This may be how they are "commonly seen", but is it correct?
Walmart pays 5 of its executives a total of ~$70m/year [1]. Walmart employs 2.2m people [2]. Redistributing 100% of these 5 executives' salary to all 2.2m workers would be a raise of... $32/year.
The bigger issue with wealth inequality is the investor class and favorable treatment of capital (low capital gains tax rates, carried interest, shady real estate business, etc.), not salaries/wages, even extremely high salaries like those of executives. Even talking about "management" as relevant to this issue is a distraction.
1. https://www1.salary.com/WALMART-INC-Executive-Salaries.html
But that's besides the point. What on earth do they need to get paid that much for? Even if you assume they're contributing 100x what line workers are doing, they'll do just fine earning under $1M/year.
Plus, you then pinpoint the bigger issue. Yeah, the investor class exists because, you know, someone shaved $32 off of everyone's salary so 5 people could get paid a total of ~$70M/year.
So with that in mind, the inequality between CEOs and general management suggest that the process of picking the CEOs is corrupted. It is possible (imho, likely) that the most competent people aren't being appointed to the role. That is bad for investors, workers and the public. The company law around appointing CEOs probably needs to be changed.
Of course why you would pay such high salaries to a CEO who is untried and might turn out to destroy the company is a valid question.
The issue isn't that good CEOs add a lot of value - clearly true. The issue is why are they being allowed to capture that value despite fierce competition? Nobody else is allowed to do that. If there are 10 willing & hypercompetent people paid <$1,000,000 available to do your job, it shouldn't be feasible for you to earn >$2,000,000 unless there is something very strange happening. Like a very effective guild system and control of the corporate budget.
Exactly as you say, it isn't like we can differentiate between these people in advance. Why do we think paying them more will help? In any other field you can get exceptional talent for far less than a CEOs salary.
Of course. And to be clear I'm not quibbling about CEO pay being higher than the minimum wage.
The question that I've an issue with is how much larger. Back in the 1950s the answer seemed to be 20x the minimum wage or whereabouts. Nowadays it's more like 360x. [0]
CEOs were doing the same kind of job at the time.
And just think about it: it means the typical large company CEO earns in one day what his baseline employees earn in a whole year. That's just a recipe for a French or Russia style Revolution to erupt.
Plus, who actually needs $1M/year? I've earned fairly good money for years -- but still a fraction of that -- and I'd have no idea how to spend that much without investing up the wazoo. And in case you're thinking "I'd know how", sure, the answer is yes, everyone does -- for a few months. As a salary, $1M/year is ludicrous. And $10+M/year is sociopathic. No one is worth that much.
[0]: https://www.forbes.com/sites/dianahembree/2018/05/22/ceo-pay...
edit: I think it's "The Magic Shoebox" episode
Focusing on a single number is irrelevant, you must account for everything in the organization and the results.
Also nobody is stopping anyone from creating corporations with different compensation, but clearly there's a certain price required when you get to these levels.
I'll do it.
It's not like that one wrong decision ends up affecting them. Even if they get fired (which they often don't), they can exercise golden parachutes that will pay out many multiples of how much an average earner gets in a lifetime.
It's a job that gets paid a lot of money because the people who do it come from a fairly tight knit community that looks out for each other, not because of merit (CEO pay actually correlates slightly negatively with performance). Being an alumnus of McKinsey is actually one of the ways to enter that community.
You are totally right about the "golden parachute".
The nice thing about being in upper management is that none of your decisions has any negative consequences for yourself and in the end you will just have more money and some more enemies who will probably not even attack you.
It is always about "vitamin b" because that is how certain networks like (financial) elites work.
I always wonder how average people try to defend the rich and argue that it is totally justified that they earn something like one year of salary in a month or even more.
Think about all the big issues we have and how we could tackle them with all the money that now is inherited and shoved around to make more money out of nothing just to be even wealthier.
It is just absurd to me and that people are actually kind of ok with this takes away most of the hope I have for our global future because if these people prevail it might as well look like the "hunger games" here some day.
I'm one of those "average" people. CEOs are paid that much because they found some other people willing to pay them that much, and I'm not arrogant enough to presume my preferences for how the people paying them should spend their money are superior to their own preferences.
Look at it as empathy. Would I like it if somebody came and started telling me how to spend my money? Hell no! Then why should I wish that upon whomever's paying CEOs?
You and a bunch of others are going to think I am totally crazy for saying it, but I think you might be too possessive of "your" money.
