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I don't think your analogy proves the point you think it does and is in fact a pretty great argument for why CEOs should be paid less and taxed more. A large pa

I don't think your analogy proves the point you think it does and is in fact a pretty great argument for why CEOs should be paid less and taxed more. A large part of the success of both athletes and CEOs is up to circumstances and chance, as well as the other competitors who may be deficient in a number of ways. Being less incompetent than your peers doesn't mean the same thing as being competent.

ThrustVectoring 7y ago
Pay isn't just about giving people what they deserve. It's also about providing the incentives that create the behavior you want. You can do that through piece-work compensation, but that's extremely hard to manage for executives (and knowledge workers, too, but that's a separate discussion). If your workers aren't risk-adverse, then a tournament is exactly as efficient as a piece-work compensation scheme for convincing them to put in effort. The proof is a bit more involved than I'm willing to digest for a HN comment, but there's a full paper you can read about this here: http://faculty.smu.edu/Millimet/classes/eco7321/papers/lazear%20rosen%201981.pdf http://faculty.smu.edu/Millimet/classes/eco7321/papers/lazea... Anyhow, what all this means is that providing a prize to top performers means you can get a ton of effort, training, and work from people competing for it, and you don't have to incur the expense of monitoring the inputs into performance or quantifying the overall performance rendered. You only have to care about the rank-ordering of performance.