> After a million dollars or so in salary, the absolute amount that a person is paid has no real impact on their life. They can't eat more meals in a day or wear more shoes. What matters to the manager is the relative amount.
Sure, nobody needs more than a million dollars in annual compensation (in 2024 dollars), but relative amount gets you to your never need to work again number faster or slower. You might still work after you don't need to, but it's nice to not need to. And of course, there's economic milestones to be had like flying first class, flying charted, leasing a jet, owning a jet. Those certainly have an impact on your life, depending on how much you travel; and you might travel more if you didn't have to wait at the airport for a flight.
I think this over-estimates the amount required to live a luxurious life in perpetuity.
Consider the case of someone wishing to live a luxury lifestyle in the trendy lower east side neighborhood of manhattan. We'll use a 1300 sqft 3 bedroom condo as a baseline.
This condo will cost 8k/month with a 20% downpayment at todays interest rates, leaving our hypothetical million dollar a year salary person with 52k/month post-tax. Assuming they live a rather luxurious lifestyle of ~16k per month, they will still have a savings rate of 60%. Leading to a retirement in 12 years with a portfolio of 7.8 MM.
If the person makes 10x this value or 10MM per year... Then they can retire in 1 year. At 100 MM, they can retire in ~2 months.
You can play with the numbers a bit, our hypothetical 1MM/year individual would be living in the "average" 3-bedroom apartment for the Lower East Side. Perhaps the 10MM/year individual would choose the most expensive unit which is only ~4x more expensive, and increase their spending to 90000 per month - equivalent to a new model X per month.
This one is immensely more powerful and should be used if you want anything more than a "neat, that's a nice ballpark to have" estimate like what you'd get from mine.
Further, this assumes that a person's primary financial goals are based on personal consumption, when a person might much more highly value their ability to contribute to their community and finance projects that improve the quality of life of those around them, or maybe they have a particular goal for society in general that they want to pursue, like funding a research project. Many wealthy people don't focus on personal consumption at all, even living frugally, but care about the wider impact of their money.
A 1300 sqft apt isn't exactly lux with a family of 4. Plus public schools aren't great in most of the city and private will cost you 50k per kid, post tax. Then you have to ask what you're doing during the summer. Camp will cost you easily another 20-50k per kid. And your naive math of tax leaves out a lot city and state tax.
There are a lot of expenses. The fire stuff you read about people retiring after a few million is often heavily biased towards young single people where you can move to Thailand and live well but falls apart with a family.
People don't retire and live in the city after making a million a year for a few years. Maybe they're all stupid, but chances are they aren't and you're severely understimating how much things cost and how much you're taxed.
If you're making a million a year you'll want nice things for your family, that includes space for your kids to enjoy their childhood, vacations together, good food, transportation, and other things, otherwise what the hell is the point of working hard?
In Manhattan, it's pretty lux :) If you expand your radius to Brooklyn and the other burrows you can get a modern renovated brownstone with 4k sqft for similar pricing and a 20 minute commute to wherever you need to go in Manhattan. Adding in 100k per year doesn't change the math too much Our hypothetical individual would retire in 13 years. However it's worth highlighting that the costs for this hypothetical individual will fall by ~30% following the kids graduation from college.
Now, in theory - there is nothing which stops one from scaling housing costs arbitrarily high. If Musk desired, he could buy the New Yorker hotel and turn it into his house.
Is that lobster camp? What are kids doing in a 50k camp? I am regular European and 50k is like an annual salary. Kids go to camps though but they are more like 700 a week. Let’s call it a grand. For 50k you can get a helicopter pilot license not a summer camp
Likely this is a summer at sleep away camp. Although tbh I've usually seen something closer to ~10k for a summer away. Presumably you could pay more for spending a summer in an immersive camp experience or do multiple high end camps spread over the summer.
Yeah, I’ve been debating the utility on that one. From observation, my daughter does better with a group of strong peers. While she’s still young (3) nothing motivates her to do something like seeing another kid do it.
what really needs to be said is that conspicuous consumption is expensive and generating a "Elon" affect where you simply can't do anything dumb for an infinite number of reasons is the trajectory of conspicuous consumption.
I work in finance and know a bunch of people who made more than 10 million a year for a while, and they all tell you exactly that: very quickly, you have way more than what you'll ever need, and having more money has zero impact on your personnal lifestyle.
They already have the house(s) they wanted, the cars they dreamt of, and the kids in the expensive schools. Plus being in finance, these people make more money with the money they already have.
Of course, there's always the dumbass who just bought his 20th ferrari, but that's just something else entirely.
dunno. after you get enough to meet all needs forever, the question then becomes "what can I build?" and how to steer civilization into something you want -- dictate the shape of things to come.
way more motivating than trying to squeeze out an extra 30k per annum to get a slightly nicer condo
This, I can't believe all these "money doesn't bring you happiness after a certain level" tropes keep ignoring saving and investing angle, just lazy. Or accumulating wealth for your kids.
On accumulating wealth for your kids: while there are definitely huge benefits to be had there for stability, freedom to pursue passions, and so on, I sort of doubt it actually leads to positive outcomes on average beyond a certain point. Giving them a financial safety net seems inarguably good, but giving them so much that they have no need to work could easily do more harm than good.
My personal pet peeve is how every retirement calculator bakes in an assumption like “you’ll NEED 75% of your current income as living expenses when you retire.”
Like your salary won’t change over your career. Like you’re just an impulse buyer. Like there’s anything but a distant correlation between these numbers.
I think there’s a conspiracy or a (USA) cultural aversion to not working.
Sadly I can see a lot of workers never truly getting pay raises as they go around jobs, not careers. The progression feels obvious if you have something highly technical, but many don't get to that point.
>I think there’s a conspiracy or a (USA) cultural aversion to not working.
maybe. "American Dream" hasn't died in many's minds.
It's generally good for people to have activities. That said, if money were totally off the table, I'd probably have retired at least somewhat earlier.
flying first class, flying charted, leasing a jet, owning a jet
Perhaps counterintuitively, going from first class to charter/leased flights is a safety downgrade. Search for accident statistics on the NTSB site and you'll see that Part 135 flights (smaller aircraft, including business jets) have 3-4x the accident rates compared to Part 121 (large air carriers), arguably because Part 121 regulations are much more stringent. Here[1] is a very recent leased jet fatal accident, for example.
Yeah, a million dollars a year is not anywhere close to where having more money doesn't impact you.
If that's $600K after taxes, and a year of college for a single child costs $80K at an excellent school, and you've got two or three kids, and housing in a major metropolitan area...
I mean you're definitely living very comfortably, but there are still lots of ways to spend money that have a big impact on your life, between your home and child care and your vacations and your comfort in traveling.
If the number is $25 million, then sure there isn't much more difference. Probably even $5 million. But $1 million still has plenty of room for very meaningful life improvement, that isn't anywhere near private jets. Not that you need, but that it's entirely normal to want.
From my personal experience in my circle of friends in my expensive west coast city, there are very impactful differences between the lower end of annual household income (400K) to the upper end (1.5M). While everyone lives fairly comfortably and doesn't have much financial stress, there are things the upper end can do that the lower end can't:
- Send the kids to private schools (more and more important as public schools start to cancel gifted programs, focus on non-core subjects, tolerate misbehavior and disruption from students that wouldn't be accepted to private school, etc.)
