Well... this is going to be a long post.
I was watching the recording of November's chat with fans on YouTube and one of the first questions that Ross addresses, actually going more in-depth than for any other question so far, is whether Capitalism threatens the survival of humanity. I wanted to write this post because just weeks ago I put my thoughts together on this same subject and, well, so far I wasn't able to talk to anyone about this. So hopefully here we can kick some ideas around.
I've thought about this for years - actually more than a decade, my bachelor thesis from 10 years ago is on a related topic.
Anyway, to summarize Ross' answer, the incompatibility lies in the fact that Capitalism doesn't have the concept of "restraint", which is essential for the survival of humanity, since we have limited resources and unlimited needs. I think this is spot on.
Ross gives the real life example of a group of farmers from California over-pumping the shared water table under their land, in order to make the most profit as fast as possible, without regard for the future. This is a textbook example of the Tragedy of the Commons, which is a specific application of the Prisoner's Dilemma game. If you don't know about these you can look them up online, but the gist of the problem is that the optimal outcome for each individual is not the optimal outcome for the group as a whole. Everyone stands to gain MORE if they cooperate (in this case, if they practice restraint and not over-pump the aquifer). But when you don't know what others are doing, the best INDIVIDUAL strategy is to pump that sucker as hard as you can, because if others are doing it and you're not, you'll get nothing: water depleted AND no profit. In the Prisoner's Dilemma this is called the "sucker's payoff".
Well, the entire world is a giant Commons and every individual is a rational actor, looking to maximize their payoff. Except it's a lot more complicated because we also have Corporations. I think the publicly-owned corporation is probably the worst thing to happen for humanity's long-term survival chances.
The system of incentives inside a corporation is set up in such a way that nobody is directly responsible for the negative externalities resulting from the corporation's activities. In other words, once it gets big enough, the behavior of a publicly-owned corporation is out of human control. (I suspect that, by some definitions, corporations can be thought of as living beings, but let's not open that can of worms for now.) Corporations are made up of three types of actors: regular employees, executives and stockholders.
Regular employees have no power of decision and so, in the context of this discussion, are irrelevant.
Stockholders don't care (and for the most part don't know) what the company actually does day-to-day - they just care about return on investment, which hinges on the company's growth. As much growth, as fast as possible.
Executives, on the other hand, are solely responsible to stockholders. Their only function, their only incentive is to bring about this growth, no matter what the cost. As long as they're able to show growth over the last quarter, they're successful and keep their positions.
The thing is, while executives DO have a say in what the company does, their hand as still tied, because Investors are always watching that bottom line. If they get the feeling that a CEO is not stepping on it ALL THE WAY, they replace him with someone who will do what it takes. That's why so many CEOs and high ranking executives are psychopaths. Natural selection at work.
So is there a solution to this? We've already seen that if we leave Corporations free to go about as they please, they'll over-graze the commons. They'll over-pump the aquifer. It's just the rational thing to do for everyone involved. The thing is, even if every individual person inside every company were a decent person with a conscience (which is a tall order to begin with,) that still wouldn't translate into a sustainable behavior of the company as a whole. There's no such thing as "Corporate Social Responsibility" - remember that buzzword from like a decade ago? Not much to show for it now.
One idea I've been considering recently is to come up with a template for a new kind of company where the incentive structure is such that long term planning is encouraged. This seems to be the case, for instance, with Co-operatives. These are companies owned by the employees instead of external investors, which means everyone feels a great deal more responsibility and ownership with regard to the company's actions. Some of these companies have very flat hierarchies, where for example employees vote for their executive teams and are generally much more involved in how the company is run. Unremarkably, cooperatives seem to be much more resilient in the face of economic downturns and recession.
Thing is I've no idea how one would go about REPLACING publicly owned corporations with co-operatives (or something of the sort.) Government regulation may be a way to do it, but I don't think it's feasible today - too many people would scream Communism. Plus relying on governments to fix things is almost always a bad idea, because of how corrupt politicians tend to be.
I don't expect more than a couple of people to have read through all of this, but if you have, does this make any sense to you? How would you address the "tragedy of the commons" problem? What do you think about this concept of a new kind of company where long-term responsibility is incentivized?