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For "how do you define "paid enough"?", yes, I did mean they weren't paid enough for the value they create, because of the price distortions I talked about that

by mrow84 13y ago

For "how do you define "paid enough"?", yes, I did mean they weren't paid enough for the value they create, because of the price distortions I talked about that occur during the bargaining (price setting) process. For "Yes, by automating their processes so that a single worker is much more productive and therefore can command higher wages. Not by paying people higher wages for doing the same work they were doing before." - automation absolutely is the only route to long term prosperity: it is what has create civilisation as we know it. However, like I said there are strong incentives to stop people becoming more productive, because it is to our benefit, even in a market, once we have invested in a certain kind of productivity (indeed this goes both ways, with workers wanting to protect outdated forms of labour well beyond time). A lot of money gets sunk into developing places, and that money needs a healthy return. So although in principle, yes, there is something to be gained by helping people become more productive, that is on the assumption that the cost of doing so is negligible, which it often isn't. Indeed, paying those costs, the ones that help people become more productive, are exactly what should be happening, and what will be avoided by whoever it was who previously invested in those people, until the investor(s) have got their return (which is essentially an indefinite period), or until the return on a new investment will be greater than its cost (and given that we're talking about moving cities, or often countries, those costs can be large indeed). Just to (try and) be clear, I fully agree that what is required is helping people to be more productive. I don't agree that "free" competition is the optimal way to accomplish that. (I quote free because making competition free requires significant effort and enforcement, which is often lacking in the kind of environments that we are talking about) As a small provocative thought: companies are legal entities, so how about requiring companies to be licensed, prohibiting them being owned, and thus requiring all returns to be either reinvested in the company or distributed to the people who work there. Investment would be entirely through bond issue, which is perfectly sensible, can be adjusted for any desired level of risk, and has good market efficiency. Lots of our structures today aren't defined by natural law, they are just arbitrary, and perhaps they have negative effects? I'm afraid I'm off to bed, so I won't respond, but I'd be interested to read your reply if you write it. Good night/morning/afternoon/evening.

pdonis 13y ago
> yes, I did mean they weren't paid enough for the value they create, because of the price distortions I talked about that occur during the bargaining (price setting) process The problem with this hypothesis is that there's no way of proving it. And the claim becomes questionable anyway if the company's response when labor is no longer available at the low wage they were paying is to automate rather than to pay higher wages. If the work the people were doing before really was more valuable, it would have been easier to just pay the workers higher wages. > A lot of money gets sunk into developing places, and that money needs a healthy return. So although in principle, yes, there is something to be gained by helping people become more productive, that is on the assumption that the cost of doing so is negligible, which it often isn't It's not quite that simple. Yes, the cost of helping people become more productive is often not negligible, but neither are the benefits. Forgoing those benefits because of what's already been invested is just the sunk cost fallacy. A major reason businesses still get away with it is, as I said before, that governments prevent fair competition. Another reason is that corporate governance is screwed up, so that any investment with a payback time horizon longer than the next quarter's returns has to run the gauntlet before being considered. > (I quote free because making competition free requires significant effort and enforcement, which is often lacking in the kind of environments that we are talking about) But any method for helping people become more productive is going to require significant effort and enforcement. Otherwise it's just another system that people will game. Free competition is like democracy according to Churchill: the worst system except for all the others. > companies are legal entities, so how about requiring companies to be licensed, prohibiting them being owned I think that would just make the screwed-up-ness of corporate governance worse. A key reason it's screwed up now is that the people in control of large corporations are not "owners" in any meaningful sense; sure, they own large blocks of stock (mainly because of being granted big blocks of options for no good reason), but they don't have the sense of ownership of the business that, say, a startup founder or the proprietor of a mom-and-pop grocery store has. If the business does well, great--they get big bonuses and they can exercise their options and sell their stock for more. If the business does badly--meh; they have their golden parachutes. So I think we need more ownership, not less, because ownership forces accountability, which is what's sadly lacking now. Unfortunately I don't have an easy answer for how to do that, because a big reason for the current lack of a sense of ownership of corporations is that much of the stock ownership now is with large mutual funds, not individuals. This has at least two negative effects. First, it shortens the effective time horizon--even if you are investing for retirement in 30 years, your mutual fund is looking for returns right now, otherwise it will move its money to a different stock. Second, it means that most shareholders are now corporations themselves, not individuals, so the original idea of corporations ultimately being responsible to the individual humans who were its shareholders is gone. And mutual funds aren't going anywhere because they serve a huge and important need--retirement investing. One possible way to help is to use technology to reduce the need for large corporations, by making more and more things doable by smaller and smaller groups of people. Making more and more things available as services helps with that. (Pg talks about this in one of his essays, where he wonders how small you could make a company if you outsourced everything except product development.) The smaller the average corporation is, the harder it is, on average, to abuse corporate governance.

by mrow84 13y ago

pdonis 13y ago

> yes, I did mean they weren't paid enough for the value they create, because of the price distortions I talked about that occur during the bargaining (price setting) process The problem with this hypothesis is that there's no way of proving it. And the claim becomes questionable anyway if the company's response when labor is no longer available at the low wage they were paying is to automate rather than to pay higher wages. If the work the people were doing before really was more valuable, it would have been easier to just pay the workers higher wages. > A lot of money gets sunk into developing places, and that money needs a healthy return. So although in principle, yes, there is something to be gained by helping people become more productive, that is on the assumption that the cost of doing so is negligible, which it often isn't It's not quite that simple. Yes, the cost of helping people become more productive is often not negligible, but neither are the benefits. Forgoing those benefits because of what's already been invested is just the sunk cost fallacy. A major reason businesses still get away with it is, as I said before, that governments prevent fair competition. Another reason is that corporate governance is screwed up, so that any investment with a payback time horizon longer than the next quarter's returns has to run the gauntlet before being considered. > (I quote free because making competition free requires significant effort and enforcement, which is often lacking in the kind of environments that we are talking about) But any method for helping people become more productive is going to require significant effort and enforcement. Otherwise it's just another system that people will game. Free competition is like democracy according to Churchill: the worst system except for all the others. > companies are legal entities, so how about requiring companies to be licensed, prohibiting them being owned I think that would just make the screwed-up-ness of corporate governance worse. A key reason it's screwed up now is that the people in control of large corporations are not "owners" in any meaningful sense; sure, they own large blocks of stock (mainly because of being granted big blocks of options for no good reason), but they don't have the sense of ownership of the business that, say, a startup founder or the proprietor of a mom-and-pop grocery store has. If the business does well, great--they get big bonuses and they can exercise their options and sell their stock for more. If the business does badly--meh; they have their golden parachutes. So I think we need more ownership, not less, because ownership forces accountability, which is what's sadly lacking now. Unfortunately I don't have an easy answer for how to do that, because a big reason for the current lack of a sense of ownership of corporations is that much of the stock ownership now is with large mutual funds, not individuals. This has at least two negative effects. First, it shortens the effective time horizon--even if you are investing for retirement in 30 years, your mutual fund is looking for returns right now, otherwise it will move its money to a different stock. Second, it means that most shareholders are now corporations themselves, not individuals, so the original idea of corporations ultimately being responsible to the individual humans who were its shareholders is gone. And mutual funds aren't going anywhere because they serve a huge and important need--retirement investing. One possible way to help is to use technology to reduce the need for large corporations, by making more and more things doable by smaller and smaller groups of people. Making more and more things available as services helps with that. (Pg talks about this in one of his essays, where he wonders how small you could make a company if you outsourced everything except product development.) The smaller the average corporation is, the harder it is, on average, to abuse corporate governance.