Ruthless Capitalism and the Death of the Mercy Rule

What We Lose When You Have Already Won, And Just Keep Scoring

I spent part of Saturday morning listening to the All In podcast, which I do most weekends to better understand how the valley’s culture is changing. I have a unique perspective: I had Chamath Palihapitiya as a guest lecturer in grad school a decade ago, and I would often listen to Jason Calacanis speak at an SF co-working space many years ago. I remember them before the All In podcast. Before Uber was a $100B company. Before Groq sold for $20B, netting Social Capital a solid payday. Back before they faced the prospect of a California wealth tax applied exclusively to billionaires.

Listening to them now talk about wealth and policy feels foreign from how I remember them—even more foreign than some of their current political views.

This week they spent the first quarter of their show talking about the proposed California wealth tax. And what it says about our country. They, and the other co-host David Sacks and David Friedberg spent a lot of time arguing about whether we’re becoming a capitalist society, a socialist one, or something else entirely. But I wonder if this framing misses something crucial: even if we choose capitalism, there are radically different versions of it, and the distinctions between them may matter far more than we acknowledge.

The spectrum of capitalist systems can be understood through two dimensions: the rewards available to winners and the penalties imposed on losers. Map any developed economy along these axes and you’ll discover that some voices in the United States occupy an extreme position—what I’d call ruthless capitalism.

The Great Dispersion

The original American capitalism once distinguished itself through widespread opportunity—the belief that anyone willing to work hard could improve their station in life, that “rising tides would lift all boats.” The reality has fallen far short of this ideal.

Today’s American capitalism is looking more and more like Ruthless Capitalism. It distinguishes itself differently: by allowing success to reach stratospheric heights while failure sinks to devastating lows. It maximizes outcome dispersion. The result isn’t just that some people win bigger—it’s that losing hurts dramatically more.

Contrast this with Germany, Japan, or the UK. These are unquestionably capitalist economies, yet they’ve invested heavily in infrastructure designed to limit how far you can fall. In Germany, you can be decidedly unsuccessful in market terms and still live well. Your children attend university without debt. You have healthcare regardless of employment. You might own a home, take regular vacations, build a stable career. The system doesn’t just permit dignity in failure—it actively constructs it.

Today’s America has made a different choice. Here, if you’re not successful, we will literally let you die on the streets. We’ll make it almost impossible to educate your children without crushing debt. We’ll tie healthcare to employment, then allow that employment to evaporate when you need care most. We don’t just penalize failure—we display it as a cautionary tale.

You might think this is a bug in our system, but I believe it’s part of the intended design. This “feature” creates extraordinary anxiety where people in turn expend immense energy simply trying to avoid the downside. The byproduct is intense economic activity. Some channel this stress into success. Many don’t. And those who don’t, are increasingly concluding that the system has failed them—because it has.

When the Mercy Rule Disappeared

I was an athlete all through college, and I often think about the mercy rule we had in high school and college sports. When one team built an insurmountable lead, my coach pulled the starters and stopped running up the score. It was already clear that we would win, so the score was no longer about changing that outcome.

This wasn’t weakness or misplaced compassion—it reflected an understanding that the health of the entire league (and the sport) mattered. Giving more players experience, allowing skill development across the roster, and preserving competitive dignity served everyone’s long-term interests. The mercy rule was considered winning with class.

Today’s American capitalism has eliminated the mercy rule.

We now permit—even promote—people are already winning by multiple touchdowns to keep scoring. Individuals with hundreds of billions of dollars, accumulate wealth faster than most nations generate GDP. Elon Musk gains or loses tens of billions in individual weeks. We’ve collectively decided this isn’t just acceptable but admirable—that the point isn’t aggregate benefit but padding the statistics of a handful of superstars.

The debate around California’s proposed wealth tax is really a proxy for a deeper question: what is wealth for, and what obligations do we winners have to the system that enabled our winning?

If we define winning as everyone improving together and the community thriving, we get one set of policies. If we define it as maximizing the gap between first place and everyone else, we get what we have now: a game where the score is 96–3 and the leading team is still throwing deep.

