A challenge for capitalists

[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?

Thought of sharing Lou Reed singing 'men of Good Fortune'.

 

[Yerda]

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.

Most of the criticisms of the kind of behaviour noted in this thread is coming from capitalists. Infact, almost every serious criticism of modern capitalism I've read has been from capitalist economists.

In Ha-Joon Chang's book 23 Things They Don't Tell You About Capitalism he raised the very problem you set out in the OP. He's a capitalist by his own description and an economist working at one of the fancy universities. His answer is that American CEOs are simply overpriced.

His book is a quick and useful read and his talks are very interesting, check them out if you haven't already.

For clarity, I'm a socialist but there are capitalists out there I trust more than about 95% of the socialists I've read or encountered.

 

[Stevicus]

Most of the criticisms of the kind of behaviour noted in this thread is coming from capitalists. Infact, almost every serious criticism of modern capitalism I've read has been from capitalist economists.

In Ha-Joon Chang's book 23 Things They Don't Tell You About Capitalism he raised the very problem you set out in the OP. He's a capitalist by his own description and an economist working at one of the fancy universities. His answer is that American CEOs are simply overpriced.

His book is a quick and useful read and his talks are very interesting, check them out if you haven't already.

For clarity, I'm a socialist but there are capitalists out there I trust more than about 95% of the socialists I've read or encountered.

I acknowledge that there have been scathing criticisms by capitalists directed at other capitalists. Likewise, there are socialists who have criticized other socialists, Christians who have criticized other Christians, Muslims who have criticized other Muslims, and so on. I'm not sure that that, in and of itself, would invalidate the criticisms being made.

My main criticism of economists is that, the way many people view economics nowadays, they seem to have forgotten that economics is a social science. Yet, so many of them apparently view it as a hard science with the absolute precision of mathematics. I think about this whenever I put forth my views and some yahoo counters with a feeble accusation that I "know nothing about economics." Whenever someone says that, I at least know that I know more than they do, since I correctly view it as a social science, while others view it as a hard science.

Another thing I would mention is that, in today's political culture, most perceptions of capitalism are based in variations of Social Darwinism and a "just world fallacy." This, coupled with endless propaganda about America being the "shining city on the hill" and a "land of opportunity" suggests that everyone has a fair and equal chance at becoming a billionaire. Moreover, this suggests that anyone who struggles or can't make it in this economy can only be because they are personal failures in life, and we live in a "just world" where only the strong shall survive. People who are "losers" are that way because they deserve it, or so capitalist propagandists would have us believe. (This line of argumentation might also include anecdotal stories of "rags to riches" stories which also make up the tapestry of the capitalist ideology, such as hearing about poor immigrants who come here penniless and turn into billionaires, solely through their hard work and perseverance.)

According to the same principles, those who are wealthy, such as billionaires or the CEOs who are the subject of this thread, are that way because they worked so hard and diligently for it, so therefore they deserve every penny of what they've got.

All I'm asking here is for evidence of this commonly-used argument which fuels capitalist perceptions and serves as the basis for public policy and the economic system we have in this country.

Can anyone provide any verifiable evidence and proof that any of these people actually deserve the money they get? Can anyone prove that they're "worth it," as they so often claim? The fact that no one has been able to do so in this thread speaks volumes.

 

[Yerda]

I acknowledge that there have been scathing criticisms by capitalists directed at other capitalists. Likewise, there are socialists who have criticized other socialists, Christians who have criticized other Christians, Muslims who have criticized other Muslims, and so on. I'm not sure that that, in and of itself, would invalidate the criticisms being made.

My main criticism of economists is that, the way many people view economics nowadays, they seem to have forgotten that economics is a social science. Yet, so many of them apparently view it as a hard science with the absolute precision of mathematics. I think about this whenever I put forth my views and some yahoo counters with a feeble accusation that I "know nothing about economics." Whenever someone says that, I at least know that I know more than they do, since I correctly view it as a social science, while others view it as a hard science.

