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PaperclipPerfector  1mo ago (text post)   29373 thread views

Culture War Roundup for the week of October 6, 2025

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I have a really hard time with CEO vs worker pay discussions. It kind of drives me crazy. Lets take Starbucks, since I'm currently hearing unions complain about the disparity right now. The argument mostly feels like math blindness, but maybe my problem is that I'm bringing an abacus to a knife fight.

The Starbucks CEO makes $95 million a year. They argue this is outrageous because their employees only make $20/hour or whatever.

Why not complete the math? What if we took the Starbucks CEO, fired him, and redistributed his $95 million a year a salary to the workers? Well, the 361,000 workers would see their pay bumped by about $1 per day. It's really hard to get across that the workers at each Starbucks already capture a huge portion of the value of the cup of coffee they serve (aside from real estate costs, cost of goods, etc). The Starbucks CEO takes perhaps a 1 cent from that cup.

This is a simple economic fact that seems almost impossible to communicate. Unionization won't improve worker pay on this front because there isn't much on a per unit basis that can be squeezed to give to workers.

I mean, the union could say lets increase the cost of coffee at Starbucks by 2.5x so that every employee can now afford a 3 bedroom 2 bathroom house in their neighborhood but then their competitors would eat their lunch. And customers might actually be pretty outraged by the idea of paying $18 for a blended coffee plus tip. So, the unions don't try this angle.

In my town a particular annoying version of this argument is happening regarding a company that distributes Pepsi products in the region. They somehow ended up with a union 50 years ago which includes a pension. The company recently announced they can't fucking afford to give employees a pension anymore for the very not valuable job of delivering cases of Diet Pepsi to 7-11s all day and they want to switch them over to an 401k. This was an enormous outrage and the delivery people have been on strike over this for a year now. Going by the town's reaction, they seem to believe thousands of dollars per case of soda being delivered are waiting to be wrestled away from the evil classists who run the company.

It never occurs to anyone to learn to do something more valuable. Just that they need to win the fight against the classists, a fight that could not change anything if they won.

How much unrest is actually caused by failure to reason through 9th grade math regarding your personal conditions?

Is any of this even about actually improving worker conditions? I know it's cliche to be skeptical of unions but I honestly don't understand their modern presence at all.

I feel like a much better target are the hordes of laptop-class, bullshit email jobs these giant companies seem to employ in droves. I worked at a grocery store that paid a triple digit salary to a 'Graciousness and Hospitality Coordinator' whose primary job consisted of slapping together poorly made PowerPoint Presentations which might have been titled 'How Not to Have Aspbergers Syndrome', meanwhile they can barely get product on the shelves because the place is so understaffed.

I have to imagine Starbucks has hordes of these silly positions whose jobs consist largely of sending emails and having Zoom meetings that have little to no effect on the overall functioning of any individual coffee stand. As a laborer who felt underpaid, these are the people I'd direct my ire towards. But in the framing of the political left, they're all a part of the 99%, and the Ceo isn't.

laptop-class, bullshit email jobs these giant companies seem to employ in droves.

I hear this complaint a lot but I work in a microcosm of a corporate environment with around 200 employees that directs billions of dollars in spending that is almost entirely composed of "laptop class" people and while I understand the incredulousness of onlookers it's very hard to tell which of the email senders and data enterers could in actuality be replaced without catastrophic consequences. If this wasn't the case then some group or another would have already raided the department and gotten rid of all of them so that they could show 10% reduced costs on some corporate slide deck and ascend the payscale. These things are much more darwinian than outsiders believe.

This is very obvious with AI entering the picture and the various departments looking around at eachother with hunger in their eyes. Do we really need this many pricing analysts? Can our underwriting be done more efficiently? Surely we can get a closing document for a $150 million deal done in under a week of labor. I promise you that you are not the first person to wonder if some job really needs to exist. Someone with skin in the game is fighting ever budget season for that job to exist and there are real stakes.

The starbucks email job sounds so frivilous until a whole region of shops doesn't get their bean delivery and can't sell their most profitable drink for a week costing the company millions because some process wasn't followed properly.

Most of the left are the laptop class doing bullshit jobs. Which I find rather hilarious. They act like email jobs are so stressful and demand even more money, but never really did anything honestly productive where results matter. It’s even funnier when you realize that most of these people who consider themselves working class have jobs that they couldn’t fail if they tried.

Interesting because it's been much, much harder for me to hold on to fake email jobs than my jobs delivering pizza and flowers. I left all the latter, the former left me (save for one).

Yeah agreed. I think the hatred against fake email jobs is somewhat warranted for a small amount of positions, but it's nowhere near the majority.

I feel like a much better target are the hordes of laptop-class, bullshit email jobs these giant companies seem to employ in droves. [...] I have to imagine Starbucks has hordes of these silly positions whose jobs consist largely of sending emails and having Zoom meetings that have little to no effect on the overall functioning of any individual coffee stand.

Probably why that video got such a backslash....

triple digit salary

Uh, what currency are we talking about?

$/hour, I'd guess.

(But yeah, normally when someone says "N-figure salary" they're talking about $/year)

He means six figures, because once you make 100+ it's "triple digit" because the trailing 000 is assumed

Making 75,000 would be "double digit" I guess because it's "75"

I've never seen that before, but if a friend asked my salary I would respond with "I make 95" not "I make 95,000" so it makes sense

Presumably USD thousands per year

Your mistake is thinking that this has anything to do with math. People aren't upset because the CEO's pay causes them to get underpaid, they are upset because it is ludicrously, wildly unfair to pay someone over 1000x what you pay the people who actually drive the company's ability to make money. It's a question of justice, not one of "how much would we benefit from cutting this guy's salary".

wildly unfair to pay someone over 1000x what you pay the people who actually drive the company's ability to make money

It's not about driving the ability to make money, it's about value over replacement employee.

A bad barista can ruin a lot of customer's days, piss people off, probably cause thousands of dollars of damage before someone notices.

A bad CEO can destroy a hundred million dollars of value, maybe even a billion, before the board removes them.

At those stakes, justice is not even close to the point. It's rational to pay that much because the swing in value caused by that single person is immense. The difference between a good CEO and a bad CEO is easily $100M just by itself.

A bad CEO can destroy a hundred million dollars of value, maybe even a billion, before the board removes them.

A lot more than that, if they are Steve Ballmer. The difference between Ballmer's and Nadella's Microsoft is exhibit A in the case for "Some of our most talented people should be non-founder executives at legacy companies."

It would be rational if there was any evidence that paying that much gave you any meaningful increase in how good your CEO is. But I don't think there is.

The evidence is that the company still exists.

I can't stress this enough -- a bad CEO can destroy the entire thing as an ongoing concern. The companies with those CEOs literally don't exist any more.

Insert the picture of the military planes coming back with the bullet holes.

No, I'm not saying that a bad CEO can't destroy the company. I'm saying that we do not have reason to believe that paying so much gets you a good CEO. Notably, even a CEO who destroys the company tends to get paid a bonus for his trouble. That is the exact opposite of rational, and so we would expect to see such clauses get eliminated, but if I'm right (and CEO compensation is driven by good old boys helping each other out) it is completely expected.

The reason to believe that paying so much gets you a good CEO is that companies that want to continue existing care about costs, and so if large compensation packages for CEOs didn't attract good CEOs, market forces would pressure them to offer lower compensation. So the fact that we continue to see successful companies pay CEOs a ton is reason to believe.

Precisely.

The resentment workers feel towards the CEO is exactly the same they would feel if they saw Gruk take 1000x their share of mammoth meat in the ancestral environment. Okay, maybe Gruk is exceptional hunter who contributed more to the hunt than most, and deserves 2x the regular share, or even 3x if he is wise and respected and high status, but 1000x?! Nobody deserves that, it's unfair!

And in the ancestral environment, it really is unfair. Nobody is 1000x a better hunter than average. But in a modern economy, it is perfectly possible for an exceptional man to produce 1000x the value of a regular man. I'm pretty sure Elon Musk and Warren Buffett produce more than 1000x the value I produce.

I think another point is the workers in Starbucks aren't paid very much. Engineers are less likely to care about CEO pay than baristas because they baristas are essential to the operations of Starbucks but don't make that much thus the CEO getting 95 million off their labor is especially unfair.

Elon Musk and Warren Buffet are bad examples though as they are Great Men, with a mythos and not easily replaced. Most CEOs are interchangeable faceless suits not visionary founders.

Yeah, Musk may be crazy and I was never a fan even back in the days when he was being worshipped as a god of tech, but he does have a Vision and a Plan. He does want to build electric vehicles. He does want to build self-driving cars. He does want to build private, reusable space vehicles. He does want to colonise Mars.

