[locklock]

And if you're getting a $365k bonus you are likely already so rich that the money is only going for luxury things while for someone making $7.25 it's quite literally the difference between living in a car or not. I wonder if you could apply this to the rest of American society...

[vishnugupta]

> you are likely already so rich that the money is only going for luxury things while for someone making $7.25 it's quite literally the difference between living in a car or not

This is a great insight which unfortunately doesn't get much attention in the inequality debate. I'm now rich enough to be in the top 0.5% of the world. The marginal utility/value of money is so low for me that I've begun valuing my time and optimizing for it.

I, however, do think about it once in a while. I could give away a non-trivial amount of money without getting materially impacted. The same money though will make a massive difference to someone below or around the poverty line. E.g., sponsoring a student, helping a business loan, etc., The capital that's getting accumulated in the richest top 1% people is such a massive waste that could help a huge portion of humanity.

Purely from a utilization (of money), perspective inequality is a suboptimal state, a massive one at that.

[yboris]

Have you heard of Giving What We Can - an international community of people who pledged to give at least 10% of their income to charities they think are most effective at helping others?

https://www.givingwhatwecan.org

I really recommend focusing on cost-effectiveness when you give, however much or however little you give. See GiveWell for amazing research!

[thrav]

Ah yes, non-religious tithing.

[gjm11]

That sounds ... dismissive, but I'm not sure what's actually supposed to be wrong about "non-religious tithing".

Should we give up not working at weekends because it's a "non-religious sabbath"?

10% is a nice round figure. It's small enough that many people can afford to give up that fraction of their income without getting into money trouble. It's large enough that many people will be doing a really substantial amount of good to the world if they give that much of their income to well-chosen charities. And, yes, it happens that some religions have used the same figure, which probably helps "give 10% of your income" seem like a reasonable thing to suggest.

Is there anything bad about any of that? If there is, I don't see it.

I don't claim that there's anything optimal about giving 10% of your income. But I don't see any reason to sneer at people for doing it, either.

[ok_coo]

I understand the sentiment but there are many good organizations that do positive things with people's money, like the ACLU, etc.

[boomlinde]

> This is a great insight which unfortunately doesn't get much attention in the inequality debate.

Doesn't it? What else motivates things like progressive taxation?

[pdimitar]

I may eat some downvotes for this but I really need to say it. It's a bit off-topic, too.

Please, do not start believing you will be making a difference through charity.

I observed rich people in the past that out of some half-conscious guilt started thinking they need to give back in some way. But they don't want to be inconvenienced by doing it personally or by evaluating which people deserve a donation or have an important material problem solved, by themselves. They prefer to unload their guilt -- or the need to feel good about themselves -- through a 3rd party. Basically, buying goodwill and good conscience with money.

That's not giving back.

I have known several rich people and they go through a very similar process. It's very saddening to observe.

If you want to make a difference with money -- go out there. Physically! Meet people with less. Talk to them. Ask them what is the hardest thing in their lives at the moment. Ask them what's a regular concern for them. Do that 100 times, or 500 times. Understand their struggle. Many would just squander the money in a week, even if you gave them a bag of it. Try and aim your efforts and money where it will truly count.

It's not an easy thing to do. But it's a worthy cause to pursue, much more worthy that a random charity.

Apologies for off-topic.

[flush]

I strongly disagree. Financially supporting a charity is an extremely good way for someone with a lot of money to give back. The charitable person may not have expertise to distribute the money effectively, whereas a group who are familiar with the needs and thus where the money should go and how it should be used will use it well.

IMO, what you're saying is akin to saying: Criminals on the streets? Why pay to hire more cops when you can physically go out on the streets and BE the cop?

[thelock85]

That’s a fascinating take. I interpreted the comment more as charities (in some cases) can be a poor startup vehicle for those getting into serious philanthropy. So why not spend some time getting to know an issue or a specific community affected by an issue, before donating. More like: Criminals on the streets, despite more cops? Why? Maybe this money can make communities safer or deter would-be criminals?

