10 ms·

It's hard for me to think of another reasonable person I disagree with more frequently than Megan McArdle. Other than pure envy, it's hard to see how I could s

by jfager 15y ago

It's hard for me to think of another reasonable person I disagree with more frequently than Megan McArdle. Other than pure envy, it's hard to see how I could somehow be made worse off if Bill Gates' income suddenly doubled, but everything else remained the same. Nobody reasonable begrudges anyone who is wealthy for creating commensurate value. The issue is with wealth that accumulates to those who don't, like CEOs who run their companies into the ground or bankers who crash the entire economy. If you're creating value, the wealth society has given you is probably a bargain for society; if you're not, it's an inefficient allocation of resources, a symptom of a systemic fault that hurts everyone else. It's actually rather more worrying if what they're giving their children is a strong education and an absolutely ferocious work ethic. An aristocracy that simply bequeaths money and social position to its children will eventually fall. And aristocracy that bequeaths the actual skills required to earn more money than everyone else is self perpetuating. Strong education + ferocious work ethic + skills to earn money seems like a weird definition of meritocracy to me, especially given that later in the article we acknowledge that this combo doesn't actually seem to be getting good results. A strong education does not necessarily imply you know how to apply it, and there's certainly a long history of people without that advantage succeeding. The dirty secret of working long hours is that much of it is either for show or spent doing shit work. And the 'actual skills' in question are still very frequently having the right connections. Don't tell me it got hostage to the wrong ideology--tell me why all those professors we paid millions of dollars to study economics couldn't provide a convincing rebuttal to that ideology in advance of the crash. Don't tell me that regulators were stupid or bankers got greedy until you first explain to me why tens of thousands of very well educated people, most of them graduates of colleges and professional schools that had aggressively winnowed them based on intelligence, barely outperformed a bunch of upstart micks, third-generation coupon-clipping WASP dimwits, and central bankers who still worshipped the barbarous relic of the gold standard? I... what?

