This is a very rosey interpretation of Al-Fayed and glosses over vast swathes of fraud and misrepresentation. A more balanced view can be gained from the Guardian, itself no fan of the British establishment: https://www.theguardian.com/world/2023/sep/02/mohamed-al-fay...
You don't make 2 billion dollars just by doing honest work for 94 years.
If the average man's labor is worth $15/hr, and he never spent (nor was taxed) a dime of that, Al-Fayed was either more than 700 times smarter, faster, stronger, and harder-working than the average man... or he acquired that wealth by doing something other than hard work.
> You don't make 2 billion dollars just by doing honest work for 94 years.
It is absolutely possible to make that (and more) by doing honest work.
> If the average man's labor is worth $15/hr, and he never spent (nor was taxed) a dime of that, Al-Fayed was either more than 700 times smarter, faster, stronger, and harder-working than the average man... or he acquired that wealth by doing something other than hard work.
Other reasons someone can vastly outperform others:
- more leverage from one's work (e.g. plumbing vs. software engineering, or starting a business that employs 100 people rather than sole proprietorship)
- higher demand for one's skills
- capitalize on luck (e.g. he had very influential connections early on that he leveraged)
> It is absolutely possible to make that (and more) by doing honest work.
I’d agree with you under our current ethical system.
Under my personal moral system, I think anyone “capturing” $1 billion as a “portion of the value they created” most likely involves greatly undervaluing the contributions of the system they built upon/in (which should have been captured by taxes and reinvested into that system), as well as much of the labor they employed (other key employees were probably given too little equity, and much of the bottom rings are likely underpaid on an hourly basis for the value they provide).
Personally I’d like to see significantly higher taxes on top-end earners to help allow the “system” which provided the infrastructure, skilled and educated labor, and favorable market environment, to capture a little bit more of the value it provided to billionaires and reinvest that in K-12 education to create a strong workforce for the next generation of business owners to rely on.
I personally think even with say, an absurdly high tax rate of 90% on earnings over a billion dollars, folks like Elon Musk and Sam Walton and Bill Gates and Jeff Bezos would still have nearly as much personal incentive to earn money past their first $1 Billion.
I personally feel that Jeff Bezos would absolutely still fight for growing his net worth from $1B to $13B at 90% tax rate, instead of $1B to $130B at his current tax rate.
That is an incredibly shallow and fairly snarky response. I can do a lot of legwork to fill out a more robust position based on assumptions about people’s beliefs who make quips like this.
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I think the most important thing this misses are that there are more parties to an economic enterprise than just a single seller and their buyers. At one extreme, let’s envision a fictional world:
Walmart builds a small empire on the back of public highways. They pay fair taxes which allows the highways to capture and reinvest the value they created for Walmart.
Walmart then lobbies government leaders to eliminate their taxes. Walmart now pays no taxes.
Walmart continues to extract value from the public highways but no longer shares that value with the government which created the value.
I’m not saying this is literally what’s happening - I’m just using it as an example to show how a company can provide great prices to customers, while inappropriately capturing value created by others. This is just to show that your model posited above fails to take into account some pretty large effects in the real world.
Plus the system lets you do highly risky things and be paid handsomely if you are right, so by definition you will get these guys and this is wonderful because we keep a lot of the benefit they create. This is the main end feature that makes it work in my opinion. There is a smart and large part of the population motivated to take huge risks on their ideas by guys winning like this and when they win we usually benefit because they cant capture 100% of the value they create and if they lose they absorb the cost. As more of the downside is socialized (i.e. crony capitalism and marxism) the system breaks down.
> If the average man's labor is worth $15/hr [..] Al-Fayed was either more than 700 times smarter, faster, stronger, and harder-working than the average man
Wonder what the average HN reader's labor is worth, and whether our output would be described as "honest work".
I'll agree that it's rare for people to get to the top in life without taking some dubious shortcuts but that maths doesn't seem right. Someone being 1.2 times smarter than average (or some other metric) can probably extract orders of magnitude more value out of the system with enough intent and motivation (without being dishonest). I think it takes much less than you're thinking, but I don't have anything to prove that.
I personally wonder whether “luck” is underestimated more among most, or whether they’re moreso overestimating the degree of the value creation of the person who was lucky to find themselves in a position where they could create lots of value.
There’s a perception that guys like Ballmer created $10B of value and managed to capture $1B of it. Just because he was lucky to be there doesn’t mean he didn’t hold a pivotal role and make a huge difference in the outcome of the enterprise, and may have been awarded a small % of that value created.
Maybe other people could have created that value too, but he was lucky to be there, they were lucky to have him there instead of someone worse, and he still only captured “10%” (or whatever) of the value created.
My thought is that many of these billionaires do have a large “value over replacement” where replacement is just some random person with the resume for the position.
But I don’t think the enterprise creates nearly as much value as has been assigned to it. I think much of the value is created by the public infrastructure, an existing public education system which provides affordable skilled labor, and much of the laborers themselves.
So personally I think Steve Ballmer did get lucky, did create a lot of value for Microsoft, and captured some portion of that MSFT +value, but Microsoft captured a lot of value that was created by others (the government/public) and likely more should have been captured by them instead.
Yeah. Lebron James (or whoever the best paid NBA player is right now) is probably only marginally better then the average or even worst or even almost but didn't quite make it to the NBA player.
Everyone is paid for the last 5% of performance though not the first 95%. People get confused about that when they complain about the BS of jobs. You're not getting paid for the BS - you're getting paid for the moments when you bring something to the table.
I think your model is a bit flawed - it’s likely value scales faster than linearly with increases in “smarter”.
So, while I philosophically agree that it’s obvious anyone with a billion dollars has not earned the vast majority of it, I also personally believe it’s slightly harmful to suggest that we should be paid in direct proportion to how hard we work.
There’s a lot more to be said on the topic, but I think the truth for “how much value can one person create; and how much of that value should they capture for themselves?” lies in-between “scales linearly with hard work and smartness” and “it’s great that they were able to capture a tiny $1B slice of the value they created in their lifetime”.
I've always been completely baffled by the point of view of hard-left-wingers.
But if there are many people who truly believe that economics is linear and zero-sum, that explains how they got there.
From this point of view, CEO's and billionaires are of course overpaid because they couldn't possibly type/talk/work/think a million times better than a thousandaire.
It's only when you internalize concepts that came up in the last couple of centuries, like leverage, positive sum growth, exponential economic growth, and exponential technological development that modern life makes sense.
The Guardian is absolutely a British establishment newspaper. You can simply observe how they reported during the lead up to the Scottish independence referendum, or when Jeremy Corbyn became leader of the Labour party.
As soon as there's any perceived threat to the British establishment they'll be running the same stories as The Telegraph.
Yeah, sadly the days of the Manchester Guardian are long gone. It's now thoroughly captured by the same London-centric, Oxbridge-born cliques that dominate the other papers.
I'd characterise it as blatant propaganda. What wasn't misleading was outright lies. When they're repeating verbatim a story from the Daily Mail you know there's something wrong.
Why do you ask? Has that enlightened you any further?
If the average man's labor is worth $15/hr, and he never spent (nor was taxed) a dime of that, Al-Fayed was either more than 700 times smarter, faster, stronger, and harder-working than the average man... or he acquired that wealth by doing something other than hard work.