- Live closer to work, shortening commutes from 2 hrs round trip to 45 minutes, saving more than an hour of stressful commute per day.
- Every major purchase other than a house requires no budgeting or planning
- Optional early retirement at 45 vs 60 or later
- Have a vacation house, which enables building social capital through hosting friends, and never having to compete with others to book lodging during peak season
- Freedom to leave a job that is too stressful/time-consuming
I used a very sterile, transactional description of it but there’s no denying that this is the case. Of course it’s not the only benefit, and it’s not what motivates the purchase in the first place.
It is unfortunately true. You cannot invite your social peers and pay for their lodging. It is only socially acceptable if you literally spend 3x as much for a rarely used guest room.
You can argue about the numbers and there is definitely the flying private jets and basically not thinking about the cost of hotels and schools, etc. echelon. But, yeah, $1m/yr probably isn't that given it's not that much out of the range of a lot of salaried senior worker bees in tech, etc. Sure, that's great comp and you can save a lot but it's not "costs don't matter" level of things.
Consuming without working for it is immoral, flying privat jets and traveling more is bad for the environment. Those are not reasons in favor of higher salaries.
Yes. If you work for 10 years and then just consume stuff for the rest of your life without lifting a finger, stuff for which other people work all day long to produce it while at the same time probably not enjoying a quality of life anywhere near yours, that is deeply unjust and I consider it immoral to desire such a life.
I would have paid double my taxes over my career if the US would spend it on elevating the poor. But asking me to not retire, to give away my savings to very few people? What, that’s not ethical.
What if I made a lot, but spend very little? Shouldn’t that weigh in, if your issue is consumption level?
What if in my early retirement, I go around lifting people up in non-monetary ways?
What if my job earned me a lot of money but was ultimately doing something I found socially harmful? I should continue working to the detriment of my mental health and against my principles?
We can elevate the poorest and decrease the amount of work the median/average person must do.
My point is very simple and we do not have to discuss all the edge cases. Working x hours and consuming stuff that took y hours to produce where y is much larger than x is unjust. All the rest are details.
I make widgets. I work 8 hours and make 8 widgets. In my spare time I make a machine to make widgets for me.
I've finished my machine, and it can make 16 widgets in 8 hours as long as I turn the crank. So I sit and turn the crank for 8 hours a day and make 16 widgets. Am I immoral yet? I just doubled my productivity for the same amount of work.
Now I pay someone to turn the crank for me. They work 8 hours and I give them 8 widgets, and I keep the other 8. They are doing the same 8 hours of work that I was doing, and I do nothing but make sure they keep turning the crank.
Am I immoral now? Why? I built the machine and I get 8 widgets a day out of it, the same amount I got when I was building them by hand. The crank turner also gets 8 widgets in 8 hours, the same amount I was producing by hand.
So the crank turner does less work for the same output, I do no work for the same output. But both of us have the same resources as my competitor who makes 8 widgets by hand.
Is it moral for the crank turner to exchange their 8 widgets for his? What about me?
How am I controlling others? They are willingly turning the crank. They still get 8 widgets and they do less work than if they built the widgets themselves.
Everyone is doing better in this scenario than when I was building the widgets alone.
Sure, everyone [1] is better off, but that just sets the bar too low. You and the other guy each turn the crank for four hours, that is the fair outcome. If you insist, you get a couple of extra widgets for inventing and building the machine.
You spend a week building the machine, time worth 40 widgets, but you want - ignoring your finite lifetime - infinite compensation for that, free widgets forever for a 40 widget investment.
[1] A bit nitpicking, in the exact case you presented, the other guy might not actually be notably better off. Instead of manually making eight widgets for himself - assuming he is as skilled as you - per day, he now spends four hours making his widgets and then four more hours making your widgets. This can of course easily be tuned to actually make him better of or that might already be the case if turning the crank also improves the working conditions over the manual process.
What then is a more fair outcome in your original scenario where producing widgets was the only activity?
If you keep working, making other inventions, that is a completely different scenario. That you should do your share of crank turning only applies to the scenario where turning the crank is the only work that needs to be done.
Clearly crank turning isn't the only job, since machine inventing must exist as another possible job.
But even if the machine is the only invention that will ever be made, it's still not fair that we each crank the handle the same amount of time, because I invented the machine. I built the machine and presumably spent my widget money on making the machine. My contribution was amassing the capital and resources to make the machine. I should get some benefit from that.
I already wrote that you can have some additional widgets for inventing and building the machine. Even if I had not mentioned it, that would be a reasonable thing to do, if I insist on splitting the crank turning work, you can pretty safely assume that I am also willing to split the inventing and building work in one way or another.
But even if you would not get anything for inventing the machine, it would not really matter significantly. As you both keep turning the crank, the relative amount of work you both did would approach one half and both of you would have half of all the widgets. Compare that to the other scenario where the guy does all the crank turning, there the relative amount of work you did approaches zero as the guy keeps turning the crank making his relative amount of work approach one.
Are your subsequent inventions better than the art they create?
Do we really need double the widgets?
I mean, the top post on this site yesterday was a self-balancing cube someone invented. This is precisely the community that should understand that inventions for inventions’ sake aren’t necessarily improving anything.
It would seem so, since I made one and they didn't.
> Are your subsequent inventions better than the art they create?
Not sure what art has to do with it. If they want to make art they can get a job making art instead of turning the crank.
> Do we really need double the widgets?
The market will decide that. If we don't then no one would buy them and it would no longer make sense to produce so many.
> I mean, the top post on this site yesterday was a self-balancing cube someone invented. This is precisely the community that should understand that inventions for inventions’ sake aren’t necessarily improving anything.
Interesting you should bring that up. That cube improved our understanding of self balancing machines and how to build them. That understanding can lead to better self balancing things, like maybe walkers for the disabled. You never know what it might lead to until you make it. Even machines that "have no purpose" have a purpose, of showing us what does not work or what does not make sense.
How bizarre it is to have strongly prescriptive opinions about other people's time-value preference, and then to mistake those opinions for moral principles.
I wonder where the limits are though. What if I save up and take a month off? Is that immoral? What about 6 months? A year? Or do I have to have some justification for it that you find acceptable (like having kids or mental health, etc?)
Or is it just immoral to not be constantly working while other people are working?
To a first approximation, you work for one hour, you get to consume stuff that requires one hour of work to produce. I don't care if you work your ass off for some time and then retire early or if you work very little or very much as long as your consume at most a proportional amount.
Come on, people have written thousands of pages about economy over centuries, I wrote a few sentences here. Of course there are differences between working conditions, individual abilities, and whatnot, that is why I wrote to a first approximation. You are not really expecting that I say something about every possible aspect and edge case in the comments here?
Let us justify why some high ranking managers deserve to retire wealthy after a couple of years while their employees at the factory floor have to work for the rest of their lives while never coming close to the wealth of their higher management.
I might be wrong, but is the labour theory of work not supposed to explain how value works in the economy and is criticised for not making the right predictions? I am not saying that this is how the economy works, I am saying that this is how it should work, that it would be fair to exchange an hour of work for an hour of work. Whether this is actually realizable, is another question, because there is more to prices than the amount of work spent.