[pdimitar]

Very wrong analogy, sorry. You are misrepresenting what I said.

You are also very generously assuming that charities actually do what they are supposed to. Here in Eastern Europe where I live this has been proven to be false, many times. Are you convinced it's better where you live?

[brianpgordon]

In the United States larger nonprofits have a great deal of public accountability. They have to file public financial statements and there are numerous watchdog groups which publish ratings on their effectiveness. Check out Charity Navigator for example. You can also give to organizations like GiveWell which are paid specifically to research nonprofits and direct funds effectively.

[Infinitesimus]

Have you ever known poor people for whom money and charity donations actually changes their lives? There are quite a lot of those all over this big world.

[pdimitar]

Serious answer: no. Never. And those who just received money like that squandered them in no time.

Granted this is anecdotal evidence but my overlook on a number of average people flaws -- and I am including myself in this group, I am not pretending like I am on some sort of a moral high ground, mind you -- indicates that most people are not... ready to receive money, if that's even the right word.

It's more or less "OMG money money money!!!!" out of them and they just mess up.

But truthfully, and this is not sarcasm, I'd love to be proven wrong.

[turk73]

I'm not quite where you are wealth-wise but definitely I have had that moment several times recently where I am re-evaluating hiring out work I would have just done myself in the past. I didn't have some big windfall, but pretty much earned and saved my way to wealth. Now it is hard to not do things like fix my own cars as well as bring my own lunch. I do them out of habit now. That's the discipline. Anyways, you don't want idiots working on your cars and you don't want to eat at restaurants all the time.

It makes no sense to me why the CEO and higher ups of the company I work at still work there. They are already set for life many times over. I can only speculate that they share a character flaw that they all see as virtuous. However it isn't--they are impeding someone's chance to "make it" in life, especially the older executives who could have stepped aside a decade ago or more. Even if you just look at the absurd salaries, it doesn't paint a pleasant portrait of greed in America.

There is a great absurdity to life in America. We basically work for the appearance of something that ends up being eaten away to a large degree. Taxes and inflation keep the goalposts moving away but we don't rebel because it's a magic trick and who doesn't like magic?

I don't work because I enjoy it but because it is a means to an end that is a better formula than some other arrangement. I would happily volunteer my time, travel, read, or simply do nothing if I could.

[maxxxxx]

“t makes no sense to me why the CEO and higher ups of the company I work at still work there. ”

My theory is that they simply like their work and get satisfaction from it. They get paid a lot but they also work a lot and I can’t imagine anybody doing this to themselves if they didn’t genuinely like it.

[asdff]

If that were the case, most executives would stay put for decades and take pride in their company. Executives are mercenaries, staying for a few years and moving once someone offers a bigger slice of pie. Lots of people are addicted to exponential growth and wealth and blinded by the damage this behavior wreaks on everyone else.

The work argument is bullshit too. I'm convinced with a few months of hands on training, any passionate and competant person can do the job of a CEO. It is really a job that lacks any qualifications beyond managing a small network of people. CEOs don't work 100x as hard as someone working full time and a second job to make 1% a CEOs pay.

[bryan_w]

If it's so easy, why aren't you one?

[bluGill]

We know the medically "sitting back, and enjoying your retirement" results in a quick death. Doctors now tell people entering retirement to "stay busy". It doesn't matter if you build birdhouses, play chess, or any of the other million things you can do, but don't sit back and relax.

I think most CEOs - used to working extra hours/hard have the least idea what they would do after they retire.

[hedvig]

Because work is identity. At least in certain cultures, for better or worse.

[SketchySeaBeast]

My sibling and their significant other are those sorts of people - both made it very high up their respective professions by their early 30's, but when it's time for the Christmas get together, it's a pissing contest about "Oh, I'm only working 70 hour weeks, so I've had some relaxation the last little while." There's little identity outside of work, amassing the cash, then taking vacations with the money, and turning around and doing it all again.

[c0vfefe]

There is such thing as ambition, and a desire for more power/money than you need. The human condition!

