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Some months ago, you suggested right here on C-D a potential stock. I took the tip, so to speak... bought it, and enjoyed some pleasant gains. You literally created value for me. Thank you! And yet... what is your compensation?
All investing entails risk. Most individual stocks make very little gains or even go down significantly in value.
The vast majority of people make money in the stock market by working at a job and investing their money in a 401k over a period of decades.
So, they have to create value to be able to invest any of their money in the first place.
From where I sit, the productivity gains in the past ~50 years are the result of increased capital investments, not any increases in human productivity. My grandsons do not work any harder or smarter than their father, etc. They just have better tools. So yes, the rich get a larger share because they have a larger investment.
I understand better, your amazing level of misunderstanding.
They have better tools, because of the contributions of everyone involved in increasing productivity. Since productivity mostly rests on the furtherance and intelligent application of technology, scientists and engineers are at the frontlines, but it's really everyone involved in the enterprise.
What rationale could you possibly have for believing that the people holding the purse strings are entitled to all the gains? This is a 3rd world attitude, whereby a company comes in and bribes the government, and sets up an extraction project, raping a country of its assets... and then leaves. No development.
The rich need us and our buying power and our work, more than we need their "allocation of capital".
The other very important factor that you seem to miss, is that we are not suffering from a "lack of capital"... rather way too much! Productive enterprise is naturally depressed due to depressed consumer buying power. If people have money to spend, production follows. This was what we did from the early 30s to 70s, and our economy was by far the most robust it's ever been. Real median incomes nearly tripled in 45 years! And just look at the infrastructure we built in this time! Even though productivity gains were equally shared between labor and capital, there was no lack of capital. I'd bet there hasn't been a shortage of capital in this country for over 150 years. Rather, except for the period I mentioned above, we've been held back by an excess of capital.
When there is an excess of capital, the rich use their excess to inflate assets and collect rents. This reached a critical point in 1929, and you know the result. Our economy for 45-50 years after that was sustainable, but in the 70s another scheme was hatched to allow excess capital accumulation once again... only this time, fiat currency, fiscal and trade deficits, loose credit, and an increasing workforce, were used to fill the hole and keep the ball rolling. Personal debt is maxed out, but it's anyone's guess how long fiscal debt can keep escalating.
lol - you realize that by being in the top 1%, the other 99% see you as the psychopath, "willing to do blah blah blah...", and we certainly need to redistribute your ill gotten gains.
From where I sit, the productivity gains in the past ~50 years are the result of increased capital investments, not any increases in human productivity. My grandsons do not work any harder or smarter than their father, etc. They just have better tools. So yes, the rich get a larger share because they have a larger investment.
This is all pretty basic stuff and a smart guy like you should understand.
People with the top 1% of net worth in the U.S. in 2022 had $10,815,000 in net worth. I'm not buying it..
While this is broadly true, the higher up the proverbial food-chain we go, the more tenuous the connection between labor and compensation. It is very clear for a gardener mowing the lawn around corporate HQ. It's less clear for a junior engineer working on designing a product. It's much less clear for the director of engineering, sitting atop of a division of 700 people. And it's even less clear for the aforementioned director's boss.
The reason for the attenuation of clarity, isn't "class struggle" per se, but because hands-on labor, whether physical or professional, has an obvious valuation. Detached labor, with monikers such as "strategic decision making", doesn't have an obvious valuation. If the guy mowing the lawn misses a half-acre, it's clear what he didn't do. If the strategic-person misses some massive decision, the damage isn't necessarily clear, nor the opportunity cost. How to dock the former for compensation, is obvious. But what about the latter? If a waitress is particularly chipper and prompt, it's clear how (and why) to tip her extra. But how do you appropriately tip the attorneys negotiating the corporate merger? Or the CEO, who made the initial contact to explore the merger, on the golf course?
The point isn't that inequality is somehow correctible, or that it should be corrected. It can't, and it won't. That's probably for the best. But let's not delude ourselves, into belief that there's tenably one-to-one correspondence between inputs (what we do) and outputs (what we get).
Excellent post, thank you for it.
It's long been accepted within microeconomics that in the aggregate workers are paid (in total compensation terms) less than their individual economic value/contribution to their employer. So you'll get no argument from me per your last comment. It must be so....no one will risk capital in order to surely breakeven or lose money.