Most other high-paying, multi-million salary CEO jobs are "Tom Bimble left Wahoo! and has now joined MegaMart, replacing Tim Bamble who has gone to Wahoo!" Interchangeable guys who didn't found the company, weren't there for its rapid growth phase, and whose job is basically "don't run it into the ground, but even if you do, your contract ensures a golden parachute".

That's where the resentment comes in: I screw up in my job, I get fired. CEO Tim screws up, he is the cause of a lot of people losing their jobs, but the terms of his contract means he walks away with a million-dollar pension and may well walk into a new job.

problem with the idea that CEOs produce 1000x the value the employees is that the CEOs are 1000x compensated as a rule, including those CEOs who don't oversee enermous successes but stagnation or drive the company to the ground. All well-paid until the end.

I think it is strongest argument that executives are not highly paid because their value is competitively assessed. It is a combination of a principal-agent problem and some kind of scope issues: executives are placed at the top of company hierarchy and control its day-to-day functioning whereas stock-owners are numerous and have relatively little direct input, which causes the principal agent problem. Because the executives are few in number, humongous compensation to few executives is only a drop in a bucket to large company, so they can get away with it.

It is a problem that probably can not be fixed in joint stock company capitalism, but perhaps benefits of capitalism are worth the costs.

Musk and Buffett, for the record, are not only CEOs. Neither is rich man because of their CEO compensation, but because they hold significant amount of shares in their respective companies. Buffett owns something like 30% of Berkshire Hathaway. Musk owns 15% of Tesla and majority of SpaceX.

But in a modern economy, it is perfectly possible for an exceptional man to produce 1000x the value of a regular man.

But is the CEO of Starbucks that man?

The perceived injustice is "He and the other execs get to vote themselves a 10% pay increase Because They're Worth It, at the same time they are slashing headcount because 'labour costs too high'. Belt-tightening somehow always means the guys on the shop floor, not the managers. And yet the managers get way more perks just for sitting at a desk".

That is true but its also relatively rare. The vast majority of senior managers are extremely replaceable/interchangeable (not by anyone, of course) and the arguments for why their compensation is as high as it is could as well apply to anyone responsible for a system which's continued operation affects a lot of money, from something as lowly as system administrators to say the commissioner of the IRS (that apparently only makes some 200k a year).

A lot of the excessive senior managment compensation is friendship/class corruption and there are reasons beyond "justice" to care about this as well, like why the money isn't going to shareholders or reinvestment in the business.

Excessive compensation for labour is a bad idea. Driven and capable people should be incentiviced to start businesses and compete/disrupt markets, not capture positions for what essentially is rent extraction.

The median ancestral human was a peasant farmer, and, inasmuch as we know the attitudes of the historical peasantry, they loved the nobles with 1000X their fair share. What they seem to have hated have been middlemen, merchants, etc.

The media ancestral human was a hunter gatherer.

Due to population densities, that isn’t true- most ancestral humans have been peasant farmers because hunter-gatherers had very low populations.

Which is of course why there were more or less constant peasant rebellions until the industrial revolution...

At least the nobility had the decency to look impressive....

Our instincts are a lot more adapted to the vastly longer time we were hunter-gatherers than to the measly 6,000 years we spent as farmers.

I'm pretty sure Elon Musk and Warren Buffett produce more than 1000x the value I produce.

???

What exactly is the instantiation of value that you think Elon Musk and Warren Buffet “produce”? Scrimshaw?

I am, I suppose, an Elon fanboy in the sense that to get to Mars I would ride with Satan himself, but he doesn’t produce anything; he is at best a Schelling point around which (as @SubstantialFrivolity describes below) an engineering Old Boy’s Network rotates, but if it wasn’t Elon it would have been somebody (anybody) else, to no material detriment to the Mars project.

In fairness to the "Elon is unique" theory, he does seem to be a locus of "I don't care what problems you encountered, we're doing sci-fi shit, so shut the fuck up and figure it out" energy. This doesn't always work out, but it appears to be a load-bearing reason for why SpaceX is SpaceX instead of "failed aerospace subsidy farm #28".

With most now-rich founder tech CEOs I could buy that. With CPUs, GPUs, OSs, social networks, whatever, there was a stable of plausible looking competitors and one caught a lead and rolled up into a progressively fatter cat that no other could compete with, network effects and all that, and maybe any one of them could have done just as well. ('anybody' seems a stretch, say, I'd most likely screw it up if asked to be a team lead of a team of any size. I might manage to manage a kitten but wouldn't bet on it. Very happy that tech companies have an IC track. And probably it takes a more select type to be a startup founder that doesn't fizzle out than, say, a Starbucks franchise boss or line manager wherever)

But SpaceX? Why would you expect some socioeconomic factors to turn up the same thing if there wasn't a idiosyncratic space maniac Elon driving it? There have been any numbers of attempts at space startups with comparatively incredibly lame results. Probably the most serious one has been Blue Origin where (if we believe the AI slop Google gives me for the search prompt) Bezos has likely poured in 100x as much of his own money as Elon did, and managed one (1) orbital flight so far, and some tens of 'hey we edged just over 100km so we can claim our tourists visited space' which tends to be peak space startup achievement. Is there any reason to think that swapping out Elon some random other boss wouldn't end up with at most a Virgin Galactic, instead of the wildly implausible looking outcome of first catching up with the established fat cat aerospace companies that had been doing this for decades at scale and made a giant government-funded grift of it, and then undercutting them on launch cost by 20x?

I'm pretty sure Elon Musk and Warren Buffett produce more than 1000x the value I produce.

Personally, I don't believe it's possible for one person to produce 1000x the value of another. I think that CEO pay is not driven by actual value provided, but from the fact that CEO compensation is set by boards of directors who are... executives themselves, so it's just a good old boys' network. But certainly whether you think the arrangement is fair depends upon if one thinks it is indeed possible for one person to provide that much more value than another.

Personally, I don't believe it's possible for one person to produce 1000x the value of another.

I have numerous coworkers that produce negative net value, so it's possible to have one person produce infinitely (or undefined, or NaN, or whatever) more value than another.

But someone like Jim Keller absolutely provides 1000x more revenue to his employers than, say, an offshore code monkey in Mumbai writing JavaScript.

You, @sarker and @TitaniumButterfly have all made that point and I will admit it's persuasive. So I will amend my statement: it is possible for one person to produce infinitely more value than another, but only in the degenerate case where one of the people is doing nothing or is a net negative to productivity. I don't think it's possible for that to occur in a normal case (where both people are actually producing value), however.

It seems strange to believe that someone can have zero or negative marginal product, but not arbitrarily small positive marginal product.

In order for it to be possible, all you need is zero, you don't have to have arbitrarily small, because it is certainly possible to produce 1000 times zero.

But it's still nonsense either way because people here are depressingly literal. "Produces 1000 times as much as another employee" implicitly compares an employee to another employee whose production is acceptable. The fact that the words "... whose production is acceptable" are not literally there doesn't change this.

There's some places where people whose output is zero or near zero are quickly rooted out and fired (assembly lines?) but in many fields ZMP workers learn to camouflage themselves and fly under the radar from management's perspective.

Or, if you like, NMP and ZMP workers can have de facto "acceptable production".

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People aren't being overly literal. Including that comparison without making it explicit isn't a reasonable thing to do, because it brings it in without leaving it open for challenge.

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"arbitrarily small" is really just the hypothesized "this person accomplishes nothing" with different wording. That sort of mathematical language makes sense if you're doing a proof, but we aren't.

Nature abhors a discontinuity. You already agreed that an employee can accomplish nothing. How can it be that producing zero is possible, producing X is possible, but it's impossible to produce x/1000?

Effort, productivity, hours worked, talent - all these things are continuous variables. It's trivially obvious that someone who has little talent, low productivity, and slacks off on the clock can produce arbitrarily less than someone with talent, drive, and focus.

The simplest explanation is that yes, corporations can gain such scale and power that paying the CEO 100 million dollars makes sense in a free market economy. Corporate officers are merely the highest-paid employees in a corporate structure and their salaries are not fixed by a mysterious cabal. If a board of directors could pay them less, they would and could. The ability and talent to grow a firm is rare: you can't hire Steve Jobs and Elon Musks off the street, and even if you can, you have to pay them for the opportunity cost of them not going off and pursuing their own ventures.

Personally, I don't believe it's possible for one person to produce 1000x the value of another.

Here are some examples:

  • X enters data from PDFs into a database manually. Y writes a script for it.

  • X creates a homebrew game that only he and his best mates like to play. Y creates a similar game, then finds niche markets for it, selling a few thousand copies.

  • X sells Girl Scout cookies by offering them to her family and neighbors. Y sets up a Girl Scout Cookie stand outside of a popular pot shop.

