The genius of the capitalist system is that it has no pretensions about prediction: It does not preselect winners and losers but instead facilitates competition based on different premises. The resulting diversification of options hedges against predictive failure: Jones invests in a future premised on A, Smith invests on a theory of not A, Thomas invests without reference to A. At least one will be wrong, but at least one will be right.
… Effective capitalist competition is premised on something subdued in the defense context: Starting more programs than can be sustained, comparing them side by side, killing the ones that are least cost-effective and allowing only survival of the fittest.
This approach is anathema for central planners. By definition, it instills conflict. It requires starting more ventures than can be completed and, therefore, ensures the failure of some ventures (which will be described as waste). Perhaps worst, such competition in the defense world would compel senior decisionmakers to judge and label failure. However, genuine competition – a radical innovation in the world of defense procurement – offers the best probability of survival in an unpredictable world.
That was from the excellent Richard Danzig, Driving in the Dark: Ten Propositions About Prediction and National Security. Read the whole thing. Danzig’s arguments are very similar to the great Armen Alchian’s back in the 1950s as he fought against the religion of systems analysis.
One of the problems is that top-down thinkers always have new tools at their disposal that makes them think they can “be certain about uncertainty.” (I hate that phrase.) First, it was knowledge of natural laws and mathematics. Then, it was the use of linear programming. Then computers started to come around, then super computers, digital engineering, AI/ML, and so forth. Quantum computing might provide hope for the next generation.
The problem with all that is that complexity is running away from us always a bit faster than our tools can help us rein it in. The tools are incredibly important for sustaining innovations — squeezing a little more performance out of existing concepts — but can be counterproductive for disruptive innovations. Instead, the social “tool” of competition is what drives sustained innovation through genuine exploration of alternatives.
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