Gvien the forum we're on, it's worth pointing out that today's white collar laborers are capturing one or two orders of magnitude less of the value they're creating than the blue collar workers of 1990's detroit.

360 billion* divided by 1.2 million = 300000 "per employee". Typical salary to 40,000ish-100,00ish range for laborers/engineers. The disparity in those numbers isn't so bad at all.

Conversely, 1 trillion divided by 137000 = 7,299,270 "per employee". Typical salary of engineers in those firms is closer to 100,000 to 200,000, and that's just for the golden child software engineers. And without accounting for massive cost of living differences between 1990 Detroit and modern day SV.

Which wouldn't be so bad if there were some engineers earning close to or more than the "per employee" numbers, but I've never heard of anyone making even close to 7 figures as an engineer at a big firm...

* I think you meant 360 bn, not 36 bn, right?

That is a direct quote from the article. The article states $36B as well, not $360B.

"None of this helps the image of big business. Paying tax seems to be unavoidable for individuals but optional for firms. Rules are unbending for citizens, and up for negotiation when it comes to companies. Nor do profits translate into jobs as once they did. In 1990 the top three carmakers in Detroit had a market capitalisation of $36 billion and 1.2m employees. In 2014 the top three firms in Silicon Valley, with a market capitalisation of over $1 trillion, had only 137,000 employees."

I look it up Ford, GM had sales over 100B that year. assuming maybe Toyota as the 3rd.

Market cap tends to be much lower than revenue for capital-intensive industries. Factories, machine tools, and steel cost a lot of money, after all.

Making cars is pretty capital intensive; Ford's Market Cap in 1990 was in the ~20bn range depending on what point you look at.

> assuming maybe Toyota as the 3rd.

Chrysler.

The difference is that the autoworkers were organized and used collective bargaining to capture more value.

And what a mixed blessing that turned out to be.

On the one hand, we had a few decades of unprecedented sharing of prosperity. Those times have ended.

On the other hand, the unions have become their own sclerotic system of oppression. The greater pity, they do not see it that way.

Especially once all this “deregulation” has finished. Actually, it was not deregulation, but divestiture of public services to the plutocrats. Barely any regulations have been removed.

Now we have basic services supposedly available on a free market, but in practice there are so many requirements that it’s all crony capitalism. And one of the major powers fighting for its share of the bureaucracy and waste is the unions. That’s one reason why it costs so much and takes so long to do anything in an industry controlled by unions.

Unions are nice, but tricky to do right, and currently there are a lot of bad examples.

The private sector unionization rate is around 6.7% in the US so, despite whatever issues unions may have presented in the past, they are certainly not the primary cause of any of our current economic issues.

But the public sector unionization rate is more like 36%, and unions have an outsized economic impact. They aren’t the primary cause of our issues, but they have their share.

Whether it’s teacher unions that make sure teachers can’t get promoted for their quality, or construction unions that make sure housing can’t be built without protracted negotiations and significant expense, or transportation unions that make sure automated subways always have an operator, multiple operators in New York, or dockworker unions that oppose new technology on the (correct) assumption that they would lose jobs. Union opposition to technology was one reason why the Port of San Francisco no longer is a major shipping port; rather than some losing their jobs, everybody lost their jobs.

It’s nice if labor can partner with capital. In practice, it’s often more like a squabble for scarce resources. Sometimes you have to accept that a role is no longer necessary, but that idea doesn’t fit the union ideology.

You're making an ideological argument, not a factual argument.

How anyone can argue that working-class people have too much economic power today is just bizarre to me. The decrease in the share of the productivity gains to the working class and the rise in inequality tracks almost exactly with the decrease in unionization.

http://www.epi.org/blog/union-decline-rising-inequality-char...

I do not claim that working-class people have too much power. I claim that unions, under the impression that they are working for the people, actually are their own form of oppression. The capitalists control the capital, the union bosses control the labor, and the worker is shut out. The ending of Animal Farm, illustrated.

There is an ideological component. I suspect that unions have a blind spot regarding just how important labor is. Of course there is no value to humans unless humans get their fair share of benefits out of the process. The problem comes when labor for labor’s sake becomes the goal.