You should not be able to do that, the system should discourage it. But I think one likely has to tolerate this to some extent because trying to completely eliminate it will probably negatively affect people that rightfully claim such benefits, for example having to constantly prove that they are eligible.
That is your idea, my idea here is that it is immoral to pay insane amounts of money to keep promoting inequality which in some cases, as flying jet planes, also involves having more power to dismantle the planet we all live in.
Okay, I see how can read it like that. What I meant is that consuming after you stopped working for it is immoral, or alternatively earning so much that you can keep consuming but stop working.
Good question, but I would ad hoc say no. In the case of a lottery people willingly gamble with some money they earned. In case of management salaries they just take a share of the money for which all the thousands of workers on the factory floor worked.
Yes, there are reasons for differing salaries and they have important functions. But at some point those justifications stop to make sense and it is really just about exploiting your position to grab as much as you can for yourself.
How is demanding your fair market value exploitation? Do we really need to take pity on companies grossing massive incomes while simultaneously not paying their fair share of taxes?
Has there ever been a union that pushed for lower compensation for it's members? A union advocating/negotiating for as much as it can for its members is exploiting its position in the same way.
No, trying to get a better compensation is not per se the issue. In a hypothetical company where the management takes home all the profits and the workers make minimum wage, moving to a more fair distribution of the profits involves less money for the management and more money for the workers.
I've said this before, but the managing director of the Norwegian Pension Fund - which currently sits at a cool $1.56 trillion, has a $657k salary. Nothing more, nothing less. The return for last year was around 25%
Some of the fund managers there make more than the managing director, but still, we're talking about a "modest" figure in the $1mm-$2mm range. That's paltry pay compared to the big bucks made in hedge funds and private equity.
The pension fund could have paid out hundreds of millions to their fund managers, and it would only have been a rounding error in the grand scheme of things...but still they manage to attract top talent.
There's this culture on Wall Street (or Connecticut, or London...) that they are the only ones that can bring big returns, because they're the right combination of correct pedigree, professional experience, network, talent, etc.
In the end, it's just good salesmanship. Tons of funds deliver mediocre returns, while making bank.
Yes of course, not everything is about money. There's also 1) prestige and 2) the promise of future money. The Norwegian Pension Fund specifically is very prestigious, and it promises that anyone who can do a good job with $1.5tr probably can also do a good job at one of those 100bn fund that do pay 10m/yr.
Is the manager of that fund really "top talent?" How hard is it really to make 25% off of $1.6 trillion? I'll bet you could do it.
Also, that's a very different job than working at a hedge fund. Hedge funds have to attract investors. How do they do that? By saying, "look at the expensive managers we have!" A government pension fund doesn't have to do that.
I wanted to accuse you of being preposterous, but it looks like S&P 500 grew 24.1%, Dow 13%, and Nasdaq 43% in 2023. A basket of investments spread evenly across those would have returned around 26.7%.
aye. S&P is up like 25% and lots of other markets are way up too. at this scale you're going to have returns that look like the global market, esp. if you're diversifying and taking relatively risk-averse choices.
Well, prior to joining the fund he had (still has) a hedge fund and is worth close to a billion, and is otherwise on par with the other hedge fund managers you'll find out there (elite education, good "pedigree" and all that).
Of course, government pension funds have much stricter investment guidelines. And there are ethical investment guidelines on top.
Their goal is never go chase the absolute largest returns, as the risk / investment guidelines would prohibit that.
The talent available for this position far outstrips supply. So the jobs go to the credentialed children of the elite, who of course require hefty compensation.
In the age of index funds outperforming hedge funds, the real question is how long they can keep up the grift.
It's pretty absurd of him to talk about how it's ridiculous that people are paid $50mil (I agree) then pivot and say that $120,000 per annum for a new grad is another example of "ridiculous comp." These things are not in the same ballpark, they are qualitatively different.
I don't know the author but this is so bizarre it makes me question their analysis overall.
"Law firms went through this cycle twenty years ago."
The reference was to new law grads 20 years ago getting $120k jobs. That indeed was a high starting point for most recent grads from most fields 20 years ago.
agreed, but this is IMO qualitatively different from a 50mil salary. The $120k job might be classified as normal competition for talent and therefor be outside the scope of what this article is talking about (astronomical salaries).
In his defense, he (should be, at least) talking about relative pay for each job. It's like talking about the price of milk and the price of caviar (or some other expensive and rare food, I don't know). You can find both at prices that you would call ridiculous and at prices you would say are a good deal, but those prices would never be in the same ballpark. A wise consumer can save money on both by shopping around.
> After a million dollars or so in salary, the absolute amount that a person is paid has no real impact on their life. They can't eat more meals in a day or wear more shoes. What matters to the manager is the relative amount.
Take the now-defunct "American dream" of a single-income family with 3 kids living in a house with a backyard, say, in Silicon Valley and other places that have mobs paying more than $1 million to people, and that goes away pretty quickly.
After tax, with standard deduction, and 5 allowances, that $1 million turns into $529k net. With a $7k rent plus $5k in personal expenses per person (pre-school tuition alone is about $3k, so $5k in personal expenses is not outrageous), that leaves at most $145k in savings.
With a $12k mortgage (the median price in Santa Clara county for all residential is $1.4 million, I'm using $1.8 for a house), that's down to $85k in savings if you live frugally.
But, as other people say, there's more to life than food and shoes.
> that's down to $85k in savings if you live frugally
Saving $85k per year, which is way more than the median income in the US, is fantastic for a family of 5, while simultaneously building equity in one of the most expensive markets.
And $5k in personal expenses per person per month is hardly living frugally, especially for a 1-income household where presumably child care (and pre-school) isn't necessary. I don't live in an HCOL area, but non-discretionary expenses for just me, besides rent/mortgage, are about $1200/month. Food and clothing aren't 4x as expensive in SV are they?
But isn't that the "relative" point? A house in Santa Clara doesn't cost $1.4M because it's 3x better than a house in another state, or costs 3x as much to build. It's because there are a lot of other high-salary people in the area who need a house and not a lot of houses being built.
I guess I'm not sure that there's a practical difference between "It's marketing" and "This is what the market rate is for a CEO." In other words, firms need to pay this much because that's what other firms are paying (at least.) That's not marketing - that's just the unfettered market at work. Which is why it needs to be fettered. I agree with the salary cap idea, because the market will naturally keep raising the price without bound unless there's something to counteract that, and it is terrible for the labor market as a whole (and even the company as a whole) to be paying so much for a CEO when the same amount could buy dozens or even hundreds of workers.
A salary cap doesn’t change the market rate! It just obfuscates it.
Salaries for public companies locked at 10M/yr? Ok, now firms have to compete on amenities. (Your current firm gives you a free car? Ours gives a jet, a personal Michelin star cook, and complimentary beverages)
You'd think so, right? Look up why corporations started providing insurance to their employees. Look into why your compensation is not just a salary, but salary, bonuses, stock (options or RSU's), etc.
AFAIK health insurance is special-cased by law. I had to pay (a trivial amount of) tax on imputed income from IBM's life insurance. The IRS is wise to a lot of perks like company cars.
