7 ms·

Parable of the Shoe Salesman - Capitalism rewards wealth owners, not creators

18 points by nickb 19y ago

chaostheory 19y ago
Besides the lack of the details (it just doesn't make any sense to fire your top salesman), I just find the article's conclusion to be stupid: "capitalism sucks (... the gov should regulate even more)" Correct me if I'm wrong, but a real life example of the "shoe salesman" is Ross Perot. "He soon had the highest sales in the company and hence received the highest commission. Then in 1961, IBM executives decided to set limits on how much commission a sales person could receive each year. It did not take even three weeks for Perot to reach his yearly maximum, which caused him great frustration. Additionally, Perot had some new business concepts that he wanted IBM to implement. IBM management was extremely resistant to trying his new ideas. Frustration related to the cap on his commission and the insult of deciding not to implement his business ideas, resulted in Perot leaving IBM in 1962 to start his own company. His company, Electronic Data Systems (EDS), was based on the very ideas that IBM rejected." Don't get me wrong, capitalism is not perfect; but it does favor creativity, risk taking, and persistence (in the face of adversity).
- wallflower 19y ago
  "Failures are like skinned knees - painful but superficial." - Ross Perot +1 for the reminder of Perot's infomercials during his 1992 presidential run in which he delivered his sales pitch for president (charts and all)
  - falsestprophet 19y ago
    I am looking for a link, you don't have one do you?
  - tjr 19y ago
    The charts were awesome.
- rw 19y ago
  You misconstrued what the article was claiming... "capitalism sucks (... the gov should regulate even more)" is not the same as "market capitalism is inherently biased towards outcomes that enrich owners of capital at the expense of nonowners who innovate."
  - chaostheory 19y ago
    given the title of the blog (Charity Focus), their past articles, and the tone of the current one - "We are favoring the interests of one class over another"; I don't feel that I misconstrued the article. I'm actually surprised this got up voted on a site populated mostly by the can-do, think outside of the box so I can move up the food chain crowd... is YC News readership changing? I could be wrong, but I feel another subtle message the article is giving is: "there's no point - just give up. the evil rich men will always outsmart and bully you no matter how hard you try or how clever u are"
    - pg 19y ago
      is YC News readership changing? Unfortunately this was in fact mostly voted up by recently arrived users. But I'm not panicking yet; overall the quality of the top stories was good today.
      - icky 19y ago
        You can still take something positive away from this article if you look at it as a compelling argument to work for yourself. Charityfocus had an interesting story, but they spun it with the kind of sad, defeatist attitude that is antithetical to the hacker news ethos.
      - Xichekolas 19y ago
        I voted it up because I think it's a great reminder why we should want to be owners and not employees. That is the part of the attraction of a startup... it's definitely more financially secure than a job, from which you can get fired. At a startup the worst you can do is fail and have to get a job. John got the shaft in the short term, but Adidas got rid of their top salesman. John will recover and probably excel, while Adidas just guaranteed that their salesman will never try and achieve anything great. The most obvious effect of an action is not the most important, as stated above.
Fuca 19y ago
There can also be another morale: always be a owner.
nandan 19y ago
Assumptions the article makes: 1. People are stupid, they cant and dont adapt. 2. The market system is rigid and exploitative. Can we expect the three people who were hired instead of John Ulviden to make the same "mistake" he made? Probably not. If they were people looking out for their own self-interests, they would factor in the "mistake" John made and make sure they dont step over the "acceptable" amount of sales. What sort of an effect does this have for Adidias? They reach a high-point in sales due to the energy and creativity of John, but then because of what they did to him, their sales are no longer going up. They have just lost the opportunity to have John take their sales to the next level. And what sort of an opportunity does this present to a competitor like Nike for example? They would probably want John for more than one reason: For his abilities and also for the relationships he has with the customers he won over for Adidas. Heck, why ramble when there is such eloquent exposition at hand: "In addition to these endless pleadings of self-interest, there is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences." - Henry Hazlitt in "Economics in One Lesson" http://jim.com/econ/contents.html http://jim.com/econ/contents.html
- NSX2 19y ago
  But most people either are stupid and/or can't change because the system is setup to maintain the status quo. If you had any clue how money is introduced into the system, you'd be outraged that banks had the nerve to try to pull such a scam at the expense of the general population. Yet it's been going on since the Medicis and nothing much has changed, even to this modern day. Meanwhile we've created unprecedented wealth over the last 50 years, and yet while being obsessed with money, every person and company, big or small owes the banking establishment tons of money which we either must pay off by assuming more debt - or by handing over the stuff of our production - as is happening now with the housing industry and foreclosures.
  - chaostheory 19y ago
    what's a better system then - more socialism and government control? imho that too will lead to maintaining a status quo. The only things that change are the people at the top (gov officials and their families), a lot of resources will be wasted (compared to a more capitalist system), and that it's much much harder for people at the bottom to move up (not to mention less incentive). O yeah, since we're talking about government controlling most of the resources and distribution, you can probably kiss your rights goodbye too. It's not like this hasn't been done before with disasterous results... there's a reason China changed economic systems... "most people either are stupid and/or can't change" doesn't it make sense then for the system not to reward them for their behavior; and instead to reward people that can change and work both hard and smart?
joe24pack 19y ago
This is why I've learned to give only as much as employers expect and occasionally 5 or 10% more. All my best ideas stay with me, for my own projects. I've made the mistake that the company's and mine interests were the same far too often and gotten burned by it. The problem I'll run into is how to align my interests and those of my employees when I'm running my own shop, but I'll worry about that when I need to. Right now it is too soon for those sort of worries.
- deleted 19y ago
  [deleted]
- h34t 19y ago