anigbrowl 15y ago
Yeah, that last paragraph didn't make sense to me either. I think her point is that for all the systemization and professionalization of knowledge over the last several decades, the boom(s) leading up to the financial crisis were just as irrational and ultimately ephemeral as the false wealth of the roaring 20s, when the financial sector was a comparative free-for-all.
ellyagg 15y ago
It feels like one's opinion on this is fundamental. The way people respond to it seems more like built-in bias rather than reasoning by logic. For example, I believe I disagree with you at a premise level rather than a reasoning level. The evidence that working hard helps you get ahead is legion. The evidence that having connections helps you get ahead is legion. Who is right? I've always thought that you got ahead by hard work, even while I spent most of my life being lazy. I didn't turn in home work or pay attention in high school; I couldn't afford college because I wasn't a protected class (unlike my best friend) and my parents simultaneously made too much money and had too many kids to pay it; and I scraped by as an adult, always being able to declare exempt on my taxes. But I knew that if I had really wanted to, I could have done something. Even the college thing was just an excuse. Finally, when I was 25 I decided to work really hard. Within a couple years I was able to get a programming job, and a couple years after that I was making 90k. You can say all day long that it's an anecdote, but seriously, the only luck involved is superficial. If it hadn't been those "lucky" events, it would have been some other ones. I had no connections. I hardly had any friends! My parents didn't help. They wouldn't even let me stay with them while I tried to make something of myself! Hard to say that it's just an anecdote when you lived it. Finally, whenever this issue of how we measure economic mobility comes up on HN, I object. What is the ideal mobility from the bottom quintile to the top quintile, anyway? Genes matter. Parenting matters. Those two things matter way more than anything government has been shown able to do. It is absolutely possible to imagine a society, one with a lot of interventionist and redistributionist policies, where economic mobility is higher because it is more arbitrary rather than merit-based. How far are we willing to take economic mobility? Parents matter more than schools. Should we redistribute children to different parents?
- einhverfr 15y ago
  I am a fan of the idea of working smarter, rather than harder. Sure, when you are starting out in an endeavor, shit work is pretty much where you cut your teeth. For example, as a programmer, cleaning up other peoples' messes. It's also good experience in that it lets you see other peoples' mistakes and gives you an opportunity to see how to avoid them. But I've watched a lot of people do shit work, and even work hard doing shit work. Working hard may be necessary but it falls far short of sufficient. Those who have merit approach the shit work as a way of looking for problems to fix, as a way of finding what can be done to reduce the level of shit, and so forth. Those who do not just keep shovelling away. I'd suggest that finding the right connections is often a matter of demonstrating to the right people that you fit in the former category.
grandalf 15y ago
How is a CEO being paid $10M per year and running the company into the ground different from an employee being paid $6/hour and alienating 10 customers? In both cases the shareholders were harmed. In both cases, the company made a bad hiring decision. If a CEO has the market power to demand a golden parachute and happens to be paid after she's fired, that's a byproduct of her initial market power, not corruption. Unless you idealize a world in which all employees have equal market power then some employees are going to be able to extract better perks, severance, etc.
- skurry 15y ago
  The board of directors decides if a CEO gets hired, and for how much money. Often this board consists of presidents and CEOs of other companies. Is it very far-fetched to suspect that there may be non-market forces at work when this compensation is determined? Quid pro quo? I don't have a chart handy, but I think the pay of a CEO in relation to the average employee of a company has been rising dramatically over the past decades. Are CEOs orders of magnitude more important today than they were 30 years ago? I don't think so.
  - einhverfr 15y ago
    I think you have to define market forces. The market force is simple: "You want me. If you don't pay me enough, I will go somewhere else that will!" In other words, as Adam Smith correctly noted, it is a question of who has power in coercive negotiations. Consequently CEO's get paid so much because they are so much more powerful than workers in that negotiation process, not because they are worth that much more. But a lot of market forces boil down to this sort of power difference analysis. We think of a free market where the consumer has the power and the company does not, but I wonder how often that is really true. But a lot of this boils down to the reason I think folks should try to be able to be self-employed-- it means you negotiate with companies from a position of greater power. I suspect if 60% of the population was self-employed doing everything from janitorial services through database engineering, we'd have no need of minimum wage laws because anyone anywhere could turn down a job offer.
WalterBright 15y ago
>If you're creating value, the wealth society has given you is probably a bargain for society If you're creating value, you're creating it, it isn't being given to you (nor is it being taken from someone else). For example, if I (as a great painter!) take $5 worth of art supplies and create a painting worth $1,000,000, I have gained a million dollars in wealth without taking it from society. In a free market, people can and do create great wealth without deleting someone else's wealth.
- JoshTriplett 15y ago
  Well said. I found the sentence you quoted fundamentally broken to the point of offensiveness. As though society has graciously allowed people to create value. Nobody asked for your permission; don't claim to grant permission for something everyone has the fundamental right to do anyway.
  - jfager 15y ago
    Do you believe that everyone who becomes wealthy by definition must have created value? And that everyone who creates value by definition becomes wealthy? If so, then yes, we hopelessly disagree. If not, then you're agreeing that wealth can accumulate to some people who don't create value and/or can fail to accumulate to some people who do. I'd hope you would also agree that that's a problem, and that we'd be better off if we figured out how to fix it?
    - JoshTriplett 15y ago
      > Do you believe that everyone who becomes wealthy by definition must have created value? And that everyone who creates value by definition becomes wealthy? The latter, sadly, does not inherently hold true; many times people create value but do not manage to get any value for themselves. That situation has improved drastically, but I'd certainly love to see it improved even further. For the former: ignoring theft and fraud, by definition they created value for someone, or they wouldn't have gotten paid. We can argue over whether we would prefer them to have created value in another way, but we don't get to choose that; that remains between them and whoever chose to give them money. If you want to improve that situation to create value in ways you'd prefer, then I'd suggest working to ensure that good mechanisms exist to help people get value from activities you'd prefer to see rewarded, and try to get people to take advantage of them. For example, crowdfunding programs like Kickstarter enabled many creative people to benefit directly from the value they create. We could use a hundred more ideas as novel and useful as crowdfunding; that would help greatly. Or, to put it another way, coming up with such an idea and implementing it would greatly amplify your own ability to create value, and in doing so it would allow you to create the kind of value you'd prefer.
bluedanieru 15y ago
We're basically on the same page, but I'm curious what you think of concentration of wealth and its effect on political processes? Say you've got a person who truly earned his wealth, who is worth billions, and who is using that wealth to corrupt politicians in his favor. You can say 'we need stronger institutions' but it might be the money that's weakening them in the first place. I don't have a good answer for how to reconcile this.

by jfager 15y ago

anigbrowl 15y ago

Yeah, that last paragraph didn't make sense to me either. I think her point is that for all the systemization and professionalization of knowledge over the last several decades, the boom(s) leading up to the financial crisis were just as irrational and ultimately ephemeral as the false wealth of the roaring 20s, when the financial sector was a comparative free-for-all.

ellyagg 15y ago

It feels like one's opinion on this is fundamental. The way people respond to it seems more like built-in bias rather than reasoning by logic. For example, I believe I disagree with you at a premise level rather than a reasoning level. The evidence that working hard helps you get ahead is legion. The evidence that having connections helps you get ahead is legion. Who is right? I've always thought that you got ahead by hard work, even while I spent most of my life being lazy. I didn't turn in home work or pay attention in high school; I couldn't afford college because I wasn't a protected class (unlike my best friend) and my parents simultaneously made too much money and had too many kids to pay it; and I scraped by as an adult, always being able to declare exempt on my taxes. But I knew that if I had really wanted to, I could have done something. Even the college thing was just an excuse. Finally, when I was 25 I decided to work really hard. Within a couple years I was able to get a programming job, and a couple years after that I was making 90k. You can say all day long that it's an anecdote, but seriously, the only luck involved is superficial. If it hadn't been those "lucky" events, it would have been some other ones. I had no connections. I hardly had any friends! My parents didn't help. They wouldn't even let me stay with them while I tried to make something of myself! Hard to say that it's just an anecdote when you lived it. Finally, whenever this issue of how we measure economic mobility comes up on HN, I object. What is the ideal mobility from the bottom quintile to the top quintile, anyway? Genes matter. Parenting matters. Those two things matter way more than anything government has been shown able to do. It is absolutely possible to imagine a society, one with a lot of interventionist and redistributionist policies, where economic mobility is higher because it is more arbitrary rather than merit-based. How far are we willing to take economic mobility? Parents matter more than schools. Should we redistribute children to different parents?