How about no salary cap but a maximum difference factor between the highest paid and the lowest paid in any company?
Not sure what the figure should be (x10?, x20?, x50?, x100?). That way companies that want to pay higher saleries to their CEO would have to increase everyone's salary.
But there would need to be a way of stopping companies just using shells and subcontracting all the real work to low pay subsidiaries.
An escape from something like this is why companies no longer employ their own janitors, but rather contract that out.
The IRS rules went in that said that with the exception of your executives (that is a whole other conversation), everyone has to have the same plan for insurance and pensions. Since they did not want to give out that much money for janitors, they got kicked out of the companies.
> After a million dollars or so in salary, the absolute amount that a person is paid has no real impact on their life. They can't eat more meals in a day or wear more shoes
There is more to life than food and shoes? This is one of the dumbest things I’ve read.
Only if you think the point of money is consumption or saving for future consumption and not dry powder for class mobility (investments / housing / schooling for children / social signaling).
No it doesn't - what if you had a trillion dollars. You could spend the money on saving the penguins, or developing a Linux distribution that's just the way you like it, or clean up the ocean, or start a Manhattan project for breakthrough battery tech, or teach kids math in Africa, or convert a large number of people to your religion, or fund the arts, or fund an expedition to Mars, or any number of things.
Human needs are infinite. There will always, always be more good and worthwhile things to buy.
According to whom? The research I've seen on this confirms Bernoulli's intuition that happiness scales with the logarithm of income.
Sure, the logarithm is slowly varying in the limit, but that seems like a very unusual definition of both "beyond some amount" and "absolute amount stops mattering."
The logarithmic decay could be more about more and more people hitting their satisfaction level, than about what the wealth can purchase. In other words, very few people actually want to be billionaires.
> Beyond some amount the absolute amount of money really stops to matter
At national monetary scales, sure, because more spending would be inflationary thereby decreasing one’s spending power. So call it a trillion dollars or so. Not a practically relevant cap.
AFAICT, the most expensive yacht is the History Supreme, which is only 100ft but is built from, among other things, 10 tons of gold and platinum. $4.8B.
It does apply to many things. You can only wear so many pairs of shoes, and only one pair at a time. You can't eat more food than will fit in your stomach. You can have X houses, but you can only live in one at a time.
If money isn't the bottleneck anymore, something else becomes the bottleneck - time, space, energy, interest/passion, etc.
> (Aside: should the guys who drive an armored car that carries millions of dollars in bonds get paid more than the guys that drive an armored car that only carries thousands of dollars in cash? Does the amount of money handled change the difficult of the work?)
Possibly, yes. The amount of money handled might affect the likelihood of a heist, and the required preparedness of the robbers. Which in turn requires more skilled drivers facing a higher risk.
If the trucks are otherwise identical the thing you should be most worried about is insiders. The cash being more fungible means you maybe should pay the cash drivers more, so they're never tempted to skim off the top or sell details to the heisters.
That isn’t weird at all. A residential home is also more likely to be robbed than Fort Knox. It goes back to the required preparedness of the robbers.
Either way, I wasn’t the one who picked the example. Seth didn’t ask “should a liquor store employee be payed more than a bank teller”. Which wouldn’t be a good example either, as we’d be comparing too many different axis.
Not really, banks are well known to have protections such that you are likely to be caught (most of which I don't know - and those who do know are not talking). It is also well known that you don't actually get much money.
There are convenience stores that still don't have cameras. Liquor stores have liquor - which is probably what you want not the money anyway (money can buy liquor, but you have to go two places now)
Truly a mindless article. Money attracts talent, doesn't matter what the historical rates have been or what the absolute cost to live is. If a good person can get 50 million instead of 3 million they're going to take it.
For the record, not everyone is like this. And - one hopes - many of the most talented are not. I've pulled out of an interview process for a job paying 3-4x (with upwards potential) the job I took, because I saw more meaning and social value in the latter. The content of the job can be more important than the salary.
I am not arguing that this is how you live and if you find meaning in it, more power to you. I find value in maximizing my salary, I view work as trading life hours for dollars. The more dollars I can extract from each working life hour, the less I need to work and the more things I can do in my non working hours. It also allows me to establish a higher base level future for my kids.
I have no loyalty to a company I work for as they generally have no loyalty to me besides the ROI they get from my work. If they can get a better deal by outsourcing my job to India, they will. We did not create this environment, corporations did so I find myself playing by the rules they created.
> (Aside: should the guys who drive an armored car that carries millions of dollars in bonds get paid more than the guys that drive an armored car that only carries thousands of dollars in cash? Does the amount of money handled change the difficult of the work?)
Aside from the bigger point of the article, what a horrible analogy. Yes, of course handling more money makes your work more "difficult", where any reasonable definition of difficult has to incorporate the fact that bad people will do crazier things for more money than less.
A bigger bounty means the bad guys can employ more expensive ways to get the truck. If you use the armored truck that transports thousands of dollars to transport millions of dollars, you're asking to get robbed, because the truck only costs "thousands of dollars" to rob.
The argument that "no one really needs more than $X" is always a flawed one, in my opinion. I don't make $1 M a year, but if I did, I'm absolutely certain I'd prefer $2M a year. I can imagine all sorts of things I'd want -- vacation homes, fancy private schools for children, whatever. At $1 M a year I'd end up doing things that put me in contact with people who make more than me, and I'd think "oh, that's pretty cool, that stuff they have."
OK, OK, before you comment that "I don't need that," well, who said I did? I said I'd prefer it, therefore it would be an easy decision to switch jobs for it, all other things being equal.
So if you disagree, why is the amount _you_ make the defensible amount? Do you need it? Maybe 100k should be the max -- that's twice the median U.S. income, after all? Why do you need more than the median U.S. income, how greedy are you? Etc. etc.
Good economists don't talk about needs vs. wants, it's all wants because anyone can argue just about anything is a want and not a need. You need food, but if you ask for anything more than beans and rice, that food is now a want. Really? No, we aren't going to play that game. You want food. You want a place to live. You want transportation. It's all wants.
Bigger salaries attracts more people, so you can have your pick of your favorite candidate.
A bad scenario is the public school teacher path: they need better marketing and should be paid on par with the congressman, senators, and other highly paid politicians in government.
My wife (engineer) taught a class called 'Math for Teachers', which was designed to teach elementary school teachers basic math. Not how to teach it, just how to do basic math themselves. A significant number should have failed that class but the administration refused to allow her to fail teachers who were failing for 'reasons'.
Absolutely what I observed as well with SF school teachers. Some were good and knew basic math and basic grade school English but a good number spoke and wrote like dropouts.
This article seems to put a lot of people into its "big salaries", from CEOs to fresh graduate.
I'd argue that, past the million dollars mark, it's hard to claim that n > 0 other people could do the same job for cheaper. Companies don't end up paying these amounts for employees they consider fungible. Their jobs are also more likely to be somewhat unique, somewhat shaped by themselves to a certain extent, such that the company marketing is unlikely to convince them anyway.
