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I believe PG's essay is first of all too long, there are two or three interesting ideas in it and some libertarian propaganda pieces. In the first part, he arg

by yk 14y ago

I believe PG's essay is first of all too long, there are two or three interesting ideas in it and some libertarian propaganda pieces. In the first part, he argues about different levels in skill which supposedly generate different levels of income. The argument works well for sport stars: A football team, that draws a crowd of 50,000 to a home match every two weeks, produces something like $25,000 per week per player. By contrast a slightly worse player who is never playing in a big league will at best generate 1/10th or 1/100th of this numbers. The crucial point here is, that the players are exploiting their personal skill to do this. By contrast in the case of an CEO, the immediate value is created by workers. ( The guys in the factory who actually assemble a product, not by R&D and not by the CEO himself). The CEO is merely responsible for creating an environment were the workers can effectively create value. Therefore the wage is not only based on his personal skill, but also on the skill of others. The later sections of the essay are sometimes simply a libertarian straw man ( The Daddy Model of Wealth), sometimes very good ( in particular the second half of "The Lever of Technology").

runako 14y ago
>> The CEO is merely responsible for creating an environment were the workers can effectively create value. With the shortened tenure of CEOs, they often don't even have this responsibility in practice. The average tenure of an S&P 1500 company is something like 6.5 years. These companies generally have 20k-200k employees; I don't think anyone would argue that 6 years is long enough to create an environment where workers can create value in a firm of 200k employees. More like "don't screw up the environment that worked when you got there" in most cases. (Obviously turnarounds are different.) There's another big problem with the theory that wealth is generally deserved because markets allocate it efficiently. CEOs of public companies generally make 100s of times what their employees make, even when they are actively destroying value. For example, compare the wealth destruction on Ballmer's watch with his compensation over the same period.

by yk 14y ago

runako 14y ago

>> The CEO is merely responsible for creating an environment were the workers can effectively create value. With the shortened tenure of CEOs, they often don't even have this responsibility in practice. The average tenure of an S&P 1500 company is something like 6.5 years. These companies generally have 20k-200k employees; I don't think anyone would argue that 6 years is long enough to create an environment where workers can create value in a firm of 200k employees. More like "don't screw up the environment that worked when you got there" in most cases. (Obviously turnarounds are different.) There's another big problem with the theory that wealth is generally deserved because markets allocate it efficiently. CEOs of public companies generally make 100s of times what their employees make, even when they are actively destroying value. For example, compare the wealth destruction on Ballmer's watch with his compensation over the same period.