Another thing I would mention is that, in today's political culture, most perceptions of capitalism are based in variations of Social Darwinism and a "just world fallacy." This, coupled with endless propaganda about America being the "shining city on the hill" and a "land of opportunity" suggests that everyone has a fair and equal chance at becoming a billionaire. Moreover, this suggests that anyone who struggles or can't make it in this economy can only be because they are personal failures in life, and we live in a "just world" where only the strong shall survive. People who are "losers" are that way because they deserve it, or so capitalist propagandists would have us believe. (This line of argumentation might also include anecdotal stories of "rags to riches" stories which also make up the tapestry of the capitalist ideology, such as hearing about poor immigrants who come here penniless and turn into billionaires, solely through their hard work and perseverance.)

According to the same principles, those who are wealthy, such as billionaires or the CEOs who are the subject of this thread, are that way because they worked so hard and diligently for it, so therefore they deserve every penny of what they've got.

All I'm asking here is for evidence of this commonly-used argument which fuels capitalist perceptions and serves as the basis for public policy and the economic system we have in this country.

Can anyone provide any verifiable evidence and proof that any of these people actually deserve the money they get? Can anyone prove that they're "worth it," as they so often claim? The fact that no one has been able to do so in this thread speaks volumes.

These are all good points. I don't think there are any sensible justifications for the explosion of executive pay.

 

[Tambourine]

These are all good points. I don't think there are any sensible justifications for the explosion of executive pay.

And it should be telling how a practice that is clearly harmful and has no sensible justification is still widely seen as normal and justified, simply because it benefits the wealthiest in society.

 

[Milton Platt]

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.

I don't discount "pay for performance". But I scratch my head when a CEO gets a bonus after a corporation starts showing red ink.

 

[Shad]

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?

You are conflating meritocracy with capitalism

 

[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.

I get that, and that is cool. I was concerned that people should not see Capitalism as some kind of monolithic thing. Just like, say, Christianity, there are many, many iterations.

 

[Emsy]

Everyone in the West is a capitalist. There is no escaping it.

 

[Tambourine]

The majority of the population in the West are in fact workers, not capitalists.

 

[Revoltingest]

Everyone in the West is a capitalist. There is no escaping it.

Not those employed by government.

 

[Tambourine]

Not those employed by government.

Of course not, capitalists are those who own capital.

 

[Revoltingest]

Of course not, capitalists are those who own capital.

Not necessarily.
One could have an uncapitalized service business.

 

[Tambourine]

Not necessarily.
One could have an uncapitalized service business.

What are you talking about?

 

[Revoltingest]

What are you talking about?

One can be a capitalist, ie, participate in capitalism without investing any capital.
This is a response to your claim that one must have capital.
Example:
I had no capital invested in my engineering consulting/contracting business.
I served primarily aerospace companies.

 

[Tambourine]

One can be a capitalist, ie, participate in capitalism without investing any capital.
This is a response to your claim that one must have capital.
Example:
I had no capital invested in my engineering consulting/contracting business.
I served primarily aerospace companies.

A capitalist is not somebody who "participates in capitalism", it's a function within a capitalist economy.

But you got me curious, how were you running a company with no capital and no investment?

 

[Heyo]

One can be a capitalist, ie, participate in capitalism without investing any capital.
This is a response to your claim that one must have capital.
Example:
I had no capital invested in my engineering consulting/contracting business.
I served primarily aerospace companies.

Capital, in Marxian analysis, is means of production. In that sense you had your own work (human capital) to invest. But that alone would make every worker a capitalist. Add to that the ability to produce "Mehrwert" (added value) from some kind of other means of production, machines, employees, investments and you have the prototype of a capitalist. If your company/business owned a car to drive you to your customers, you were a capitalist.

 

[Heyo]

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

Well, I don't call myself a capitalist even though I am in the most basic sense of the word. And I don't want to defend overly high salaries but I may add some lines of thought to explain how that model came to be.

