Learn Me: Average Wage Across Business as Measure of Success vs Profitability?

Toyman! said:

Thinking management and employee value are equal is amusing. Even communist societies don't believe that.

Not equal, no, but not hundreds of times more valuable. Probably not even 10x. While business owners face a lot of risk, most of the CEOs of large companies don't own the business and face basically no personal consequences for messing up - within a year they've made enough money for a plush retirement after all. Steve Elop made millions while his employees watched him carefully and avoidably steer the company into a glorious slow-motion trainwreck. Adam Neumann made millions managing a company so badly that it seems kind of surprising that nothing he did was illegal. People effectively working 24/7 is far from exclusive to management and is probably less common in executive positions than upper or middle management.

In reply to GameboyRMH :

We can agree on that. There are certainly some CEOs that suck at their jobs. There are certainly some of them that would make outstanding villains in movies. The law doesn't say you have to be good at your job and many shareholders suck at picking the right man for the job. But when they have the ability to make the company owners/shareholders billions, why should they not be paid millions? 

Toyman! said:

In reply to GameboyRMH :

But when they have the ability to make the company owners/shareholders billions, why should they not be paid millions?

They don't have the ability to make the company owners or shareholders billions, that's the misattribution of productivity I'm talking about. They're doing high-level management work that's worth 6 digits a year. They're not single-handedly building a big chunk of the widgets that come off the production line.

They do have the ability to direct other people at the company to make the company owners/shareholders billions - or perhaps more accurately, to prevent a disastrous loss of that revenue by not making plainly terrible decisions such as Steve Elop did. A systems architect could make or break a tech company in a similar way, and they don't make more than 6 digits a year.

Toyman! said:

In reply to GameboyRMH :

The feds have created close to 10 trillion dollars in the last two years alone. It's as close to manna from heaven as you can get. 

Have you ever run a company? Even running a tiny $1m company like mine is worth more than hands-on work. When I was an hourly guy, my work day started when my pay did and my work day ended at quitting time. Now my day starts whenever I start thinking about business and ends when I stop. That's with me doing my best to leave work at work. 

The hands-on guys, while valuable to the company, are replaceable and in most cases can't destroy the company with a mistake. The CEO can tank a company with a bad guess or even the swipe of a pen. 65% of businesses fail within the first 10 years. They can also send it to the stratosphere the same way. Employees don't share the risk but expect to share the reward. 

While the guys are considering today and the work ahead of them for the next 6 hours, I'm considering the next several weeks, months, and even the next several years. Trying to guess what the economy is going to do. Where the market trends are headed. Are my cash reserves enough to cover the $45k in materials that were delivered this week? Do I hire another person? Adjust pricing to combat the inflation I and my employees are fighting? Pay raises? Can I afford better insurance? Should I replace the old Ford Ranger?

Thinking management and employee value are equal is amusing. Even communist societies don't believe that. 

 

 

I'm sorry but you are confusing  work with success.  As a successful business man that's a natural tendency. 
     Yes making the right decisions at the right time should reward you with greater monetary reward than simply showing up and doing your job does.  
  However, the fine line is when you fail to reward others for their contribution.   It may be something as trivial as a friendly smile or as earth shattering as a creative approach to an existing problem.  "What if we put cheese In the crust?"  Or whoever came up with the Big Mac. 
    
      

porschenut said:

Very interesting discussion and kudos to all for keeping it clean.  So many forums on the net would have members start going to nasty places.  After working, mostly in manufacturing, for the last 40 years I have seen some strange things done in the name of keeping a company running.

Bottom line to me is people and conscience. 

Capitalism is good until it isn't.  Some people forget they work with people having a life and needs, the perceived  needs of the ones on the top over ride the needs of those below.  

Private companies can be run just as greedily as public.  Sometimes more.  If you aren't publically traded and small abuses are commonly overlooked.  

