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Comment by nell | Hacker News Reader

Capital allocators are always paid top dollar. CEOs are only a small part of it. Wall street bankers are paid top dollar too? They find investment opportunities that can generate returns. Traders make a lot of money too. What value do they add to society? They help in the price discovery of assets. Are they paid fairly, who knows?

From a job complexity standpoint, CEO jobs are more challenging than bankers since they have to manage a real business to generate a positive return. Bankers have no skin in the game and yet make millions.

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"Capital allocators are always paid top dollar."

That seems to be unrelated to the subject matter. I could just as easily say, "senior employees are always paid top dollar over junior employees".

Presumably, "capital allocators" were paid top dollar in 1978. Somehow though, their wages have grown 1460% relative to the people who actually put the capital to work.

In 1978 GE was the largest by revenue. They made 54B in revenues ~13B in a quarter.

In 2022 Apple is the largest. They made 124B in a quarter.

Revenues are up 1000%

The larger the capital you manage, the the higher the compensation.

Btw, I am not justifying, just trying to understand what could lead to this.

Keep in mind that CEO pay has grown 37% more than the stock market (which would be the companies they are managing).

In 1978 GE had 330,000 employees. In 2022 Apple has 164,000 employees, about half of which are in the US.

So if you're making 10x the revenue with half the employees, it stands to reason that the value of employees has increased on average by 20x... and if anything the CEO's value has increased proportionately less. Imagine the incredibly trivial case of a CEO who had 10 people under them in 1978 for $10 million in revenue, and now has 5 people under them in 2022 with $100 million. Sure, you might pay that CEO maybe 5x... maybe even 10x what you used to pay them in 1978, but you'd think, if anything you'd pay the employees more than 10x what you used to pay them (and you'd still be net ahead), because each one is far more valuable to you now.

Modern employees are expected to be more productive, and often expected to have more sophisticated skills & education than we expected in 1978... but we pay them proportionately less than CEOs that are expected to manage smaller organizations.

There's this odd notion that attributes most of the increased productivity to management, rather than the people doing the work.

Finance is a service job (like lawyers, gardeners, doctors, haircutters, etc). The fact that money is attached gives them disproportional adulation and influence. Their useful function is making sure there is liquidity and availability of capital for companies and households to function, just like gardeners keep the weeds, down and help make the flowers flourish.

The celebrity obsession with CEOs mostly gets in the way of them doing their jobs, but the job at least is part of making something happen. Hired gun CEOs can do a lot for a company, but the pay is probably out of whack there too.

Thanks for the whataboutism argument. It really opened my eyes to workers deserve less money.

If you want to really understand why it is that way, you have to dig deeper, and you'll find they are much more deep-rooted and has tentacles everywhere. It's simplistic to point to one job function and call it out as unfair as the system is set up so some key positions accrue value.

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