Maybe X produces more social and community value by providing cookies to family and neighbours than Y does by profiteering off potheads?

We are talking about value an employee brings to a business, which is more straightforward to measure.

Personally, I don't believe it's possible for one person to produce 1000x the value of another.

It is actually much worse than even @TitaniumButterfly is suggesting. There are Zero Marginal Product workers, but there are also Negative Marginal Product workers, those who actually reduce a team's aggregate output after joining (one example would be Ignatius J. Reilly).

Plenty of people can't produce anything, so how does that math work out?

Technically undefined, I think? Because it would be dividing by zero to determine how much more someone is producing than that worker.

The HVAC union(OK, technically a plumbing union, but whatever) raises costs by a lot, but it's never short of work. Yes, construction and the trades are a bit of a different market. But at some point people are willing to pay more for fairly nominal benefits. In the case of the HVAC union it's mostly guaranteeing good techs on a jobsite to customers who don't care about the cost very much; think hospitals and the like. I can easily imagine starbucks being a premium provider because all of their workers make six figures. It would be smaller though.

People's value functions are based on envy/their relative position. A lot of people would be objectively happier being upper middle class in 1925 than lower middle class in 2025 despite the latter being materially a lot better off, happier living poor in a poor neighbourhood over living average in a rich neighbourhood, and happier earning $50k under a CEO earning $60k than earning $60k under a CEO earning $80m.

Well maybe, I won't deny envy as a factor, but the ability to buy property is another huge factor. People who can afford property tend to be a lot more content than those who can't. Regardless of wealth disparity or relative social class.

A lot of people would be objectively happier being upper middle class in 1925 than lower middle class in 2025 despite the latter being materially a lot better off

And therein lies the tragedy of humanity. As La Rochefoucald said: The truest mark of being born with great qualities is to be born without envy. I was not so fortunate but have over the years tried to kill the envy in me because in the end it's just destructive. Perhaps we should have compulsory lessons on this in school for everyone to make the average man content with his average life instead of trying to pull down his betters.

I suspect that there would be less envy in the world if people got the impression that those above them were trying to pull everyone else up to their level rather than trying to keep them down.

Would it? Or would they just blame them even more?

In any case, I don’t understand why they should help. Help me or I’ll envy you and make things difficult sounds like extortion.

In any case, I don’t understand why they should help. Help me or I’ll envy you and make things difficult sounds like extortion.

Because the obscene concentration of wealth that allows those elites to exist requires the existence of a coherent and functioning society. You can't have millionaire layabouts and the idle rich without somebody to actually do the work, and if those people believe that current social arrangements have lost their legitimacy then things can change very, very fast. The French aristocracy didn't give a shit about the concerns of smelly peasants and didn't want to help them out at all, but that famously did not end particularly well for the aristocracy.

Regarding pensions, I think having private companies pay out pensions to employees is silly. It also distorts incentives, with the state more willing to rescue a company because the pensions of a lot of former employees depends on it.

Instead, the retirement part of the paycheck should be invested either by the employee directly or by a specialized company (under strict regulations, basically "hang all the C-level executives if the company folds during a finance crisis" or something). I am fine with an insurance model, where people who live to 100 get their pensions subsidized by people who died half a year into retirement. I am not particularly fine with my deductibles directly paying for current pensioners (which is the case in Germany), and all I get in return is a vague promise than politicians will make future generations pay for my pension in turn.

People want nice stuff—especially housing. Bing that cost down and other things like the above won’t matter

This feels like a Pascal's Mugging type of argument though. Or more specifically the petersburg paradox

Is there any specific reason to pay the CEO $95 million? It's not like there's a standard market rate for CEOs. It varies wildly and depends heavily on the subjective opinions of the board members. Why not go out and find another CEO for $200 million? A $200 million CEO should be even better than a mere $100 million one, right? Starbucks makes about $36 billion in annual revenue right now, so even $200 million is (like you said) a drop in the bucket. A mere 0.5%. If the new, better CEO can increase performance even 1%, he's worth it.

But then you can play the game again, and again, and again. There's no upper limit for CEO pay! Where does it stop? Their stock is kind of struggling right now- would a $10 billion CEO lead them to greatness? Or should they just cut costs and try to remain in their nice, small, profitable niche? Most sane people would say they should just stick to selling coffee, but you could do the math and imagine that even a 1% chance of becoming the next hot tech stock is worth gambling the entire company on.

Starbucks is admittedly a weak example for this. They have a lot of part time hourly employees, and they all get health benefits, so their biggest expense by far is already employee compensation. It just doesn't go as much to salaries.

For a different extreme, look at Tesla. 125,000 employees right now. Market cap 1.3 trillion. Elon Musk right now earns about 8$ billion a year under current conditions, but it goes up by 1% of Teslas total market cap for each additional trillion in their market cap. If he hits just the easiest goals, he gets $36 billion a year. If it goes up to 8 trillion, he clears an eye watering $878 billion in 10 years, almost $90 billion a year. (yes that's in stock, not cash, if that makes a difference)

Doing the same math as you, that could be ($90 billion)/(125,000 employees) = $720,000 per employee, per year. Is that still just a trivial cost? I dont' think so. In that case he's being given a large chunk of the company as his compensation. (And that's just the CEO, non including any of the other executives who also get paid a lot)

You could argue that in that situation he deserves it since the stock went up so much. But like... how do you know? How does anyone know? If some Tesla employee delivers full self driving while the government decides to tax gas cars and promote EVs, does Elon really deserve that much credit? Surely there should be some limit where we decide that a CEO is just too expensive, but there doesn't seem to be any mechanism in corporate America to limit it. Meanwhile, managers are very much incentavized to cut expenses, which heavily includes limiting employee salaries. There isn't any mechanism in the corporate structure to say "OK our stock didn't grow much. But on the plus side, we were able to consistently raise salaries for all our employees every year."

in history they sometimes talk about "the great man model," where history is heavily shaped by a few exceptional individuals. They mostly bring it up to disparage it, saying how history is far more complicated than just what people like Caesar and Alexander did. They'd be laughed out of the room if they tried to give all credit for an entire country to just one person. But apparently corporate leadership still believes in this line of thinking- they value the CEO far more than anything else. I can't help but worry that our largest corporations are under the control of middlebrow business majors who vastly oversimplify everything.

For a different extreme, look at Tesla. 125,000 employees right now. Market cap 1.3 trillion. Elon Musk right now earns about 8$ billion a year under current conditions, but it goes up by 1% of Teslas total market cap for each additional trillion in their market cap. If he hits just the easiest goals, he gets $36 billion a year. If it goes up to 8 trillion, he clears an eye watering $878 billion in 10 years, almost $90 billion a year. (yes that's in stock, not cash, if that makes a difference)

Musk's CEO pay at Tesla is uniquely generous even compared to other overly-generous CEO pay packages - to the point where the Delaware courts ruled it illegal. Tesla has the most liquid options of any single stock so it is quite easy to measure the ex ante value of Tesla share options. The pay package Musk "agreed" with Tesla in 2018 that was rescinded after it turned out to be worth $56 billion ex post was worth $2 billion ex ante back in 2018 - at a time when Tesla was only a $50 billion market cap. The number of public-company CEOs who made $2 billion from CEO compensation ex post is small enough to count them on your fingers. But even as the highest-paid CEO ever (by an order of magnitude) Musk made more as an owner than he did as CEO.

But the typical fat-cat non-owner CEO retires with a net worth in the high double-figure millions. Overpaid non-owner CEOs get a grossly disproportionate amount of public attention relative to how relevant they are to rising inequality, or falling living standards for line workers. I was particularly amused by the press coverage of Andy Jassy's $40 million payday as CEO of Amazon - none of which made the comparison to how much Jeff Bezos made off Jassy's work (about $80 billion, so 2000 times as much).

Would you agree that, even if in general CEO pay is not a major expense on their companies, there are particular cases where it could be, and Musk at Tesla is one of those examples? And it's interesting that he wa able to get it past the board and all sorts of normal shareholder protections, to the point where it required a court ruling to stop it. It's not some perfect elegant self-maintaining system.

Surely there should be some limit where we decide that a CEO is just too expensive, but there doesn't seem to be any mechanism in corporate America to limit it.

There is, obviously, or every CEO would already be making a trillion dollars a year. Specifically, they need to convince the owner(s) or their representatives to pay them that much. And the more money they pay the CEO, the less profit they make. Why do you think the board is any less incentivized to cut staffing costs than managers? They're the ones applying that pressure!

As for the actual reasons why the market looks like it does: I'm pretty sure the thinking is much more about ensuring you've got someone who's experienced and reliable enough to avoid any major corporate screwups (which can easily run into the billions) than attracting some business genius to lead the company to glory. But if everyone wants experienced executives with a record of reliability and no one wants to take a chance on someone who isn't there yet... Well, that's how prices get bid up.