The Wealth Attribution Problem

I spent some time thinking about why things have changed, and I believe something fundamental has shifted in how successful people understand the sources of their wealth today. Previous generations—mostly shaped by major wars—developed a visceral understanding of luck’s role in outcomes. The current era lacks this perspective. Earlier generations understood that life or death could come down to a coin flip. When those Americans entered the workforce, they carried that philosophy with them: we are all just lucky to be here.

My father-in-law immigrated from Vietnam as a refugee. His perception of his role in American society is inseparable from knowing he’s simply lucky to be alive. He doesn’t get upset about taxes or minor policy debates because he knows a whole neighborhood of friends from Vietnam who will never be able to worry about such things—one day their luck ran out and they ended up dead or imprisoned. Their fate had nothing to do with intelligence or hard work. Some things just come down to luck. He had friends who went to war and never returned. He survived his journey to the US on a refugee raft largely because he was lucky, not because of anything he did.

The World War II and Vietnam generations understood that outcomes aren’t purely meritocratic. You could be brilliant, hardworking, and ambitious—and still end up in the wrong place at the wrong time. Fate was undeniable.

Our current generation of American elites has largely avoided these formative experiences. We haven’t had a draft touching the upper classes in decades. We haven’t faced existential threats on our soil. Without these lessons in luck’s role, it becomes far easier to attribute success entirely to individual merit: I have this because I earned it, because I’m that good, because I deserve it.

This attribution shift fundamentally changes how we view our obligations. If your wealth is purely a product of your talents and efforts, why owe anything to anyone else? If the game merely provided a neutral arena for your brilliance, why shouldn’t you keep all the rewards from winning?

What the Mercy Rule Protected

The mechanisms that once created something resembling a mercy rule in American capitalism—progressive taxation with much higher top marginal rates, stronger unions, robust public goods, meaningful antitrust enforcement—have been systematically dismantled over four decades.

In the 1950s and 1960s, the top marginal tax rate exceeded 90%. This wasn’t confiscatory—it was a mechanism to prevent runaway accumulation that would destabilize the system. Unions gave workers genuine bargaining power, ensuring productivity gains translated into broad-based wage growth. Public investment in education, infrastructure, and research created genuine opportunity mobility.

These weren’t constraints on capitalism. They were the mercy rule that made capitalism sustainable.

The result of removing them is wealth concentration unprecedented in modern American history. We’re creating not just billionaires but centi-billionaires and trillionaires—accumulations of individual wealth that previous generations couldn’t imagine. We’re doing this while homelessness rises, life expectancy falls, medical bankruptcy persists, and educational opportunity increasingly reflects family wealth rather than individual potential.

The Real Choice

As we debate wealth taxes and inequality, we’re really debating what kind of capitalism we want. I don’t think a wealth tax is the right mechanism to balance capitalism, but I also don’t think it’s socialism. But, the real question isn’t capitalism versus socialism—it’s ruthless capitalism versus a more benevolent form capitalism.

Do we want a system that creates a handful of statistical superstars while everyone else loses so badly they quit the sport? Or do we want one that still rewards success and innovation but recognizes that the health of the entire league matters—that there should be limits to both winning and losing, that luck and timing play enormous roles, and that extreme winners have obligations to the game that enabled their success?

Right now, we’ve chosen ruthless. We’ve decided that padding individual statistics matters more than the aggregate health of society. We’ve eliminated the mechanisms that once prevented runaway accumulation. We’ve created an environment where attribution error runs rampant and winners feel no obligation beyond continuing to win.

The mercy rule wasn’t about handicapping success or rewarding mediocrity. It was about recognizing that sustainable competition requires limiting outcome dispersion—that if the gap between winning and losing becomes too extreme, people eventually stop playing the game.

A growing number of Americans are discovering what it feels like to be on the losing end of a game with no mercy. They’re not asking for socialism. They’re asking for a version of capitalism that doesn’t treat their failure as an opportunity to score one more touchdown.

The question is whether we’ll listen before they stop showing up to play.

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