Maybe you think you got it because you are totally that awesome and really deserve it more than somebody else. But surely you were supported throughout your lifetime to end up making that money. It's a collaborative effort.
Sometimes I get approached by homeless types on the sidewalk and I give them a $20 or something. Occasionally it's been larger than that, often it's been smaller. One might call that being generous. I am surely in a position of privilege being able to do that without it hurting much. But really all I am doing is giving them a piece of paper. Particles of the universe just like any other matter. I don't feel it's mine any more than it's theirs. So it moves from my wallet to their hand. No big deal.
I will admit that this attitude has its limits. You can go broke doing it too much. But there is room for it in our lives.
That is an odd point to make when you are fully aware of how much $20 could mean to a homeless person.
In an ideal world maybe everyone would be provided for and we wouldn't obsess over paper. But the system is a sort of lesser approximation of fairness. "Worst one except for all the others", as the saying goes.
My response would be that everybody who supported me was paid to do so, so they already got their fair share. Except for my parents, but personally I don't think children owe their parents because the parents are the ones who make the decision to have a child, so they should bear responsibility for the children's existence, not the child (i.e. they're obligated to provide for the child they created).
>Sometimes I get approached by homeless types on the sidewalk and I give them a $20 or something. Occasionally it's been larger than that, often it's been smaller. One might call that being generous.
There's a big difference (or at least there is in my eyes) between voluntarily giving someone something, and being forced by somebody else to do so. People who oppose punitive taxation doesn't necessarily oppose it because they oppose charitable giving, they oppose it because they don't think people have a right to decide how other people spend their money. For the record, it seems that in the US conservatives give more to charity than liberals: https://www.nytimes.com/2018/11/03/your-money/republicans-de... .
That strikes me as a cynical read on the situation. Could it be that some of those people liked you, believed in you, wanted you to thrive for selfless reasons that were not economic?
> People who oppose punitive taxation ... oppose it because they don't think people have a right to decide how other people spend their money.
That's the thing, the "their money" part is sort of a fiction. Additionally it is totally fungible, not earmarked or put conditions upon, it doesn't go into a little pile marked "asveikau's taxes" for only the parts of government I approve of. We pool it, and it's all or nothing, take the good with the bad. We have elections for any disagreements that may arise from there.
Maybe that did, but it doesn't change that they did whatever they did without asking for anything in return. At least to me the idea of a system in which you owe somebody more for something they did (either something they did out of generosity or because you paid for it) than what you explicitly agreed upon is quite unpleasant. Like if somebody came to my house, asked "could I mow your lawn", and I was like "uh okay sure, I suppose so", then afterwards they were like "ah-hah, now you have to pay me $200!" or "ah-hah, now you have to clean my kitchen!", I wouldn't consider that very fair. Ideally an agreement/contract is only valid when both parties understand and agree to it.
>That's the thing, the "their money" part is sort of a fiction. Additionally it is totally fungible, not earmarked or put conditions upon, it doesn't go into a little pile marked "asveikau's taxes" for only the parts of government I approve of.
Well then that's where the disagreement comes from. For people who believe in property rights, money isn't a fiction, it's a proxy for the claim people have over the value of the product of their labour. For many of the American founders, it was a consequence of https://en.wikipedia.org/wiki/Natural_law . For economically conservative Christians, it was a product of the argument that commandment "Thou shalt not steal" is not waived merely because enough people have voted for you to steal. If someone believes for whatever reason in an inherent moral right to their property, they won't believe it's acceptable for that right to be violated just because other people voted to do so.
It's pretty simple when you realize the majority of the rich started as average people.
Wealth is relative, you're likely better off than 95% of the planet. Should we reduce your salary because of what a rural farmer makes in China?
And yes, we should prioritize everyone having a decent baseline quality of life. Excess wealth doesn't make people happier anyway.
1. https://www.cnbc.com/2019/09/26/majority-of-the-worlds-riche...
> "But you speak to a very American delusion."
It's called the American Dream. Freedom and opportunity to achieve your own goals, something people seem to take for granted until they go somewhere that doesn't have it.
> "Defend the ultra-rich because you think you will be one some day. You will not."
You shouldn't assume, but even if I never become a billionaire, I sure don't need to hate them for it. I defend their ability to attain success, not their wealth.
Here a snippet of an interesting article on this[0]: "Yet the opportunity to live the American dream is much less widely shared today than it was several decades ago. While 90% of the children born in 1940 ended up in higher ranks of the income distribution than their parents, only 40% of those born in 1980 have done so."