More generally and even for employees paid less than that, the compensation and especially its constant part (salary) is the one thing we can trust when we sign. The company and its culture might change, my manager with whom I've had a good relationship might leave, but it's still unlikely they'd decide to reduce my salary (maybe it'd be impossible to come back from when it comes to recruiting new hires, reputation-wise?). There are also many companies that are just not known enough, or have team-dependent cultures, such that when you start, you don't know how it's going to be. The compensation is also the one thing you take with you when you start a new job, as a baseline for negotiations. Good luck saying that your previous job had meals or massages on-site, so your new job should figure out a way to accommodate that for you.
I think that's a big part of this one-axis marketing, how concrete the compensation is in comparison with most other aspects of a job.
The danger with offering "marketing" instead of salaries is that it locks your company into valuing (and continuing to offer) the boon that got people to join it in the first place. Google (and HP before it) used to distinguish itself with "We take care of our employees, give you decent work-life balance and flexible working arrangements, and let you work on self-directed projects. We will probably not be the absolute highest compensation you can make, given your skill level." This worked great when it actually offered those. At the very first hint of layoffs, or RTO, or manager-directed product priorities, Googlers ask themselves "Wait - why am I working here again?" In pretty short order, the only ones left are those that actually are motivated by money, but couldn't get a better offer.
Similarly, Apple offers "the ability to work on products that users love", and tends to pay a bit less than similarly-skilled employees can get elsewhere. This works great, until users cease to love your products. Current Apple is lucky that they are still on top, but historical Apple absolutely went through this sort of brain-drain from 1993-1997, when they were not on top in product quality and so there was no real reason for skilled people to work there.
The big advantage of paying a lot is that you know that the type of person you get is motivated by money. If you want them to do something, pay them a lot for it, and make that pay contingent upon them actually doing it. It takes ulterior motives out of the equation and gives the corporation flexibility, because the only reason people work for it is the money.
FWIW, Google and HP back in their days did still pay among the highest if not the highest salaries. But you are right the ideals mattered a lot to the employees and it's really really hard for a company to maintain those high ideals for too long, but I think HP did it for around 40 or 50 years. Google for maybe 15? Different time periods though.
The competition for Google back in the days wasn't a random enterprise software shop, it was usually the financial industry or starting your own company, both of which could have payoffs in the tens of millions. When I got my first offer letter (2009), they explicitly said "Googlers do not generally work for Google for the prospect of outsize financial gains." They paid very well compared to your average software company, but there was no way they could match say Jane Street or D.E. Shaw.
Wow, people used to nearly worship Seth Godin, it's pretty refreshing to see a whole lot of disdain for this article here :-)
I think there's something to his point about marketing. There probably is a way for companies to pay a little less but still attract the top talent by selling the job better. But then, why hasn't anyone figured this out and started doing it? Maybe financial workers, CEO's, laywers, and engineers see through it?
This part is just hilarious, "an industry-wide tax and trade salary cap will actually help these organizations." I mean, I guess maybe he really is feeling like this sort of regulation would be a charitable thing to do? It's actually a terrible idea though.
> it's pretty refreshing to see a whole lot of disdain for this article here :-)
This is Hacker News. World peace and Star Trek-style wealth and post-scarcity could be achieved and we'd still have an overwhelmingly negative Hacker News comment section nitpicking the way peace was achieved, or lamenting that life was better with poverty and the threat of war.
I'm pretty sure it was hacker news roughly 15 years ago that introduced me to Seth Godin. Or maybe it was Slashdot. Either way, there was a time when engineers were excited about starting businesses and were drinking up everything they could about marketing because we knew we sucked at it (and probably because PG told us to).
That time is not now. Now HN is half corporate boot lickers defending the status quo, like the temporarily embarrassed billionaires they are, while the other half are using HN as a political soap box to rail against San Francisco or the current federal administration or last year's HN icons who have since fallen off of the pedestals HN put them on.
It's become mostly a joke where perhaps 1 of 10 comments are insightful and hacker-y, the inverse of what it was 15 years ago when intellectual curiosity and, you know, hacking, were seen as more important than preening and demonstrations of social status.
HN is becoming Instagram or Twitter. It's nearly fully degraded to NextDoor levels of discussion.
Beyond a few million a year, the rest of the comp is really providing something that's more difficult to purchase with money: power.
So, while there's a diminishing return on the benefits of additional money in a person's life, a certain subset of people have an insatiable desire for more power. It's problematic in what's supposed to be a democratic society with a fairly flat amount of power distributed among citizens. We essentially recreate a hereditary nobility, which reduces the fitness of our civilization as a whole since we no longer have the most qualified people making the decisions.
Money only equals political power to the extent that the political power itself is up for sale. Attempting to suppress the acquisition of money via political power will ultimately just create an alternate elite that denominates power via something other than money. The only solution is to reduce the reach of formal political power such that even if it is easier to manipulate it with money, it still can't be used to conduct abuses.
Fundamentally, no one is qualified to make decisions for anyone else in the first place, and the way we ensure the fitness of our civilization is to disaggregate and decentralize power.
> Fundamentally, no one is qualified to make decisions for anyone else in the first place, and the way we ensure the fitness of our civilization is to disaggregate and decentralize power.
This just sounds like one of the libertarian greatest hits, and this line of political philosophy is how you end up with bears taking over your town[1].
I think on the contrary, centralized power is necessary, and the solution to the problem of corruption is extreme transparency. Balkanized decision-making is entertaining, but not a sane way to organize a society. Pick competent people, give them the authority to make the decisions that are best for society, and surveil the living hell out of them while they have that authority to prevent abuses. It's not like corruption and abuse of power doesn't exist in small towns, on the contrary I'd say it's worse.
> This just sounds like one of the libertarian greatest hits, and this line of political philosophy is how you end up with bears taking over your town[1].
No, it's the way of avoiding having the "bears" take over your town.
> I think on the contrary, centralized power is necessary, and the solution to the problem of corruption is extreme transparency.
Seems very speculative, given the lack of any effective extant mechanism for ensuring extreme transparency; nor does this seem sufficient to counter the inevitable abuses of centralized power should those abuses simply be undertaken transparently, as many of the worst regimes in modern history have done.
> Balkanized decision-making is entertaining, but not a sane way to organize a society.
Quite to the contrary, the only way to effectively organize a society is to make sure that the principle of subsidiarity is respected, since societies can only form and be sustained on the basis of mutual trust negotiated among individuals, and the constant threat of having local decisions overridden by distant strangers inevitably erodes that foundation of trust.
The fundamental mistake you're making is taking society-as-a-single-entity for granted, and not recognizing it as an emergent pattern of ever-fluctuating relations among diverse individuals.
> Pick competent people, give them the authority to make the decisions that are best for society
There are no people competent to make uniform society-spanning decisions, and the idea of encouraging any society to embrace uniform, singular decisions creates massive risk exposure by creating single points of failure that are non-adaptive to change. Evolutionary resilience is a product of variation, and variation is maximized through decentralization.
> It's not like corruption and abuse of power doesn't exist in small towns, on the contrary I'd say it's worse.
All concentrations of power inevitably become corrupt, which is why it's so important to ensure that those concentrations of power are (a) maintained only for matters where it's absolutely necessary, and (b) limited to bounded contexts. Heavy corruption is bad when it's localized, but much worse when it's universalized, and has enough resources to reach into every gap and beyond every frontier which would otherwise be a refuge away from abuses.
