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should the guys who drive an armored car that carries millions of dollars in bonds get paid more than the guys that drive an armored car that only carries thous

by mdasen 18y ago

should the guys who drive an armored car that carries millions of dollars in bonds get paid more than the guys that drive an armored car that only carries thousands of dollars in cash? Does the amount of money handled change the difficult of the work? I think this is an interesting aside in the article. Seth seems to be arguing that it's the same work, but it really isn't. The amount of money handled does change the difficulty. First, it's going to require more trips to move the money and that is increased labor. More importantly, the risk goes up the more money you're transporting. Maybe those changes are small. OK. The real difference comes in the value to the firm hiring you. If you're being entrusted with $1M vs $100K, the firm has a greater interest in making sure you're good at your job. Loosing $1M because you hired a poor driver is worse than loosing $100K because you hired a poor driver. Likewise, when we're talking about hiring for a CEO, a firm will want the best since they're entrusting that person with the livelihood of the firm. His or her job may be no more difficult than anyone else's job, but the firm has a high interest in making sure the CEO is competent. An incompetent person in an entry-level position is unlikely to be in a position to do the damage that an incompetent CEO could do to the firm. So, by paying high salaries, firms hope to be able to take their pick of managers and get the most competent. However, firms have yet to show that they are able to determine the competent from the incompetent. So, at the moment, most firms are simply paying high salaries to whomever is good at politicking and showing themselves in a good light regardless of actual competence. There is a theory behind it and it's not just marketing. However, the fact that firms have proven unable to filter the competent from the incompetent limits the applicability of that theory.

time_management 18y ago
So, by paying high salaries, firms hope to be able to take their pick of managers and get the most competent. However, firms have yet to show that they are able to determine the competent from the incompetent. So, at the moment, most firms are simply paying high salaries to whomever is good at politicking and showing themselves in a good light regardless of actual competence. Correct. I would go further and argue that paying stratospheric salaries for executives actually reduces the quality of people selected. The number of competitors increases, but the nature of the competition changes dramatically and therefore the selection process becomes a nasty pile of fail. Short-sighted narcissists instead of leaders rise. They elevate like people, and so on, until their worldview completely dominates the corporate sphere. High-ranking political positions pay a middle-class salary (although the social access these positions offer corrupt this intention) for a reason: people who attain them should be those who want the job and to do the work (in this case, to lead) rather than those seeking the material perks.
- mdasen 18y ago
  Yeah, as the number of applicants increases due to large salaries, the difficulty to figure out which candidates are good increases. One area that economists often point this out is in education. Many would like teachers to be both paid more and held to a higher standard (when being hired) to get the best teachers. However, as you increase the screening and competition for teaching jobs, the ones with the most alternative options (who are likely the best teachers) will seek jobs elsewhere rather than being subjected to a battery of tests and bureaucracy. In this case, there aren't as many alternatives since CEO positions are at the top of the pile. Likewise, political positions come with other desired perks - namely power and prestige. Economics in this area is really hard. If you (or anyone) come up with a better system of screening individuals for positions, the world will be a much better place. Right now, we typically rely on things like resumes, experience, interviews, etc. which don't really give a good picture. For example, someone who worked on impressive thing X might have had a really minor roll in X and someone else who worked on slightly less impressive Y might have been integral to Y, but resumes can sometimes deceive on that. However, both of those candidates can be filtered above someone with no experience. Eh. I really wish I had a good solution to this - and other rating problems. Yelp is nice, but just because many people are rating things doesn't make it accurate - sometimes people get angry over something that isn't the other party's fault and can take out retribution which skews the ratings. Interesting to think about though.
  - time_management 18y ago
    Economics in this area is really hard. If you (or anyone) come up with a better system of screening individuals for positions, the world will be a much better place. Right now, we typically rely on things like resumes, experience, interviews, etc. which don't really give a good picture. There's a solution, but it's radical: a massive push in the direction of social equality, decoupling one's material well-being and lifestyle (somewhat) from one's job position. Right now, the perks associated with a corporate leadership position are so obscene as to create an incentive for the wrong people not merely to put themselves forward for these positions (which could be attributed to a benign overestimation of one's skill) but to actively manipulate the system. Obviously, society needs to encourage and reward hard work, but the mainstream corporate approach is seriously broken. Hard jobs should pay more than easier ones, and high-ranking jobs should only be available to those with sufficient experience and knowledge, but the concept of a job title as a reward for previous accomplishments (work for less than you're worth now, maybe be an overcompensated and famous CEO later) has proven itself to be a practical disaster, in addition to the model's ethical problems. The main reward for a high-power job should be the work itself, so that those who fill the positions are likely to be people who actually want to do the job (and are likely to be good at it) rather than those who want the salaries and status. 95% of Fortune 500 executives are not people who want intrinsically to run companies; they want the perks. Regarding material rewards, that's a matter of "getting the stakes right"-- not so low as to be insulting (since trivial rewards/costs are less incentive than intrinsic motivations) but not so high as to encourage people to lie about their talents, skills, and work ethics (more than they already do, human nature being what it is).
katz 18y ago
That is true. There is another problem: most companies want a person with executive experience in the specific field. There are only a few people with that experience since there are only a few companies.