This correlates to the fact that wealth concentrates in few and fewer people around the world (the 1% for whom laws, governments, borders etc. do not exist).
It is not about a comparison with the people who are at their worst (and it will probably not be Chinese farmers but that is another topic). It is about fairness and an average level we can ALL agree to.
I want all people to have a meaningful existence and a life that they think is worth living because in my frame of mind this is fairness.
As long as people starve and children cannot afford to got to school and women are being used, sold and shipped like some goods etc. I cannot stand to see people who get so much more than they need just to spend all the money on stupid things (please take a look at some of their instagram profiles and youtube videos if you don't know what I refer to).
The best of behavior I saw is people like Musk who puts his money into businesses which hope to (really) "make the world a better place" - at least if this is true and not some sales pitch (we can discuss about this in a few years when there is more results I think).
Others like to frame themselves as "benevolent" super-humans who are giving away money to charities. This is "green washing" most of the times to improve their PR. The money they give is a joke and these charities do not change the world as you can see.
Why does someone need or even deserve to own 50 cars and 7 houses? No one contributes that much to the world that he would deserve that and especially not while others are dying because they cannot afford to buy food.
This "hard work" that is needed to become rich is using others and ignoring all moral implications in many times. I had two opportunities in my lifetime to become (kind of) rich and both where at least dubious in one way or the other. It is about cheating governments to not pay any or too much taxes and it is about customers who are willing to pay a huge amount of money for someone to "take responsibility" he does not really take in the end. Also you can cheat consumers like "big tobacco", sugar etc. do.
Staying in this position only took them some money to pay scientists, politicians and others to be legally sold or even recommended and advertised.
These systems are built by generations of people without moral (maybe they are raised like that) and inherited to alumni who are at least as numb and asocial.
=> No one deserves to be that rich no matter what they do. => They become rich by using people like you and me without moral implication or hesitation. => They try to uphold the "American Dream" so we stay quiet until we are as poor as the people on the bottom. (look at Warren Buffet who talked about the "War of the Rich against the Poor")
[0]: https://www.theguardian.com/inequality/2017/jun/20/is-the-am...
It's a tight knit community because there are only a few individuals who get to that level of management and can be selected from to lead (and are even open to a new position in the first place).
The golden parachutes are to offset a bad tenure from hurting their future prospects. There are several CEOs who aren't hired anymore (or anywhere near that level) because of their past performance and they lose their earning potential.
You make it sound like they'll somehow lose out personally by losing the company 1000x their salary and hurting the livelihoods of workers, like they're somehow being compensated for personal risk.
What you cited represents no personal risk to the CEO. They already made their millions. Now maybe if CEOs were actually liable for the damage they could do to the company and economy, would it be more justified.
This is like wanting to find a top-tier senior staff engineer for $30k/year in San Francisco. At the end of the day, the people who can do the job can also perform other roles, and those other roles already pay more than $1M/year. You have to convince them to take on an unprecedented amount of stress and responsibility and effectively act as a public figure with all the baggage that comes along with that. You also have to retain them and prevent competitors from hiring them and deploying them against you. That means you have to pay them more -- sometimes a lot more.
Also corporations partly exist to shield liability so CEOs are not going to be personally held responsible outside of gross negligence or criminal acts, the same way you wouldn't be held responsible if you caused a major outage in your company that lost customers. There is an general move towards more performance-based compensation though, which I think you would agree is a good thing.
And if I do a shit job I might have trouble getting hired too, but I'm not paid millions for it.
For some reason, I hear that they do fine all the time. Like https://en.wikipedia.org/wiki/Marissa_Mayer ?
I'm asking because Google isn't giving me answers.
This is true for all jobs...
Not to mention sometimes CEO's performing badly results in a golden parachute... quite a far cry from your grunt worker getting laid off with no pension or benefits.
Golden parachutes are not about performance, it's about change of control like a company takeover or merger. It's very common and happens to many startup founders that get acquired. It's also not much different than severance which is offered to employees at large corporations.
Golden parachutes are extra insulation for CEOs and their performance can definitely cause them to exit a company with a parachute that otherwise would keep them. It is like severance except wildly higher and more often than not there is no severance for average workwrs, especially nowadays.