We have to follow three possibilities:
1. The board members who hire those overpriced CEOs are bumbling idiots.
2. They have nefarious reasons to rob their investors of their revenue and instead give it to the CEO.
3. They know something we don't.

1. Idiots
Yes, some are. But if all were idiots the first entrepreneur with a brain would outperform them all so we can put this hypothesis to rest, at least as the main reason.

2. Nefarious reasons
Board members are usually investors with the highest stakes. So it is their money they are paying the CEO. But often the investors are represented by surrogates. If the investor is a bank or other corporation, the surrogate is just an employee and they may think of becoming a CEO themselves. In that case they profit more from a general rise of CEO salaries than from keeping costs low.
Other reasons could be personal connections. The "good old boys" connections are rampant in the business world.

3. The real value of a CEO
As pointed out in #2, it may not be the personal performance of the CEO that is worth what s/he is paid but her/his connections. If they reach into politics s/he could be worth more than their salary if s/he can play the connection to benefit the company.
Also, as discussed in an other OP currently, everybody has his price. Not everybody is willing or able to be as ruthless as a capitalistic society demands.

 

[Stevicus]

Well, I don't call myself a capitalist even though I am in the most basic sense of the word. And I don't want to defend overly high salaries but I may add some lines of thought to explain how that model came to be.

We have to follow three possibilities:
1. The board members who hire those overpriced CEOs are bumbling idiots.
2. They have nefarious reasons to rob their investors of their revenue and instead give it to the CEO.
3. They know something we don't.

1. Idiots
Yes, some are. But if all were idiots the first entrepreneur with a brain would outperform them all so we can put this hypothesis to rest, at least as the main reason.

2. Nefarious reasons
Board members are usually investors with the highest stakes. So it is their money they are paying the CEO. But often the investors are represented by surrogates. If the investor is a bank or other corporation, the surrogate is just an employee and they may think of becoming a CEO themselves. In that case they profit more from a general rise of CEO salaries than from keeping costs low.
Other reasons could be personal connections. The "good old boys" connections are rampant in the business world.

3. The real value of a CEO
As pointed out in #2, it may not be the personal performance of the CEO that is worth what s/he is paid but her/his connections. If they reach into politics s/he could be worth more than their salary if s/he can play the connection to benefit the company.
Also, as discussed in an other OP currently, everybody has his price. Not everybody is willing or able to be as ruthless as a capitalistic society demands.

Thanks, Heyo. One of the reasons I started this thread was because of numerous conversations I've had with ideological capitalists and their fellow travelers who have tried to pass off this notion that there's some kind of logical, objective "science" to all of this. They often try to use tactics of ridicule and belittlement, saying things like "well, you just don't know anything about economics," as if they believe that economics is a hard science with mathematical precision.

So, if they believe that to be the case, then they should have had no problem answering this thread and showing the math which proves the objective value of high salaries for CEOs. If economics was really the precise, exact science they insinuate it to be, then the challenge of this thread should have been a cake walk for any ideological capitalist.

What I was hoping for was that at least one person would be willing to make an admission that the "science" they worship is not really a "science" at all. It's more based in whimsy and feelings that "I'm worth it." If they're unwilling or unable to admit at least that part of the equation, then that speaks volumes about what they really stand for.

I don't think many people have so great a problem with the capitalist "system" as much as they have a problem with the common lies used to prop it up. Their adherence to the "just world" fallacy and social Darwinism would indicate a certain level of malice, misanthropy, and amorality in the capitalist mindset. And yet, they think they're morally qualified to judge socialists (or anyone else who questions their religious beliefs). They think they hold some kind of moral high ground over other systems and other countries, but they really don't.

I just wish more of them would be intellectually honest enough to admit it.

 

[Revoltingest]

But you got me curious, how were you running a company with no capital and no investment?

It was a company of one, selling only my services to businesses in need.