einhverfr 15y ago
I am a fan of the idea of working smarter, rather than harder. Sure, when you are starting out in an endeavor, shit work is pretty much where you cut your teeth. For example, as a programmer, cleaning up other peoples' messes. It's also good experience in that it lets you see other peoples' mistakes and gives you an opportunity to see how to avoid them. But I've watched a lot of people do shit work, and even work hard doing shit work. Working hard may be necessary but it falls far short of sufficient. Those who have merit approach the shit work as a way of looking for problems to fix, as a way of finding what can be done to reduce the level of shit, and so forth. Those who do not just keep shovelling away. I'd suggest that finding the right connections is often a matter of demonstrating to the right people that you fit in the former category.

grandalf 15y ago

How is a CEO being paid $10M per year and running the company into the ground different from an employee being paid $6/hour and alienating 10 customers? In both cases the shareholders were harmed. In both cases, the company made a bad hiring decision. If a CEO has the market power to demand a golden parachute and happens to be paid after she's fired, that's a byproduct of her initial market power, not corruption. Unless you idealize a world in which all employees have equal market power then some employees are going to be able to extract better perks, severance, etc.

skurry 15y ago
The board of directors decides if a CEO gets hired, and for how much money. Often this board consists of presidents and CEOs of other companies. Is it very far-fetched to suspect that there may be non-market forces at work when this compensation is determined? Quid pro quo? I don't have a chart handy, but I think the pay of a CEO in relation to the average employee of a company has been rising dramatically over the past decades. Are CEOs orders of magnitude more important today than they were 30 years ago? I don't think so.
- einhverfr 15y ago
  I think you have to define market forces. The market force is simple: "You want me. If you don't pay me enough, I will go somewhere else that will!" In other words, as Adam Smith correctly noted, it is a question of who has power in coercive negotiations. Consequently CEO's get paid so much because they are so much more powerful than workers in that negotiation process, not because they are worth that much more. But a lot of market forces boil down to this sort of power difference analysis. We think of a free market where the consumer has the power and the company does not, but I wonder how often that is really true. But a lot of this boils down to the reason I think folks should try to be able to be self-employed-- it means you negotiate with companies from a position of greater power. I suspect if 60% of the population was self-employed doing everything from janitorial services through database engineering, we'd have no need of minimum wage laws because anyone anywhere could turn down a job offer.

WalterBright 15y ago

>If you're creating value, the wealth society has given you is probably a bargain for society If you're creating value, you're creating it, it isn't being given to you (nor is it being taken from someone else). For example, if I (as a great painter!) take $5 worth of art supplies and create a painting worth $1,000,000, I have gained a million dollars in wealth without taking it from society. In a free market, people can and do create great wealth without deleting someone else's wealth.

JoshTriplett 15y ago
Well said. I found the sentence you quoted fundamentally broken to the point of offensiveness. As though society has graciously allowed people to create value. Nobody asked for your permission; don't claim to grant permission for something everyone has the fundamental right to do anyway.
- jfager 15y ago
  Do you believe that everyone who becomes wealthy by definition must have created value? And that everyone who creates value by definition becomes wealthy? If so, then yes, we hopelessly disagree. If not, then you're agreeing that wealth can accumulate to some people who don't create value and/or can fail to accumulate to some people who do. I'd hope you would also agree that that's a problem, and that we'd be better off if we figured out how to fix it?
  - JoshTriplett 15y ago
    > Do you believe that everyone who becomes wealthy by definition must have created value? And that everyone who creates value by definition becomes wealthy? The latter, sadly, does not inherently hold true; many times people create value but do not manage to get any value for themselves. That situation has improved drastically, but I'd certainly love to see it improved even further. For the former: ignoring theft and fraud, by definition they created value for someone, or they wouldn't have gotten paid. We can argue over whether we would prefer them to have created value in another way, but we don't get to choose that; that remains between them and whoever chose to give them money. If you want to improve that situation to create value in ways you'd prefer, then I'd suggest working to ensure that good mechanisms exist to help people get value from activities you'd prefer to see rewarded, and try to get people to take advantage of them. For example, crowdfunding programs like Kickstarter enabled many creative people to benefit directly from the value they create. We could use a hundred more ideas as novel and useful as crowdfunding; that would help greatly. Or, to put it another way, coming up with such an idea and implementing it would greatly amplify your own ability to create value, and in doing so it would allow you to create the kind of value you'd prefer.

bluedanieru 15y ago

We're basically on the same page, but I'm curious what you think of concentration of wealth and its effect on political processes? Say you've got a person who truly earned his wealth, who is worth billions, and who is using that wealth to corrupt politicians in his favor. You can say 'we need stronger institutions' but it might be the money that's weakening them in the first place. I don't have a good answer for how to reconcile this.