The myth of big salaries (it's all marketing)

> After a million dollars or so in salary, the absolute amount that a person is paid has no real impact on their life. They can't eat more meals in a day or wear more shoes. What matters to the manager is the relative amount.

Sure, nobody needs more than a million dollars in annual compensation (in 2024 dollars), but relative amount gets you to your never need to work again number faster or slower. You might still work after you don't need to, but it's nice to not need to. And of course, there's economic milestones to be had like flying first class, flying charted, leasing a jet, owning a jet. Those certainly have an impact on your life, depending on how much you travel; and you might travel more if you didn't have to wait at the airport for a flight.

I've said this before, but the managing director of the Norwegian Pension Fund - which currently sits at a cool $1.56 trillion, has a $657k salary. Nothing more, nothing less. The return for last year was around 25%

Some of the fund managers there make more than the managing director, but still, we're talking about a "modest" figure in the $1mm-$2mm range. That's paltry pay compared to the big bucks made in hedge funds and private equity.

The pension fund could have paid out hundreds of millions to their fund managers, and it would only have been a rounding error in the grand scheme of things...but still they manage to attract top talent.

There's this culture on Wall Street (or Connecticut, or London...) that they are the only ones that can bring big returns, because they're the right combination of correct pedigree, professional experience, network, talent, etc.

In the end, it's just good salesmanship. Tons of funds deliver mediocre returns, while making bank.

It's pretty absurd of him to talk about how it's ridiculous that people are paid $50mil (I agree) then pivot and say that $120,000 per annum for a new grad is another example of "ridiculous comp." These things are not in the same ballpark, they are qualitatively different.

I don't know the author but this is so bizarre it makes me question their analysis overall.

> After a million dollars or so in salary, the absolute amount that a person is paid has no real impact on their life. They can't eat more meals in a day or wear more shoes. What matters to the manager is the relative amount.

Take the now-defunct "American dream" of a single-income family with 3 kids living in a house with a backyard, say, in Silicon Valley and other places that have mobs paying more than $1 million to people, and that goes away pretty quickly.

After tax, with standard deduction, and 5 allowances, that $1 million turns into $529k net. With a $7k rent plus $5k in personal expenses per person (pre-school tuition alone is about $3k, so $5k in personal expenses is not outrageous), that leaves at most $145k in savings.

With a $12k mortgage (the median price in Santa Clara county for all residential is $1.4 million, I'm using $1.8 for a house), that's down to $85k in savings if you live frugally.

But, as other people say, there's more to life than food and shoes.

I guess I'm not sure that there's a practical difference between "It's marketing" and "This is what the market rate is for a CEO." In other words, firms need to pay this much because that's what other firms are paying (at least.) That's not marketing - that's just the unfettered market at work. Which is why it needs to be fettered. I agree with the salary cap idea, because the market will naturally keep raising the price without bound unless there's something to counteract that, and it is terrible for the labor market as a whole (and even the company as a whole) to be paying so much for a CEO when the same amount could buy dozens or even hundreds of workers.

> After a million dollars or so in salary, the absolute amount that a person is paid has no real impact on their life. They can't eat more meals in a day or wear more shoes

There is more to life than food and shoes? This is one of the dumbest things I’ve read.

> (Aside: should the guys who drive an armored car that carries millions of dollars in bonds get paid more than the guys that drive an armored car that only carries thousands of dollars in cash? Does the amount of money handled change the difficult of the work?)

Possibly, yes. The amount of money handled might affect the likelihood of a heist, and the required preparedness of the robbers. Which in turn requires more skilled drivers facing a higher risk.

https://www.youtube.com/watch?v=lsu6AhYzG_4

That aside was an unnecessary bad tangent which undermines the point.

Truly a mindless article. Money attracts talent, doesn't matter what the historical rates have been or what the absolute cost to live is. If a good person can get 50 million instead of 3 million they're going to take it.

> (Aside: should the guys who drive an armored car that carries millions of dollars in bonds get paid more than the guys that drive an armored car that only carries thousands of dollars in cash? Does the amount of money handled change the difficult of the work?)

Aside from the bigger point of the article, what a horrible analogy. Yes, of course handling more money makes your work more "difficult", where any reasonable definition of difficult has to incorporate the fact that bad people will do crazier things for more money than less.

The argument that "no one really needs more than $X" is always a flawed one, in my opinion. I don't make $1 M a year, but if I did, I'm absolutely certain I'd prefer $2M a year. I can imagine all sorts of things I'd want -- vacation homes, fancy private schools for children, whatever. At $1 M a year I'd end up doing things that put me in contact with people who make more than me, and I'd think "oh, that's pretty cool, that stuff they have."

OK, OK, before you comment that "I don't need that," well, who said I did? I said I'd prefer it, therefore it would be an easy decision to switch jobs for it, all other things being equal.

So if you disagree, why is the amount _you_ make the defensible amount? Do you need it? Maybe 100k should be the max -- that's twice the median U.S. income, after all? Why do you need more than the median U.S. income, how greedy are you? Etc. etc.

