Honestly, it's hard to believe that one person who isn't actually producing/outputting anything can create that much value, and that you can't fund someone to do the same work for half the cost.
I'm not going to attempt to justify the number, but this statement is incorrect. Value is provided by working on the right thing. I work for a startup, and ~20% of my time is spent figuring out what we're working on/if we need to pivot, and the other 80% on doing some of that work (with other developers). The 20% of time that I spend choosing what we're working provides an order of magnitude more value to the company than the 80% of my time that I spend developing, and I suspect that as we grow that gap will continue to grow.
The situation isn't quite as black and white as that. I'm not just sitting there picking randomly out of a list, I'm ensuring that the people who _are_ providing "tangibles" are providing tangibles in areas that are important to our company and team. Imagine a person can do 5 tasks per week, but they decide to focus on area A which is interesting to them, but not valuable to the project, and area B is something that actually benefits the team/project. By directing those people from area A to area B, you provide a huge value gain. Now consider the fact that I ensure that 10 people are working on area B insead of area A, not just 1. The value of my decision is proprtional to the value of the outcome of all of those people, and if I make a wrong call we're probably done for.
> I think it's stupid that people get paid obscene amounts for making some decisions and having fancy dinners with other big shots. Then they justify making 100x or 1000x what the actual workers do.
It's an enormous stretch to go from "people who execute those decisions create more value" to "people get paid obscene amounts for making some decisions and ahving fancy dinners/justify making 100x what the actual workers do". I did say in the comment you replied to that I'm not going to try justify the specific number, but as an early employee in a 25/30 person startup, you are not getting paid 100x what the people who do the work are for making some decisions.
Secondly why do you think he isn't actually producing/outputting anything? Just because you may not understand what a CEO does, doesn't mean he doesn't do anything. The guy certainly produces outcomes (after all, he grew AWS into a billion-revenue company faster than anyone else has ever accomplished that task as one simple example).
Finally, the guy is already a billionaire because he's been with Jeff Bezos since the very early days of Amazon. If you want to retain someone like that the compensation is going to be high.
Knowing a couple of friends who run such firms, let me tell you -- it would be hard to find someone of 25% of that caliber for even 75% of that price.
Value is what the market is willing to pay. There is only 1 Andy Jassy in the world in the same way there is only 1 Jeff Bezos.
No doubt that's not the entire job: there's also networking, communication and thought leadership involved. But similar approaches could apply. Liability could be a trickier one.
There are actual concrete responsibilities that a CEO at that level needs to accomplish, a sample of which include:
- fundraising
- organizational structuring
- hiring
- strategic planning + competitive positioning
- go to market motions
- R&D
- investor relations
There's nothing fungible about any of these responsibilities, so no matter how many ordinary people you stack together, you'll never arrive at even a fraction of what a competent executive can do. Companies have executives for the same reasons countries do.
Executives rotate in and out of power subject to the ongoing favor of their stakeholders, but the hierarchical structure of retaining an executive to represent the will of those stakeholders remains in place because there's no efficient way to operate otherwise.
> There's nothing fungible about any of these responsibilities, so no matter how many ordinary people you stack together, you'll never arrive at even a fraction of what a competent executive can do.
I think I'd disagree with that - you state it fairly strongly, but I think that each of the items you mention is possible to delegate and distribute successfully, to varying degrees. Much of that is aided by referring to existing patterns that have succeeded elsewhere.
> Executives rotate in and out of power subject to the ongoing favor of their stakeholders, but the hierarchical structure of retaining an executive to represent the will of those stakeholders remains in place because there's no efficient way to operate otherwise.
That I do find harder to challenge (and I don't necessarily think it's worth challenging). Conversation and consensus can arise, but even then it's useful to have someone to canvas that and say "ok, I've heard the commentary on this topic, here is our selected outcome".
I think we're getting a lot closer to the meat of the issue here. I agree with you that it is possible to delegate and distribute /most/ of what I mentioned successfully to varying degrees. But that leaves the "incompressible" part of the CEO, which is fundraising/investor relations and hiring/org building.
Fundraising is completely impossible to delegate (if you delegate that to someone else, you'll alienate investors) and even with hiring/org building, you have to at least do the recruiting/candidate selection of top lieutenants yourself as a CEO in order to make sure that you are putting the right team of divisional heads in place to execute. You have to be a better coach than the vast majority of coaches out there to succeed in this endeavor, and to even attract and accurately assess the kind of talent that will set up the org for success. It is very easy to mess this up.
On the whole, a lot of what I'm talking about is high stakes high rewards strategic dealmaking. This isn't a common skill for most people to have. It's a blend of analytical (determining leverage points, BATNA in negotiations) and creative (figuring out how to grow the pie) that is hard to practice unless you've done it before.
Most decisions you make here are irreversible. The other challenge with this kind of dealmaking is that the stakes are so high and the counterparties so formidable that if you put anyone except an equally formidable party in place to negotiate with them, you'd end up in a bloodbath that ended up unfavorably for the company and favorably for the counterparty.
In my opinion, that's why we end up at the steady state of executive compensation across most of the world that we see today. It's a miserable job unless you really enjoy it because everyone will (and should) blame you when things go wrong. That is made more challenging by the fact that by the time one becomes a successful CEO, one can generally retire off earnings and/or become an investor with much better WLB and risk adjusted returns.
