A challenge for capitalists

[Stevicus]

So, here is the challenge, for those willing to accept it.


Capitalists often argue that they're "worth it," that those at the very top who earn exorbitant, obscenely high salaries are worth every penny to whatever organization is paying them that amount. This argument seems to imply that an organization might lose money (or be diminished in some other way) if they don't pay some executive a ridiculously high salary.


Well, I would just like to see what this would look like in writing, showing the math.


I found a list of the highest paid CEOs (Who Was the Highest Paid American CEO in 2018?). It's a little less than a year old, but it still should be current enough for this exercise.


Let's take number 3 on the list, Bob Iger, CEO/Chairman of Walt Disney Co., whose compensation in 2018 was $146,616,652. That's $70,488.78 per hour, based on a 40-hour work week.


What, exactly, is the message they're sending by paying such a huge salary? Is this guy so incredibly talented and indispensible that they just had to have him as CEO? Are they saying that they would lose money if they hired someone else for less? How do they calculate something like that? What if they got someone who's a little less qualified who's willing to take less?


For example, say they got someone to take the job at $10,000,000 a year (which is still obscenely high, but nevermind). Disney would save $136,616,652, but by paying Iger what they're paying him, they're essentially saying that, without his leadership, the company would end up losing whatever is they'd be saving and be worse off financially.


Again, how do they calculate this? Is there some kind of secret accountant's formula they use? If anyone knows the answer to this, I'm genuinely curious. It sounds like it's just stupidity, greed, and manipulation, but if there truly is a rational, scientifically provable explanation, I'd love to see it (and I'd love to look at the math).


According to his Wiki article, Bob Iger has a BS degree in radio and TV from Ithaca College. No other education to speak of, and he's certainly not the creator and founder of the company named after Walt Disney. It wasn't his vision that built Disneyland or Disney World. So, what makes him worth that much to that organization?


Of course, I'm not necessarily expecting that anyone here would know the inner workings of the Walt Disney Co., although if you're familiar with any other company with a similar situation, I'd be interested in hearing your comments.


If a bachelor's degree is all it takes to be a CEO, then why doesn't everyone with bachelor's degrees earn $146 million per year? Another commonly used capitalist argument is that the big money goes to those with the best skill sets, and that if one is not making much money, then it's because their skills are not useful or valuable.


In comparison, I've read that the average neurosurgeon makes about $500,000 a year, which is decent, and commensurate with the required skills, education, and the actual work involved. There are also very few people who can actually do that job, so there are actual shortages in qualified people.


In contrast, I would seriously doubt that any company would have trouble finding someone qualified to be a CEO, so I'm sure they would have plenty of applicants for the job. Everybody wants to be the boss, so there's plenty of people wanting the job, and many of them probably have bachelor's degrees in something or other. In terms of supply and demand, the supply of available personnel to be CEO is probably greater than that of the supply of qualified neurosurgeons.


So, all you capitalists and self-proclaimed experts in the study of economics, this is your challenge. Please show your work. Take any CEO or any other high-salaried individual and prove that they're actually "worth it" and that they're somehow so much more valuable and useful to the well-being of the United States. Prove that their skill set (and whatever it is they create or produce, if anything) is actually worth that much more than the skill set of a minimum wage worker (or even a neurosurgeon).


Who has more practical use to the United States? The CEO of Disney, or 293 neurosurgeons?

 

[Sunstone]

It would be a huge undertaking to fairly calculate whether most any CEO was worth what they were being paid. You'd have to calculate their productivity, which would mean assigning a dollar value to their decisions, and a dollar value to the consequence of their decisions. Very hard to do.

On the other hand, I think just about anyone who investigates can figure out that the CEO of the Sears Holding Company is not worth his four million or so per year. Edward S. Lampert is almost universally recognized as a screw up. So why does he even have a job, let alone the job of CEO of Sears?

Who knows? All I know is he's such a screw up, the country is likely to see him president some day.

 

[Stevicus]

It would be a huge undertaking to fairly calculate whether most any CEO was worth what they were being paid. You'd have to calculate their productivity, which would mean assigning a dollar value to their decisions, and a dollar value to the consequence of their decisions. Very hard to do.