[mlthoughts2018]

There is a much higher rate of sociopathy among corporate executives [0]. It’s still a small rate probably, but it also likely means that some fraction of the people seeking these positions are doing so to derive sadistic pleasure from authority and power. Yes, they also want wealth, but they may persist even after money is no longer important because the position gives them power to soothe narcissistic & sociopathic tendencies.

[0]: https://en.m.wikipedia.org/wiki/Psychopathy_in_the_workplace

[maxxxxx]

I think doing something and then learning that you are good at it is pretty intoxicating in general. People who make it to the upper levels of a company are extremely good at playing the games you have to play and there is a lot of external validation in it too. I am just a little tech lead but I also get a kick out of my team of a few performing well. I can't even imagine how exhilarating it is to have an influence on hundreds or thousands of people and to play with millions and billions of dollars.

[jl6]

> It makes no sense to me why the CEO and higher ups of the company I work at still work there.

I expect a large number of middle/upper-middle class people would already be made for life if they just moved to a low cost area/country and simplified their lifestyle.

But we carry on because we want more.

[Kalium]

> I wonder if you could apply this to the rest of American society...

At very large-scale companies, it doesn't always work as well as coud be hoped. A company ten times the size of this company may not have ten times as many extremely-highly-paid executives, but it probably has ten times as many people further down the pyramid.

For example, the CEO of United Airlines is compensated $18 million-ish. There are 88,000 employees of United. That's $200 dollars per employee per year. You'd have to find a lot more money than that before you started seeing benefits to average employees on the same scale as here. Even if you assume all the highly-compensated execs can account for 5x-10x that, you're still well short of $14k/yr.

[mercer]

What if you were to add up the income of not just the CEO, but all high level management or, say, those who make more than 500.000 a year? Honest question that I'm not sure how to answer myself, but I suspect the benefit to the lower ranks would be much more than the $200 a year.

[Kalium]

That's an excellent question! Let's see if we can address it with some math.

I'll start with this: http://ir.united.com/corporate-governance/company-leadership

This says there are 24 executives at United (I counted). If you assume literally every single one of them is paid as much as the CEO is and redistribute all that money across the whole of United, then that's 24 * $200 = $4800. $200 was rouding a bit ($207 is ungainly to work with), so it's actually closer to $5000.

Now, $5000 a year isn't nothing. It's undoubtedly and unquestionably a life-changing amount of money for a lot of people struggling to get by on manifestly unreasonable and unfair minimum wages.

That said, $5k is also far short of the $14k number above. And we had to make several unreasonable assumptions to get here.

Realistically, the policy proposed here is freezing salaries and re-directing raises among executives. Most compensation would be unaffected. Further, not every executive will be paid as well as the CEO. Assuming generous 10% yearly raises and that other executives are paid around half of what the CEO is, you get a result that looks like $5000 / 2 = 2500 * 0.1 = $250 / yr.

Which isn't far from the initial result. (And still includes some unreasonable assumptions)

[mercer]

Thanks for the calculation! I think limiting it to the 24 execs is still a bit on the conservative end of things (as far as equalizing pay goes), but it's interesting to think on.

I'm actually surprised how merely broadening the calculation a bit already results in a quite significant amount. 5k is quite a bit!

Anyways, thanks again :).

[Frondo]

What I'd like to see is what the numbers look like if you:

1) Pegged the CEO <-> lowest-paid worker (or contracted worker, so you can't just contract out the janitors) to no greater than 10 to 1.

2) Balance out the next few layers of management to reflect that cap.

3) And see what pay looks like for the lowest-paid workers.

If you don't like 10-to-1, maybe we do 20-to-1. Find a nice low ratio, though, and if people want to make more, they can run the business such that everyone makes more.

[Kalium]

Very minimally different, I rather strongly suspect. You'd probably get larger shareholder dividends, but not that much larger.

There's this idea we're dealing with here that there's massive, virtually untapped, make-everybody-well-paid amounts of money being wasted on management overhead. It's a very reasonable idea. Managers at the top get paid an amount of money that's clearly and obviously incredibly excessive and has absolutely no connection to anything!