Bigger salaries attracts more people, so you can have your pick of your favorite candidate.

A bad scenario is the public school teacher path: they need better marketing and should be paid on par with the congressman, senators, and other highly paid politicians in government.

This article seems to put a lot of people into its "big salaries", from CEOs to fresh graduate.

I'd argue that, past the million dollars mark, it's hard to claim that n > 0 other people could do the same job for cheaper. Companies don't end up paying these amounts for employees they consider fungible. Their jobs are also more likely to be somewhat unique, somewhat shaped by themselves to a certain extent, such that the company marketing is unlikely to convince them anyway.

More generally and even for employees paid less than that, the compensation and especially its constant part (salary) is the one thing we can trust when we sign. The company and its culture might change, my manager with whom I've had a good relationship might leave, but it's still unlikely they'd decide to reduce my salary (maybe it'd be impossible to come back from when it comes to recruiting new hires, reputation-wise?). There are also many companies that are just not known enough, or have team-dependent cultures, such that when you start, you don't know how it's going to be. The compensation is also the one thing you take with you when you start a new job, as a baseline for negotiations. Good luck saying that your previous job had meals or massages on-site, so your new job should figure out a way to accommodate that for you.

I think that's a big part of this one-axis marketing, how concrete the compensation is in comparison with most other aspects of a job.

As with everything, TANSTAAFL.

The danger with offering "marketing" instead of salaries is that it locks your company into valuing (and continuing to offer) the boon that got people to join it in the first place. Google (and HP before it) used to distinguish itself with "We take care of our employees, give you decent work-life balance and flexible working arrangements, and let you work on self-directed projects. We will probably not be the absolute highest compensation you can make, given your skill level." This worked great when it actually offered those. At the very first hint of layoffs, or RTO, or manager-directed product priorities, Googlers ask themselves "Wait - why am I working here again?" In pretty short order, the only ones left are those that actually are motivated by money, but couldn't get a better offer.

Similarly, Apple offers "the ability to work on products that users love", and tends to pay a bit less than similarly-skilled employees can get elsewhere. This works great, until users cease to love your products. Current Apple is lucky that they are still on top, but historical Apple absolutely went through this sort of brain-drain from 1993-1997, when they were not on top in product quality and so there was no real reason for skilled people to work there.

The big advantage of paying a lot is that you know that the type of person you get is motivated by money. If you want them to do something, pay them a lot for it, and make that pay contingent upon them actually doing it. It takes ulterior motives out of the equation and gives the corporation flexibility, because the only reason people work for it is the money.

Wow, people used to nearly worship Seth Godin, it's pretty refreshing to see a whole lot of disdain for this article here :-)

I think there's something to his point about marketing. There probably is a way for companies to pay a little less but still attract the top talent by selling the job better. But then, why hasn't anyone figured this out and started doing it? Maybe financial workers, CEO's, laywers, and engineers see through it?

This part is just hilarious, "an industry-wide tax and trade salary cap will actually help these organizations." I mean, I guess maybe he really is feeling like this sort of regulation would be a charitable thing to do? It's actually a terrible idea though.

Beyond a few million a year, the rest of the comp is really providing something that's more difficult to purchase with money: power.

So, while there's a diminishing return on the benefits of additional money in a person's life, a certain subset of people have an insatiable desire for more power. It's problematic in what's supposed to be a democratic society with a fairly flat amount of power distributed among citizens. We essentially recreate a hereditary nobility, which reduces the fitness of our civilization as a whole since we no longer have the most qualified people making the decisions.

I've worked jobs where I'm paid 60-80k and where I'm paid 100k plus.

I can tell you for sure I cared much less about the job where I wasn't getting paid as much. I would never answer an after work call or go out of my way to follow up organizational or systemic issues. For me working overtime is part of the package when I get paid loads more.

> claiming that they need to pay CEOs $50,000,000 salaries in order to recruit the very best ...

>After a million dollars or so in salary, the absolute amount that a person is paid has no real impact on their life...

At the high end it isn't really about employee lifestyle, it's about the value the person can bring to the business. If one CEO will take a $100k salary and keep the business about the same and the other wants $50m but will add £1bn in value to the business then the latter is a better deal for the owners.

And the person wanting the $50m may not be greedy but just being offered similar elsewhere because they are good. Of course in real life people often get the high salaries without actually being that good which is a less fair deal.

(2009)

“In fact, we need more private companies that innovate and pay their staff a ton. But if you're owned by shareholders..”

Private companies are owned by shareholders.

That’s just one of the internal inconsistencies. Bit curious. Leads me to question the whole argument.

You don't need Max Verstappen to drive your armored truck, but you sure do need Steph Curry to sell basketball tickets.

The level of competition between companies--the level of talent needed to win--is what drives the salaries.