Granted, it is a tall order. I was just wondering if there was an actual "science" to it, or if it was just a matter of whimsy. Capitalists and economists make it out to be so logical and legitimate, but how can anyone be sure that it's not some kind of flim-flam?

On the other hand, I think just about anyone who investigates can figure out that the CEO of the Sears Holding Company is not worth his four million or so per year. Edward S. Lampert is almost universally recognized as a screw up. So why does he even have a job, let alone the job of CEO of Sears?

Who knows? All I know is he's such a screw up, the country is likely to see him president some day.

Yeah, I've heard about that guy. I wonder about these things, too. It reminds me of the old saying "it's not what you know, it's who you know." I'm wondering if they all belong to some secret society. Maybe they're a race of aliens disguised as humans. Or maybe they're agents of the Devil.

I struggle to find a rational and plausible explanation, which is why I started this thread. I really want to know the answer to this.

I recognize that I may not ever know the meaning of life or whether or not there's a God. But this is a question within the realm of human knowledge and control, so somebody out there knows.

 

[sun rise]

There's no science.

I feel one way about someone who starts a business, works 80 hours a week for a couple of decades, turns the business into total success employing tens of thousands of people at a decent wage and then retires and uses his billions in projects designed to help humanity.

The vast majority are not in the class at all. Boeing. Sears. And so forth. Are they truly earning large salaries for messing up companies or for being good buddies with members of the Board?

 

[Milton Platt]

So, here is the challenge, for those willing to accept it.


Capitalists often argue that they're "worth it," that those at the very top who earn exorbitant, obscenely high salaries are worth every penny to whatever organization is paying them that amount. This argument seems to imply that an organization might lose money (or be diminished in some other way) if they don't pay some executive a ridiculously high salary.


Well, I would just like to see what this would look like in writing, showing the math.


I found a list of the highest paid CEOs (Who Was the Highest Paid American CEO in 2018?). It's a little less than a year old, but it still should be current enough for this exercise.


Let's take number 3 on the list, Bob Iger, CEO/Chairman of Walt Disney Co., whose compensation in 2018 was $146,616,652. That's $70,488.78 per hour, based on a 40-hour work week.


What, exactly, is the message they're sending by paying such a huge salary? Is this guy so incredibly talented and indispensible that they just had to have him as CEO? Are they saying that they would lose money if they hired someone else for less? How do they calculate something like that? What if they got someone who's a little less qualified who's willing to take less?


For example, say they got someone to take the job at $10,000,000 a year (which is still obscenely high, but nevermind). Disney would save $136,616,652, but by paying Iger what they're paying him, they're essentially saying that, without his leadership, the company would end up losing whatever is they'd be saving and be worse off financially.


Again, how do they calculate this? Is there some kind of secret accountant's formula they use? If anyone knows the answer to this, I'm genuinely curious. It sounds like it's just stupidity, greed, and manipulation, but if there truly is a rational, scientifically provable explanation, I'd love to see it (and I'd love to look at the math).


According to his Wiki article, Bob Iger has a BS degree in radio and TV from Ithaca College. No other education to speak of, and he's certainly not the creator and founder of the company named after Walt Disney. It wasn't his vision that built Disneyland or Disney World. So, what makes him worth that much to that organization?


Of course, I'm not necessarily expecting that anyone here would know the inner workings of the Walt Disney Co., although if you're familiar with any other company with a similar situation, I'd be interested in hearing your comments.


If a bachelor's degree is all it takes to be a CEO, then why doesn't everyone with bachelor's degrees earn $146 million per year? Another commonly used capitalist argument is that the big money goes to those with the best skill sets, and that if one is not making much money, then it's because their skills are not useful or valuable.


In comparison, I've read that the average neurosurgeon makes about $500,000 a year, which is decent, and commensurate with the required skills, education, and the actual work involved. There are also very few people who can actually do that job, so there are actual shortages in qualified people.


In contrast, I would seriously doubt that any company would have trouble finding someone qualified to be a CEO, so I'm sure they would have plenty of applicants for the job. Everybody wants to be the boss, so there's plenty of people wanting the job, and many of them probably have bachelor's degrees in something or other. In terms of supply and demand, the supply of available personnel to be CEO is probably greater than that of the supply of qualified neurosurgeons.