So you’re saying the guys like Stalin in the USSR (who only had a couple dachas and nothing too fancy) were better than folks like Putin, because they weren’t greedy?
Or something else?
If you’re arguing having centralized political power is just a huge attractive nuisance, I certainly agree.
But It’s not like HOA’s aren’t a consistent top 10 complaint for people though either.
At least everyone knows what the greedy asshole is after, and it’s ‘only’ money. Usually. At first.
Stalin used the state to steal literally everything from everyone. That's pretty much the epitome of greed.
Centralized power absolutely is an attractive nuisance, and the idea of creating greater nexuses of centralized power to counter the bad effects of the existing ones is pretty crazy.
Greed is taking things for yourself, which Stalin didn’t really do did he?
He took it and burned it, essentially, rather than steal it.
Which yeah, is arguably worse - but at least no one was able to be jealous after the fact, no? At least at anyone in the country. Which is why it went that way I suspect. Crabs in a bucket. They did seem pretty jealous of the West though, come to think of it. Which would explain a lot.
No one can stand any one party winning (and no party is strong enough to ‘win’), so everyone loses. They’re miserable, but miserable as “equals”. Though typically, even the winners are often poorer and more miserable than the losers would have been under another approach, Except for those who somehow managed to be ‘more equal’ somehow. Weird how that happens.
I think the crazy effect you’re noticing is essentially using fantasy as a coping mechanism.
The current mess is untenable, and we can’t figure out how to make it better (every time we try, we get convincing arguments that we’re at fault somehow or it's not good enough), so surely if we found the ‘good man’ to fix it for us, everything would be great.
But how, one asks? Too difficult to figure out, so you are a bad person for asking - apparently.
Which, uh, yeah, typically isn’t actually going to produce a good outcome, but…. The ‘good man’ says it will all work out, and everyone else seems worse, right?
Personally, I'm wondering if I'm actually being cynical ENOUGH about the current direction things are going in the US.
I've worked jobs where I'm paid 60-80k and where I'm paid 100k plus.
I can tell you for sure I cared much less about the job where I wasn't getting paid as much. I would never answer an after work call or go out of my way to follow up organizational or systemic issues. For me working overtime is part of the package when I get paid loads more.
> For me working overtime is part of the package when I get paid loads more.
I've tended to think this way, but it's all relative. Plenty of people who've never had a $50k job will treat the $100k job as the baseline/minimum, and wouldn't ever think of going the extra mile like you do. For you (and me?) - yeah, you're paying "a lot", I'll make sure I do a bit extra/more when needed. But if you've never had less, that $100k is your bottom, and you might only consider doing 'extra' for a $200k job.
> claiming that they need to pay CEOs $50,000,000 salaries in order to recruit the very best ...
>After a million dollars or so in salary, the absolute amount that a person is paid has no real impact on their life...
At the high end it isn't really about employee lifestyle, it's about the value the person can bring to the business. If one CEO will take a $100k salary and keep the business about the same and the other wants $50m but will add £1bn in value to the business then the latter is a better deal for the owners.
And the person wanting the $50m may not be greedy but just being offered similar elsewhere because they are good. Of course in real life people often get the high salaries without actually being that good which is a less fair deal.
Yeah, a lot has changed since then and his post does not age well. The post-2008 era of trillion-dollar tech companies and winner-take-all markets, like social media and apps, necessitates superlative talent to get products out to market fast to capture invaluable market share. The difference between being early or late can mean missing out on literally hundreds of billions of dollars of valuation. It is not irrational at all for huge tech or finance companies to pay top dollar for talent when the returns are so great and things are so competitive, too. Paying $500k/year or more is immaterial when you're talking trillions of dollars.
Relevant, as this was written during the last global financial crisis, when everybody outside the financial industry was busy agreeing with each other that people in the industry (especially banking) were hugely overpaid.
What he's suggesting is that the massive public markets drive companies in ways that tiny groups of people who came together specifically to make a company plus perhaps their friends, families, and a few moneyed investors, simply don't. That you can't quite connect with that suggests you are not the target audience for this article.
Since it's a 2009 article and there is taxpayers in the text, I think he was upset because the great recession bayouts and even with all world crumbling at the moment, large bonuses to C-Level.
Now it's 2024 and I expect lower profits in the middle term to companies that pays anyone more than they give in return.
1. He keeps saying marketing but salary is actually a pretty good indicator for how good a job is.
2. You pay to retain not to hire. You can hire people at practically any price point. Whether they'll stick around for longer than 6 months is a different matter. I've seen multiple startup founders burnt by this.
This post raises a question I'm curious about: is executive pay higher or lower in private firms compared to ones that are public? Adjusting for confounding factors like size and sector.
This article is pretty shallow and sounds a lot like the people on Reddit calling for the removal of billionaires and how its the fault of the rich that they are struggling without acknowledging the amount of work it takes to become rich. The same people that minimize what people like Musk have accomplished.
If I get paid more, I work harder. There is obviously a realistic limit on how hard I can work. The longer I stay at a company though the more knowledge I have and the more effectively I can utilize my time to accomplish my goals and those of the business.
If I can get a 20% raise somewhere else and do the same amount of work, I will do so. In order to keep me, my company just has to match my new salary offer. Something that they are free to do or reject based on their valuation of what I bring to the table.
A million dollars is a lot of money, but its significantly less if I need to buy a house in California vs Wyoming. The free market does a relatively good job of assigning capital, lets not make up arbitrary caps based on make believe morality.
> The same people that minimize what people like Musk have accomplished.
Oof, I agree in general with what you're saying but Musk is a bad example. His companies have been successful in spite of him, rather than because of him.
come on friend. I can understand someone getting lucky, happening to hire the exact right person and the company succeeding due to the hard work of someone else. Once. But this guy is so lucky that he managed to do it in: SpaceX, Paypal, Tesla, Neuralink, and The Boring Company.
Even if Neuralink and Boring company are not profitable, the sheer scale and potential of the ideas are incredible. I understand why people don't like Musks opinion on many things but to infer that he has somehow become the richest man in the world by accident is disingenuous.
I thoroughly dislike Trump as a person and know that much of what he accomplished was given to him. Even with that said, the guy is successful and became the 45th president of the United States and has a cult like following in a good portion of the US. I have no issue acknowledging his success despite my personal objection to him in general.
> But this guy is so lucky that he managed to do it in: SpaceX, Paypal, Tesla, Neuralink, and The Boring Company.
Not so great examples.
The Boring Company only real customer is the city of Las Vegas. Nothing much to show apart from that.
Neuralink is barely a R&D project, and still not making any money.
PayPal wasn't a Musk's venture, x.com was. x.com lasted for a couple years. Musk was the CEO for maybe a year. Essentially, he cashed out on the success of Thiel as CEO after PayPal went public and was sold to eBay.
SpaceX is very much still losing money.
> I understand why people don't like Musks opinion on many things but to infer that he has somehow become the richest man in the world by accident is disingenuous.
Not by accident, and richest only on paper.
But he was indeed incredibly fortunate and somewhat lucky. The fact that he is successful doesn't change that.
> ... without acknowledging the amount of work it takes to become rich
Being rich has more to do with background, than work.