They mostly bring it up to disparage it, saying how history is far more complicated than just what people like Caesar and Alexander did. They'd be laughed out of the room if they tried to give all credit for an entire country to just one person. But apparently corporate leadership still believes in this line of thinking- they value the CEO far more than anything else.

These are not at all the same thing. They value the CEO over any other individual in the company, yes. But, as OP pointed out, they're paying him less than half of one percent of their total payroll. Sure, you can't reduce all of Roman history during Caesar's reign to Caesar... but I'm pretty sure you can attribute 0.5% of it to him. He did actually make a lot of decisions that impacted the lives of many Romans, many as a result of his particular circumstances. Upwards of 2-3%, I'd bet.

In general, the strong form of the case against the Great Man Theory is clearly false. Stanislav Petrov and Stanislav Petrov alone prevented nuclear war. Many times events don't neatly follow from the choices of any one (or even several) specific individuals, and sometimes when they do those choices would probably have been made by someone else in their place, but it's ridiculous to insist that's always the case. But I don't think most actual historians push the strong case; the point is just that other factors matter too, and often matter more. Which is in no way incompatible with thinking good leadership really does matter.

Musk is an outlier, for sure. But he's an even bigger outlier in terms of success. You can say he just got extremely lucky (twice, since SpaceX is an incredible success too), but I don't think that's where the balance of probability lies. Now, I'm not sure his compensation is reasonable even given that fact... which is why I haven't put any money into Tesla. (Well, I mainly haven't because I think other companies are quickly catching up, if they're not already there.) If more people thought like me, Tesla's stock would drop and he wouldn't get those huge bonuses... So there's your limiting factor. Clearly the people with skin in the game do feel he's worth it. They might be wrong, but it's their money they're betting.

Stanislav Petrov and Stanislav Petrov alone prevented nuclear war.

No, that's not understanding it correctly. Petrov reporting what he saw faithfully wouldn't necessarily have resulted in nuclear war; it was the Soviet leadership's job to decide whether to launch on that information and it's entirely plausible that they wouldn't have.

Vasily Arhkipov is an obvious but-for case, but not Stanislav Petrov.

And as someone (I think it may have been later SSC poster John Schilling) pointed out in a long-ago argument on Usenet, it's possible that Petrov may have made war more likely -- now every time things are all quiet, there's always the lurking possibility in the leadership's minds: "Are things really peaceful, or is there really a missile launch and another Petrov-wannabe in the radar center is playing games with our inbound data feed?" Soviet leadership knew, or should have known, that military hardware can be flaky, but raising the possibility that the underlings can be lying is not a method likely to lower upper-level paranoia...

Why do you think the board is any less incentivized to cut staffing costs than managers? They're the ones applying that pressure!

It's a bit different though. The pressure to cut expenses comes from the top down. But there's no one above the board of directors who can hold them accountable- they're already at the top! Many of them serve on multiple boards at once, and rotate in and out of CEO or other C-level jobs at other companies, so they have a strong "class interest" in pushing up CEO pay in general. They might get some bad press or worker grumbling about unfairness, but there's no one that can actually fire them for setting the CEO pay too high. In theory I guess the general stockholders could all come together to do it, but they're so disorganized that it never happens. The only practical way to force them out is for some corporate raider to do a hostile takeover, and even then there's golden parachute clauses designed in part to preevent that sort of thing.

also worth noting that the ratio of CEO pay to average worker pay has massively increased over the last few decades. So it may well just continue to increase until they're taking home some large fraction of the company's total revenue as their personal salary. Or maybe the CEO ends up with all of the company's stock (making it harder and harder for regular shareholders to oppose them) and they become a private company, like SpaceX already is.

edit: most of the starbucks board members are current or former CEOs of other companies. They directly benefit from raising CEO pay, since that sets a higher baseline for themselves to justify their own pay. This isn't some abstract "class consciousness thing," there's a very small group of CEOs and board members who are tightly connected.

Stanislav Petrov

I wonder if he was awarded 1% of all the USSR's money as a reward for his services? That should be fair, right? Or did he not get anything at all? Our intuitions for what's fair really fail at this kind of scale. (edit: he was not rewarded. it was seen as an embarassment for the entire Soviet system and was quietly swept under the rug)

In theory I guess the general stockholders could all come together to do it, but they're so disorganized that it never happens.

Well, this is primary mechanism in play. Board members are elected, but I'm sympathetic to the idea democracy doesn't really work. Principal-agent problems do happen. Many companies do have stock ownership requirements for board membership, but I guess the financial consequences of poor choices here could be cancelled out by your executive price-fixing conspiracy.

Fortunately, it's not the only mechanism: you can just choose not to invest in companies that you think overpay their executives. If you think that leadership doesn't really matter/extra CEO pay doesn't get you much better CEOs, that's profit just sitting on the table, and companies that don't do that will do better, all else equal. This information is publicly available, nothing's stopping you or anyone who agrees with you from creating a 'low CEO to worker pay ratio' fund. This doesn't instantly solve the problem, but it does mean it's not your problem. It's the shareholders who are getting cheated here, not the general public or the employees who, after all, have not been deceived: they were offered a certain product/wage for the money/work and accepted it. It's only the board's betrayal of their fiduciary duty to the shareholders that's dishonest.

also worth noting that the ratio of CEO pay to average worker pay has massively increased over the last few decades.

Not totally clear to me why this is the case, but I don't think it's strong evidence of corruption. Maybe they were underpaying them before, or maybe something about the corporate landscape has changed that makes leadership that much more important, or suitable applicants have become that much more rare. The increase alone is insufficient to demonstrate there's a problem.

So it may well just continue to increase until they're taking home some large fraction of the company's total revenue as their personal salary.

If this does happen, I think it'll result in massively worse performance. There's some leeway for inefficiency in successful companies, but enough to divert 10%+ of revenue into an empty pit? Either the executive really is that great (which maybe isn't impossible, but most certainly aren't) or they'll get outcompeted by companies that don't do this.

I wonder if he was awarded 1% of all the USSR's money as a reward for his services? That should be fair, right? Or did he not get anything at all? Our intuitions for what's fair really fail at this kind of scale. (edit: he was not rewarded. it was seen as an embarassment for the entire Soviet system and was quietly swept under the rug)

The USSR indeed had infamously dysfunctional incentive structures. His treatment was not even particularly bad by their standards. That's really not an argument for adopting them.

That said: not like any other nation would have paid out that kind of money for equivalent actions. A medal would have been entirely appropriate; hell, he'd have been a far better candidate for the Nobel Peace Prize than most of its recipients. (And he did in fact receive various lower profile rewards from some Western organizations.) But a cash prize comparable to the amount of value he preserved? No way. The Soviets did spend an enormous amount of money on nuclear launch detection (the fact it didn't work notwithstanding), but offering huge rewards for correct judgements in these situations would provide the wrong incentive: why would you ever say the detection was genuine? Either it's a false alarm and you get the award, or you've got half an hour to live and it's not going to matter to you either way.

(And there's a more generally applicable takeaway: there's a difference between fulfilling a prior agreement and dolling out rewards case-by-case after the fact. The latter can be worth doing, but the former is obviously far more reliable, and reliability is the most important thing in leadership.)

you can just choose not to invest in companies that you think overpay their executives.

Well, I can't, because I'm not a finance genius who has devoted my life to picking stocks. My money is mostly in simple index funds, because (a) that's what everyone assured me was the smart thing to do and (b) those are simple and convenient for me to use as a regular person. My company 401k plan never offered me a "basically the S&P 500, but avoid stocks that overpay their executives" fund. Most other normal stockholders are in the same situation as me. I don't even get a chance to vote on proxy votes, since my share votes are handled by the index fund managers. And even when I did own individual stocks in the past, and I got a proxy vote as a regular stock holder, my vote was so small (a few shares out of billions at a blue chip company) that it didn't seem worthwhile to even mail it in. I had less power to influence them as a stockholder than I do to influence the US government as a voter, and that's a pretty low bar.

And most other players can't do this sort of thing either. Rich people might have their money tied up in stock for the company they worked for. Finance managers have to convince the rich people they work for that they're doing a safe, normal strategy. Hedge funds have to follow rules that mitigate risk for their institution. And most people just aren't interested in this sort of thing.

Ok, in principle there's room for some young Warren Buffet type to make his name by finding these companies, shorting them, and outperforming the market. But only to the extent that their excess compensation takes away from every other factor going on, and his efforts to short the stock would be countered by everyone else shovelling money into it. As long as the executives keep it below a few percent, it would be hard to notice.