PS: I'm also realizing another interesting petri dish where we could see parts of what you're suggesting play out are DAOs in crypto. Theoretically, if we can arrive at a DAO that works efficiently, it would serve as proof that for certain kinds of commercial organizations, the chief executive role may be able to be diminished or even eliminated. I am very curious about whether these experiments pan out (and inside my heart hope they do) although I remain skeptical.
The idea that intelligence or hard work or danger justify executive pay defies common sense.
People keep arguing it because they can't think of something better, and there must be some reason for a persistent feature of reality.
But maybe a better explanation is simply that CEOs are being bribed, not to deliberately, neglectfully, or ideologically, wreck everything.
If your job is to steer a huge ship, then the job might not be that difficult, but someone underpaid, and unmotivated could easily have tremendous impact on everybody else.
And if money is the tool that you have, then you want people whose loyalty can be bought - possibly implying they have a neurotic attachment to money as a scorekeeping method.
Of course that often doesn't work, but you can't stop trying.
> People keep arguing it because they can't think of something better, and there must be some reason for a persistent feature of reality.
By definition, common sense is not going to apply when it comes to running a modern nation or multi-national corporation. There is nothing common about what it takes to do these things successfully.
> But maybe a better explanation is simply that CEOs are being bribed, not to deliberately, neglectfully, or ideologically, wreck everything.
A thought-provoking idea but not sure it really comports with reality? CEOs almost always report to a board who can and will fire them for poor performance.
If you were looking for a figure who is "being bribed, not to deliberately, neglectfully, or ideologically, wreck everything" then you'd be looking for the chairman of the board and large investors with highly concentrated positions.
Of course, with any of these folks, reputation travels far, so the idea of them being bribed not to wreck everything is prima facie laughable; the reason they don't "want to wreck everything" is because they are looking to max their "society ELO" score. Social credit already exists and applies to people at this echelon of society.
Maybe? It's not an infallible deterrent and it doesn't remove the incentive to avoid the consequences of bad management in the first place.
>If you were looking for a figure who is "being bribed, not to deliberately, neglectfully, or ideologically, wreck everything" then you'd be looking for the chairman of the board and large investors with highly concentrated positions.
I have no idea what you mean. How are they bribed and how would they "wreck everything"?
>idea of them being bribed not to wreck everything is prima facie laughable; the reason they don't "want to wreck everything" is because they are looking to max their "society ELO" score
Who says that can't be done by destroying a company? All you have to do is convince yourself that the world would be better off, and that you're not afraid of the consequences to yourself.
> ...
> The other challenge with this kind of dealmaking is that the stakes are so high and the counterparties so formidable that if you put anyone except an equally formidable party in place to negotiate with them, you'd end up in a bloodbath that ended up unfavorably for the company and favorably for the counterparty.
I know you didn't connect these two paragraphs explicitly -- perhaps you had something more like {vendor/partner} establishment in mind for the latter -- but in practice I think they connect fairly neatly.
They ring true based on the way that strategic initiatives from large companies and startups alike often either succeed wildly or fail completely; the outcome depends on the ability to identify an opportunity and then have motivated and ambitious people in place to capitalize on it (both in terms of negotiations and implementation).
Personality-wise: an ability to quickly assess a business relationship, summon the relevant statistics and talking points, evaluate potential outcomes (a nod to your mention of BATNA) and then communicate and work towards the preferred ones: all of that is good. Persuasion, influence and manipulation are where things get a bit murkier, I think.
Environment-wise: is your sense that many of these negotiations are zero-sum? That kind of situation would seem to be a natural fit for extremely competitive mindsets, although my sense is that it could be better to wait for positive-sum opportunities, even if that takes longer and requires {business/market} development. Return-on-capital might not always reward that kind of delay, but I think that effective human advancement does (and, ideally, regulation should try to align those two vectors).
(rationale: positive-sum situations feel like they should be easier to agree upon (aided by the presence of honest and verifiable information), should be more sustainable growth-wise for both parties, and should reduce the risk of disputes occurring later -- something that employers might not necessarily have on their mind when allowing competitive negotiators to dealmake)
> PS: I'm also realizing another interesting petri dish where we could see parts of what you're suggesting play out are DAOs in crypto.
I share your skepticism on this - the code in cryptocurrency {contracts/organizations} as they exist today doesn't stop when a problem occurs; instead the stories we hear about are expensive mistakes and losses of funds.
Code as most developers write it also has limited ways to assess the real-world effect that it has on each contracted party (not to mention uninvolved parties, often equally or more important) beyond basic metrics.
To refer back to an earlier thought: perhaps the hosting environment for the code (not the contracts themselves, necessarily, to be clear, but the hosting environment within which they're evaluate) should look for and reward positive-sum results. And (human) governance of that hosting environment should confirm that those rewards are being distributed "correctly" -- in whatever senses that's possible to determine.
(by the way: thanks for the thought-provoking discussion - even if I've gone off on some unusual tangents)
Not only but that reputation means that he can fetch huge compensation at competitors, so you need to pay to cover that as well.
In this case, the PE firm is incentivized to cut costs in order to magnify the returns on their leverage. Obviously, the largest line item in OpEx is generally compensation, and executive compensation the largest line item there. If PE firms could cut costs here without issue, they would, because they'd make a LOT of money doing it.
But...they don't. Why?
I agree!
Like a driver of an armored truck that you pay extra, not for driving it being difficult, but due to the value of the cargo.
Does that seem so weird to you?