> The same people that minimize what people like Musk have accomplished.
The son of a property developer and part owner of an emerald mine, and a top model, no less.
What I'm trying to say is that getting a jumpstart, while not guaranteeing a path to success, does provide a massive advantage over those from poorer backgrounds.
Lets say I agree with you and Musk was given a large amount of startup capital (he wasn't). If I gave you say 10 million, could you turn it into 300 billion? 10 billion? 1 billion?
> Lets say I agree with you and Musk was given a large amount of startup capital (he wasn't).
That's relative and debatable.
Musk was born to a wealthy family, and had the opportunity early in life to move to California.
He founded his first venture the same year he arrived, in 1995. It was initially backed by angel investors, and then received a $3M investment just one year after. That's $6M adjusted for inflation.
Only an unfathomable small minority of the world's population, with both the money and the connections, are able to afford this.
> If I gave you say 10 million, could you turn it into 300 billion? 10 billion? 1 billion?
Maybe. We will never know, because I wasn't given the opportunities Musk had since childhood.
I have yet to encounter a rich guy whose parents weren't, at the very least, well off enough so he could go to good schools and live a relatively comfortable life. Most rich people I have spoken to are, in fact, quite disconnected from the struggles of being poor. Many would claim that they are either self made, or come from a lower middle class background, yet haven't gone hungry for a single day in their lives.
Hahahaha, this is capital complaining about the increasing cost of labor because of supply constraints straight out, which has been increasing world wide recently because of super-ZIRP and COVID killing off a margin of the workforce. Will he suggest a cap and trade wealth tax over the estate tax limit while people are alive next? No.
The capitalist here is berating other capitalists for not having enough marketing savvy to get labor at cheaper prices. Seth is a capitalist, he treats his work as a business to build vs. a salary to earn. On top of this, Seth's business is consulting to other businesses about marketing, using the marketing techniques of saying something a bit wrong and agreeing with the common man about some stereotypes to enhance it's virality.
It comes to pure supply and demand, and they wouldn't do it if they weren't making more money off of it. It's never about what you "deserve". Anybody on a salary without significant equity ownership is labor, but it's expensive labor in this case. Because if the business could get equivalent quality labor at cheaper prices, they would!
He also knows that "Goldman Sachs" is about class, because they make their money via front office sales, and someone lower class is not going to make a good salesman. Anybody who can do spreadsheets, basic algebra and have a cocaine driven work ethic can do banker jobs, it's not a talent issue beyond insane work ethic and social skills.
Sometimes I imagine all the very wealthy people thinking about where to allocate their capital like "hm, hiring more people to do computational cancer research? nah. Let's try and invalidate people's insurance claims through their ad clicks instead."
Most corporations with any power are sociopathic institutions run by sociopaths competing with other similar corporations on who accumulate and deploy the most power. Punching down is always more lucrative than punching up and you don't change things or have breakthroughs without at least a little punching up. As you noted, that rarely happens because it's simply easier and more lucrative to fuck people over.
autonomy is a big one for some people. respect. influence/power. As a software engineer I have left jobs because the total traffic was too low, and I was addicted to 10^9 and the like numbers in my counters. Additional salary is ok, but it functionally just means I waste more or less money before having to rein it in. If I saw really rich people doing more awesome stuff with their moneys, I might think otherwise, but having a Lambo or a house so large my kids would be less able to relate to people in general doesn't seem that useful. Get used to luxry clothes instead of my somewhat scruffy true style
A big one as a developer is internal investment. Who works on internal tooling and infrastructure? How robust is the CI/CD pipeline? How much of an event is it when a deploy happens?
Equity? If you have the choice of a million dollars in salary and 100,000 shares or 1.1 million in salary and 50,000 shares, probably you should take the lower salary
This is a garbage opinion piece demonstrating the archetypical boomer mentality of caring about your pay being passe. Trying to market an “innovative” workplace to save money on employee pay is just a cheap trick. Yawn
- Salary is absolutely the key factor when people pick jobs. The difference between a fun hobby and a great job is that you get paid a lot to do the latter.
- Here he's saying that companies should create a buzz around jobs; but having good feelings about your low-paid job doesn't help you nearly as much as just having lots of extra new wealth.
- Saying that because high-end employees are far beyond the "buying food" stage of Maslow's Hierarchy means more money is unnecessary is just brain-dead. Economic growth anyone? More money = good.
- High pay is a great way for companies like Google to prevent competition. Why risk starting a business when you can earn a million bucks every couple of years working for them?
- High CEO pay is absolutely not a problem. If a top CEO increases a company's market cap by billions, and is only paid tens of millions, then what a waste of time and emotional energy it is to fixate on the tens of millions.
I can't believe this character is actually advocating for lower salaries.
> Salary is absolutely the key factor when people pick jobs.
For people with poor reasoning - yes. Most people think of ROI, especially after COVID. A finish carpenter runs at $150 per hour, but your career is limited by your physical abilities.
Going to a company like Bridgewater, where 50 hr workweeks onsite are expected, at $250k may be less valuable than going to Microsoft at $180k.
> I can't believe this character is actually advocating for lower salaries.
Did you spend any time understanding the article? The whole article is all about how certain companies only use salaries are something to draw and keep people in.
No, they didn't spend any time. That doesn't happen much here on HN any more. They took the headlines, perhaps a few other comments here, and ran with whatever their gut was telling them, often contrarian and usually wrong.
No doubt you, oh wise one, carefully weighed every factor in both the article and the entire comment chain before offering your comment, which by the way is totally not contrarian.
Yes I read the article, and yes I think it's a crock of shit written by a "marketing guru" in 2009 to capitalize on popular anger towards bankers.
>Salary is absolutely the key factor when people pick jobs.
Eh. It's a key factor. Once you get beyond a certain point, many people take lots of factors into account for jobs that are not otherwise basically interchangeable.
A CEO picking between a $10m / yr gig and a $50m / yr one would have to have rather a lot of soft factors working in favor of the lower paid one to justify it.
I'm not sure. I spent a quarter century in tech, and probably brought in about 20% maybe 255 of what I could have in that same time if I'd have sacrificed my ethics and gone to work for one of the big players rather than a non-profit. I chose not to because I value how I feel about myself more than I value the extra money. I've got a paid for house in the bay area under 3 acres of redwoods, 12 miles from the Googleplex. Sure all that money would be nice, but not at the expense of my conscience.
So, my experience as a non-CEO is that yes, people are willing to take the job that pays 1/5th the salary when it meets their needs and matches their ethics. If I had it to do all over again, I'd make the same choice. I simply couldn't function knowing I spent the most valuable years of my life striving to make rich people richer by tricking poor people into clicking more links.
Almost certainly a lot of that would be variable comp depending upon a bunch of things. And I could also imagine a $10m gig (especially with speculative equity) at a company with really exciting prospects could trump a $50m one for a stodgy company not going anywhere.
After aging I'm starting to have new views on large salaries:
1. The money is just going to be saved. Net gain to the person is they're probably going to live for the rest of their life off dividends. Net gain to society, is any money taken out of circulation fights inflation.
