There’s one sentence in Scott Winship’s post at RealClearPolitics, ostensibly a review of Ed Conard’s book, The Upside of Inequality, that caught my eye. Here it is:
As Conard notes, “It is illogical for a CEO managing five employees to earn the same pay as one managing fifty thousand employees.â€
I agree. That’s why I want there to be thousands more companies with five employees and fewer with fifty thousand employees. Especially when those companies with 50,000 employees got that way through crony capitalism, rent-seeking, federal bailouts, government-granted monopolies, or government contracts. I think you’d be surprised at how frequently that’s the case.
Remember that John D. Rockefeller founded his enormous fortune on war profiteering sales to the Union Army during the Civil War.
Employees are like assets under management for the CEO, so his valuation goes up as the number of employees increase.
“It is illogical for a CEO managing five employees to earn the same pay as one managing fifty thousand employees.â€
Heh.
It is illogical for an employee managing five hundred thousand dollars to earn the same pay as one managing hundred million.
Canards other book is a great read. But people will hate you for the point of view.
I don’t mind CEO’s of big companies getting huge pay – what bothers me is they get that huge pay regardless of how well they do. Even if they get fired or run the company into the ground, they almost always walk away with millions in compensation. They don’t really have any financial risk which is a pretty sweet deal. Of course, this is a generalization and the usual caveats apply.
I don’t share your affection for small companies, at least not those with which I interact directly. I’ve actually made an effort to buy small and local, largely because I like variety and don’t want the whole world to be taken over by Wal-Mart and Applebees. So I’ve tried to use the little local picture framer not the big box store, or the small-time liquor store rather than Bev Mo.
But the small-timers are generally really lousy at their jobs. They frequently don’t keep reasonable hours. They often have chips on their shoulders and seem almost hostile to their customers. They lack procedures to ensure consistent delivery of services. Their stores are often poorly-lit, badly-located, ill-considered. And to top it off they don’t even have especially knowledgeable staff. If you want to charge me an extra two bucks a bottle more than Bev Mo, shouldn’t you at least have a staff that can opine on single malts?
Of course there are counters to that. In Tiburon we had a wonderful grocer, and my local cigar shop is tops. But overall, as much as I hate to say it, the chains do a better job. The little guys don’t seem to grasp the fact that their desire to take Mondays off pushes me to the big box store or online, and once I’ve been fended off, I’m probably not coming back.
Michael,
I doubt you want all single-malt and cigar manufacturers, for example, to consolidate into massive global conglomerates. I know I don’t want to get all my wine from Carlo Rossi, my beer from Embev and my syrup from Aunt Jemima.
Retail is a tough one for smaller businesses because 90% of people out there care about price above all else. The internet supplanted most of the expertise a specialized store could provide for a premium. But retail is just one part of business and I think the big online firms will move from being virtual stores to commerce platforms. Amazon is already doing this – I know a couple of people who make a living using Amazon’s FBA. Or, just look at Ebay.