  If you limit the ideas or energy you give to your job, I think you'd better be prepared to give those ideas & that energy to your own project quite quickly and in a concrete way. If your "independent dream project" is too far away on the horizon, you might just get in the habit of holding yourself back from your job, and get used to the idea that you're the type of person who does mediocre work -- and the people you work with may also think of you as mediocre. So the cost of protecting yourself from being burned can cost you in [1] change of personal habits & [2] reputation among those you work with & know your track record. Even in times I've been burned with work/life, I've never regretted the effort I put into doing my best at whatever I set my mind to. I've wished I could have foreseen bad events, but not wished I'd tried less hard. I like trying hard... it's fun; I don't just do it for money. Other people can take away the rewards that I may have been entitled to, but they can't tell me that my efforts were mediocre.
  - joe24pack 19y ago
    At my present day job, I don't have to hold my ideas back because they are only tangentially related, if at all, to my employer's line of business. I give my day job only as much energy and enthusiasm as I need to get the work done well and in a timely manner. As far as personal habits go, keeping motivated while working more or less piecemeal on my pet project is difficult, but I've managed to work through worse.
Xichekolas 19y ago
Since the owners of the company didn't create any wealth by creating the company... they just magically were born owning a shoe company and never worked a day in their lives. </sarcasm> What happened to this fabled John is pretty crappy, but that is a risk every employee has always had. The only way to avoid that risk is to put your own capital on the line and be an owner (a founder is an owner, even if it only costs him $10 for the domain name). If anything, this article shows why capitalism does work well. If we weren't using capitalism, John couldn't start over again. If we were under communism, and the State fires and blacklists you, you are screwed. All jobs belong to the state. If we were under feudalism, and the Lord 'fires' you (most likely by taking your plot of land and possibly just killing you), then you're only choice is to try and find another Lord to take you in. How is that better? I'd bet the author wants a benevolent state to give us all jobs that pay the same amount. That is all fine and dandy, except then what would even be the point? At that point we'd be living on Airstrip One and enjoying our daily Two Minutes Hate.
tx 19y ago
I find it strange that a salesperson is named to be the one who creates wealth. If they could create wealth at will, why do they always want exclusive rights to their "territories"?
BrandonM 19y ago
This article is bad mainly because it relies on a strawman as an example. Any (reasonably rational) business owner would love to have a salesman like John, probably promoting him to a higher position where he can have an even better influence. The whole idea of putting a cap on what an employee can earn is a socialistic practice, anyways (don't want employees getting too "unequal"), and has nothing at all to do with capitalism. Do mistakes happen? Yes. Do companies, owners, and other people in power make bad decisions? All the time. Does that mean that capitalism doesn't work? The problem, in my mind, is the one that YCombinator is trying to solve. There are not enough owners. There is not enough competition. The more competition there is among smallish businesses, the more likely that big, inefficient companies and other companies that make bad decisions (like firing your best salesman) will fail. One reason there aren't many owners is all the red tape and government control. Two examples: My stepmother has been breeding and selling German Shepherds for over ten years now, and she gets customers from all over the US. To go along with the dog-selling aspect, she would like to open up a small shop to sell dog food, leashes, toys, etc. Simple enough, right? In order to do so, they would have to install a new septic/sewage system, just so that they can run a business. Why is this important? Also, in spite of the fact that she is always accommodating to people with special needs (e.g. she would be perfectly willing to carry out an entire litter of puppies in order to show someone in a wheelchair), she would have to take special measures to ensure that all public areas are wheelchair accessible. So she hasn't opened the place up yet. I just watched Be Kind, Rewind today, and although several of the ideas were far-fetched and irrational, one part in particular hit home. A new developer would like to take over an old building in the downtown area of a small town, and the city can basically force the owner out of his business by citing "building code" requirements. Things like this actually happen in real life; I've seen a similar situation with a building in Columbus, OH, that was not up to fire code. In both instances, small businesses are suffering because of big government. In both cases, laws were made "in the interest of the people," but in the end, they hurt the people. In my ideal world, the government would be more responsible for ensuring consumer awareness without the use of coercion. Clearly, people have the right to know that they are preparing to enter a dangerous building. Beyond that, however, if that individual wants to take the calculated risk of going in, anyways (whether to work or conduct business), it should be up to the individual. Government hand-holding only causes more problems, and the implication of the article that government needs to step in and make measures to ensure that capitalism "rewards wealth creators" is mistaken. /rant (sorry about that)
Tichy 19y ago
What does that story have to do with capitalism? Some random company seems to have made some decision about some random employee. That has nothing to do with capitalism - capitalism did not tell the company to act in that way. I can only shake my head in disbelief at so much nonsense.
gscott 19y ago
Live, learn, then roll your own web application.
david927 19y ago
The point of the article, that capitalism has a natural inclination to increase the disparity between wealthy and poor, has been long assumed as a self-evident property of capitalism. This doesn’t make it bad, but it does show how it needs to be tempered. Most countries, including America, use a combination of socialism and capitalism to find a healthy balance.
BornInTheUSSR 19y ago
All right... owners are rewarded for their capital risk running the factories and creating the product. John doesn't get paid if he doesn't sell since he's working on commission. He sells at the risk of wasting his time (but not capital), makes bank and now he's fired. Where is the injustice of him losing everything? Did he have to give back his commission? His risk was rewarded. There's a definite hint of an agenda here.
pchristensen 19y ago
Lesson learned: creating a profitable, repeatable business process is more valuable than being an excellent piece of that process. That's something every startup founder should always remember. Google is more than its engineers, Goldman Sachs is more than its IBankers, Hollywood is more than its stars, etc. Companies are engines that turn money into more money - everything else is just a part in that engine. Maybe you can make more money being a part in a big engine than owning your own small engine, but don't complain if the owner of big engine swaps you out.