2. If you pay someone a lot of money they will, essentially, spend it on other people. Either through salary or just buying shit. The richest people will make other people wealthy, and those people will make other people money too. Net again sounds like it's a benefit to not just the original person.
3. I've had lots of people say it's not a zero sum game. This is turning out to be true. Someone having success inventing and selling a new ketchup dispensing lid (and making billions) does not prevent someone from starting a successful company that makes Gyroscope toys that stands on its corner that can hold a tomato.
Your point 2 is suspiciously close to the trickle down economy hypothesis which doesn’t work - I mean yes they spend that money but they spend both absolutely and relatively much more on point 1.
Also, I have serious doubts that buying assets fights inflation. It’s only true if the money ends up locked in some central bank account, otherwise someone else gets it and can spend it on goods or services instead of different financial assets.
So you're arguing you can allocate capital inefficiently and it's not a problem. I disagree. Capital should be allocated fairly so those who are doing the work stay motivated and those who are not doing anything aren't disproportionately rewarded.
Do you manage your own money this way? Do spend 10 grands on a running shoe because, well, it will eventually make the whole society wealthier and improve standards of living for everyone including you?
Trickle-down economics. It sounds like a good idea, but in practice, the system is much less about dollars and cents and more about intangible deals and than goods and services. So the vast majority of wealth in the system never actually is seen by the less wealthy. It just endlessly circulates amongst the very wealthy.
This is "trickle down economics" you're repeating. That theory has failed to provide any empirical evidence.
1. Inflation is good, deflation is bad and out of order high inflation is bad. Unless you literally store cash, you're not taking money out of the system. It's either invested or lended. Your point #1 is completely false.
2. Rich people don't create the middle class, and create only a very small set of people wealthier... if any at all.
There are diminishing returns for society of having exceptionally rich people.
As an example: mathematically having a few people in a town earn more than 100x the rest will not boost the economy as much, as having a distributed rise in compensation.
In our current world what you pay for services and products is not at all dependent on your income. Which means that an average American software engineer earning 150k will still pay $1k for an iPhone, $200 for gardening services and so on. That is the same price anyone else is paying... This leads to diminishing wealth redistribution, as the denominator is how often a service or product is purchased.
Our household income is within the range of 500k, we consume the same products and services as our teacher neighbors at less than half that income.(they probably consume more, given that they have 3 kids)
If our household income goes to $1mil - we will not need to call the gardener more often, we will not eat more, we'll not need more haircuts, we will increase our expenses but not double them.
If our household income goes from $1mil to $10mil, there will be even lower increase in spending that would distribute the income...
Now if every house in our neighborhood got a $100k annual raise, the demand for services and products would go up 100 fold.
3. It's not a zero sum-game. It's a case of diminishing returns. It's interesting that you present a mass market product as an example, where wealth is produced by mass market, instead of an example of rich people making other people wealthy.
I’d say there are many examples of higher salaries being zero sum or negative sum.
I’ve noticed from people I’ve visited in the US with large salaries that there’s many who buy homes with swimming pools they don’t necessarily use much. It’s kind of something you just have to have, especially if you plan to sell the home one day.
The European model might involve smaller homes, higher taxes, and thus lower salary. But the taxes will often go to public infrastructure, and since housing is denser, that infrastructure is potentially in walking/biking distance. So you get public pools with more amenities (even a big slide if you’re lucky) for less money.
I was struck by a side comment in Linus from Linus Tech Tips that he felt his family needed to spend some of the summer at home to justify the huge investment in the swimming pool in their new home. Seems kinda crazy to me.
The mega yachts that seem popular with the ultra wealthy also seem to me like such a huge waste. So many people employed building those big money sinks who could have been building infrastructure.
In the case where the gains on capital or large salaries is used as new capital for new ventures, I agree it’s not zero sum. But if that’s what we want more of, there can be ways to encourage that money is managed that way more often. Doesn’t feel like there’s enough effort on those kinds of policies.
I mostly agree with point 1 in the sense that the rich and powerful's money doesn't directly contribute to inflation of basic goods, i.e. Bill Gates can only eat so much rice personally so he's probably not affecting global rice prices.
However, per point 2, the issue is paying people to do useless things. If Bill Gates buys a superyacht staffed by 30 people just paid to operate the yacht, well that's a whole lot of man-hours and natural resources (fuel, raw material) being pumped into a useless object that could otherwise be spent improving the world. And yes, downstream from that (people paid to grow the food that feeds the yacht workers) are now doing mostly useless work.
>If you pay someone a lot of money they will, essentially, spend it on other people.
This touches on the concept of trickle down economics and it is generally regarded as not doing what you think it does (or at least, not very effectively).
Trickle down economics don't seem to work and while the broader economy isn't a zero sum game an individual company's decision to pay executives more money is a decision not to spend that money elsewhere.
I think it makes more sense to look at it through the lens of labor distribution. Money is abstract and cyclical and can be inflated and deflated by policy, which makes it complicated to draw conclusions about. But money is ultimately used to influence the distribution of labor, which we as a species have a finite capacity for, and which has concrete impacts.
As a person becomes wealthier, each marginal dollar is less likely to be used to support critical infrastructure like food distribution and more likely to support the construction of mega-yachts. And because the labor pool is finite and subject to competition, increasing the leverage of the mega-yacht industry can have a negative effect on other sectors' abilities to meet people's basic needs. This is why I hold income inequality to _generally_ be a negative thing under capitalism: not because of any moral judgment on rich people, but because a certain level of competitiveness among individuals in the labor market is a requirement for survival.
edit: whoops, everyone else already made this point while I was typing. Sorry for the pile-on.
The neat part about it is that if my friend's buddy, Bubba (Yeah. He's an electrician.) goes to see a congressman, governor, or the president and says he wants something done, he'll get a big shit-eating grin and a "Sure, buddy, we'll work on that!" with a hearty handshake.
If I go to them, I'll get offered a cup of coffee and possibly a few minutes to make my case.
If the guy making $50,000,000 per year does it, then, well, his wish is your command.
The main problem here, in my opinion,is that we have artifically capped the number of congress critters at an absurdly low amount. We should have almost twice the number of representatives. You should basically be able to walk to your reps house assuming you live in a somewhat dense city or small town. You should know what church they go to. Where they go to the gym, etc. By limiting the supply of congress people we've given disproportionate weight to the richest in their district. If every neighborhood had a congressperson, there would be less of this, because they'd have to compete with votes for the (likely average) people who live there.
That being said, for me personally, I've had great luck calling my state congresspeople, because like what I said above, I do know where they live and their habits, because they're a known neighbor. Note, I completely disagree with her politics, but in terms of constituent services and getting things done, I can't criticize at all.
> if my friend's buddy, Bubba (Yeah. He's an electrician.) goes to see a congressman, governor, or the president and says he wants something done, he'll get a big shit-eating grin and a "Sure, buddy, we'll work on that!" with a hearty handshake
Sure, nobody needs more than a million dollars in annual compensation (in 2024 dollars), but relative amount gets you to your never need to work again number faster or slower. You might still work after you don't need to, but it's nice to not need to. And of course, there's economic milestones to be had like flying first class, flying charted, leasing a jet, owning a jet. Those certainly have an impact on your life, depending on how much you travel; and you might travel more if you didn't have to wait at the airport for a flight.