But think about how far this has gone. It's no longer "the executives deserve this much money because it's what's best for the company." It's "they can pocket hundreds of millions without hurting the company in a way that anyone steps in to stop them." You could make the same argument for how a retail cashier could get away with stealing money out of the till, or how a middle manager could get away with embezzling from the accounting department, but for them it's illegal and there are protections in place to stop that sort of thing.

All of this to say- the market is not some omniscient, perfect entity. It's mostly efficient, but there are still plenty of efficiencies. I think there's a tendency among shape-rotator type people to assume that it's perfectly efficient because that makes for a much more elegant argument, but the reality is a lot more messy.

Also this:

It's the shareholders who are getting cheated here, not the general public or the employees

I would argue that the executives, especially the CEOs, are being disengenuous here. They're not just some shmuck working behind the scenes, they act as the public face of the company, for both its employees and the general public. Their personal life reflects on the company just like a politician's personal life reflects on his country. When the CEO tries to make himself seem like a moral paragon when he's obviously just there to grab as much cash out of the company as he can get away with, that's going to demoralize every single employee and tank their performance far beyond the actual cash impact of his salary.

Surely there should be some limit where we decide that a CEO is just too expensive, but there doesn't seem to be any mechanism in corporate America to limit it.

Who's "we"? What does this "we" have to do with it? What would it mean for this "we" to "decide"?

I can certainly think of mechanisms in corporate America by which individuals can "decide" that they think a company is wasting money on a CEO and take actions based on that decision. If enough of them do, then I guess maybe one could call that group a "we", and the results can range from simply insulating that "we" from any negative consequences to providing a signal to directly causing a change.

I think your response actually supports my point. In theory "we" the stockholders could cut their CEO's pay, or "we" as voters could pass a law limiting all CEO pay. But in practice, no one is organized enough to actually be able to do anything about it. The CEOs get their pay not because some perfectly efficient market is finding the correct value for them, but because they have more political power where it counts.

In theory "we" the stockholders could cut their CEO's pay

This seems like something that "we" the stockholders can do. There are stockholder votes. Moreover, if "we" the stockholders "decide that a CEO is just too expensive", then "we" the stockholders can sell (or even short) the stock. No need to be organized about it, either. It's more likely that you just find yourself in a situation where many other stockholders disagree with you, and so you are not, in fact, a "we" that has "decided". You just "decided" on your own and want to imagine that you have a "we". You might even be upset at the fact that you don't have a "we", and so come up with things like....

or "we" as voters could pass a law limiting all CEO pay

And here is the rub that I figured you were getting at. What does the general population of voters have to do with it? Should the general population vote to "decide" that some company's investments in AI are "just too expensive"? How about the bill they pay for janitorial services? "Just too expensive". Or anything else? Why should it be across the board? A CEO could be massively "just too expensive" for Starbucks, but downright cheap for another company. You'll probably screw up both cases with a naive law like this.

the great man model

For context, 18th century enlightenment universalism focused on "socioeconomic factors" and described people as interchangeable stereotypes. Romanticism/counter-enlightenment pushed back with worship of genius (elevated by Eduard Young in 1759) and great men's ability to overcome fate. Carlyle praised hero-worship for teaching the necessary lessons of heroic leadership men need to stand up when the occasion arises to be great. While our lifetimes have seen the prior model reign again overall, in business the concept of heroic leader survived even the managerial revolution.

One possible way to explain exorbitant CEO salaries would be conspicuous consumption on the part of the company, especially to attract investors.

"Look at us, we are paying 100M$/a to our CEO, not necessarily because we believe that the marginal dollar of his salary is a good investment, but simply because it is a performance expected of us, and paying less would signal to our investors that we are not a solid company to invest in."

If you are king, and there is a widespread belief that good kings keep war elephants, then that is a great reason to spend huge sums to keep war elephants, even if you privately believe that spending the money on infantry would be more efficient.

yes that's in stock, not cash, if that makes a difference

Yes, that's a huge difference, mostly because the stock is only worth anything if the CEO does a good job of running the company. This can cause problems as well, such as CEO taking measures to juice short term sugars process at the expense of long term corporate health, but is a standard way to align incentives.

Tesla is also a special case because the CEO is also the principal founder and largest shareholder by a considerable margin, so it is to be expected that his interests and the company's will align.

i mean, i'm happy to take my salary in the form of corporate stock if that would 10x my compensation... but regular employees don't seem to get that option.

Even if you were prevented from selling it for several years, at which point it may or may not be worth anything? Most people need actual money to live on in real time.

For the average Joe, stocks are a white elephant gift. When and how does he sell them? Does he take them to his bank? Does he have to go find a broker? How does he track the taxes on it? It’s a world he’s never seen before, knowing only paychecks and bank accounts.

You can transfer them to an etrade account or similar and sell them using the web interface. The mechanics of self-service stock selling are trivial.

Taxes can be automatically handled by selling a portion of the stock at vest for taxes. This is again a button on a brokerage web interface.

It's pretty standard in tech to have stocks as part of your compensation even for entry level positions. I would be surprised if no other highly compensated industries did that. Now, the question is, are the workers at these companies "average Joes"? Dunno. But they probably don't count as elite corporate supermen either. There's way too many of them, for one. (Something, something, if everybody is super, nobody is).

For the average Joe, stocks are a white elephant gift. When and how does he sell them?

He logs into the website of the broker company contracted by the corp to manage stock grants and clicks the "sell" button.

How does he track the taxes on it?

Well, that depends on your country of residence. For example, in one country I'm familiar with, you pay a flat tax on the sale price of any stocks you obtained as part of your renumeration, at the end of the fiscal year in which you sold. There's like an extra form to fill.

I would be surprised if no other highly compensated industries did that.

In finance it is part of the deal at mid-levels and above. As a quant VP I get my bonus in cash, but a VP-level trader or corporate financier would be getting part of their (larger) bonus in RSU's, as do my bosses at director and MD level.

For my stocks, at the moment they vest (a taxable event) a fraction of them are sold and the proceeds are given to the IRS as tax withholding. This is pretty common in the US.

No extra forms. It goes on my W2.

I mean the white elephant thing depends on vehicle. If you're fortunate enough to work for a large liquid traded firm it's easy enough to redeem but for a lot of other people it's nebulous startup equity options kinda stuff or privately held firms where it's a mess

I am not saying you cannot criticize the CEO's pay package. I'm simply saying his high pay is not at any realistic expense of the rank and file employee. It's irrelevant to the economics of the Starbucks barista's local monkeysphere. You may as well be complaining that athletes get paid too much for playing sportsball.

Then you should also consider that part of his high pay is also in keeping expenses low, so there is in fact an antagonistic relationship there. If starbucks was forced to use all of their profits to pay employee salaries, the board would probably expect to pay the CEO a lot less.

Rallying the lower class requires simplifying things. It is easier to rally people around CEO pay than the more complicated “if you unionize you can redirect more of Starbuck’s yearly profit to its 4 billion workers, giving each worker an extra $11,000 per year”. Starbuck’s should not have a high profit margin as it has maxxed its expansion in America and it is a predictable business that doesn’t need to “innovate”. Literally just sell the pumpkin spiced latte. It should have the profit margin of a grocery store.

Probably because being CEO is heads I win, tails you lose. There is no downside, no penalties, no risk and no repercussions for doing their job poorly. If we had a tradition of skinning the CEOs alive if the company was not doing well, I would be ok with their obscene pay.

I would even settle for a tradition of requiring the CEO to invest a material percentage of his liquid net worth in the company’s stock on his first day on the job, precisely to put the fear of God downside risk in him. Or, more or less equivalently, a tradition of letting shareholders pierce the corporate veil and personally sue the CEO in civil court for securities fraud or breach of fiduciary duty in the event that the share price declines too much (perhaps relative to a broad market index, or a basket of competitors’ stocks or something)

He already has the downside risk of losing his job. You're not supposed to invest in a company you work for unless you don't mind losing your job and your stock at the same time; diversification is a thing and investing in your own company would be opposed to diversification.

Or, more or less equivalently, a tradition of letting shareholders pierce the corporate veil and personally sue the CEO in civil court for securities fraud or breach of fiduciary duty in the event that the share price declines too much

That's a great way to make sure companies never do risky things. Also, to be fair, he should be able to sue the bureaucracy of his own company and the voting stockholders when they get in his way, since he faces personal liability when they fail.

He already has the downside risk of losing his job.

This isn't actually a downside risk - a lot of CEOs have incredibly lavish golden parachute pay clauses. If the company goes to shit and disintegrates because he outsourced the management to CEOgpt while fucking his secretaries and writing racist screeds on the internet he will be rewarded for causing immense damage to the lives of the people working there with financial compensation far in excess of what the average employee earns.

He already has the downside risk of losing his job.