Then unions tend to reject labor-saving technologies, which would work if they had a captive market. That might contribute to why unions still have such a large share of government and geographically constrained markets. But a lot of the time, the union temporarily improves the worker’s conditions, and then the capitalist moves the job overseas, or a competitor who is already overseas rises out of obscurity, or the citizens flee to the suburbs; and the next generation has a harder time finding an entry-level position to escape from poverty.

Unions also tend to discount intellectual contribution. In the United States, teachers are constantly under attack regarding their professionalism. Well, maybe we could treat them as professionals more easily if their unions allowed us to treat them as professionals. But no, they are labor, and a long-serving crank has more status than an inspirational young teacher. (Inspirational old teachers also have more status, but inspirational young teachers rarely stick around that long.)

I’m not in principle opposed to unions. I just think in notable cases they have been harmful.

Not only that, but in US salaried status is routinely used to avoid paying overtime, when overtime is a tacit requirement of many jobs.

Even as a contractor with an hourly rate. The assumption is the rate given is for 40 hours a week. I've had a number of hourly contracts where I was told either work the over time or find a new contract. The lack of care to employees is appalling at times.

I've been on contracts that are flat billed based upon 40 hours / week but no overtime is chargeable. The problems start when more than 40 hours / week is regularly expected to perform assigned tasks to standards of the contract and there's little control you have over the client putting barriers in place that make you less productive making the true hourly rate at least 25% lower.

I've only had two types of contracts. One is absolutely nothing to do, what I'm hired to do is not feasible and shelved. The second is so busy, so much overtime you can't breathe.

So many jobs now, over work and expect over 40 hours. With no additional compensation. A majority of my contracts are flat rate. I had one role that paid half of my rate for over time.

Not just tacit -- I used to work at a factory, where as an engineer I was exempt. But I was on 12 hour shifts, 3 on, 4 off, 4 on, 3 off. Except that if there's a meeting, you stay an extra hour or come in an hour early. Or if there's an incident, you stay until everything is cleaned up. And if there's a meeting on your off day? You come in anyway. You get paged in the middle of the day / night when you're supposed to be asleep? You call in, and if things are bad enough you come in. Nothing tacit about it. If you didn't do those things, you were getting fired.

This is a great point. Comparisons should really take in to account salary per real hour worked, not just salary per year.

I'm really glad I live and work in Norway where such conditions are illegal.

You can't divide market capitalization by number of employees and compare that with "yearly" salary figure. A better comparison would be to divide revenue by number of employees.

At least explain why this is not a good first-order comparison.

You are going to have high market cap per employee in asset rich companies like oil producers and REITs. The value in those cases is primarily the mineral and real estate assets, not the employees, so tying salaries to it doesn't make a lot of sense.

Yes, but in the case of silicon valley, the actual assets aren't that big.

Annual salaries come from our weird convention of defining years as groups of 365 days. A software engineer can earn $100k/year but also $1m/decade. Neither is comparable to a company being worth $xbillion because you're comparing stocks with flows.

Even better, value added per employee.

Don't think you needed a throwaway for that, that's a cogent point.

When it comes to opinions or facts in sensitive subjects (such as anything related to taxation) - to be able to discuss freely you actually need a throwaway account.

A lot of people only down vote when they disagree to some content or questions and leave the questions and discussions somewhere else.

Funny cause amazon is closer to the 330K per employee mark. Wonder why their P/E is so high? Assuming it took all of walmart's sales it would only get 4 times bigger then now. how much profit can it extract?

Amazon appears to be able to ramp of profit at will via controlling expenditures and promotions. Review this years numbers vs the prior years. I think they wanted to show a investor what it looks like when they 'wanted' to turn a profit instead of plowing money back into everything imaginable.

https://www.google.com/finance?q=NASDAQ%3AAMZN&fstype=ii&ei=...

If I'm wrong and they are still plowing money back into everything and are still throwing off numbers like this (compared to the past) ~ that's simply amazing.

even after thinking through that defense - a 191 P/E is above my understanding. I think their technology and software revenues are seen a hyper growth

It's possible. I did a research report on Amazon many years ago since I kept hearing people gripe about them not being profitable. They turned a large enough profit on that year that they could've wiped out all their debt in 1 to 2 years. They could then just keep pulling in profit. It was clear they were instead re-investing all their money back into the company's operations for growth and dominance. They also had this growing business selling computing resources that had taken over a new market with projected long-term potential. ;)

I think AWS is masking the non tech size profits of a bunch of warehouses moving and storing goods.