Yet, it might be worth considering that this might not actually be true in the important broad sense. What if there isn't a vast pool of money locked up in management salaries that would dramatically improve the lives of workers? What if there isn't the "fix the car money" or "send a kid to college money" another poster was rhapsodizing about for every worker? Might it be worth considering that in most cases, managers aren't actually paid vastly more than their direct reports?

Besides, there are plenty of ways to structure businesses that would get around something as simplistic as a compensation ratio.

There will always be another "But what if we run the numbers differently?" scenario.

[Kalium]

5k is definitely a lot!

You have to be wildly fantastical to get there, though. Meaning it's not a number that should be taken at all seriously as anything other than a work of numerical fiction. $250 is a number that's likely much closer to reality, though probably still too high unless you can find a much broader swath of people to freeze the salaries of.

[saalweachter]

Or, if you take a company like Google, give every engineer a 5% haircut, bring the chefs and cleaning staff and groundkeepers and building maintenance back into the company (rather than contracting out), and distribute the money and stock grants among the support staff.

[c0vfefe]

That'd cause a big morale hit & big incentive for engineers to leave. Support staff are great, but at the end of the day they're not what drives growth for the company.

[saalweachter]

Eh, you take it out of the stock grant refreshes and the noise of stock fluctuations will make it rather difficult to notice in your total compensation.

EDIT: Also, you're taking income off the top of the tax brackets and giving it to someone at the bottom of the bottom, so you get a tax multiplier where you take $1 from me and give $1.50 to someone else. Also, you probably don't need even a 2% or 3% haircut off the engineers' salaries to make every support position a $100k/year job with full benefits and 401k matching, unless your engineer : support ratio is crazy.

EDIT EDIT: Yeah, pushing everyone to $100k/year is probably overselling the idea. You could still free up a life-changing amount of money for people making minimum or near-minimum wage.

[Kalium]

Google's published numbers put their engineering headcount at below half their overall headcount.

I'm not sure a 3% haircut on engineers at Google would give them enough funds to make every support position $100k while also doing what you suggested and bringing all the contracted services in-house.

If we assume a 3% haircut on an average engineering compensation of $250k, and 45% of the organization, you have $6k and change per support headcount. And this is without bringing TVCs in-house.

Unless the support staff are all making right about 95k, this seems like it might not quite work out.

[c0vfefe]

What you're saying makes rational sense, but people's egos are not rational. It's the principle of the thing: why tolerate a pay cut when there's a long line of companies in the valley itching for your skills?

[asdff]

That's a terrible mentality. Exponential growth is not sustainable. The worst thing about technology companies these days is that putting out a polished product and covering overhead + emergency funding is seen as a failure. Products must be modified to extract money from the consumer at every turn, and the market cap must rise and rise. If engineers would leave a company because its no longer growth driven, then our universites have failed to teach empathy in their engineering curriculum.

[c0vfefe]

That focus on increasing shareholder value above all else is definitely a regrettable inevitability of publicly-traded companies.

I know my engineering curriculum hasn't focused on empathy, or ethics much at all. Unfortunately you can't educate the selfishness out of humanity.

[Kalium]

Last time someone tried to teach me empathy, all I learned is that they had a poor understanding of how emotions connect to actions. They assumed that if I had a real, true, genuine emotional experience of empathy then I would be compelled to take some specific action. Generally the action assumed is either something directly to alleviate the perceived pain or the one prescribed by the person evoking the empathy.

I find these notions curious, and rather at odds with how I expect thinking humans to interact with the world around them.

Perhaps there's something else you think our universities might be failing to teach?

[bluGill]

Still not much. I didn't bother to look it up (it probably isn't public), but doubt more than 10 people at United make more than $500,000/year, so the amount isn't significant. Now if you said $200,000/year I would expect a significant amount of people make that. However now you are getting into the middle class where lifestyles have expanded to spend most of that money, and they would feel the pinch.

[saalweachter]

The latest SEC filing does not include executive compensation, having disclosed it at the latest shareholder meeting.