18 points by nickb 19y ago

Besides the lack of the details (it just doesn't make any sense to fire your top salesman), I just find the article's conclusion to be stupid: "capitalism sucks (... the gov should regulate even more)" Correct me if I'm wrong, but a real life example of the "shoe salesman" is Ross Perot. "He soon had the highest sales in the company and hence received the highest commission. Then in 1961, IBM executives decided to set limits on how much commission a sales person could receive each year. It did not take even three weeks for Perot to reach his yearly maximum, which caused him great frustration. Additionally, Perot had some new business concepts that he wanted IBM to implement. IBM management was extremely resistant to trying his new ideas. Frustration related to the cap on his commission and the insult of deciding not to implement his business ideas, resulted in Perot leaving IBM in 1962 to start his own company. His company, Electronic Data Systems (EDS), was based on the very ideas that IBM rejected." Don't get me wrong, capitalism is not perfect; but it does favor creativity, risk taking, and persistence (in the face of adversity).

wallflower 19y ago
"Failures are like skinned knees - painful but superficial." - Ross Perot +1 for the reminder of Perot's infomercials during his 1992 presidential run in which he delivered his sales pitch for president (charts and all)
- falsestprophet 19y ago
  I am looking for a link, you don't have one do you?
- tjr 19y ago
  The charts were awesome.
rw 19y ago
You misconstrued what the article was claiming... "capitalism sucks (... the gov should regulate even more)" is not the same as "market capitalism is inherently biased towards outcomes that enrich owners of capital at the expense of nonowners who innovate."
- chaostheory 19y ago
  given the title of the blog (Charity Focus), their past articles, and the tone of the current one - "We are favoring the interests of one class over another"; I don't feel that I misconstrued the article. I'm actually surprised this got up voted on a site populated mostly by the can-do, think outside of the box so I can move up the food chain crowd... is YC News readership changing? I could be wrong, but I feel another subtle message the article is giving is: "there's no point - just give up. the evil rich men will always outsmart and bully you no matter how hard you try or how clever u are"
  - pg 19y ago
    is YC News readership changing? Unfortunately this was in fact mostly voted up by recently arrived users. But I'm not panicking yet; overall the quality of the top stories was good today.
    - icky 19y ago
      You can still take something positive away from this article if you look at it as a compelling argument to work for yourself. Charityfocus had an interesting story, but they spun it with the kind of sad, defeatist attitude that is antithetical to the hacker news ethos.
    - Xichekolas 19y ago
      I voted it up because I think it's a great reminder why we should want to be owners and not employees. That is the part of the attraction of a startup... it's definitely more financially secure than a job, from which you can get fired. At a startup the worst you can do is fail and have to get a job. John got the shaft in the short term, but Adidas got rid of their top salesman. John will recover and probably excel, while Adidas just guaranteed that their salesman will never try and achieve anything great. The most obvious effect of an action is not the most important, as stated above.