That’s not really a downside risk (i.e., a risk of negative payoff), that’s just a risk of getting zero payoff.

Yes, sure, fine, if you account for opportunity costs, then losing a CEO job might be net negative (depending on base salary, length of and compensation during a post-termination non-compete period, if any, etc.—and, of course, on the value of the next-best alternative to being CEO)

But there is still a principal-agent problem here. The shareholders want (or should want, under homo economicus assumptions*) the CEO to be an agent who only takes +EV actions, where the “V” in “EV” is “market cap”. The more diversified the CEO personally is, the less he will personally care about declines in the value of the company’s equity—sure, if he makes some decisions which go south, then his equity compensation from this job might only be good for toilet paper, but if he’s already amassed a generational fortune and socked it away in a well-diversified portfolio, then a bet which is zero or negative expected value for the shareholders might very well be positive expected utility for the CEO. It’s just like how you’re much more inclined to go for a YOLO all-in with a questionable hand in poker when playing with Monopoly money than when playing with real money.

*There are some interesting ways in which homo economicus incentives break down when the shareholders themselves are all massively diversified; in the extreme case (which may no longer be all that extreme, now that everyone and his mum has piled into market cap-weighted index funds), everyone has the exact same equity portfolio, so all shareholders of company A are also shareholders of all of its competitors (B, C, D …). In such a world, it no longer makes sense for company A’s CEO to prioritize increasing market cap by any means; if he increases A’s market cap at the expense of B’s, the shareholders are no better off! But that’s a story for another time.

Ironically, since not being allowed to diversify is a bad thing, you need to pay people extra money for them to be willing to take a job which doesn't let them diversify, which means that that would raise CEO salaries.

You are both trying to achieve diametrically opposite things. Clearly, it's not possible for CEOs to be seriously concerned about downside risk so that they are responsible stewards, whilst also making them feel safe and detached enough to comfortably take serious risks.

Really, Starbucks is your example? Starbucks? In the year of our Lord 2025, Starbucks?

The CEO of Starbucks has been around for a year. Starbucks has lost 16% of its value in a year that the SP500 has gained 13%. Relative to just parking your money in an index fund, the CEO of Starbucks has during his regime lost you 30%.

Same store sales sank year over year continuing a downward trend. 70% of customers plan to visit less. Corporate plans to emphasize Starbucks as a 'Third Place' have fallen as pearls before swine. Starbucks' customer base is getting older, cutting their spending, and less committed than they used to be. Starbucks is closing locations at the same time that competitors, from Dutch Bros to Wawa (sieg heil!) are expanding their espresso offerings to take bites out of Starbucks' market. Dutch Bros stock is up 65% year over year. Starbucks is cutting jobs and locations at a time when their competitors are growing.

So sure, the CEO's pay has little to do with the hourly pay of workers. But, what kind of boot licker looks at a $95mm salary and says he earned it without asking what his VORP is? Because I'm sure they couldn't have done too much worse for $50mm.

It's one thing to talk about Elon Musk's pay package, as without Elon Tesla's valuation probably halves overnight. It's one thing to talk about Jeff Bezos' wealth, who built a dominant and revolutionary company. But Starbucks? GM? HP? It's hard to justify what these guys are getting paid to be mediocre.

No one has quite solved these kinds of incentive problems.

To be clear I'm not saying the CEO of Starbucks earned his pay. That's a separate topic. I'm saying it really has nothing do with how much baristas are being paid. The localized economics of the individual Starbucks location matter much more and the union, which presumably wants to improve pay for baristas, is barking up the wrong tree by making the conversation about the CEO's pay. The reason baristas aren't paid more is because the work they're doing is not that valuable, and no amount of collective bargaining will make value spontaneously appear.

And this is why unions are historically organized as locals with membership policies to generate a scarcity in a particular market.

It really just sounds like they want a minimum wage increase so that barista served coffees cost $20. But that has other problems.

But baristas don’t make anywhere near the minimum wage.

They do in my state, which has a high minimum wage. And is where I hear them campaigning about unionizing.

At which point a lot of them will learn about union dues, and another bunch will learn that even Starbucks customers have limits on how much they'll pay for a latte.

So sure, the CEO's pay has little to do with the hourly pay of workers. But, what kind of boot licker looks at a $95mm salary and says he earned it without asking what his VORP is? Because I'm sure they couldn't have done too much worse for $50mm.

Well. How much would you demand to be CEO of Starbucks?

EDIT: I'm not trying to be flip. Being the CEO of Starbucks sounds terrible. They're in decline, having been badly mismanaged, and competition is becoming more fierce than ever. And a ton of their stores have become unionized and the NLRB is saying shit like you must re-open closed stores. Figuring out how to stick your nose up Trump's ass is almost certainly in your future.

If I'm hot shit enough to be taking interviews with boards of directors of $100 billion companies I would not come to Starbucks for cheap.

Again, none of this is to say my OP is about what the CEO deserves. That's separate.

I mean you can play "bigger fool" and say everyone who gets offered CEO of Starbucks probably has some other pendejo company that will offer him $94mm, but I think that just tells you lots of companies are pendejos. Marrying a whore is stupid even if she has other proposals. Now answering your question as asked, me personally:

If I'm given creative control to turn the company around the way I would do it, $5mm/yr plus long term stock options tied to performance. Operating under the assumption that I'm also getting expense accounts for flights and other costs that go into being CEO, So higher total compensation.

If I have to follow the board's cockamamie operation plan and I'm taking the wheel on the Titanic to take off steam before the iceberg? $20mm per year cash, that's enough after a few years to walk away and work on my memoirs in some New England shore spot.

Now realistically I'm not at that talent level to run that organization. But we know there are guys at that talent level who will run similar organizations for $10-20mm, and if you can't find one on the street poach a runner up from Costco.

Well. How much would you demand to be CEO of Starbucks?

I would do it for a paltry $1m/year, almost 1% of what they are paying the current guy. I don't promise to be a great businessman who can turn the company around, but it sounds like he isn't either. So if they're going to have someone who is bad at the job, they may as well at least have someone who is cheap.

Sticking your nose up Trump's ass so he makes the NRLB do whatever you want is easy though.

This is missing the point. Do you think anyone complaining about starbucks unionizing would be satisfied if starbucks stock instead grew at 10x the rate of the s&p500?

It's not missing the point, it's bringing up another separate point that bears on the argument.

If Starbucks paid I-beam X Kendo $200mm per year for a sinecure as grand czar of diversity equity and inclusion it also wouldn't have anything to do with worker pay, but it would be manifestly unjust and many people would point it out. The CEO is manifestly overpaid and everyone is going to point that out to their own ends.

Costco, for example, doesn't have this problem. Costco is well run, pays its people well, treats them well, and has had an excellent run of fairly compensated CEOs. Costco pays a total of $20mm including stock. Is Starbucks doing better than Costco? (No) Is Starbucks more complex than Costco? (No) Why does he make 5x for a worse performance? Why do GM and Ford perpetually pay their CEOs multiples of what Toyota and Honda pay while Toyota and Honda completely muscled Detroit out of the car market?

CEO overpayment is an obvious and manifest injustice, so of course people are going to latch onto that. Saying well it's a big company with a lot of money sloshing around so stealing a few bucks is no big deal is the morality of the shoplifter and the lazy employee, not the profit maximizing shareholder or the diligent corporate steward.

Starbucks probably had problems under Howard Schultz, but no one ever really complained about his pay in the same way, because the company was growing like a weed and treated its workers better at the time.

Starbucks used to be a well regarded employer. I think what changed was the macroeconomic conditions. They went from being a novel third place coffee house with charming exposed duct work and chill vibe to being kind of a place that serves something you can get at five other stores in the vicinity and they want you out the door ASAP.

Perhaps they can be blamed for not having a monopoly on the chill coffee shop vibe forever, but the fact remains most coffee shops don't make much money. No barista anywhere is buying a 3 bedroom 2 bathroom house.

The lower blue collar labor market has also gotten a lot tighter- there's been a greying of the population, lots of people got addicted to welfare during covid and aren't willing to work anymore, illegals don't work at starbucks but labor has a certain amount of fungibility, etc. Conditions/benefits/pay at starbucks-type jobs have just genuinely improved everywhere, it's harder to stand out. I've seen the desperate competition for workers.

It's not missing the point, it's bringing up another separate point that bears on the argument.

It doesn't bear on the argument because it's got nothing to do with the argument. The argument is that CEOs are parasitizing comp that should be going to the barista, and the barista union will undo this injustice.

Trying to shoehorn in concerns about CEO performance is missing the point at best and quokkadom at worst ("wow, the union and I both think the CEO is overpaid, we must have a common cause! Comrades, what do you mean you don't care about the stock going up?")

