i think it's important to realise that the scale of income has an extreme range and we are already on the upper end and definitely rich by global standards. my personal opinion is that a majority of people living in the western world is actually rich and any complaints on salaries by these are just first world problems.

on a more constructive note, i think i've seen a study that said that higher salary actually does motivate more, but hits the point of diminishing returns at about (i think) 80k or 100k. I don't remember which country and whether it was $ or €, but that should give a sense of the rough order of magnitude.

My experience of being an engineer in the Bay Area, with three kids and a wife, has been that much of my annual salary has been consumed in costs which I felt I "had" to pay (mortgage, power, food, pre-school or school, clothes, saving for the future (401k)). And while I recognize that from an annual salary, property ownership, and actually having savings for retirement that made me "rich", a bit of extra money from bonuses would enable things like replacing an older car, or a family trip to Hawaii. Often times the bulk of any "extra" money would go into things like the savings fund for my kids college tuition.

For me, and my living situation, when I had the option of earning a bonus it would enable something in my life (saving for kids educations, a vacation trip) that would normally be outside of my financial profile. As a result I was motivated to compete for those bonuses. But had all those other things been covered vacationing every year in the Alps in my chalet, private jet service where ever I wanted to go etc. Extra money would have very little motivation for me. That is why I was really curious about how it motivated someone who had a multi-million dollar bonus program.

  1. Wealth is exponentially distributed.
  2. People tend to socialize with people in their rough income range.
  3. Expenses tend to grow to fill any budget.
  4. US society isn't very good at saving money, so most 
     people's budget for spending is their entire income.

  1. People tend to know a few people who make >10x what they do, 
     a few people who make <1/10x what they do, 
     and a lot of people that make about what they do. 
  2. Normal expenses in a milieu are enough to use up a person's entire income.
  3. A person's idea of a luxury will tend towards something
     that would require >10x their income to be affordable.

When I moved to the Bay Area from LA it was with the plan to get a house as quickly as I could, build up some equity in the house while working for a company with offices outside of the Bay Area and then transfer to one of those offices when we had kids so that using the equity in our California house we could greatly reduce our burn rate and in a lower cost of living location and support a one earner payroll. So paying attention to our burn rate as a family was critical to understanding what the payroll requirements would be on a single earner to maintain a lifestyle that didn't add stress to our lives.

And there are lots of things that incrementally add burn rate, communication charges, cable service, eating out, expensive to maintain cars, debt (especially credit card debt) etc. I also had aspirations for paying my kids college tuition (even though tuition was rising much faster than incomes or inflation) and being able to reach a point where I could develop enough passive income from investments/dividends/royalties/what have you that I would not be required charge an employer for my services in order to survive. Doing that math kind of make #4 a necessity, had to send money into the future (save) so that it could cover those costs which I wouldn't be able to cover out of a paycheck.

On your corollaries I find #1 is blown away by attending a church. It is especially true if you're volunteering for some of the community service activities at said church.

I certainly see #2 as a valid up to a point, per the $75K mention earlier. I remember working as a summer Intern and getting paid $200 a week and thinking "Wow, I can't even spend all the money I'm making!" but yes, you can always spend more without too much effort. During (and after) the 2009 banking crisis when people I knew were out of work and looking at being so for a "long" time a few of them were astonished at how much their monthly expenses has creeped up on them without thinking about it. One guy who was out of work for 18 months, once he got back to work he and his family made an explicit agreement to talk about 'incremental' costs before they took them on.

I also don't know about Corollary #3. Perhaps its a magnitude thing.

Corollary #3 is the one I feel the shakiest about. Interesting point about church. Childhood friends who went into careers with diverse income ranges, combined with a social scene outside my career does some of the same things for me, but I suspect church would do a yet better job in keeping me grounded.

another thought: you could donate all of it. the perfect money sink. it actually helps, and more of it helps better. so with an altruistic mind you can get motivated with that no matter on which salary level :)

But how about you? Do you feel better about yourself if you have more art? or more cars? a bigger house? a staff? And if so, why does that make you feel better about yourself?

Whoever said that money was an obedient servant but a cruel master pretty much nailed it.

There are, of course, plenty of things to worry about that money cannot solve. But having known the kind of worries brought on by too little money, I very much appreciate that none of my current worries are about money. Anything beyond that is nice to have, but I doubt anything could beat that feeling of not having to worry about money any longer.

Sure my family with an extra 100k could do a handful of extra things in life but quality of life isn't going to change because of it.

Happiness does not grow linearly with salary and happiness is what you ultimately want to maximize. Income is only one input, and as it grows, it can actually complicate your life decreasing your happiness.