by mdasen 18y ago

time_management 18y ago

So, by paying high salaries, firms hope to be able to take their pick of managers and get the most competent. However, firms have yet to show that they are able to determine the competent from the incompetent. So, at the moment, most firms are simply paying high salaries to whomever is good at politicking and showing themselves in a good light regardless of actual competence. Correct. I would go further and argue that paying stratospheric salaries for executives actually reduces the quality of people selected. The number of competitors increases, but the nature of the competition changes dramatically and therefore the selection process becomes a nasty pile of fail. Short-sighted narcissists instead of leaders rise. They elevate like people, and so on, until their worldview completely dominates the corporate sphere. High-ranking political positions pay a middle-class salary (although the social access these positions offer corrupt this intention) for a reason: people who attain them should be those who want the job and to do the work (in this case, to lead) rather than those seeking the material perks.

mdasen 18y ago
Yeah, as the number of applicants increases due to large salaries, the difficulty to figure out which candidates are good increases. One area that economists often point this out is in education. Many would like teachers to be both paid more and held to a higher standard (when being hired) to get the best teachers. However, as you increase the screening and competition for teaching jobs, the ones with the most alternative options (who are likely the best teachers) will seek jobs elsewhere rather than being subjected to a battery of tests and bureaucracy. In this case, there aren't as many alternatives since CEO positions are at the top of the pile. Likewise, political positions come with other desired perks - namely power and prestige. Economics in this area is really hard. If you (or anyone) come up with a better system of screening individuals for positions, the world will be a much better place. Right now, we typically rely on things like resumes, experience, interviews, etc. which don't really give a good picture. For example, someone who worked on impressive thing X might have had a really minor roll in X and someone else who worked on slightly less impressive Y might have been integral to Y, but resumes can sometimes deceive on that. However, both of those candidates can be filtered above someone with no experience. Eh. I really wish I had a good solution to this - and other rating problems. Yelp is nice, but just because many people are rating things doesn't make it accurate - sometimes people get angry over something that isn't the other party's fault and can take out retribution which skews the ratings. Interesting to think about though.
- time_management 18y ago
  Economics in this area is really hard. If you (or anyone) come up with a better system of screening individuals for positions, the world will be a much better place. Right now, we typically rely on things like resumes, experience, interviews, etc. which don't really give a good picture. There's a solution, but it's radical: a massive push in the direction of social equality, decoupling one's material well-being and lifestyle (somewhat) from one's job position. Right now, the perks associated with a corporate leadership position are so obscene as to create an incentive for the wrong people not merely to put themselves forward for these positions (which could be attributed to a benign overestimation of one's skill) but to actively manipulate the system. Obviously, society needs to encourage and reward hard work, but the mainstream corporate approach is seriously broken. Hard jobs should pay more than easier ones, and high-ranking jobs should only be available to those with sufficient experience and knowledge, but the concept of a job title as a reward for previous accomplishments (work for less than you're worth now, maybe be an overcompensated and famous CEO later) has proven itself to be a practical disaster, in addition to the model's ethical problems. The main reward for a high-power job should be the work itself, so that those who fill the positions are likely to be people who actually want to do the job (and are likely to be good at it) rather than those who want the salaries and status. 95% of Fortune 500 executives are not people who want intrinsically to run companies; they want the perks. Regarding material rewards, that's a matter of "getting the stakes right"-- not so low as to be insulting (since trivial rewards/costs are less incentive than intrinsic motivations) but not so high as to encourage people to lie about their talents, skills, and work ethics (more than they already do, human nature being what it is).

katz 18y ago

That is true. There is another problem: most companies want a person with executive experience in the specific field. There are only a few people with that experience since there are only a few companies.