Costco, for example, doesn't have this problem. Costco is well run, pays its people well, treats them well, and has had an excellent run of fairly compensated CEOs. Costco pays a total of $20mm including stock. Is Starbucks doing better than Costco? (No) Is Starbucks more complex than Costco? (No)

Okay, but Google, for example is (reasonably) well run, has vastly outperformed the S&P over the past five years, pays its employees pretty well, and people still bitch about the CEO comp. "Well, he screwed up when he laid off all th-" "but google employees don't get paid at top of ma-" no, this is a competitive business, nobody does everything right, the point is that the company is doing well and employees are paid fantastic amounts.

Why are Starbucks baristas and Google engineers alike complaining about this? It's because of leftism. Nothing to do with CEO performance.

CEO overpayment is an obvious and manifest injustice, so of course people are going to latch onto that. Saying well it's a big company with a lot of money sloshing around so stealing a few bucks is no big deal is the morality of the shoplifter and the lazy employee, not the profit maximizing shareholder or the diligent corporate steward.

Yeah, agreed, bad CEOs should get the boot. The mistake is to think this has anything to do with the amount of comp that the rank and file get.

Bad CEOs are bad for the rank and file because if your employer goes out of business it's bad news. That's about it. The other points you mention are much more relevant for investors than employees who stand to gain about tree-fiddy a week if the CEO takes a 50% paycut.

I really enjoy getting downvoted on Reddit for doing the "CEO pay"/"# workers" = "incredibly small number"

It's always a good laugh

Another fun one is when people get shitty about airplane ticket prices, insist on how airlines are ripping them off and how "back in the day" flying was luxurious and nice.

Shockingly, pointing out 1) airlines are a cutthroat awful industry to be in with 3% net income margins (5% operating) which can be seen by them constantly getting bailed out, 2) "back in the day" airplane tickets were something like $10,000 in today dollars, and 3) if you want the "back in the day" experience, you can actually have a better version of it right now by flying first/business class results in screeching and downvotes.

I think the cost of plane tickets back in the day is exaggerated. Based on my reading, I think they were about 10 times more expensive than the most budget airline deals of today, but still affordable for the average upper middle class person. In the early 70s you would have paid the equivalent of about $1000-$1500 in today's money to fly from coast to coast in the US. So plane travel was not nearly as affordable for poor and lower middle class people as it is today, but it also wasn't something that only the upper class could afford.

In the early 70s you would have paid the equivalent of about $1000-$1500 in today's money to fly from coast to coast in the US.

Which confirms @fmac's point - a quick search on Kayak found that Alaska Airlines and Hawaiian Airlines* have 1st class transcon fares in that price range. And "Economy with extra legroom" plus the checked bag and other such upcharges is a lot cheaper, and closer to a 1970's economy experience than 1st class is.

* The big 3 carriers use long-haul configured aircraft on the premium transcon routes, and long-haul business class is a lot nicer and a lot more expensive than traditional US domestic first class. So you need to look at smaller airlines to get a fair comparison.

That may not seem like a lot, but even as a relatively comfortable middle class office worker, 5X more expensive airfare would have a massive effect on my wellbeing. Going from being able to visit friends and family spread around the country three or four times a year to being able to swing a single family reunion every two or three years. Entire years at a time not being able to see my parents. I would have been an adult before getting on my first plane, because there's no way in hell my parents could have swung $6000 on airfare for a family vacation. As much as I grumble about 17-inch-wide seats, I'll take that over forced isolation any day.

So plane travel was not nearly as affordable for poor and lower middle class people as it is today

I suspect this has something to do with air travel in the past being romanticized as the good old days.

I really enjoy getting downvoted on Reddit for doing the "CEO pay"/"# workers" = "incredibly small number"

This is like 50% of what drives me crazy. What are people clicking downvote even doing? Do they think you're making the very easily checked facts up? Are they mad that you're spoiling a good circle jerk? Have you simply signaled that you're a member of the outgroup and must be destroyed? This is a fact that should cause a complete crash to their worldview and it does. not. register.

As mentioned elsewhere in the thread, it's downvoted because splitting up that money is not the point. The point is that the money is undeserved and unfair.

I think it's all of the above, but is largely operationalized as a gut reaction/feeling versus a conscious choice. Person doesn't like thing, person chooses the "negative" option, whether that's a downvote, 1 star, or whatever. I think it's almost entirely a system 1 decision though.

It's also really funny because that behavior in endemic here as well. It's a very human reaction.

I try to only do it here when someone is making bad faith arguments but it can be cathartic to downvote someone. In highly insular communities, any wrongthink is quickly teleported to the shadow realm.

Moderating is a whole other topic but it’s essential to quality discussion. The less pervasive and more focused on agreed upon rules, the better.

airlines are a cutthroat awful industry to be in with 3% net income margins (5% operating) which can be seen by them constantly getting bailed out

One of my favorite jokes:

What's the easiest way to become a millionaire?

Start out as a billionaire and buy an airline

To a first approximation, everyone is bad at math, and it's a rare person who applies it thoroughly to all parts of their lives. As a more immediate demonstration than abstractions around compensation, just pay a Starbucks worker cash for your latte and see them figure out the change.

For this particular case, union officials are absolutely aware of this, and I don't think it's common for a bargaining committee to push a fix to this as a demand during contract negotiations. Or, honestly, that it happens at all. Union staff have plenty of people who can do math. But it is an effective rhetorical move: it's evergreen and will always be true, so once the disparity becomes a true-ism among workers, it can be called on in any situation. The alternative would be to focus on e.g. profits. In which case, the rhetoric would entirely lose its potency: if high profits mean workers should get higher pay, then low or nonexistent profits would undercut any argument for improved pay.

Even if the math did work, there’s always the CEO’s perfect out— outsource their front-line labor to a company that does staffing and then only be compared to the C-Suite officers who make 80% of what he does. And I can’t imagine putting all coffhouse staffing under a temp to hire company is going to improve conditions let alone pay as it now makes wage competition nonexistent.

I literally can't imagine how bad the coffee would be from a company using pure temps.

This happens because labor theory of value is rather instinctive, as it appeals to our innate sense of fairness, even if it's wrong and inefficient. In which, of course, there is no realistic way a CEO could be doing thousands of times the amount of labor that his subordinates do, so there is no fair way in which they should be taking home thousands of times the pay as these subordinates.

Once people realize that there is no fair objective way of pricing goods and services, including labor, then they can understand why they should accept the inequalities created by a market.

*EDIT : Of course, that matters for mistake theorists. Conflict theorists that do know better than to believe in labor theory of value will still gladly invoke it to agitate against their opponents.

The thing people mess up the most is that the CEO isn't competing with them for their salary, the CEO is competing against other CEOs. A bad CEO can absolutely destroy a company, so a company will pay as much as it can afford to have a good one.

The usual response is that in the cases where the CEO is bad, their quality of life won't really fall like a worker's quality of life falls if a worker fucks up and is fired.

This is irrelevant; both the worker's and the CEO's quality of life once fired is beyond the control of the company.

It rarely falls below what the worker would have had if the company was successful.

One question would be how related not paying a lot to the CEO is to the CEO destroying the company. I mean, there have been CEOs which have made disastrous business decisions, but are their cases where we can say "if only the company had been willing to pay 100M$/year instead of settling for the kind of incompetent fool you will attract if you offer only 50M$/year"?

It's not like a CEO just comes in and develops absolute mandate of heaven control, though. Most of the rest of the internal bureaucracy/information-sourcing infrastructure will remain the same which is ultimately what drives the CEO's actions.

Yeah, but if you were to have to explain to someone why CEOs compete for 7-8 digit salaries while "normal people" compete for 5-6 digit salaries, even if you accounted for time spent in education and risk taken, it would be hard to make it seem fair. And if you told them that in the end, everyone ends up with more if they just shut up about fairness and let the market do its thing, it'll be hard to convince them it's not self-interested rich capitalist propaganda (or bootlicking), because, again, of how unfair it seems.

A bad CEO can absolutely destroy a company

What's your opinion on the CEOs that seem to continuously get hired after driving companies into the ground?

I can't tell if there's some massive moral hazard involved, or just plain incompetence on the part of the board.

Maybe the CEO is a specialist in managing decline.

A regular CEO might be able to extract $10B profit from a declining company, but he can extract $15B before it dies. If I were on the board of a declining company, I would surely want to hire this guy.

There are some quite specialized CEOs. John J. Ray III is the grim reaper for dying companies. He extracts what value is left and pays creditors as best he can. He did this for Enron and FTX. Not that Starbucks is in such dire situations, but their CEO may indeed be tasked with managing and slowing decline, trying to preserve what he can.

Many possibilities.

Maybe driving the company into the ground was the goal, they're raiding it for its assets.