So, all you capitalists and self-proclaimed experts in the study of economics, this is your challenge. Please show your work. Take any CEO or any other high-salaried individual and prove that they're actually "worth it" and that they're somehow so much more valuable and useful to the well-being of the United States. Prove that their skill set (and whatever it is they create or produce, if anything) is actually worth that much more than the skill set of a minimum wage worker (or even a neurosurgeon).


Who has more practical use to the United States? The CEO of Disney, or 293 neurosurgeons?

Capitalists are not a monolithic group of people. And capitalism takes more than one form. I would address those capitalists who specifically hold the above opinions.

 

[Valjean]

One wonders how foreign corporations manage to survive while paying their executives much less than American executives.

I also wonder how an extra 10 or 20 million dollars will improve the life of a millionaire so substantially that he'd insist on it as a condition of employment.

 

[Stevicus]

I would address those capitalists who specifically hold the above opinions.

I'm addressing those who are staunch supporters and cheerleaders for capitalism. I'm just trying to discern whether their support of capitalism is based on blind faith in propaganda, or if it's something else more substantial.

It seems to me that if there really was something to it, the capitalists around here would be jumping at this challenge, since it should be so incredibly easy. But the fact that few are rising to the challenge is very telling. Very telling indeed.

 

[Milton Platt]

I'm addressing those who are staunch supporters and cheerleaders for capitalism. I'm just trying to discern whether their support of capitalism is based on blind faith in propaganda, or if it's something else more substantial.

It seems to me that if there really was something to it, the capitalists around here would be jumping at this challenge, since it should be so incredibly easy. But the fact that few are rising to the challenge is very telling. Very telling indeed.

Okay.
Well, I'm a capitalist and the U.S. is a capitalist country. Capitalism has a lot going for it as an economic system, but there is no perfect system that I know of, I think unbridled capitalism is harmful. I also believe one can blend socialist ideas into capitalism (and visa versa).

 

[Stevicus]

One wonders how foreign corporations manage to survive while paying their executives much less than American executives.

I also wonder how an extra 10 or 20 million dollars will improve the life of a millionaire so substantially that he'd insist on it as a condition of employment.

What makes me wonder is why companies go along with it. There has to be some reason they'd pay someone so much money, especially in cases where a company is doing badly (such as Sears). It's almost as if some kind of massive swindle is taking place.

 

[Stevicus]

Okay.
Well, I'm a capitalist and the U.S. is a capitalist country. Capitalism has a lot going for it as an economic system, but there is no perfect system that I know of, I think unbridled capitalism is harmful. I also believe one can blend socialist ideas into capitalism (and visa versa).

Okay, this seems a reasonable position to take. I also agree that a mixed system could work. I think perhaps a restrained capitalism could work, but that's where a lot of capitalists tend to balk and argue passionately against any kind of governmental restrictions or interference in the free market. They tend to argue that the free market should be allowed to run its course, and (presumably) everything will be alright.

As far as the U.S. being a capitalist country, this is basically true, although we're more than just that. There are many capitalist countries in the world, and while a few do well (such as the US and a few others), most do not. The U.S. may have a lot going for it, but not necessarily because we're capitalist. It's not the "system" which has made us what we are.

 

[Augustus]

What, exactly, is the message they're sending by paying such a huge salary? Is this guy so incredibly talented and indispensible that they just had to have him as CEO? Are they saying that they would lose money if they hired someone else for less? How do they calculate something like that? What if they got someone who's a little less qualified who's willing to take less?

It's called rent seeking, people manipulating a situation to extract wealth from a system unconnected to value creation.

Entrepreneurs who create their own businesses and incur personal risk in doing so can take what they like out of their companies. Managers, who are custodians of other people's wealth and incur no risk, should be paid roughly in accordance to their value created.

Value created is not the same as company profits either as just about any relatively competent manager could make lots of money at Apple (at least in the short term). In sports analytics, some people use metrics like 'wins above replacement': how much does this player contribute when compared to a 'street free-agent' i.e. another person who could be acquired at minimum salary. So for a CEO, what do you bring to the table that cannot be achieved by a generic CEO type?

By working off some kind of approximation of this, very few, if any, ultra-high pay CEOs are good value propositions.