The 2015 SEC filing includes 8 named individuals in its executive compensation program. In 2015, they received between $500,000 and $1.25M in base salary, and between $1 million and $10.7M in long-term incentives. In addition, they received between 110% and 150% of their base salary in annual incentives (bonuses). Two of them received additional monthly cash payments of $100,000 and $40,000 for temporary duties in addition to their normal post.

Granted, that's only the top 8 individuals at the company, but if the lowest-compensated individual among those 8 is taking home >$2M I'm fairly certain that there are a lot more than 10 making more than $500k.

It's also still the case that that pile of money is not much divided among 88,000 people, but you could still raise the income of the lowest-compensated 10k employees by several thousand dollars, or fund employee daycare, or something other than give it to a small group of people.

[_bxg1]

At that point people don't value money for what it can buy them, they value it for what it looks like in their accounts. That's the problem.

I'm not rich per se, but I make enough that I can give away 10% of my pre-tax income to nonprofits without it materially impacting my quality of life, so that's what I do. If my society won't distribute wealth in a sane way, then I'll do it for them. If anyone else has similar feelings, consider taking a percentage off the top of your own salary and allocating it to charities that will help the less fortunate.

[bigred100]

Yeah indeed. I wonder why more rich Americans don’t feel shame and embarrassment at such purchases.

[bitexploder]

There are studies that show being wealthy somehow decreases empathy.any people just stop noticing. https://www.scientificamerican.com/article/how-wealth-reduce...

[SkyBelow]

The studies do not show that.

>In order to figure out whether selfishness leads to wealth (rather than vice versa), Piff and his colleagues ran a study where they manipulated people’s class feelings. The researchers asked participants to spend a few minutes comparing themselves either to people better off or worse off than themselves financially. Afterwards, participants were shown a jar of candy and told that they could take home as much as they wanted. They were also told that the leftover candy would be given to children in a nearby laboratory. Those participants who had spent time thinking about how much better off they were compared to others ended up taking significantly more candy for themselves--leaving less behind for the children.

Trying to take a single minor difference in behavior in a controlled setting and apply it to an entire demographic is bad psychology. Imagine someone doing this with a demographic distinction other than SES.

[c0vfefe]

Do you also wonder why the entire Western world doesn't give extra penny to global poverty relief? http://www.globalrichlist.com/

Perhaps we're all just flawed, self-centered people trying to keep up with what our environment defines as the good life.

[harimau777]

I agree that a lot of luxury is irresponsible, but at the same time I tend to view it differently depending on the situation:

An executive making a luxury purchase is different if their company is successful versus laying off lots of employees.

Buying a yacht can be part of an understandable (although expensive) hobby/lifestyle as opposed to something simply wasteful like buying solid gold toilet seats.

Building beautiful architecture, commissioning art, or adventuring/exploring (e.g. being the first person to climb X or to cross Y) can contribute to the vibrancy of society even if it isn't super practical.

[throwaway55554]

They do. Then they go shopping to make themselves feel better.

[systemtest]

Most Americans have smartphones worth about as much as a monthly salary in Europeans countries. Should people feel embarrassment about that?

[CalRobert]

I think most Americans have phones that are used, and not Apple, and not flagship. Europe is pretty divers so I don't know if you mean Greece ~€1000 or Norway ~€4000 but it still seems like a stretch

https://en.wikipedia.org/wiki/List_of_European_countries_by_...

When I lived in the US I thought more Europeans lived in gorgeous architecture and had excellent public transport. Living in Europe, I find a lot of people think Americans are wealthier than reality (though if they're thinking of tech salaries, they're probably right - that EU/US disparity is enormous).

[systemtest]

There are twelve countries in the European Union with an average net income of less than 1000 euro. The two poorest ones (Romania & Bulgaria) are at 515 euro and 406 euro. So it's not that of a stretch that Americans have phones worth more than a European monthly wage.

[vonmoltke]

It is a stretch to say most Americans do, though.

Also, your original post needs a qualifier on the scope of "European countries".

