.

Being merely good isn’t good enough. And, as the rating structure extends to everything, so society becomes obsessed with success and signs of success. People want the best house, the newest, brightest Nespresso coffee machine, the most remarkable flagstone patio, the most splendid granite-topped kitchen island or most authentic wood-burning stove.

Winner-takes-all rewards are matched only with winner-takes-all possessions. Inequality thus becomes embedded and reinforced.

Conor McGregor understands the game and its rules; and, as a result, has taken his chances better than most. Don’t be fooled by the trash talking: behind the bravado is a man who understands the modern world far more keenly than most.

This is why his withdrawn, defeated face as he sat on the canvas tells a much bigger story. He knows the stakes.

Conor McGregor knows the rules of winner-takes-all economics

Over the past few days, I’ve been haunted by Conor McGregor’s face. He is sitting on the mat after his defeat in Las Vegas, dazed. He is looking into the distance, apparently trying to take it all in. Obviously he is exhausted, having been almost strangled a few seconds earlier. The bravado is gone. He is humbled.

But for me there is something else in his eyes: the realisation that everything has changed. Conor is a clever man and he understands the enormity of the defeat. It is not just a sporting defeat, it is much greater.

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Why do we tax income instead of wealth?

At this time of year my inbox fills up with emails urging me to attend something called a “budget breakfast” on the morning after the budget. Such events are normally held in the plush offices of well-respected accountancy firms. These chrome and glass financial citadels on the river are testimony to the enormous fees paid by the wealthy to advisers in order to avoid tax.

The tax avoidance industry is one of the staples of the professional classes. And the annual nature of the budget ensures that these fees are fool-proof recurring annuities.

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Why Ireland leads in tolerance towards immigrants

Is Brexit the new normal? By this I don’t mean simply the act of leaving the EU, but more the quixotic political cocktail of nostalgia, anti-immigration and the impulse to seal off borders from cosmopolitan influences in favour of nativist urges?

All over Europe, from the Swedish Democrats and True Finns in the north to the Northern League in Italy in the south, from the Brexiteers in the west to Orban’s Hungary in the east, the forces of populism are evident and they are not going away.

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Why Ireland is economically superior to Britain

It’s time to talk about England and consider what has happened to the English political centre. The political creature that Leo Varadkar is negotiating with this weekend is completely different from anything in living memory.

We are dealing with an extremely unstable political entity, where the centre has been abandoned to the radicals on either side.

Not too long ago, Tony Blair won three straight elections from the deep centre. Given the fact that the DUP now holds the balance of power, it is important to remember that Blair won his elections with huge 120-plus seat majorities. Blair represented a broad wing of the Labour Party that could be described as its social democratic centre.

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Dereliction is legalised vandalism for the property-owning classes

Let’s talk about urban dereliction. Walk around Dublin, Cork or Limerick and dereliction is everywhere. Close to The Irish Times offices large swathes of Dublin’s south inner city are run down, in need of repair, unoccupied and derelict. And while many buildings may look occupied on the ground floor, once you lift your gaze more often than not the third and fourth floors are falling down.

The same is the case for Cork from where I’m writing today. Walking the length of this lovely city west to east you see something similar all the way from the Mardyke to Custom House Quay, upper floors appear grossly under-utilised and, in the main, vacant. They are certainly not homes or apartments.

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Dublin’s housing market not yet ripe for a crash

This week the influential magazine the Economist suggested that Dublin’s house prices are 25 per cent overvalued relative to long-term income. The Economist was one of the early sirens last time out, warning loudly about the Irish property market in 2003, so it has good form.

More worryingly, in the list of 22 cities, although Dublin was not the most overvalued capital city, it is the one that has experienced most rapid house price growth since 2012.

In the past seven years Dublin prices have increased 72.9 per cent, compared with 63 per cent for Berlin, 54 per cent for Sydney, 56 per cent for Auckland and 60 per cent for Vancouver. Although cities such as London and Paris are significantly overvalued, the British capital has seen falls in the past year, while Paris has always been expensive and has seen prices rise only 6 per cent in the whole of the past seven years.

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The past is a sexually repressed, tax-dodging, country

When thinking about the past there is a tendency to remember the big events, the political crises, the economic moments and the newsworthy stories. This approach only tells us so much about the country and tends to offer blurry snapshots of the big-shots. What about the ordinary citizen? This is where survey data is so revealing. The attitudes garnered in survey data are the creed of the country and this value system represents the suite of beliefs that we professed openly.

In 1981, just after the papal visit and just ahead of the 1983 abortion referendum, the European Values Study conducted a wide-ranging survey of Ireland, interviewing thousands of people. The results expose an extraordinarily conservative country, with deep-rooted animosity to people outside the mainstream, a level of moral and sexual conformity that is quite startling, but also a country whose political stability was not taken for granted.

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We may be on verge of a global financial crisis

Twenty years ago this week Russia devalued, defaulted and suffered a catastrophic bank run. The chaos opened the door for Vladimir Putin, who emerged from the financial bedlam to drag Russia back from the brink. In mid-August 1998, people in Moscow could not...

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