 

[Valjean]

All national economies are 'mixed'. What varies, off the top of my head:

What parts of the economy are private, vs 'government' run (socialized).
Distribution of profits.
Regulation: how much, of what, and to what end.

 

[Milton Platt]

Okay, this seems a reasonable position to take. I also agree that a mixed system could work. I think perhaps a restrained capitalism could work, but that's where a lot of capitalists tend to balk and argue passionately against any kind of governmental restrictions or interference in the free market. They tend to argue that the free market should be allowed to run its course, and (presumably) everything will be alright.

As far as the U.S. being a capitalist country, this is basically true, although we're more than just that. There are many capitalist countries in the world, and while a few do well (such as the US and a few others), most do not. The U.S. may have a lot going for it, but not necessarily because we're capitalist. It's not the "system" which has made us what we are.

Whether a country does well economically depends on many more things than whether it is basically capitalist or not. It depends upon the legal system, the specific laws which effect how the economy is managed, whether there is rampant corruption, etc.
I have never conversed with anyone who advocates for a virtually free market....but those people probably exist. When we had a less constrained form of capitalism here, we had robber barons, child labor, no social security or unemployment, or health insurance. I don't see how that was a better society.

 

[Wandering Monk]

Maybe we need to make a distinction:

Crony Capitalism - an economic system characterized by close, mutually advantageous relationships between business leaders and government officials.

Capitalism - an economic and political system in which a country's trade and industry are controlled by private owners for profit, rather than by the state.

Free Market Economy - an economic system in which prices are determined by unrestricted competition between privately owned businesses.

Laissez Faire Economy - the belief that economies and businesses function best when there is no interference by the government.

 

[Tambourine]

Maybe we need to make a distinction:

Crony Capitalism - an economic system characterized by close, mutually advantageous relationships between business leaders and government officials.

... or, as some people would call it, capitalism as it is being practiced in the real world.

It's called rent seeking, people manipulating a situation to extract wealth from a system unconnected to value creation.

To be fair, at least CEOs and similar manager types do acutally put in hours and show up for work every day, so they're not really "rent seeking" in the strict economic sense, just possibly very overpaid for what they do.

 

[Kangaroo Feathers]

One wonders how foreign corporations manage to survive while paying their executives much less than American executives.

I also wonder how an extra 10 or 20 million dollars will improve the life of a millionaire so substantially that he'd insist on it as a condition of employment.

What really gets me is the "well they work hard for their money" bootlickers. We can put it in real world terms. These CEOs who make 100s of times the wage that their most junior subordinate makes, show me any one of them that works so many hundreds of times harder than that junior employee. Just one...

 

[atanu]

So, here is the challenge, for those willing to accept it.

Capitalists often argue that they're "worth it," that those at the very top who earn exorbitant, obscenely high salaries are worth every penny to whatever organization is paying them that amount. This argument seems to imply that an organization might lose money (or be diminished in some other way) if they don't pay some executive a ridiculously high salary.


Well, I would just like to see what this would look like in writing, showing the math.


I found a list of the highest paid CEOs (Who Was the Highest Paid American CEO in 2018?). It's a little less than a year old, but it still should be current enough for this exercise.


Let's take number 3 on the list, Bob Iger, CEO/Chairman of Walt Disney Co., whose compensation in 2018 was $146,616,652. That's $70,488.78 per hour, based on a 40-hour work week.


What, exactly, is the message they're sending by paying such a huge salary? Is this guy so incredibly talented and indispensible that they just had to have him as CEO? Are they saying that they would lose money if they hired someone else for less? How do they calculate something like that? What if they got someone who's a little less qualified who's willing to take less?


For example, say they got someone to take the job at $10,000,000 a year (which is still obscenely high, but nevermind). Disney would save $136,616,652, but by paying Iger what they're paying him, they're essentially saying that, without his leadership, the company would end up losing whatever is they'd be saving and be worse off financially.


Again, how do they calculate this? Is there some kind of secret accountant's formula they use? If anyone knows the answer to this, I'm genuinely curious. It sounds like it's just stupidity, greed, and manipulation, but if there truly is a rational, scientifically provable explanation, I'd love to see it (and I'd love to look at the math).


According to his Wiki article, Bob Iger has a BS degree in radio and TV from Ithaca College. No other education to speak of, and he's certainly not the creator and founder of the company named after Walt Disney. It wasn't his vision that built Disneyland or Disney World. So, what makes him worth that much to that organization?