Either way, originally you made a statement about a CEO having negative impacts from their performance, but the exact same thing is true of everyone. A public story of a CEO performing badly is just as ethereal as a recommendation from a past job. Neither is a death sentence or a golden ticket, it's just a job and if you do it poorly you will have negative consequences. Publicity could serve an exiting CEO regardless of performance, that is not hard to conceive. It's just a different level of job people aren't blind to that. But to say they take greater personal risk by being a CEO, I don't buy that, they take the same risk as everyone else. If you do well you get rewarded, if you do poorly you're future is negatively affected. There's really nothing to support it's so different for a CEO.
Being a CEO is not a 9-5. Everything and anything a CEO does is monitored by a cadre of people.
Exactly. The wrong decision costs _the company_ a billion, it hurts the livelihoods of _the workers_. Incompetent, even criminal, managers more often than not pay for their mistakes with early retirement and severance packages.
Winterkorn got a 10+m bonus when he stepped back and receives over one million in additional pension payments each year. That's the guy who is at fault for the Emssions Fraud Scandal. John Cryan, who oversaw the further demise of Deutsche Bank, was kicked with a 10m severance package. During his time as CEO, the Deutsche Bank share went from 30€ to 15€.
That doesn't have a lot to do with a public company.
Companies decide. It is their prerogative. If you dont like it nothing prevents you from having your own billion dollar company where everyone earns the same.
Yet it is also a legitimate target for outside regulation, if there are indicators of market failure (monopoly, externalities, asymmetric information, etc.).
No one needs to get paid anything. Calvin Coolidge's[1] son died of an infected blister he got playing tennis. Do we need antibiotics? No. People lived without them and if we're unlucky we will too as antibiotic resistance spreads.
It's not about what people need. Americans don't need such huge houses or so many cars. Swedes don't need their winter holiday to the sun. Chinese peasants don't need to go from eating meat once a year to every day of the week. It's about what people are worth paying, whether they produce more than it costs to employ them.
The news that Steve Ballmer was retiring as CEO caused MSFT stock to rise $1 billion. Ballmer was worth -$1,000,000 as CEO. Since Satya Nadella became CEO its market capitalisation has quintupled. He is very easily worth paying $100 million a year.
On your final point, the investor class is the reason we can have nice things. People who have money and invest it instead of consuming it are where investment comes from. Without investment our private stock of capital will rapidly run down due to depreciation and there will be no economic growth, no research and development.
We've seen the alternative to capitalism. It failed to promote economic growth, freedom or human flourishing. For countries starting from almost everyone being peasants it has its plus points[2], see Branko Milanovic's new book. For
[1] A US President
[2] Communism probably led to faster investments in education and healthcare than would otherwise have occurred in countries like Romania and Bulgaria. In countries that were already developed before the Soviet conquest like East Germany or Czechoslovakia it had basically no redeeming features
One of those two numbers appears to be off by 3 orders of magnitude.
You make it sound like there's only one alternative! Which one would that be and where did we "see it"?
I think much more than healthcare and education, investment in infrastructure, industry and research were somewhat "redeeming" features of the brutal totalitarian regimes in Romania at least.
More to the point, most ground-breaking research, especially computing and rocketry, has actually come from the state in the capitalist USA, with private capital only serving with mass-marketing of those technologies once proven out and gifted from the public to the private space.
Also, a non-capitalist society would not be investor-less. It would instead spread investment opportunities to vastly more people, and would encourage them to band together and pool their investment in worker-owned enterprises. This is in stark contrast to the totalitarian state capitalism of the so-called "communist countries".
Investment in industry, infrastructure and research are not lacking in capitalist countries with the relatively minimal conditions of security of property, freedom to contract and rule of law. The Communist investment in education is just unparalleled at the same level of output per capita. Ditto for healthcare. The CCP killed more Chinese people during the Cultural Revolution than the Japanese did during their invasion of China and they still look good in terms of lives saved by virtue of bringing very basic healthcare everywhere.
> More to the point, most ground-breaking research, especially computing and rocketry, has actually come from the state in the capitalist USA, with private capital only serving with mass-marketing of those technologies once proven out and gifted from the public to the private space.
Basic research is definitely a strength of government. Development isn't. You need the R and the D and private industry is much, much better at the latter than any government ever has been.
> Also, a non-capitalist society would not be investor-less. It would instead spread investment opportunities to vastly more people, and would encourage them to band together and pool their investment in worker-owned enterprises. This is in stark contrast to the totalitarian state capitalism of the so-called "communist countries".
There's nothing to stop workers forming cooperatives under capitalism. Worker-owned enterprises abound in law and accounting and used to be common in banking. The cooperative movement is going on 200 years old. We even have a reasonable explanation for its failure in that employee owned businesses have a disincentive to expand as they maximise profit per employee not total profit.
