If the average man's labor is worth $15/hr, and he never spent (nor was taxed) a dime of that, Al-Fayed was either more than 700 times smarter, faster, stronger, and harder-working than the average man... or he acquired that wealth by doing something other than hard work.
Wonder what the average HN reader's labor is worth, and whether our output would be described as "honest work".
Everyone is paid for the last 5% of performance though not the first 95%. People get confused about that when they complain about the BS of jobs. You're not getting paid for the BS - you're getting paid for the moments when you bring something to the table.
Steve Balmer is a billionaire today due to landing a job as an early employee at Microsoft.
There’s a perception that guys like Ballmer created $10B of value and managed to capture $1B of it. Just because he was lucky to be there doesn’t mean he didn’t hold a pivotal role and make a huge difference in the outcome of the enterprise, and may have been awarded a small % of that value created.
Maybe other people could have created that value too, but he was lucky to be there, they were lucky to have him there instead of someone worse, and he still only captured “10%” (or whatever) of the value created.
My thought is that many of these billionaires do have a large “value over replacement” where replacement is just some random person with the resume for the position.
But I don’t think the enterprise creates nearly as much value as has been assigned to it. I think much of the value is created by the public infrastructure, an existing public education system which provides affordable skilled labor, and much of the laborers themselves.
So personally I think Steve Ballmer did get lucky, did create a lot of value for Microsoft, and captured some portion of that MSFT +value, but Microsoft captured a lot of value that was created by others (the government/public) and likely more should have been captured by them instead.
So, while I philosophically agree that it’s obvious anyone with a billion dollars has not earned the vast majority of it, I also personally believe it’s slightly harmful to suggest that we should be paid in direct proportion to how hard we work.
There’s a lot more to be said on the topic, but I think the truth for “how much value can one person create; and how much of that value should they capture for themselves?” lies in-between “scales linearly with hard work and smartness” and “it’s great that they were able to capture a tiny $1B slice of the value they created in their lifetime”.
It is absolutely possible to make that (and more) by doing honest work.
> If the average man's labor is worth $15/hr, and he never spent (nor was taxed) a dime of that, Al-Fayed was either more than 700 times smarter, faster, stronger, and harder-working than the average man... or he acquired that wealth by doing something other than hard work.
Other reasons someone can vastly outperform others:
- more leverage from one's work (e.g. plumbing vs. software engineering, or starting a business that employs 100 people rather than sole proprietorship)
- higher demand for one's skills
- capitalize on luck (e.g. he had very influential connections early on that he leveraged)
- ambition
- risk taking
- etc.
I’d agree with you under our current ethical system.
Under my personal moral system, I think anyone “capturing” $1 billion as a “portion of the value they created” most likely involves greatly undervaluing the contributions of the system they built upon/in (which should have been captured by taxes and reinvested into that system), as well as much of the labor they employed (other key employees were probably given too little equity, and much of the bottom rings are likely underpaid on an hourly basis for the value they provide).
Personally I’d like to see significantly higher taxes on top-end earners to help allow the “system” which provided the infrastructure, skilled and educated labor, and favorable market environment, to capture a little bit more of the value it provided to billionaires and reinvest that in K-12 education to create a strong workforce for the next generation of business owners to rely on.
I personally think even with say, an absurdly high tax rate of 90% on earnings over a billion dollars, folks like Elon Musk and Sam Walton and Bill Gates and Jeff Bezos would still have nearly as much personal incentive to earn money past their first $1 Billion.
I personally feel that Jeff Bezos would absolutely still fight for growing his net worth from $1B to $13B at 90% tax rate, instead of $1B to $130B at his current tax rate.
Hundreds of thousands of customers that willingly gave them money, would seem to disagree.
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I think the most important thing this misses are that there are more parties to an economic enterprise than just a single seller and their buyers. At one extreme, let’s envision a fictional world:
Walmart builds a small empire on the back of public highways. They pay fair taxes which allows the highways to capture and reinvest the value they created for Walmart.
Walmart then lobbies government leaders to eliminate their taxes. Walmart now pays no taxes.
Walmart continues to extract value from the public highways but no longer shares that value with the government which created the value.
I’m not saying this is literally what’s happening - I’m just using it as an example to show how a company can provide great prices to customers, while inappropriately capturing value created by others. This is just to show that your model posited above fails to take into account some pretty large effects in the real world.
But if there are many people who truly believe that economics is linear and zero-sum, that explains how they got there.
From this point of view, CEO's and billionaires are of course overpaid because they couldn't possibly type/talk/work/think a million times better than a thousandaire.
It's only when you internalize concepts that came up in the last couple of centuries, like leverage, positive sum growth, exponential economic growth, and exponential technological development that modern life makes sense.
As soon as there's any perceived threat to the British establishment they'll be running the same stories as The Telegraph.
Why do you ask? Has that enlightened you any further?