Unions are good until they aren't.  They helped correct unsafe, underpaid situations.  But then the people running them got greedy and started killing the companies.  I worked for GM in the 70s, the unions were no longer helping a company, they were not really helping their employees.

The stock market might have been good at one time but not in my life.  It does seem to be a racket but it is the only way to make money you saved grow.  I don't have a lot and most of it is in FDIC protected stuff.  But the little I have invested has done well, until the last 6 months!  But is seems to be the king of greed rules types.  

The future will prove to break many rules.  Why? Baby boomers are leaving the workplace and there just aren't enough people in the pool anymore to practice what used to work.  Right now those trying to "fix" the economy should not put as much weight on employment numbers unless there is a retirement correction figured in.  Manipulating the interest rates is needed, it has been too low for too long and that created more problems.  Why not get a second mortgage and put it in an index fund, net gain is better than what the banks give.  That is a bad model that has made many rich.

Sorry no happy ending or forecast of the future.  Except we all will die one day, I will go knowing I tried to not screw my fellow man.

Very well said.  
   I've started a couple of unsuccessful companies. And a couple that were successful but not enough.  ( I could earn more money working for others).  
 I've looked at a couple that I wanted  to do  but on close examination  wouldn't be  as successful as I could be working for others. 

In reply to GameboyRMH :

The productivity of the employees, while important, is only a percentage of what makes a company profitable. In many cases, it isn't the largest percentage. Leadership is probably more important because without it all you have is a mob and mobs aren't capable of producing anything. 

Where would Tesla be without Elon? Where would Amazon be without Bezos? Apple without Jobs? The driving force behind those companies isn't the employees, it's the leadership. Without the leadership, they would be no different than every business you've never heard of, or the 65% of businesses that don't make it past 10 years. 

In reply to frenchyd :

Frenchyd, your responses in these threads are making less and less sense as time goes on. 

Do you think a businessman doesn't work? You think success is a natural tendency? Work doesn't equal success? Seriously?

I'm not going to bother with a response for you because we don't live in the same world. 

Toyman! said:

In reply to GameboyRMH :

The productivity of the employees, while important, is only a percentage of what makes a company profitable. In many cases, it isn't the largest percentage. Leadership is probably more important because without it all you have is a mob and mobs aren't capable of producing anything. 

Where would Tesla be without Elon? Where would Amazon be without Bezos? Apple without Jobs? The driving force behind those companies isn't the employees, it's the leadership. Without the leadership, they would be no different than every business you've never heard of, or the 65% of businesses that don't make it past 10 years.

Employees do make up the largest percentage of what makes a company profitable. If the company has a product or service, they're the ones doing the work to provide those things. Without workers you'd just have a guy at a desk giving orders to imaginary friends while the phone line backs up with complaints. Management has value but it's ludicrous to say that it's a large fraction of what makes a business profitable. It's as ridiculous as saying that the janitor is responsible for most of the profits by keeping everyone at the company from dying of dysentery, or that the security guard is responsible for most of the profits for letting everyone into the building, or that IT is responsible for most of the profits for keeping the website up and emails working.

Elon deserves credit for starting Tesla, but apart from putting money into launching an EV manufacturer while the mainstream automakers were ignoring them, I often wonder if the company succeeds more despite his efforts than because of them. Elon has a well-established reputation for building toxic workplaces at this point. Jobs deserves some credit for building Apple into what it is, although he's also made some huge blunders, such as keeping app developers off of iOS for years (on top of launching what was intended as a flagship smartphone with far less features than the competition had at the time). Personally I'm not happy that one thing Apple has become is the #1 threat to general-purpose computing, but that's getting off-topic.

Bezos is nothing special, just a hungry cutthroat businessman who was in the right place to cut the right throats at the right time. Perhaps like Elon he deserves some credit for taking a risk on something new at the beginning, in his case online shopping. One thing they both share are remarkably anti-union workplaces with bad safety records.