That's true, but it misses the point of the anti-capitalist critique, which is a critique of capitalism, the unconscious structuring of society for particular ends. When anti-capitalists criticize capitalism, they do not criticize individual capitalists, but the system in which there is predominant waged labour, alienation, commodity fetishism, and exploitation. Forming a cooperative is an admirable thing to do, but to suggest it alone is by no means a response to criticism of capitalism, a particular social formation, because the suggestion is an individualized one. It would be impossible to bring everyone on earth under cooperatives in a capitalist society.
Analogy: "Just live in a safe neighborhood" is no solution to murder, or its structural causes. Just one individual being murdered is sufficient to show the problems of the system and the individualized solution.
I still feel it is important to raise the awareness of the idea of worker cooperatives as a viable alternative to capital-owned corporations, since a lot of people think anti-capitalism implies something like larger state involvement and being anti-market.
But you are absolutely right, forming cooperatives under the current system will never be a viable path to removing the entrenched from power. It is simply a vision of what a working alternative to capitalism could look like.
Yes, $70 million to the execs while many earn minimum wage sure does sound awful. But like OP says, even if you achieved resounding success in eliminating this inequality, it translates to a $32/yr raise. That rounds down to zero in terms of improvement in prosperity.
Isn't prosperity of the rest what we really ought to care about? It seems an awfully lot like focusing on the cosmetically ugliest problem that doesn't really move the needle.
>someone shaved $32 off of everyone's salary so 5 people could get paid a total of ~$70M/year.
But that's not it works. It's like Walmart has a "wages" budget that gets divided up. Leadership compensation comes out of profitability.
It’s not that either. Total realized capital gains income in 2017 was $660 billion. 30% of that went to the bottom 99%. So you’re talking about $462 billion to the top 1%. Even totally confiscating that income and redirecting it to the bottom 99% would only increase income for the bottom 99% by 5.5%.
People see eye popping CEO pay but divvying up a few very high incomes doesn’t go far. 60% of all income is earned by the top 60-99%. 40% is earned by the top 20%. A lot of income inequality is driven not by CEOs and billionaires, but educated urban professionals. College administrators, programmers, doctors, IT managers, etc.
I agree that parceling it out piecemeal might not be the best way to spend that sum. $462b could be put into an education or infrastructure trust, and pay dividends towards our schools, public housing, roads, and transit networks. And that would be $462b per year dumped into this trust.
It might just be the analogy talking; but that sounds like the plan to fix a problem that does not actually fix the problem. It may be a bad plan.
> $462b could be put into an education or infrastructure trust, and pay dividends towards our schools, public housing, roads, and transit networks.
If you think about it, you may discover you are describing what already happens. Your proposed solution is the fund managers are ... y'know, some bureaucrat ... and some % of the fund goes to government coffers. The current situation is the 1% are fund managers and the withdrawal rate is linked to their taxes paid. At a very high level all that proposal does is fiddle around the edges with what the effective rate of withdrawal and what gets invested in and it is entirely possible the total take will drop. The wealthy currently invest in housing, education & transit very visibly.
It is very unlikely that a government fund would survive without attracting a serious wave of leeches; the incentives to raid the fund and waste the money would be huge. The process is fraught. It would be far safer and probably more effective to look to incentives rather than subject investment to the erratic outcomes of government voting.
But if that happened, every small business in America would cease to operate immediately. Corporations would be instantly worthless.
Your unstated assumptions are that capital gains are the entirety of value and this is a zero-sum game. I posit that CEOs and the 1% are playing[0] a negative-sum game by shipping jobs overseas and underpaying their workers. Even though it is a net-loss to the system, their incentives are such that they defect at every turn since they gain more from a "loss".
[0] All shareholders benefit, not just the 1% - but the lower segments don't gain as much, and lose in their non-shareholding, employee roles
It's not a net loss to the hundreds of millions of Chinese and Indians who have been lifted out of poverty in the past couple decades. Their gain has vastly outweighed what the American working class lost.
so, the amount of wealth they convert into yachts, but not the amount of wealth that they actually accrue which is usually many multiples of that...
Be serious.
Even to the extent we should care how rich a billionaire gets, surely we only care to the extent they can actually do things with that wealth. Bloomberg has to realize gains to pay for his campaign ads. Bezos has to realize gains to buy WaPo (in his personal capacity). Why on earth should we care about illiquid wealth that can’t be used to do anything?