Of course, I'm not necessarily expecting that anyone here would know the inner workings of the Walt Disney Co., although if you're familiar with any other company with a similar situation, I'd be interested in hearing your comments.


If a bachelor's degree is all it takes to be a CEO, then why doesn't everyone with bachelor's degrees earn $146 million per year? Another commonly used capitalist argument is that the big money goes to those with the best skill sets, and that if one is not making much money, then it's because their skills are not useful or valuable.


In comparison, I've read that the average neurosurgeon makes about $500,000 a year, which is decent, and commensurate with the required skills, education, and the actual work involved. There are also very few people who can actually do that job, so there are actual shortages in qualified people.


In contrast, I would seriously doubt that any company would have trouble finding someone qualified to be a CEO, so I'm sure they would have plenty of applicants for the job. Everybody wants to be the boss, so there's plenty of people wanting the job, and many of them probably have bachelor's degrees in something or other. In terms of supply and demand, the supply of available personnel to be CEO is probably greater than that of the supply of qualified neurosurgeons.


So, all you capitalists and self-proclaimed experts in the study of economics, this is your challenge. Please show your work. Take any CEO or any other high-salaried individual and prove that they're actually "worth it" and that they're somehow so much more valuable and useful to the well-being of the United States. Prove that their skill set (and whatever it is they create or produce, if anything) is actually worth that much more than the skill set of a minimum wage worker (or even a neurosurgeon).


Who has more practical use to the United States? The CEO of Disney, or 293 neurosurgeons?

While I agree with the main points raised in the post, I am curious to know why you chose Bob Iger rather than Tesla boss as your example?

 

[Stevicus]

While I agree with the main points raised in the post, I am curious to know why you chose Bob Iger rather than Tesla boss as your example?

I didn't want to pick the highest, and besides, I think he started the company.

 

[Stevicus]

What really gets me is the "well they work hard for their money" bootlickers. We can put it in real worls terms. These CEOs who make 100s of times the wage that their most junior subordinate makes, show me any one of them that works so many hundreds of times harder than that junior employee. Just one...

Yep, that was the challenge, and as we can see, no one has been able to substantially address any of the points raised. I know exactly what you're talking about with the "well they work hard for their money" bootlickers. So, this is kind of a reversal of the "show me the money" meme. I'm saying, "Show me the work!"

There is an interesting chart in this article: CEOs make $15.6 million on average—here’s how much their pay has increased compared to yours over the year

Notice how, back in 1965, the ratio between the average CEO and average worker was about 21:1, a tenth of what it is now. Back then, the U.S. economy actually worked...far better than it does now.

So, the lesson here is, paying CEOs high salaries doesn't do diddley for the U.S. economy. Letting the rich get richer doesn't help either.

Despite all the propaganda and browbeating from capitalist ideologues, it seems quite clear that during the one time the US actually lived up to its fullest potential (WW2), our economy was quite socialistic under FDR and the Office of Price Administration (an agency we desperately need now).

I see the above chart as evidence of a decades-long pattern of widespread thievery and looting of America.

Someday, I hope these CEOs are made to pay for their crimes against the American people.

 

[Stevicus]

Whether a country does well economically depends on many more things than whether it is basically capitalist or not. It depends upon the legal system, the specific laws which effect how the economy is managed, whether there is rampant corruption, etc.
I have never conversed with anyone who advocates for a virtually free market....but those people probably exist. When we had a less constrained form of capitalism here, we had robber barons, child labor, no social security or unemployment, or health insurance. I don't see how that was a better society.

I've encountered some people who advocate for a virtually free market. Many of them seem to be devotees of Ayn Rand. They also appear to overlap with the followers of Milton Friedman. (You will know them if they attempt to support any of their arguments with links from the Mises Institute.)

I first recall hearing about them in the early 80s, around the time of Reagan. The irony is that up until Reagan, the U.S. economy had done rather well under Keynesian policies, yet Reagan and his capitalist followers kept saying America was in dire straits and that their version of capitalism on steroids was the only thing that could save us.

The bottom line is, capitalists wanted to fix something that wasn't broken, and they ended up breaking it.