[rockinghigh]

Many Europeans in wealthier countries also have phones worth over 1000€. Buying iPhones is not exclusive to Americans.

[JetSpiegel]

Most? 50%? I don't think this is correct.

[EliRivers]

I understand that a popular philosophy is that they're rich because they deserve it; they're simply better people. There's no shame to be had; it's simply the natural order of things, it's morally right.

[Konnstann]

While I agree with the absurdity of rich people being "better" than the less wealthy, what makes someone "deserve" to be rich? I would argue that no one deserves to be poor, but whether or not it is morally correct to buy nice things doesn't sound to me like a debate worth having.

At what point does someone need to be ashamed of the money they make? Is anything over the $50k figure that is quoted as the maximum happiness per dollar figure considered shameful?

[SketchySeaBeast]

I don't think it's a matter of shame, but it's a matter of realizing that while it may have been hard work, it was also a fair amount of luck that got you to where you got to be, and that a lot of people put in the same amount of work, but due to the fates they don't end up in the same place.

[EliRivers]

What makes someone deserve to be rich, under this philosophy? I understand that's not part of it. Maybe some of them deserve to be rich for being clever, some deserve to be rich for working hard, there are many reasons. The point is that they clearly do deserve it because they are rich.

[rakoo]

If it even goes into luxury buying, rather than to an investment account that will only enrich them and whoever is managing the account.

[taneq]

That's the thing, once you reach a certain level of net worth it's actually relatively hard to become poor again. You have to actively make really poor financial decisions over a long period of time.

Buy a boat for $100,000 and it'll cost you money to maintain and run.

Buy a boat for $100 million and it'll earn you money if you lease it out or take passengers during the 11 months of the year that you're not using it.

[bluGill]

Maybe. It is hard to making money leasing your boat. You need to pay the crew and such. If the market of people wanting to lease a boat is down one year you still have to pay those people.

Note that a boat is a bad example on your part. There are lots of other things you can do that are more likely to earn money.

For that matter if you can afford a $100 million boat, the crew cost is a line item that you can ignore and thus your boat sits in port 11 months just so you can have your boat. If you really like that boat it isn't a big deal that you are losing that much money.

[challenger22]

Interesting bit I learned a while back- boat operating costs run about 10% of capital expense, regardless of size of boat.

[agent008t]

You seem confused. It is much, much better for the world if the money is invested than if it is spent on frivolous personal consumption.

[bluGill]

It doesn't really make much difference.

If you invest it directly you support whatever you invest in. (you might or might not get it back depending on if the investment is successful) The best case you supported a new things that everybody buys, thus creating a company that employees a lot of workers.

If you buy luxury goods you directly support all the employees of the companies that make those goods, keeping them in a job.

Even if the investment choice was a life saving drug, the luxury purchase means those employees have money and they are likely to donate to research of life saving drugs.

[agent008t]

Consider what happens to the actual resources in the different cases:

1. You spent the money on consumption. By definition, consumption means that whatever you buy ends up being less valuable after you are done with it (otherwise we would consider it investment - note that unsuccessful investment is also a form of consumption under this definition). Consider an extreme example, where you commission a massive yacht to be built for you, then use the yacht recklessly and sink it. All of the time of many people, all of the materials that went into building it have been wasted. In aggregate, we are all poorer as a result. The fact that the yacht company now has more money just means that they now have a relatively larger claim on a smaller overall economic pie than they did before.

2. You invest. Instead of spending money on yourself, you instead use the resources you have a claim to that the money represents (e.g. the people and the resources that could have resulted in a yacht for yourself) to create real value for others. This makes the overall economic pie larger (and also changes the distribution of claims on this pie that people have).

3. You donate money to other people, burn the money - neither consume nor invest. The overall economic pie is unchanged, but the distribution of claims on this pie by various people has changed.

Of course, there are caveats and nuances, but in general option 2 makes society richer in aggregate, option 1 makes it poorer, and option 3 merely changes who gets to decide what to do with the resources that we have while neither growing nor shrinking this resource base.

[erfgh]

Someone is making this luxury thing.