Being an ordinary business you've never heard of is far from a bad thing, they may be quietly profitable companies that are great places to work unlike Tesla, Amazon and Apple which all have notably bad reputations as workplaces. Most of the workers at those 3 companies would've loved to trade in one of those celebrity CEOs for one of those nobodies and customers may not have noticed a difference.

There are some standout leaders out there but they're certainly not more important than employees collectively and probably not more important than a lot of individual mid-level employees. There is actually a designation of "key personnel" used by companies for insurance purposes that relates to this. Managers can take time off at basically any time with no immediate impact to a business while certain employees doing the actual work need to have someone fill in for any and every part of their work day or the E36 M3 will hit the fan instantly.

I'm sure we could bat this back and forth for the rest of the day but I think it's time for someone else to carry the thread. You and I aren't going to change each other's minds on how business should work. 

Fun chat though, thanks. 

Hey you're both right. How about this:

It's incredible how much success and how much failure can come right from the CEO. I worked for GE under Immelt, so I have seen firsthand how a board somehow gets >$10MM and simultaneously cited for "poor performance" and it's easy to get pissed off. I think, in that case, deservedly so. Neumann is another example of stunning lack of common sense and cash burn that looks like a parody of Brewsters Millions, and somehow he walks away with enough to give every MegaDork on the forum $5MM with room to spare.

Apple would not have survived at all without Jobs. Tesla thrived because Musk is a charlatan who has enough pop culture charisma to pull off near-theft.

I'm a capitalist. It makes no sense to have a salary cap, or a salary ratio cap. Such a thing would be really weird for businesses.

I'm a human. Nobody in history (other than maybe Newton, Einstein, a handful of others) is worth anything close to that amount of money in terms of what they actually bring to society. I also recognize that we don't pay based on what you bring to society, but then again, it should probably be pretty close just as a lagging indicator.

Something is pretty wrong, and I am not sure how to fix it. Taxes aren't going to fix it. Fewer idiots like those running SoftBank will help.

tuna55 said:

Something is pretty wrong, and I am not sure how to fix it. Taxes aren't going to fix it. Fewer idiots like those running SoftBank will help.

A very specific kind of tax did keep the problem in check in the past in the US and still does in a few countries today, specifically very high tax rates on high income brackets. If you can settle on a level of income that is objectively and universally insane, say $1m per year, and put a 90-100% tax rate on income over that amount and then start closing the loopholes around them, suddenly it doesn't make sense to try paying anyone that much money. Is it a salary cap? Sort of. But so far it's the only method within capitalism that's been found to prevent the creation of capitalist space royalty.

GameboyRMH said:

tuna55 said:

Something is pretty wrong, and I am not sure how to fix it. Taxes aren't going to fix it. Fewer idiots like those running SoftBank will help.

A very specific kind of tax did keep the problem in check in the past in the US and still does in a few countries today, specifically very high tax rates on high income brackets. If you can settle on a level of income that is objectively and universally insane, say $1m per year, and put a 90-100% tax rate on income over that amount and then start closing the loopholes around them, suddenly it doesn't make sense to try paying anyone that much money. Is it a salary cap? Sort of. But so far it's the only method within capitalism that's been found to prevent the creation of capitalist space royalty.

I am genuinely curious how you would get around loopholes such as:

Someone with $0 cash and $1T in company stock taking a line of credit for their spending

Someone living overseas on paper to avoid the tax

Someone using capital gains or dividend investing with very high capital

The Billion dollar IRA problem

Sports team write-offs

Real-estate and Industrial building write-offs

Hobby write-offs (horses, sailboats)

Toyman! said:

In reply to frenchyd :

Frenchyd, your responses in these threads are making less and less sense as time goes on. 

Do you think a businessman doesn't work? You think success is a natural tendency? Work doesn't equal success? Seriously?

I'm not going to bother with a response for you because we don't live in the same world. 

