David McWilliams: 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.

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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.

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

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.

Being merely good isn't good enough. And so society becomes obsessed with success and signs of success

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.