Fuca 19y ago

There can also be another morale: always be a owner.

nandan 19y ago

Assumptions the article makes: 1. People are stupid, they cant and dont adapt. 2. The market system is rigid and exploitative. Can we expect the three people who were hired instead of John Ulviden to make the same "mistake" he made? Probably not. If they were people looking out for their own self-interests, they would factor in the "mistake" John made and make sure they dont step over the "acceptable" amount of sales. What sort of an effect does this have for Adidias? They reach a high-point in sales due to the energy and creativity of John, but then because of what they did to him, their sales are no longer going up. They have just lost the opportunity to have John take their sales to the next level. And what sort of an opportunity does this present to a competitor like Nike for example? They would probably want John for more than one reason: For his abilities and also for the relationships he has with the customers he won over for Adidas. Heck, why ramble when there is such eloquent exposition at hand: "In addition to these endless pleadings of self-interest, there is a second main factor that spawns new economic fallacies every day. This is the persistent tendency of men to see only the immediate effects of a given policy, or its effects only on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. It is the fallacy of overlooking secondary consequences." - Henry Hazlitt in "Economics in One Lesson" http://jim.com/econ/contents.html http://jim.com/econ/contents.html

NSX2 19y ago
But most people either are stupid and/or can't change because the system is setup to maintain the status quo. If you had any clue how money is introduced into the system, you'd be outraged that banks had the nerve to try to pull such a scam at the expense of the general population. Yet it's been going on since the Medicis and nothing much has changed, even to this modern day. Meanwhile we've created unprecedented wealth over the last 50 years, and yet while being obsessed with money, every person and company, big or small owes the banking establishment tons of money which we either must pay off by assuming more debt - or by handing over the stuff of our production - as is happening now with the housing industry and foreclosures.
- chaostheory 19y ago
  what's a better system then - more socialism and government control? imho that too will lead to maintaining a status quo. The only things that change are the people at the top (gov officials and their families), a lot of resources will be wasted (compared to a more capitalist system), and that it's much much harder for people at the bottom to move up (not to mention less incentive). O yeah, since we're talking about government controlling most of the resources and distribution, you can probably kiss your rights goodbye too. It's not like this hasn't been done before with disasterous results... there's a reason China changed economic systems... "most people either are stupid and/or can't change" doesn't it make sense then for the system not to reward them for their behavior; and instead to reward people that can change and work both hard and smart?

joe24pack 19y ago

This is why I've learned to give only as much as employers expect and occasionally 5 or 10% more. All my best ideas stay with me, for my own projects. I've made the mistake that the company's and mine interests were the same far too often and gotten burned by it. The problem I'll run into is how to align my interests and those of my employees when I'm running my own shop, but I'll worry about that when I need to. Right now it is too soon for those sort of worries.

deleted 19y ago
[deleted]
h34t 19y ago
If you limit the ideas or energy you give to your job, I think you'd better be prepared to give those ideas & that energy to your own project quite quickly and in a concrete way. If your "independent dream project" is too far away on the horizon, you might just get in the habit of holding yourself back from your job, and get used to the idea that you're the type of person who does mediocre work -- and the people you work with may also think of you as mediocre. So the cost of protecting yourself from being burned can cost you in [1] change of personal habits & [2] reputation among those you work with & know your track record. Even in times I've been burned with work/life, I've never regretted the effort I put into doing my best at whatever I set my mind to. I've wished I could have foreseen bad events, but not wished I'd tried less hard. I like trying hard... it's fun; I don't just do it for money. Other people can take away the rewards that I may have been entitled to, but they can't tell me that my efforts were mediocre.
- joe24pack 19y ago
  At my present day job, I don't have to hold my ideas back because they are only tangentially related, if at all, to my employer's line of business. I give my day job only as much energy and enthusiasm as I need to get the work done well and in a timely manner. As far as personal habits go, keeping motivated while working more or less piecemeal on my pet project is difficult, but I've managed to work through worse.