 

Wow? Where did you get those thoughts?   I listed my past successes and failures to Porschenuts .  So I obviously recognize what is required and that I don't have it.   In the end I was happier and much more successful  working for good managers or owners.  
    I also said the Owner deserves more return than just someone who shows up and does a job.  
      I absolutely hate administrative work which makes me a lousy owner candidate.   I love working hard and successfully. So I did that.   
  Too often management would change or owners would change.  Then my long hard work went unnoticed as my paycheck was examined.  Hire 2 or 3 young guys for that territory and we will have more sales at lower costs.  
   Except it never worked that way.  It was 14 months before Caterpillar sold another piece of equipment I was selling 5-6 times a month.  Plus when I left crane sales stopped. 
John Deere never did reach the market share  I was putting up and increasing month by month.  
 Ingersol Rand can be excused they had to let everyone go.  
   Yes I was the most expensive employee they had.  But I also made the most profit and sold the most.  By a lot.  
     

tuna55 said:

GameboyRMH said:

 

A very specific kind of tax did keep the problem in check in the past in the US and still does in a few countries today, specifically very high tax rates on high income brackets. If you can settle on a level of income that is objectively and universally insane, say $1m per year, and put a 90-100% tax rate on income over that amount and then start closing the loopholes around them, suddenly it doesn't make sense to try paying anyone that much money. Is it a salary cap? Sort of. But so far it's the only method within capitalism that's been found to prevent the creation of capitalist space royalty.

I am genuinely curious how you would get around loopholes such as:

Someone with $0 cash and $1T in company stock taking a line of credit for their spending

Someone living overseas on paper to avoid the tax

Someone using capital gains or dividend investing with very high capital

The Billion dollar IRA problem

Sports team write-offs

Real-estate and Industrial building write-offs

Hobby write-offs (horses, sailboats)

The last 3 are pretty straightforward tax loopholes that can be solved with political will. Problem 2 could be handled by taxing stock options/issuance more like income. Problem 3 is actually very well handled already, I know that from a previous job. For #4 capital gains taxes have been proposed but they're not without problems.

I haven't made a comprehensive plan of it, and there were tax loopholes exploited in the '40s-'70s US as well, but the system largely worked nonetheless.

Toyman! said:

In reply to GameboyRMH :

We can agree on that. There are certainly some CEOs that suck at their jobs. There are certainly some of them that would make outstanding villains in movies. The law doesn't say you have to be good at your job and many shareholders suck at picking the right man for the job. But when they have the ability to make the company owners/shareholders billions, why should they not be paid millions? 

 

 

This goes back to what I said on the previous page. If I bust my ass and ship more widgets, install more doors, answer more phone calls..........I don't get rewarded.........the owner does. Which is why many people only do the minimum to keep their job. 

Why should I work as hard as the owner for 1/10th the pay? Gary Vaynerchuk has some really good stuff on this. 

GameboyRMH said:

tuna55 said:

GameboyRMH said:

 

A very specific kind of tax did keep the problem in check in the past in the US and still does in a few countries today, specifically very high tax rates on high income brackets. If you can settle on a level of income that is objectively and universally insane, say $1m per year, and put a 90-100% tax rate on income over that amount and then start closing the loopholes around them, suddenly it doesn't make sense to try paying anyone that much money. Is it a salary cap? Sort of. But so far it's the only method within capitalism that's been found to prevent the creation of capitalist space royalty.

I am genuinely curious how you would get around loopholes such as:

Someone with $0 cash and $1T in company stock taking a line of credit for their spending

Someone living overseas on paper to avoid the tax

Someone using capital gains or dividend investing with very high capital

The Billion dollar IRA problem

Sports team write-offs

Real-estate and Industrial building write-offs

Hobby write-offs (horses, sailboats)

The last 3 are pretty straightforward tax loopholes that can be solved with political will. Problem 2 could be handled by taxing stock options/issuance more like income. Problem 3 is actually very well handled already, I know that from a previous job. For #4 capital gains taxes have been proposed but they're not without problems.