The CEO has off-the-scales charm and is able to snooker a board into hiring him despite his poor track record.

The board isn't offering enough and is only able to attract bottom tier candidates for this kind of role.

The board is corrupt and is getting some personal benefit.

Maybe driving the company into the ground was the goal, they're raiding it for its assets.

Okay, but that's worse. You do get how that's worse, right?

Why? If I buy a junker of a car in order to scrap it for parts, who has a right to complain? The CEO works for the shareholders, not the employees, and the shareholders are under no obligation to lose money on a failing company as some act of charity to the workers.

If a company isn't worth the sum of its parts, and there doesn't appear to be much low-hanging fruit to pick in an effort to turn things around, hiring a CEO for the express purpose of liquidating its assets in a way that protects the interests of the shareholders is 100% the right call. When someone dies, you don't blame the executor of their will.

When someone dies, you don't blame the executor of their will.

If somebody gets murdered, with intent, then you actually do start looking extremely closely at the people who get to profit massively from their death. When the executor of a murder victim's will stands to gain vast sums of money from their will, people will absolutely and instinctively blame said executor - and in this specific case they're actually correct to do so given that the company was driven to the ground on purpose.

I'm still wrestling with this one personally.

Sometimes you see CEOs that roll into a company, drive it completely into the dirt, but in a way where all the board members get filthy rich. Weird structured mergers that saddle the brand with insane amounts of debt, and then it declares bankruptcy and then the board makes a killing selling it piecemeal. There is a suspicion this is what Intel's board/CEO are planning on doing. Just rip the company to shreds and make themselves filthy rich selling the x86 license, the fabs, the business to business contracts to the highest bidder.

You see this constantly with Indian CEOs and their ruthless value extraction. Every year, Microsoft for example, gets exponentially worse. Every year they shitcan more Americans, hire more H1Bs, treat customers more adversarial while offering a worse product. But profits go up, share holders are happy, so every year it continues. At least on paper. It's almost impossible for me to reckon that this can continue forever. That they aren't eating their seed corn in some fundamental way. That at some point the tech debt they continually accumulate won't cause the Microsoft ecosystem to be such a risk to run, that there is an institutional push to abandon it.

But I suppose the phrase "There is a lot of ruin in a nation" goes for trillion dollar companies too. There is a lot of value left to extract, and a lot of enshittification yet to pursue with a trillion dollar market cap. But I'm sure they'll find some way to convert all $1,000,000,000,000 into H1B Visas.

But profits go up, share holders are happy, so every year it continues. At least on paper. It's almost impossible for me to reckon that this can continue forever. That they aren't eating their seed corn in some fundamental way. That at some point the tech debt they continually accumulate won't cause the Microsoft ecosystem to be such a risk to run, that there is an institutional push to abandon it.

The hard part, though, is that if that is true, if you know for certain that they are eating their seed corn, then my friend you have tremendous alpha and should put all your money betting on Microsoft going belly up.

These risks are not separate from the valuation, they are priced in. And while I also really, really dislike the direction Microsoft has taken, they are making a killing on cloud licenses, especially Office 365. Pretty much every company I work with and for has to pay a monthly per employee tax to Microsoft.

The hard part, though, is that if that is true, if you know for certain that they are eating their seed corn, then my friend you have tremendous alpha and should put all your money betting on Microsoft going belly up.

Surely even if this is true, predicting when this will happen is still incredibly difficult?

I don’t think that’s true, or at least not necessarily true. Microsoft has a huge advantage in “lock in”, meaning that you run into a lot of problems if a company decides to go with other software platforms. The files they depend on to run their business are made in Microsoft products and thus in many cases, unless the company had the foresight to enforce a rule that ensures that they didn’t all save all their stuff in formats that only Microsoft can use, switching to something else imposes a burden. That’s before considering the learning curve for switching to a new company. It’s enough of a PITA that most don’t switch unless the software is really bad.

This is more or less my sticking point. It's almost unimaginable that Microsoft products could get so terrible, companies change their entire workflow to avoid them.

But only almost. Like, surely if it were regularly eating their data, or causing massive lawsuits against them, they'd change infrastructure, right?

Or does Microsoft start bringing other companies down with them? And only after that do new companies just avoid them from the start to fill the gaps? Does the next trillion dollar company that hasn't been founded yet avoid Microsoft and all their products entirely?

And I mean, if that's the case we're looking at what, a 40 year timeline? I might be dead by then?

I think there is a tipping point where the cost of migration and training and related expenses would be worth it just to get a better production environment. But the cost of switching is high so the cost of continuing to work in the Microsoft environment has to be high than that.

It’s the stupid recall equation from fight club. The probability of a failure from using the product times the projected loss from that failure < cost of replacing the product = we don’t replace it.

The hard part, though, is that if that is true, if you know for certain that they are eating their seed corn, then my friend you have tremendous alpha and should put all your money betting on Microsoft going belly up.

If there were an open ended mechanism to short a stock that didn't require exquisite timing, I'd think about it. But the market can remain irrational longer than you can remain solvent.

Yep, and this mechanism should be "I'll call up my bank and take Microsoft out of my personal index." Sadly, while this does exist, it's not really percolated down to a consumer product yet.

I can't tell if there's some massive moral hazard involved, or just plain incompetence on the part of the board.

It's just politics on a very small scale. In theory the shareholders should keep them in check, but unless someone has majority ownership, it's a lot harder for them to coordinate than it is for the board.

failure to reason through 9th grade math

Famously, the Third-Pound burger failed horribly, for the same price as McDonald's Quarter-Pounder. In focus groups investigating what went wrong, A&W discovered most people thought 1/3 is smaller than 1/4 and were thus getting less meat for the same price...

This has always struck me as a self-flattering urban legend people trot out to mock the burger-eating proles. Turns out the only evidence we have of this anecdote is a quote from the memoirs of A&W's former CEO, years after the fact, attempting to deflect blame for running his company into the ground. "I didn't fuck up; the customers were just too stupid to understand how superior our product was!"

So it might be true, but I'd take that story with a grain of salt.

https://www.motherjones.com/kevin-drum/2014/07/great-third-pound-burger-ripoff/

Maybe they failed because they were trying to copy McDonalds too closely? Skip the "we give you a third of a pound for the same price as a quarter of a pound" and instead emphasise "fresh beef, better taste, superior value".

The Third Pound just sounds like really bad marketing, because they were chasing the established hold McDonalds had with their quarter-pounders. I could easily see someone going "but I don't want more meat in my burger; a quarter-pounder is big enough for me!" or if they did want more meat, then they'd go for two burgers.

It's like someone trying to compete against Coke by going "we're just like Coke only we have bigger bottles" - that's not different enough to make me switch from Coke. What's unique about your product?

That anecdote does sound too much like "it can't be our fault the product failed, it was the dumb consumers!" Tell that to New Coke 😁 Even if your customers are dumb, they are still your (potential) customers so if this approach isn't working, scrap it and go for one that does: "bigger and better for the same price!" Don't call it a third pounder, compare "we have over 5 ounces of prime fresh beef in every burger versus 4 ounces of processed meat in our rivals" to sell it, not mess around with trying to copy the brand name of a McDonalds product that is already well-established. Call it the Big Beautiful Burger! 🤣

Large pizzas are usually a good deal for the same reason as 16" vs 12" sounds like only a third more pizza.

Each day I think my opinion of people has hit rock bottom but somehow they manage to drill further into that bedrock. Such a person being given the vote is the root cause of I'd wager at least 50% of modern evil.

Sounds like McDonald's should've sold a 1/5 burger for the same price then.

Apparently that's the Big Mac; it has two 1/10th of a pound patties to the Quarter-Pounder's one 1/4 of a pound patty. 2/10ths = 1/5th, so that's the 1/5 burger right there!

People pick either Quarter Pounders or Big Mac for reasons other than amount of meat; the Big Mac has more options while the Quarter Pounder is plain meat-and-bun (and cheese and condiments). Depends if you want the flavour of the pickles and sauce versus just 'gimme the meat' (and give it to me raw?)

Sell it on a slight discount as the 'really big deal for a really big meal' or something.

It never occurs to anyone to learn to do something more valuable. Just that they need to win the fight against the classists. How much unrest is actually caused by failure to reason through 9th grade math regarding your personal conditions?

Perhaps there's a cause and effect here. If you can't reason through the 9th grade math, you can't find anything more valuable you're capable of doing.

But probably not; it's just the politics of envy. You can always point at some fatcat you claim is getting all the value. Or if that fails, blame the customers for not paying enough. After all, if you by law increase the cost of coffee so every employee can afford a house, you've eliminated the problem of direct competitors eating your lunch. The idea that people might say 'fuck it, I'll make my own coffee' can just be dismissed out of hand.

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