You can watch here[1] how Larry Summers asks Emmanuel Saez, the leading proponent of wealth taxes, how liquid wealth gives individuals power in their personal capacity. Given how extremely underwhelming Saez's response is, I can't imagine any of the wealth taxes proponents having a good answer for the illiquid situation.
I don't understand why this is even brought up? Surely the line worker who failed high school can't contribute the same value as a software engineer automating away 20 line workers?
All the studies I've seen compare the highest to the lowest salaries, while a more comprehensive look across all employee positions would provide a better data set for setting pay levels.
He earned it many, many times over.
CEO decisions have enormous leverage over a company's fortunes, both good and bad. CEO pay is the least of those concerns. It's not hitting the pipe with a hammer, it's knowing where to hit the pipe.
Source: https://www.technologyreview.com/s/539861/techs-enduring-gre...
In my view, there is tremendous value in taking something existing and productionizing it so the whole world can get value from it.
It’s value add.
It would also be nice if they wouldn't be so hell bent in abusing the patent system or - standards in oder to ringfence their privilege and make sure that nobody can build useful products on foundations essentially paid for by the tax payer.
Is tax avoidance a failure of business then? What about the billion dollar lobbying inudstry?
“[Rentier capitalists] assert a belief in ‘free markets’ and want us to believe that economic policies are extending them. That is untrue. Today we have the most unfree market system ever created….
How can politicians look into TV cameras and say we have a free market system when patents guarantee monopoly incomes for twenty years, preventing anyone from competing? How can they claim there are free markets when copyright rules give a guaranteed income for seventy years after a person’s death? How can they claim free markets exist when one person or company is given a subsidy and not others, or when they sell off the commons that belong to all of us, at a discount, to a favoured individual or company, or when Uber, TaskRabbit and their ilk act as unregulated labour brokers, profiting from the labour of others?"
"…today, a tiny minority of people and corporate interests across the world are accumulating vast wealth and power from rental income, not only from housing and land but from a range of other assets, natural and created. ‘Rentiers’ of all kinds are in unparalleled ascendancy and the neo-liberal state is only too keen to oblige their greed.
Rentiers derive income from ownership, possession or control of assets that are scarce or artificially made scarce. Most familiar is rental income from land, property, mineral exploitation or financial investments, but other sources have grown too. They include the income lenders gain from debt interest; income from ownership of ‘intellectual property’ (such as patents, copyright, brands and trademarks); capital gains on investments; ‘above normal’ company profits (when a firm has a dominant market position that allows it to charge high prices or dictate terms); income from government subsidies; and income of financial and other intermediaries derived from third-party transactions."
Source: https://www.resilience.org/stories/2017-08-03/book-day-corru...
There's wide consensus amongst people to simplify the tax code for both corporations and individuals, and to remove big lobbying from government. The hard part is getting the political capital to get it done.
This means they should still pay taxes as necessary.
> I’ll believe it when the government makes the next iPhone, or the next electric vehicle.
> In my view, there is tremendous value in taking something existing and productionizing it so the whole world can get value from it.
The point is you can't productionize something that doesn't exist. Without the foundation of government-funded basic research and technology development, the iPhone would have been nothing. No one's saying there's no value in product development, just that it's an error to mistake that value for all the value.
For the most part, businesses don't do much if any basic research because there's no clear path to a payoff. It's simply a bad business decision. They do the last step (product development) because it's the least risky and most profitable. The exceptions are few monopolies, and they probably wouldn't have bothered without the piles of excess money and the antitrust axe hanging over their head.
Businesses (and individuals) often contribute to universities monies which are used for basic research. It becomes the university's endowment. A great deal of basic research is funded this way. Often in return the university will name the building after the donor.
The government didn't do much of anything in basic research before WW2, it was privately funded.
http://www.bu.edu/articles/2015/funding-for-scientific-resea...
> Businesses (and individuals) often contribute to universities monies which are used for basic research. It becomes the university's endowment. A great deal of basic research is funded this way. Often in return the university will name the building after the donor.
Your link doesn't seem to support your conclusion very well, but rather echoes my points:
> ...She points out that the other likely [non-government] source of research funding—industry—prefers to direct its money to projects that affect the bottom line. “Industry is focused on applied research that will result in the development of products with immediate commercial application,” she says. “But fundamental or basic research is needed in order to create the knowledge base that leads to more applied research.
> ...
