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Comment by three14 | Hacker News Reader

I agree with the basic thesis - you can earn lots of money, and deserve it.

But the essay as a whole suffers from assumptions that the market is pretty efficient. It's really hard to believe that the market as a whole is anywhere near efficient, particularly the CEO market. Was the CEO of Bear Stearns or Lehman Brothers worth the salary they got?

(I think it's easy to point at a lot of likely reasons for distortions in the upper tiers of the salary scale, but I think that distracts from the point - a good number of CEO salaries were empirically demonstrated to be poor investments.)

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A good part of market efficiency is the simple mechanism it provides to punish those who make wealth-destroying choices. Markets can't guarantee perfect decision-making (what can?), but free markets can provide that people who make poor choices suffer losses.

I don't understand your comment. If you mean a Platonic Free Market, maybe. In the real world, the CEOs weren't penalized for their wealth-destroying choices, and the boards weren't penalized. Sure, they lost their jobs, but perhaps they never should have had those jobs to begin with. They got to keep the money that they didn't earn. And that market is about as close to a free market as you'll see in the real world.

The investors lost money. They put their trust in bad (or simply imperfect or misguided) CEOs and careless boards. In the future, perhaps they will be more careful in their selection of managers. If not, they will continue to lose money. That's part of the market process.

The CEOs got to keep their money because the investors made poor choices; the investors could have negotiated a clawback in the compensation packages, for example. But in some sense, you might even say that the CEOs gave the investors exactly what they wanted. If the investors had wanted a more conservative corporate strategy, they could have always pulled their money out and invested in Berkshire Hathaway, or they could have uprooted management. Management set out on a strategy that didn't turn out well, but they weren't hiding anything from their investors.

It gets a little blurry at high levels, but remember that at the end of the day, the CEO is just an employee. The owners are ultimately responsible for the company.

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