I haven't made a comprehensive plan of it, and there were tax loopholes exploited in the '40s-'70s US as well, but the system largely worked nonetheless.

www.fairtax.org

No loopholes. 

But then we still have many people in this country who think corporations "pay tax" and don't account for it in the cost of doing business. 

z31maniac said:

GameboyRMH said:

tuna55 said:

GameboyRMH said:

 

A very specific kind of tax did keep the problem in check in the past in the US and still does in a few countries today, specifically very high tax rates on high income brackets. If you can settle on a level of income that is objectively and universally insane, say $1m per year, and put a 90-100% tax rate on income over that amount and then start closing the loopholes around them, suddenly it doesn't make sense to try paying anyone that much money. Is it a salary cap? Sort of. But so far it's the only method within capitalism that's been found to prevent the creation of capitalist space royalty.

I am genuinely curious how you would get around loopholes such as:

Someone with $0 cash and $1T in company stock taking a line of credit for their spending

Someone living overseas on paper to avoid the tax

Someone using capital gains or dividend investing with very high capital

The Billion dollar IRA problem

Sports team write-offs

Real-estate and Industrial building write-offs

Hobby write-offs (horses, sailboats)

The last 3 are pretty straightforward tax loopholes that can be solved with political will. Problem 2 could be handled by taxing stock options/issuance more like income. Problem 3 is actually very well handled already, I know that from a previous job. For #4 capital gains taxes have been proposed but they're not without problems.

I haven't made a comprehensive plan of it, and there were tax loopholes exploited in the '40s-'70s US as well, but the system largely worked nonetheless.

www.fairtax.org

No loopholes. 

But then we still have many people in this country who think corporations "pay tax" and don't account for it in the cost of doing business. 

I agree, but it does nothing to reduce the wage gap, which is the laudable goal of our friend GameBoy.

z31maniac said:

www.fairtax.org

No loopholes. 

But then we still have many people in this country who think corporations "pay tax" and don't account for it in the cost of doing business. 

No loopholes, but also an effectively-regressive flat tax with only a carve-out for those at the bottom...not a fan.

Corporations absolutely do "pay tax." The only situation where costs entirely pass through to consumers would be a corporation selling a product or service with perfectly inelastic demand.

GameboyRMH said:

z31maniac said:

www.fairtax.org

No loopholes. 

But then we still have many people in this country who think corporations "pay tax" and don't account for it in the cost of doing business. 

No loopholes, but also an effectively-regressive flat tax with only a carve-out for those at the bottom...not a fan.

Corporations absolutely do "pay tax." The only situation where costs entirely pass through to consumers would be a corporation selling a product or service with perfectly inelastic demand.

This is the typical "Perfect is the enemy of good" situation. 

Is the www.fairtax.org perfect? Absolutely not. Is it loads better than the nearly 80,000 page tax code we currently have that is massively skewed toward things like the wealthy and rewarding people for having children? I think it is. 

Goods and services are worth exactly what someone is willing to pay for them. If no one will pay you $30 an hour to stock a shelf, then you are not worth $30 an hour to stock a shelf. If someone is willing to pay LeBron James $44 million a year to play basketball, then he is worth $44 million a year to play basketball. We as society have voted with our dollars what different goods and services are worth. Don't like it? Don't buy those products.

z31maniac said:

This is the typical "Perfect is the enemy of good" situation. 

Is the www.fairtax.org perfect? Absolutely not. Is it loads better than the nearly 80,000 page tax code we currently have that is massively skewed toward things like the wealthy and rewarding people for having children? I think it is. 

We'll just have to agree to disagree on that one. Yes the current tax code is overcomplicated and full of loopholes and flaws, but to me, keeping progressive tax brackets around is worth keeping that baggage vs. going to a flat sales tax which is effectively regressive. This thread was really about inequality, and with the FairTax, the wealthier you are the harder you'd be laughing all the way to the bank, especially because sales taxes are the easiest tax to jurisdiction-shop for. Very wealthy people already do a lot of their spending outside their home country, this would just turn it up to 11.