Xichekolas 19y ago

Since the owners of the company didn't create any wealth by creating the company... they just magically were born owning a shoe company and never worked a day in their lives. </sarcasm> What happened to this fabled John is pretty crappy, but that is a risk every employee has always had. The only way to avoid that risk is to put your own capital on the line and be an owner (a founder is an owner, even if it only costs him $10 for the domain name). If anything, this article shows why capitalism does work well. If we weren't using capitalism, John couldn't start over again. If we were under communism, and the State fires and blacklists you, you are screwed. All jobs belong to the state. If we were under feudalism, and the Lord 'fires' you (most likely by taking your plot of land and possibly just killing you), then you're only choice is to try and find another Lord to take you in. How is that better? I'd bet the author wants a benevolent state to give us all jobs that pay the same amount. That is all fine and dandy, except then what would even be the point? At that point we'd be living on Airstrip One and enjoying our daily Two Minutes Hate.

tx 19y ago

I find it strange that a salesperson is named to be the one who creates wealth. If they could create wealth at will, why do they always want exclusive rights to their "territories"?

BrandonM 19y ago

This article is bad mainly because it relies on a strawman as an example. Any (reasonably rational) business owner would love to have a salesman like John, probably promoting him to a higher position where he can have an even better influence. The whole idea of putting a cap on what an employee can earn is a socialistic practice, anyways (don't want employees getting too "unequal"), and has nothing at all to do with capitalism. Do mistakes happen? Yes. Do companies, owners, and other people in power make bad decisions? All the time. Does that mean that capitalism doesn't work? The problem, in my mind, is the one that YCombinator is trying to solve. There are not enough owners. There is not enough competition. The more competition there is among smallish businesses, the more likely that big, inefficient companies and other companies that make bad decisions (like firing your best salesman) will fail. One reason there aren't many owners is all the red tape and government control. Two examples: My stepmother has been breeding and selling German Shepherds for over ten years now, and she gets customers from all over the US. To go along with the dog-selling aspect, she would like to open up a small shop to sell dog food, leashes, toys, etc. Simple enough, right? In order to do so, they would have to install a new septic/sewage system, just so that they can run a business. Why is this important? Also, in spite of the fact that she is always accommodating to people with special needs (e.g. she would be perfectly willing to carry out an entire litter of puppies in order to show someone in a wheelchair), she would have to take special measures to ensure that all public areas are wheelchair accessible. So she hasn't opened the place up yet. I just watched Be Kind, Rewind today, and although several of the ideas were far-fetched and irrational, one part in particular hit home. A new developer would like to take over an old building in the downtown area of a small town, and the city can basically force the owner out of his business by citing "building code" requirements. Things like this actually happen in real life; I've seen a similar situation with a building in Columbus, OH, that was not up to fire code. In both instances, small businesses are suffering because of big government. In both cases, laws were made "in the interest of the people," but in the end, they hurt the people. In my ideal world, the government would be more responsible for ensuring consumer awareness without the use of coercion. Clearly, people have the right to know that they are preparing to enter a dangerous building. Beyond that, however, if that individual wants to take the calculated risk of going in, anyways (whether to work or conduct business), it should be up to the individual. Government hand-holding only causes more problems, and the implication of the article that government needs to step in and make measures to ensure that capitalism "rewards wealth creators" is mistaken. /rant (sorry about that)

Tichy 19y ago

What does that story have to do with capitalism? Some random company seems to have made some decision about some random employee. That has nothing to do with capitalism - capitalism did not tell the company to act in that way. I can only shake my head in disbelief at so much nonsense.

gscott 19y ago

Live, learn, then roll your own web application.

david927 19y ago

The point of the article, that capitalism has a natural inclination to increase the disparity between wealthy and poor, has been long assumed as a self-evident property of capitalism. This doesn’t make it bad, but it does show how it needs to be tempered. Most countries, including America, use a combination of socialism and capitalism to find a healthy balance.

BornInTheUSSR 19y ago

All right... owners are rewarded for their capital risk running the factories and creating the product. John doesn't get paid if he doesn't sell since he's working on commission. He sells at the risk of wasting his time (but not capital), makes bank and now he's fired. Where is the injustice of him losing everything? Did he have to give back his commission? His risk was rewarded. There's a definite hint of an agenda here.

pchristensen 19y ago

Lesson learned: creating a profitable, repeatable business process is more valuable than being an excellent piece of that process. That's something every startup founder should always remember. Google is more than its engineers, Goldman Sachs is more than its IBankers, Hollywood is more than its stars, etc. Companies are engines that turn money into more money - everything else is just a part in that engine. Maybe you can make more money being a part in a big engine than owning your own small engine, but don't complain if the owner of big engine swaps you out.