> The AAAS has the data to support Waters’ concern about corporate research: 80 cents of every dollar that industry spends on R&D goes to development, and only 20 cents goes to basic and applied research, a ratio that is the polar opposite of that found in civilian science agencies.
> At BU, whose researchers study an enormous range of subjects, from the birth of frogs to the birth of planets, about 80 percent of the roughly $350 million for sponsored research received in FY 2014 (down from a 2010 peak of $407 million) came directly from the federal government, and another 10 percent originated in government grants and came to BU through other institutions, such as Harvard or MIT.
That's 90% federal funding. Why do you make such a big deal out of the remaining 10%?
> Matt Hourihan, director of the AAAS R&D Budget and Policy Program, says the notion that corporate and foundation sponsors are waiting in the wings is a comforting one, but his association’s research has found no evidence that it’s true. So far, says Hourihan, the biggest increases have come from university coffers. “Industry contributions haven’t increased appreciably, and I’m not sure we have a clear enough picture on the philanthropic front yet.”
So the government funds the bulk of basic research. The funding is declining for political reasons, but there's no evidence that private groups are picking up the slack.
> The government didn't do much of anything in basic research before WW2, it was privately funded.
And afterwards (as described in your link), the story drastically changed. Which was when much of the relevant research and technology development related to the iPhone was done.
However, in the last 10-15 years, it seems like starve-the-state politicians may be starting to change that successful formula:
> One Washington insider, an expert on US research funding ... says that “research and development funding generally does pretty well in the government’s budget process,” because the government branches agree it’s important to stay competitive in science and technology. But looming over every budget decision, this expert says, is a broader debate about what the size of the government should be and how the government should spend its limited research budget.
Sure it does:
"Before World War II, government money for research was rare, and was mostly aimed at aeronautics and agriculture studies."
> Sure it does:
> "Before World War II, government money for research was rare, and was mostly aimed at aeronautics and agriculture studies."
But that's kinda irrelevant, no? We were talking about the iPhone, and most of the relevant basic research and technology development occurred after WWII.
Is it your view that basic research activity should be reduced by 75-90%, to the level that can be sustained with private funding?
Every human that has ever lived has lived on the same Earth. We have all had access to the same resources. However, some people did different things with the resources available to them. Stating that the basis of these achievements require the work of others is true but besides the point. Someone somewhere, with access to the exact same things you and I have access to, is inventing something that neither of us will. Should that person not get the reward for their skill and work?
Apple made the iPhone under the leadership of Steve Jobs, meaning the company profits enormously and thus the company can reward Steve Jobs enormously.
> do we really think that if Jobs and Musk had never come along
Do you really think that without the internet, nobody would have invented a network? And they did - Compuserve, Timenet, MCIMail, BIX, Prodigy, FidoNet, Gopher, etc. Heck, anyone with two or more computers would hook them together. I even wrote code to connect my own computers together over a serial line.
The internet was also based on previous technology - the telegraphy network.
"The idea of “great men” as engines of change grew popular in the 19th century. In 1840, the Scottish philosopher Thomas Carlyle wrote that “the history of what man has accomplished in this world is at bottom the history of the Great Men who have worked here.” It wasn’t long, however, before critics questioned this one–dimensional view, arguing that historical change is driven by a complex mix of trends and not by any one person’s achievements. “"
and:
"Hero myths like the ones surrounding Musk and Jobs are damaging in other ways, too. If tech leaders are seen primarily as singular, lone achievers, it is easier for them to extract disproportionate wealth. It is also harder to get their companies to accept that they should return some of their profits to agencies like NASA and the National Science Foundation through higher taxes or simply less tax dodging."
For me the point is that innovators stand on the shoulders of giants (all the advancements made up until this point).
Another source talking about the same author (Mariana Mazzucato) and using her arguments (from her book: the Entrepreneurial State):
“Lone genius:
"An individual at the head of a private enterprise who has achieved fame through effective PR designed to create an arbitrary association of that person with successful commercial innovation, instilling in the public’s mind the absurd belief that the insight behind the innovation emerged from a social, economic and intellectual vacuum”
Source: https://qrius.com/the-myth-of-innovation-and-the-lone-genius
I and the D team makes and gives away D for free. Many individuals and companies have made a great deal of money from using D. They do not retroactively owe me money. I'm not upset that they made money off of D - I'm glad they did!
Of course it is nice when they decide to give back to the D community - I appreciate that. But nobody owes us anything for D.
Also wealth isn't zero sum and Musk/Jobs have created plenty of millionaires and even other billionaires. It's not just them, they just happen to be the most famous.