To me it seems like the reverse income tax carve-out at the bottom is the only thing keeping FairTax from looking like it's twirling its mustache at me.
 

In reply to z31maniac :

Manager at work would throw this down to me all the time.  Salesman gets big order and he gets a big commission.  Branch manager gets paid extra on branch growth. Regional guy gets extra too.  

Three guys making hoses might now have to work all day Saturday for 1.5x hourly wage.  Work enough overtime and it's decent but not as encouraging as the other guys.  

Our problem was overtime wasn't always a way to motivate our guys. Why kill yourself? For the donuts the salesperson would bring in on Saturday?

Datsun310Guy said:

In reply to z31maniac :

Manager at work would throw this down to me all the time.  Salesman gets big order and he gets a big commission.  Branch manager gets paid extra on branch growth. Regional guy gets extra too.  

Three guys making hoses might now have to work all day Saturday for 1.5x hourly wage.  Work enough overtime and it's decent but not as encouraging as the other guys.  

Our problem was overtime wasn't always a way to motivate our guys. Why kill yourself? For the donuts the salesperson would bring in on Saturday?

Exactly. That's why I don't take side jobs. Even if the companies that ask were willing to pay 1.5x my rate, I'd rather not be working late nights/weekends. 

GameboyRMH said:

z31maniac said:

This is the typical "Perfect is the enemy of good" situation. 

Is the www.fairtax.org perfect? Absolutely not. Is it loads better than the nearly 80,000 page tax code we currently have that is massively skewed toward things like the wealthy and rewarding people for having children? I think it is. 

We'll just have to agree to disagree on that one. Yes the current tax code is overcomplicated and full of loopholes and flaws, but to me, keeping progressive tax brackets around is worth keeping that baggage vs. going to a flat sales tax which is effectively regressive. This thread was really about inequality, and with the FairTax, the wealthier you are the harder you'd be laughing all the way to the bank, especially because sales taxes are the easiest tax to jurisdiction-shop for. Very wealthy people already do a lot of their spending outside their home country, this would just turn it up to 11.

To me it seems like the reverse income tax carve-out at the bottom is the only thing keeping FairTax from looking like it's twirling its mustache at me.
 

Fair enough.  But in reality, the tax code will never get simpler because it benefits Congress to have the power to encourage/reward certain behaviors. 

In reply to frenchyd :

In reply to Boost_Crazy :

Job mobility isn't as simple as you make it.   If your home is near your employment finding a similar job with better pay includes calculating the cost of the move.  Either commute costs that may be significantly higher or selling you home which may have serious costs to your long term  fincial health even with higher pay.   
  The cost of selling is typically around 10% of the houses valve between listing costs, required repairs, updates, moving costs, and acquisition of required items to make the new home liveable.  
 If you live in a typical $250,000 that's $25,000 moving costs which come from the equity in your home which may have taken you 10 years to achieve.  
 

So the solution is to overhaul the whole capitalist system instead? Which, if you play the math out- puts everyone back in the same position in which they started. 
 

I know lots of successful people, and a few unsuccessful people. Do you they have in common? The unsuccessful people make excuses and blame others for their position in life, while the successful people don't, and take ownership of their own situations. Every time we have these discussions- successful people who have been there, done that, share the keys to getting ahead. Instead of heading the advice, the same old arguments of why they are wrong keep coming up, despite all evidence to the contrary.

I work with dozens of business owners. I've seen failures and successes. Success is hard, it doesn't just happen. In my experience- hard work, setting goals, and the willingness to make sacrifices trump all other advantages to success. I've seen those with every opportunity blow it because the lacked the above and those with lots of disadvantages succeed because they were willing to do whatever it took.