A person making 60k a year losing 15% of their income? There's likely to be significant lifestyle changes.

Furthermore, I think any financial advisor would advise that your 'lifestyle' not depend on one year's bonus!

but of course it's true that the further you go up the scale, the more absurd it becomes to talk about serious comfort losses, and there's a point on the lower end where we're talking about actual poverty.

[1] http://home.bt.com/lifestyle/money/mortgages-bills/how-much-...

[2] (warning self starting video) http://www.investopedia.com/articles/financialcareers/10/buf...

Piketty, Capital in the Twenty First Century

It is very difficult to give a precise estimate of the value of Tim Cook's contribution to Apple, or indeed what it might be at any other firm. Competitive markets do not need (and often must not) rely on comprehensive estimate analysis pricing to determine the value of something to the parties making the exchange. This is why they were much more successful than totalitarian central planning: central planners found themselves forced to try costing out all prices in terms of their complete component parts and recursing ad nauseam, rapidly running into limited knowledge issues. Instead, I find the more Hayekian analysis of prices emerging through human behaviour on voluntary transactions much more compelling.

While Piketty is right to mention that the market is embodied in specific institutions and that no market exists in pure isolation from institutional dynamics, these different institutions do exert competitive pressure on one another.

I agree with the basic thesis that as the productivity of workers (as measured by $ generated per worker hour of labor) has gone up tremendously in the silicon age, and that the fruits of that gain have been disproportionately allocated to management. But as the root of that gain has been the transition for goods economies to information economies, and information economies are particularly susceptible to price correction through antagonistic action[1] Given the challenges of creating barriers to entry, the information economics will (in my opinion of course) eventually force capital to the creators away from management.

[1] In the goods economy if the price of a car is too high you substitute other goods (like bikes or motorcycles) but in an information economy if your price is too high people simply pirate the content and take the capital out by force. cite: Netflix vs Napster vs MPAA.

Piketty argues that the root of the move towards equality from 1945-1995 was long-lasting economic shocks after WWII:

Quite different in their effect were the rates of 20–30 percent or higher that were imposed in most wealthy countries in the wake of the military, economic, and political shocks of 1914–1945. The upshot of such taxes was that each successive generation had to reduce its expenditures and save more (or else make particularly profitable investments) if the family fortune was to grow as rapidly as average income. Hence it became more and more difficult to maintain one's rank. Conversely, it became easier for those who started at the bottom to make their way, for instance by buying businesses or shares sold when estates went to probate.

> Given the challenges of creating barriers to entry, the information economics will (in my opinion of course) eventually force capital to the creators away from management.

Until we can eat information, or make a house out of information, we won't be living in an information economy. (Even at that point you can bet that someone will have figured out how to gate/moat/control/curate/distribute the most "necessary" information, much as corporations and the press do today). For now we need to rely on taxation to redistribute the returns on capital:

Without taxes, society has no common destiny, and collective action is impossible. This has always been true. At the heart of every major political upheaval lies a fiscal revolution. The Ancien Régime was swept away when the revolutionary assemblies voted to abolish the fiscal privileges of the nobility and clergy and establish a modern system of universal taxation. The American Revolution was born when subjects of the British colonies decided to take their destiny in hand and set their own taxes. ("No taxation without representation"). Two centuries later the context is different, but the heart of the issue remains the same. How can sovereign citizens democratically decide how much of their resources they wish to devote to common goals such as education, health, retirement, inequality reduction, employment, sustainable development, and so on?

   2016 net sales and operating income were
   96.4% and 99.5% of the respective target
   goals set by the Compensation Committee.
   This performance resulted in a combined
   payout at 89.5% of target for each named
   executive officer ... the 2016 payouts to
   our named executive officers were significantly
   less than the annual cash incentive payouts for
   2015, reflecting strong pay-for-performance alignment.
   The Compensation Committee determined that no downward
   adjustments to the payouts would be made, based on
   Apple’s 2016 performance and the individual
   contributions of our named executive officers.

I can believe it. I once worked at an investment bank where, during bonus time, I needed to deal with an issue at a trading desk. While there I had the following conversation with a particularly angry fixed income trader.

  Me: Hey Trader, what's got you so pissed off? 
  Trader: Just got my bonus. I got 13MM, but Trader2 got 16MM! Can you believe it?! I made way more money than Trader2 this year!!! 
  Me: ...

Nice problems to have.

No, because brownie points are not backed by the full faith of the US government.

Bigger is better. As simple as that.

You can do a heck of a lot more with $3m than $13k.

I know you're thinking proportionally, but that's not necessarily correct.

And you can always find things you really need the money for. Want a mega-yacht? Better start saving, because $13M ain't gonna cut it.