> from 1939 to 1950, hourly workers’ wages rose roughly three times faster than elite executives’ pay.
This seems like it would be a good place to get back to.
A calculation Louis XVI likely made in 1791.
Aggregate CEO pay at the largest 350 firms in the US was $6 billion in 2018[1]. Let's quadruple that to account for the remainder of large firms and other C-suite executives.
Let's assume all of CEO compensation is entirely rent-seeking, CEOs don't add anything of economic value, and we can just redistribute their compensation to every man, woman and child in the US with no loss of GDP.
In total that would represent an income gain of only $72 per year for the median person. CEO pay may be symbolically important, but it's simply inconceivable that rising CEO compensation has had any meaningful impact on middle class wages.
Again, no matter how you want to slice it, aggregate CEO pay is simply too small in magnitude relative to aggregate American salaries to have any meaningful impact. At most you could say something about it being symptomatic of a larger problem, but CEO pay is absolutely not the direct cause of slow growth in wages.
[1] https://www.usatoday.com/story/money/business/2018/05/25/ceo...
The richer they are, the less they care about wage or product, the more they care about extracting rent - via investment or cuts, causing stock market reactions, which ignore all those things.
They tend to also lose the common touch, just like the aristocracy that preceded them.
Riiiiiight.
This is revisionism. Stamping out unions has nothing to do with modern management and everything to do with the (eternal) conflict between management vs. unions. The reason why unions are more and more scarce is a complex one riddled with both positives (employers are more sensitive to employee needs, government has implemented legislature that protects workers) and negatives (unions are often rife with corruption and cronyism). McKinsey is a footnote at best.
> CEO salaries are certainly relevant to the working middle class, since they are commonly seen as tremendously too high and the extra money could contribute to the middle class' wage.
This has already been debunked ad nauseam in this thread. We should be talking about capital gains, offshore accounts, low-interest corporate bailouts, quantitative easing (!!!), etc. But CEO salary outrage gets clicks.
> I think the point of that sentence is more like "the amount of effort it takes to become successful is significantly greater than it was when the system worked better."
I'm not sure how you're reading that. If anything, he mentioned how most CEOs of old had worked on the company line for like 30 years prior and is lamenting that "all" executives need these days is a diploma from an elite school and a McKinsey badge.
In that case, the pay is a tiny fraction of company earnings to get talent that's capable and willing to shoulder that responsibility and also accept any potential long-term reputation hits.
Companies aren't looking to waste money. If they could find a magical CEO at 1/10th of the price, they would. There's a reason those jobs are worth that much.
Looking at medians and averages isn't the same thing as looking at extrema, and discarding those extrema is harmful to the data set when you can try and infer things about those extremes and how they impact the data set. Every person working on data eventually has to deal with this.
When it comes to executive compensation the question isn't if it's a market reality or not. It obviously is. The question is if those market realities are beneficial to everyone else impacted by the market, and many would argue otherwise. Yes, golden parachutes and lucrative salaries/equity options are par for the course for fortune 1k companies. But how do those packages influence incentives? Are they encouraging, even creating positive feedback loops for short term incentives that cause inefficiencies in our companies? Are they a symptom or source of greater issues relating to long term health of our labor markets for average workers?
I don't know, but it's worth investigation.
It's generally agreed that more performance-based pay with long-term goals and clawbacks on excessive failures, negligence and unethical acts is the way to go, and most companies are already shifting to this.
I'm not so sure about this. The CEO is selected by the board members, which don't have an interest in debunking the myth that CEOs need to make obscene amounts of money. These guys can often get CEO jobs themselves later in life, and if they propagate ideas that deflate CEO salaries, they're harming their future self.
In other words, the high-end executives (incl. board members) form an aristocracy of sorts and they protect their interests as a class.
I don't see any complaints about all those FAANG developers with extreme salaries that have skewed entire housing markets. Should they be limited from negotiating a rate that the company is willing to pay?
1. I don't think it's a big secret that stamping out unions is a key part of modern management. If McKinsey and other consulting firms were management consultants, they should be even more aware of that strategy and would have been in a key position to effect that change over a large number of companies.
2. CEO salaries are certainly relevant to the working middle class, since they are commonly seen as tremendously too high and the extra money could contribute to the middle class' wage.
3. I think the point of that sentence is more like "the amount of effort it takes to become successful is significantly greater than it was when the system worked better."
4. He's not trying to be the technocratic management, he's literally arguing against its existence.