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Comment by cycomanic | Hacker News Reader

Because the people who decide exec salaries are execs in other businesses, so they generally have

1) An inflated view of the impact of execs compared to other employees. This is a well studied psychological phenomena. People tend to overestimate their "skill/contribution" even in poor luck or even rigged scenarios. (There was a study which gave some subjects a head start in monopoly, i.e. more money, the subjects tended to talk significantly more about the advantages of "their" strategy in the game, then the subjects that we not given the head start).

2) It's in the interest of execs to keep C-suite salaries high, because it increases their own salary.

So it's not surprising that we have seen a dramatic increase in ratio of exec to average employee compensation, and why execs are typically isolated from economic downturns.

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Your salary isn't determined by impact. It's more related to your market value. Part of your market value is set by yourself, through negotiation. The other part is the labor market and what the alternative candidates are asking.

Of course impact is related, but only as a qualifier. If your impact doesn't justify the salary then that is a problem. But as long as you do enough to justify your salary than other factors tend to dominate.

You don't get what you deserve, you get what you negotiate.

> People tend to overestimate their "skill/contribution" even in poor luck or even rigged scenarios.

I don't personally understand this one, although I don't doubt its veracity. I am an engineer with years of experience in the industry, but I don't think my contribution is high or important; I could be fired at any moment and would anyone notice? Maybe in the short term yes, but mostly no. I am easily replaceable, my boss is easily replaceable... Society will continue on without me because like most of us I work a B.S. job. So I really struggle to empathize with the viewpoint of a self-perceived 'Hero IC', is it just narcissism?

Because the threat of firing and the driving down of your self worth as a worker is core to (American style) capitalism. Your fear for your job or the prospect of having to find another one makes you take suboptimal economic positions, the arbitrage of which keeps the gears of capital spinning.

We couldn’t have the workers collectively realizing their worth now, could we? The inmates would be running the asylum.

This narrative is counterfactual to how capitalism actually works. Your worth is determined by supply and demand. Investors would never agree to paying American developers twice as much as European developers if they knew they would be on the hook for them until their cash reserves bled dry.

> Your worth is determined by supply and demand.

Supply and demand works in a world with no information/power assymmetry in Econ 101, a.k.a. freshman's dream. Even in the most basic case, when a sack of flour is being bought and sold, the buyer wants to buy a sack of flour, the seller wants to sell a sack of flour + a variable number of bugs in it, and the seller's profit margin goes up with the number of bugs. That's why there is a third party necessary which fixes the maximum number of bugs to be included with a sack of flour: otherwise this whole "free market" falls apart or starts killing people.

Yes. Regulations should exist. Econ 101 is a prerequisite to learning about exceptions to Econ 101, which evidently the general populous has not. This is why people get surprised when the solution of throwing more money at a limited supply of housing and college slots ends up increasing the price of housing and college.

You can make a good argument that protections need to be made to protect income workers and that we wouldn't lose much economic efficiency from these changes. On the other hand, most people in this thread are intentionally ignorant of the market landscape that gave their their cushy mid-six figure compensation. Instead they would rather make the same tired memes about "short term profits" and whatnot.

I'll reply down here.

> This narrative is counterfactual to how capitalism actually works. Your worth is determined by supply and demand. Investors would never agree to paying American developers twice as much as European developers if they knew they would be on the hook for them until their cash reserves bled dry.

Supply and demand works best when the data about the market is symmetric. In the job market it is not. Firms know that they are willing to pay, and what they have paid, for work. Workers do not. If a worker takes a penny less than what the firm can bare, that is slippage that is being arbitraged into profit by the firm. Workers are goaded into a cheaper price for their work by firms through the threat of "We will go with another candidate" even if there are no other candidates. Again, asymmetric data.

> On the other hand, most people in this thread are intentionally ignorant of the market landscape that gave their their cushy mid-six figure compensation. Instead they would rather make the same tired memes about "short term profits" and whatnot.

Comparatively (amongst workers) well paid workers does not mean that those same workers are compensated fairly by the firm. Workers do work, managers manage. The core question posed by the thread OP was around the value of the work (and the protections afforded to) workers do as opposed to that of management.

> Supply and demand works best when the data about the market is symmetric.

It works efficiently despite information asymmetry.

It's called "risk". Risk always factors into prices. You pay more at a dealership because your risk is less. You pay less for a used car because your risk is more. A job that is more secure pays less. A job that is less secure pays more.

The market efficiently prices in information asymmetry.

Hello Walter. Nice to see you. Thanks for D.

But this is not true. An economically efficient market is one where goods and services produced are delivered at their most valuable. The job market is the antithesis of that.

If there is asymmetric information (and asymmetric risk) AND that asymmetry is known by the side with most information (like it my job example), then the side with more data can price more optimally than the side with less. If we extend that into the tenure of the job, you can be pressured to work longer and harder than you are actually paid for if the risk of losing your job is greater than the risk of you company having to replace you. Just look to Japanese salarymen or Chinese 996 workers. Those are not efficient markets. They are markets skewed towards the owners of capital.

Your example of used vs new cars is an example of a risk discount, but it really doesn't fit here, imo.

You're quite welcome! Enjoy using D!

The risk element goes both ways. An employee factors risk into what salary he'll demand. For example, people going to work for startups are going to demand lots of stock options to compensate for the risk that the startup fails. People accept lower salaries at established companies for the lower risk of the company failing. An employee will demand a higher salary to cover the risk of having to relocate. An employee will demand a higher salary for jobs that entail more personal risk.

It goes on and on. Risk is most definitely a factor in all negotiations, and risk is exactly another word for information asymmetry.

>Supply and demand works best when the data about the market is symmetric. In the job market it is not.

Sure, I agree that corporations should be more transparent but this isn't the messaging that I'm getting from these comments. Maybe I'm completely misinterpreting, but this is what it looks like people are trying to say: "These corpos are too damn greedy! If only we pressured these corpos for being greedy, we wouldn't be in this position." My point is that this sentiment completely ignores that this "greed" is what created such a large class of relatively wealthy tech workers in the first place. If companies weren't allowed to lay people off, they would be less willing to hire them in the first place.

> We couldn’t have the workers collectively realizing their worth now, could we?

What is stopping them? If this were really true wouldn't we see at least a few examples of large worker collectives succeeding by now?

I also think people underestimate what a CEO does.

On HN coding is more respected than social skills. A software engineer is likely to crumble in 30 seconds when they are interviewed on CNBC.

> On HN coding is more respected than social skills

No it isn't, you see people saying "social skills are more important than technical skills" everywhere people discuss such things, and they get upvoted a lot. People saying the opposite tend to get heavily downvoted.

So to me it looks like even on HN social skills are more respected than technical skills, at least in threads where we discuss what skills are important.

Maybe on HN, but not in practice in the industry. The general rule at most SV companies is that poor leetcode performance in interviews is an automatic no hire. Poor social skills, on the other hand, are handwaved away unless the candidate did something really egregious.

> People tend to overestimate their "skill/contribution"

This can’t possibly extend to computer engineers right?

Of course it does--at least in many cases.

Definitely not. Computer engineers are famously humble and rational

This is a dishonest super one-dimensional analysis, borderline conspiracy theory, I'm disappointed to see it be the most upvoted.

Do you have a concrete rebuttal that does not involve name calling? I'm interested in reading a counterpoint.

Sure, so give us a better analysis instead of the presumptive downvote-and-grouse.

Be the change you want to see in the world. Provide us with an alternative analysis.

It's rational and makes sense. Elaborate on the flaws of the argument instead of just calling it a "conspiracy theory".

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