I'll bite. How about for every incremental $1 in ecommerce spending, Amazon gets about 50 cents? And (roughly speaking) many new startups start out and grow on AWS providing new revenue as well as valuable intelligence.

http://www.marketwatch.com/story/amazon-will-account-for-mor...

https://stratechery.com/2016/the-amazon-tax/

Online sales in the United States are expected to reach $523 billion in the next five years, up 56% from $335 billion in 2015, and mobile devices are expected to be a key driver in that growth, Forrester Research Inc. says.

https://www.internetretailer.com/2016/01/29/online-sales-wil...

Comparing yearly wage with market cap makes no sense. You should be looking at gross profit / year.

it would look even more out of wack. Tech companies are way more profitable.

More importantly (for market cap), they often grow faster.

"today's white collar laborers are capturing one or two orders of magnitude less of the value they're creating than the blue collar workers of 1990's detroit."

Which is why the problems associated are much more about the macro-economy than they are about silicon valley. The middle class is being gutted before our very eyes while the elite gobble up more and more of the "created value" through the power of technology.

Wealth isn't zero sum. Creating something of value doesn't take anything away from anyone else.

It depends on the business. A lot of businesses create things that do take away from other people. Amazon destroyed the local bookstore, for one. In a sense, wealth is spread through redundancy and waste, and the more efficient people get the less wealth. My home town going from three regional retail chains to a single walmart led to the destruction of plenty of wealth through efficiency.

edit: it depends really too what we mean by wealth. If we define wealth as being employed, good lord wealth is zero sum. The amount of jobs the modern tech sector has created has been pitiful, with poorer compensation than many unskilled fields. If it means by possessing things, its a mixed blessing.Plenty of free or low cost content, though large staple goods like houses or cars are climbing up there.

Also, Martin Ford mentions something called the lights in the tunnel problem. Imagine a tunnel full of lights that represent the wealth of people. In the modern world, a handful of lights shine intensely bright, while increasingly more are dark, dim, or low-intensity. But the tunnel is dark, because a handful of lights can't generate enough light to make it illuminated. He used it in context of automation, but this is modern wealth creation, and eventually it will reach the point where the ones controlling the wealth have done so by dimming so many people that the tunnel goes dark.

> My home town going from three regional retail chains to a single walmart led to the destruction of plenty of wealth through efficiency.

Take into account the increase in wealth of all the customers (as they get more for their money).

Well, it is zero sum, but the actual limits are unimaginably vast. Though, there is a very high energy barrier to exploiting the resources of the entire universe. Let’s at least get to Mars, first.

There’s the matter of supply and demand. Nothing comes out of nowhere. When you create a thing, you demand some resources, and then the next person has to pay more for the same resource. Even for a creative output from yourself, you need food and shelter. (And what a controversy shelter has become, in the San Francisco Bay Area.) In the ideal case, the resources you consume enable you to create more wealth than you cost to the rest of society, and thus society benefits. (Not the now homeless person in San Francisco, though.)

Technology is sort of weird in that consumption actually decreases costs, in some situations. The semiconductor companies are paying exponentially increasing costs for state of the art fabs, and they need to keep the fabs selling at peak capacity to make a profit. Also, software is merely knowledge, with very low reproduction costs, so a small production of software can be consumed on a vast scale across the planet, and facilitate the production of more software, enriching people’s lives. This does not make it easy to reward the creators fairly.

>Wealth isn't zero sum.

It is sometimes. The profits "earned" by Wall Street are nearly always zero sum, for instance. They are not making other people richer.

Free market transactions are not zero-sum because each party feels they gain by making the trade (else they would not trade). Zero sum transactions are things like theft, any transaction with an unwilling party.

Or fraud. Or monopolies and cartels collecting rents.

https://en.wikipedia.org/wiki/Libor_scandal

Market cap is the wrong number for auto companies. They are more debt financed than equity, especially relative to Silicon Valley.

Ford has four times the debt that it has equity. Enterprise value (debt plus equity) is a better measure.

The other thing that gets lost is jobs in the supply chain.

This may not change the end conclusion, but the existing methodology is flawed.