4 ms·

... when someone makes money, it's because he's providing something of value to society. And the more money he makes, the more value he's delivering. I agree t

by mmorris 16y ago

... when someone makes money, it's because he's providing something of value to society. And the more money he makes, the more value he's delivering. I agree that people should receive reward in proportion to the value they create, but I don't believe that people who make more money are always delivering more value. The main problem with that idea is the difficulty in determining how much value a single individual actually generates. There are plenty of terrible CEOs who destroy the value of the companies they manage, yet still receive huge salaries and bonus packages, and there are plenty of great teachers/engineers/others lower on the totem pole who earn a relative pittance. Is this because of the value they've created, or due to the CEO's direct proximity to value creation, an ability to convince others of their importance, and a relatively small supply side? I'd say looking at the ridiculous increases in the CEO-worker earning gap over the last few decades it has been warped by factors other than deservedness. It may be true that there is a correlation between value created and income, but I think there are too many other factors at play to say that it is a general rule.

CWuestefeld 16y ago
I don't believe that people who make more money are always delivering more value. Then why are people giving them money? What makes you think that you (or some regulator or something) could do a better job of evaluating their worth. There are plenty of terrible CEOs who destroy the value of the companies they manage, yet still receive huge salaries and bonus packages I think this is a case of the normal human inability to assess the risk of rare, significant events (and hence our overreaction to terrorist attacks, child abduction, etc.). While the kind of thing you cite certainly happens from time to time, I submit that it's much rarer than many people seem to perceive -- the very fact that they make big news is evidence of how unusual it is. The hiring of a CEO is a very significant decision that is attended with a certain amount of risk. On one hand it's important to be able to attract the best talent available, but on the other hand the calculated risk may crap out. Eliminating the risk of losses due to contract buyouts is (obviously, at least to me) not the solution. I know that I'm not capable of doing the job that my company's CEO does; I don't know anyone who is. Even if I were technically capable, I don't think I could handle the responsibility she shoulders, keeping us all profitably employed. I think she earns everything she gets. I'd say looking at the ridiculous increases in the CEO-worker earning gap over the last few decades it has been warped by factors other than deservedness. ... there are plenty of great teachers/engineers/others lower on the totem pole who earn a relative pittance I think that much of that can be attributed to the fact that the market is not free to assign value as appropriate. For one thing, we have protectionism preserving low-skill jobs. While the value of an excellent CEO really is increasing, the value of a low-skill assembly worker is not. But tariffs (caused in part by the demagoguery of greed, I might add) prevent us from getting rid of those jobs, which would eventually lead to greater availability of high-skill jobs. In the specific case of teachers, the mismatch of contribution to compensation is explicitly their own fault. The rules that their unions demand we adhere to disallow us from compensating better those with greater value. The same is true of other unions (which tends to correspond to those lower on your totem pole).
- mmorris 16y ago
  Then why are people giving them money? What makes you think that you (or some regulator or something) could do a better job of evaluating their worth. First off, I don't believe that we should impose a different system for valuing people's salaries, and I didn't mean to imply that if I did. I just think that there are obvious flaws in the current system. I wish I had an answer that would fix all the issues, but, of course, it's not that simple. Essentially, my impression is that you believe that the market which determines people's salaries is entirely rational, and I disagree. As in most (all?) marketplaces, it's not really about the value, it's about the perceived value. Some people (and they are not evenly distributed across all career paths) are better than others at convincing people they are worth a lot, so they get paid more. This is partly due to proximity to the money making process, which is one of the reasons that salespeople are paid so much (it's easier for them to make an argument based on "look how much money I've made you!"). In addition, people don't value CEOs (or anyone else for that matter) in a vacuum. They look at what other CEOs are being paid and are primed to base their valuation accordingly. If their pay was truly based on value-delivered, this wouldn't be the case. I wholeheartedly agree with you that government involvement via tariffs and salary management is generally a bad thing. It only makes a messy situation messier. But that doesn't mean the free market is perfect, and examining and understanding its weaknesses can only benefit us.

by mmorris 16y ago

CWuestefeld 16y ago

I don't believe that people who make more money are always delivering more value. Then why are people giving them money? What makes you think that you (or some regulator or something) could do a better job of evaluating their worth. There are plenty of terrible CEOs who destroy the value of the companies they manage, yet still receive huge salaries and bonus packages I think this is a case of the normal human inability to assess the risk of rare, significant events (and hence our overreaction to terrorist attacks, child abduction, etc.). While the kind of thing you cite certainly happens from time to time, I submit that it's much rarer than many people seem to perceive -- the very fact that they make big news is evidence of how unusual it is. The hiring of a CEO is a very significant decision that is attended with a certain amount of risk. On one hand it's important to be able to attract the best talent available, but on the other hand the calculated risk may crap out. Eliminating the risk of losses due to contract buyouts is (obviously, at least to me) not the solution. I know that I'm not capable of doing the job that my company's CEO does; I don't know anyone who is. Even if I were technically capable, I don't think I could handle the responsibility she shoulders, keeping us all profitably employed. I think she earns everything she gets. I'd say looking at the ridiculous increases in the CEO-worker earning gap over the last few decades it has been warped by factors other than deservedness. ... there are plenty of great teachers/engineers/others lower on the totem pole who earn a relative pittance I think that much of that can be attributed to the fact that the market is not free to assign value as appropriate. For one thing, we have protectionism preserving low-skill jobs. While the value of an excellent CEO really is increasing, the value of a low-skill assembly worker is not. But tariffs (caused in part by the demagoguery of greed, I might add) prevent us from getting rid of those jobs, which would eventually lead to greater availability of high-skill jobs. In the specific case of teachers, the mismatch of contribution to compensation is explicitly their own fault. The rules that their unions demand we adhere to disallow us from compensating better those with greater value. The same is true of other unions (which tends to correspond to those lower on your totem pole).

mmorris 16y ago
Then why are people giving them money? What makes you think that you (or some regulator or something) could do a better job of evaluating their worth. First off, I don't believe that we should impose a different system for valuing people's salaries, and I didn't mean to imply that if I did. I just think that there are obvious flaws in the current system. I wish I had an answer that would fix all the issues, but, of course, it's not that simple. Essentially, my impression is that you believe that the market which determines people's salaries is entirely rational, and I disagree. As in most (all?) marketplaces, it's not really about the value, it's about the perceived value. Some people (and they are not evenly distributed across all career paths) are better than others at convincing people they are worth a lot, so they get paid more. This is partly due to proximity to the money making process, which is one of the reasons that salespeople are paid so much (it's easier for them to make an argument based on "look how much money I've made you!"). In addition, people don't value CEOs (or anyone else for that matter) in a vacuum. They look at what other CEOs are being paid and are primed to base their valuation accordingly. If their pay was truly based on value-delivered, this wouldn't be the case. I wholeheartedly agree with you that government involvement via tariffs and salary management is generally a bad thing. It only makes a messy situation messier. But that doesn't mean the free market is perfect, and examining and understanding its weaknesses can only benefit us.