Per your second paragraph man - since the stone age has rewarded strategists over day to day decision makers and day to day decision makers over workers. IMO it's simple supply and demand. Across virtually every sizable group ever there are/there will be far, far more people capable of labor than decision making and far, far more capable of decision making than setting strategy.
While this is broadly true, the higher up the proverbial food-chain we go, the more tenuous the connection between labor and compensation. It is very clear for a gardener mowing the lawn around corporate HQ. It's less clear for a junior engineer working on designing a product. It's much less clear for the director of engineering, sitting atop of a division of 700 people. And it's even less clear for the aforementioned director's boss.
The reason for the attenuation of clarity, isn't "class struggle" per se, but because hands-on labor, whether physical or professional, has an obvious valuation. Detached labor, with monikers such as "strategic decision making", doesn't have an obvious valuation. If the guy mowing the lawn misses a half-acre, it's clear what he didn't do. If the strategic-person misses some massive decision, the damage isn't necessarily clear, nor the opportunity cost. How to dock the former for compensation, is obvious. But what about the latter? If a waitress is particularly chipper and prompt, it's clear how (and why) to tip her extra. But how do you appropriately tip the attorneys negotiating the corporate merger? Or the CEO, who made the initial contact to explore the merger, on the golf course?
The point isn't that inequality is somehow correctible, or that it should be corrected. It can't, and it won't. That's probably for the best. But let's not delude ourselves, into belief that there's tenably one-to-one correspondence between inputs (what we do) and outputs (what we get).
No - you are equating labor/work with physically manipulating / putting something together. Most labor has little to do with physically manufacturing - most businesses are based on labor without physically manipulation as output - jobs like teachers, lawyers, brokers, bankers, software designers, etc. And that manipulations are certainly not what is determining the worth of labor or the associated compensation. It is more about the uniqueness / value of the task that is the work - the labor required between the inputs and outputs that determines the value and compensation.
It takes years of training for the engineer to be able to design something worth building and years of experience of design to manage that team of engineers, and you pay the strategic decision maker lots to not miss something massive. On the other hand, it takes maybe an hour to train the guy to mow a lawn or a day to train a waitress to serve.
If the guy mowing the lawn misses a half-acre, it's clear what he didn't do. If the strategic-person misses some massive decision, the damage isn't necessarily clear, nor the opportunity cost. How to dock the former for compensation, is obvious. But what about the latter? If a waitress is particularly chipper and prompt, it's clear how (and why) to tip her extra. But how do you appropriately tip the attorneys negotiating the corporate merger? Or the CEO, who made the initial contact to explore the merger, on the golf course?
To be a corporate attorney, you have to get a JD and pass the bar exam.
To be a CEO of a major company, you very likely have to get an MBA from a top school.
IQ, work ethic and other qualities are going to determine whether you're even in the running for those positions.
The only remedy to being a victim of the money / usury scam is to extricate oneself from their money system.
When prosperity is measured by one's prodigious production of surplus usable goods and services, equitably traded and enjoyed, money is unimportant.
Only the money-mad seek money tokens instead of prosperity.
I like to fully spell it out as FIRE sector. Though I will say finance raises my ire the most.
Sometimes, sometimes not. Like many here, I invest in the S&P 500. My "compensation" is the fund's dividends, and hopefully the cumulative capital gains. If my investment is large, and I don't make stupid kneejerk trades like some people on our "investment" forum, then statistically, the compensation will be handsome... recent market performance notwithstanding. Did I do anything to create value? I only placed a phone call, to make a trade.
The capital markets are the premiere vehicle by which we provide risk capital to public companies, evaluate economic opportunities, evaluate the hired help (executives & managers), and - most importantly - allocate capital.
The work is the allocation of risk capital. The telephone call you refer to is merely the end transaction.
Collectively, you (and I and others) are allocating risk capital in such a way that we assure capital flows to worthy economic endeavors. I contrast that with, for example, government-directed allocation of the public's money according to fashion and political whim. Remember government "investment" in Solyndra? In Fiskar? Or the CHIPS act???
While we usually do not directly provide risk capital to an individual firm, we absolutely provide liquidity to the capital markets and hence to the allocation of capital. We are compensate for that risk via a (mathematical) expectation. Sometimes it turns out in our favor; sometimes not so much.
It is the brutal & unmerciful capital markets that reward the correct allocation of capital (and capital liquidity), and thereby enable successful economic endeavors to flourish.
Last edited by moguldreamer; 09-28-2023 at 02:53 PM..
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