Since it's a 2009 article and there is taxpayers in the text, I think he was upset because the great recession bayouts and even with all world crumbling at the moment, large bonuses to C-Level.

Now it's 2024 and I expect lower profits in the middle term to companies that pays anyone more than they give in return.

1. He keeps saying marketing but salary is actually a pretty good indicator for how good a job is.

2. You pay to retain not to hire. You can hire people at practically any price point. Whether they'll stick around for longer than 6 months is a different matter. I've seen multiple startup founders burnt by this.

I think the limit of a million dollar annual salary makes a lot of sense and we should start with the entertainment industry.

The NFL is on my mind, as of course is soccer since there was a actual football player in one of the commercials during the recent game

This post raises a question I'm curious about: is executive pay higher or lower in private firms compared to ones that are public? Adjusting for confounding factors like size and sector.

This article is pretty shallow and sounds a lot like the people on Reddit calling for the removal of billionaires and how its the fault of the rich that they are struggling without acknowledging the amount of work it takes to become rich. The same people that minimize what people like Musk have accomplished.

If I get paid more, I work harder. There is obviously a realistic limit on how hard I can work. The longer I stay at a company though the more knowledge I have and the more effectively I can utilize my time to accomplish my goals and those of the business.

If I can get a 20% raise somewhere else and do the same amount of work, I will do so. In order to keep me, my company just has to match my new salary offer. Something that they are free to do or reject based on their valuation of what I bring to the table.

A million dollars is a lot of money, but its significantly less if I need to buy a house in California vs Wyoming. The free market does a relatively good job of assigning capital, lets not make up arbitrary caps based on make believe morality.

The job of corporate lawyer is so singularly awful, with awful colleagues, the firms have to pay the salaries as that is all there is.

Savage : "Unable to muster up even a mite of marketing insight, they chose to compete on only one axis: salary..."

Hahahaha, this is capital complaining about the increasing cost of labor because of supply constraints straight out, which has been increasing world wide recently because of super-ZIRP and COVID killing off a margin of the workforce. Will he suggest a cap and trade wealth tax over the estate tax limit while people are alive next? No.

The capitalist here is berating other capitalists for not having enough marketing savvy to get labor at cheaper prices. Seth is a capitalist, he treats his work as a business to build vs. a salary to earn. On top of this, Seth's business is consulting to other businesses about marketing, using the marketing techniques of saying something a bit wrong and agreeing with the common man about some stereotypes to enhance it's virality.

It comes to pure supply and demand, and they wouldn't do it if they weren't making more money off of it. It's never about what you "deserve". Anybody on a salary without significant equity ownership is labor, but it's expensive labor in this case. Because if the business could get equivalent quality labor at cheaper prices, they would!

He also knows that "Goldman Sachs" is about class, because they make their money via front office sales, and someone lower class is not going to make a good salesman. Anybody who can do spreadsheets, basic algebra and have a cocaine driven work ethic can do banker jobs, it's not a talent issue beyond insane work ethic and social skills.

The post is from 2009, and hence shortly after the mortgage derivatives market meltdown.

Name the other axes, Seth. What are they? What else is there but money? With sufficient money you can fill your positions instantly with top talent.

Anyone pretending there are other answers is probably guilty of lowballing, wanting to lowball or the English translation of my name: a grape fox.

This is a garbage opinion piece demonstrating the archetypical boomer mentality of caring about your pay being passe. Trying to market an “innovative” workplace to save money on employee pay is just a cheap trick. Yawn

Also, this should have a [2009] tag

(2009)

What a tone-deaf article.

- Salary is absolutely the key factor when people pick jobs. The difference between a fun hobby and a great job is that you get paid a lot to do the latter.

- Here he's saying that companies should create a buzz around jobs; but having good feelings about your low-paid job doesn't help you nearly as much as just having lots of extra new wealth.

- Saying that because high-end employees are far beyond the "buying food" stage of Maslow's Hierarchy means more money is unnecessary is just brain-dead. Economic growth anyone? More money = good.

- High pay is a great way for companies like Google to prevent competition. Why risk starting a business when you can earn a million bucks every couple of years working for them?

- High CEO pay is absolutely not a problem. If a top CEO increases a company's market cap by billions, and is only paid tens of millions, then what a waste of time and emotional energy it is to fixate on the tens of millions.

I can't believe this character is actually advocating for lower salaries.

After aging I'm starting to have new views on large salaries:

1. The money is just going to be saved. Net gain to the person is they're probably going to live for the rest of their life off dividends. Net gain to society, is any money taken out of circulation fights inflation.

2. If you pay someone a lot of money they will, essentially, spend it on other people. Either through salary or just buying shit. The richest people will make other people wealthy, and those people will make other people money too. Net again sounds like it's a benefit to not just the original person.

3. I've had lots of people say it's not a zero sum game. This is turning out to be true. Someone having success inventing and selling a new ketchup dispensing lid (and making billions) does not prevent someone from starting a successful company that makes Gyroscope toys that stands on its corner that can hold a tomato.