I must admit I never read the school book definition of the word - so yeah, maybe I'm not understanding meritocracy.
To me it means: The words/opinion of person with the most expertise on a certain topic should have the most weight in a discussion/decision.
In that sense I don't care about gender, skin color, religion, etc. as long as the person knows what he/she is talking about. So I don't see how it would be opposed to diversity or inclusiveness.
Where meritocracy gets bad isn't the "merit" part, it's the "-ocracy" bit - the idea that people who have the most merit get to call the shots.
It's problematic in all sorts of ways. First, who gets to define merit? Well, probably the meritocrats. If we assume they're rational agents (which we must, by definition), then they will choose to define merit in the most self-serving manner possible, in order to consolidate their own position, status, and power. And even if we don't assume they're perfectly rational agents (which is more likely, if contradictory to the basic idea behind meritocracy) we should still expect to see self-serving definitions of merit that grow organically out of everyone's bias for their own perspective. Consider the history of racial bias in IQ testing, for example.
Second, by the people who merit the highest in a meritocracy have different backgrounds, and therefore slightly different interests, from everyone who's lumped together in the lumpy part of the bell curve. This is inevitable - in a world where education costs money, you'll have a hard time getting to be the most educated at anything without coming from a position of relatively greater economic privilege than others. Pythagoras was no peasant, nor was Galileio or Newton or Einstein or Feynman. Therefore, we should not assume that they will make decisions in accord with the best interests of society as a whole. And their current circumstances are probably sharply different from most others' too. Probably the person who knows more than anyone else about investment banking is himself (I think we can safely assume it's a he - see below) an investment banker. That by no circumstances means that this person is the most fit to dictate investment banking regulation. It's true that he's got the expertise to draw up a set of rules that will encourage almost any outcome, but the outcome we should all be most worried about is the one where investment bankers get outlandishly wealthy at the expense of everyone else.
Finally, it's impressive how effectively people can use their pre-existing merit to influence others' ability to acquire merit. Often their ability to do so is so well-honed that they can wield it almost constantly without even realizing they're doing so. See: White men in academia, white men in fraternities, white men in software development, etc.
Ok, I see how this could turn bad. But what is the alternative?
In our current system people "run the show" who are good at politics and know how to use their elbows. In my books that's not any better than what you described.
The one recurring problem with meritocracy is that there is a strong danger of misdefining the measure of merit.
(In the case of discussions of the tech industry, a common error of this type is the equation of "success in the environment as it exists" with "merit", which makes the claim of meritocracy neatly circular, but its not the only way this can go wrong.)
> "The words/opinion of person with the most expertise"
That's oligarchy, or a hair's breadth away, rather than a recent ideal of meritocracy. The problem is that it's all too easy for the "smart people" to become the ones who just run the show without consideration for others' ideas on their merit. That is, "meritocracy" as applied to individuals vs. their ideas can rapidly result in very different things. And it's not always so easy to distinguish between the two in the moment.
Part of the problem is that over the past few years, we're beginning to learn that our collective sense of who our experts are, who we do/don't listen to, is broken. Even those who would self-describe as being very meritocratic easily end up having massive blind spots based on gender, etc. So the bit about "inclusiveness, diversity, and respect" hits to the community trend towards efforts to acknowledge and deal with these problems.
