The era of distrust and disloyalty

http://www.gerrymcgovern.com/new-thinking/era-distrust-and-disloyalty

by joeyespo • 11 years ago

72 46 11 years ago

x0x0• 11 years ago

If you liked this, you may also like _Twilight of the Elites_ by Chris Hayes. It discusses the disillusionment many of us feel when we discover what our leaders and elites have gotten up to.

http://www.amazon.com/Twilight-Elites-America-After-Meritocr...

carsongross• 11 years ago

The destruction of previously high-trust societies is the story of the west in the last forty years. It will be fascinating to read the eventual analysis.

bsbechtel• 11 years ago

A few years back there was a lot of talk about a coming digital dark age. Due to not a lack of information, but an overabundance of information and an inability to discern truth from fiction. I think we are arriving at that moment now.

PavlovsCat• 11 years ago

Simplicity, usefulness, functionality, details and facts, transparency; these are the pillars of the new digital design. We trust what we can quickly and easily use but only as long as it’s useful. Design for use. Design for usefulness.

Amen! That reminded me of an essay I love dearly: http://fadeyev.net/moral-design/

gizi• 11 years ago

Imagine a company doing $10 billion in yearly revenue. If the right guy manages the joint, it will do $11 billion. Are you willing to pay 10 million a year for this person? What if another company in similar circumstances offers 20 million? And another company 50 million? In the end, they all have 1 billion at stake. So, they all could even offer more and still be laughing all the way to the bank. In other words, even if a CEO could only make a difference of 10% on a large company's revenues, it would still be worth it to pay him incredibly large amounts of money. Apple paying Steve Jobs $50 billion would still have been a very cheap bargain. He made a difference of way more than that.

AlexB138• 11 years ago

The studies sited in the article directly contradict your statement, unless I'm misunderstanding what you're trying to say.

pitay4• 11 years ago

The same could be said for any other employees. Programmers, warehouse workers or whatever. Maybe they could be paid for the difference they make too. Yet this doesn't happen, because the supply side is important as well, as well as the lack of power these people have.

From what I see, finding the right guy to manage a company is very hit and miss in the real world. Just look at Ron Johnson. He was previously senior vice president of retail operations at Apple, and then hired as CEO of J.C. Penny. He was fired as CEO from J.C. Penny in 2013, after retail sales were down by 32% and stock prices fell steeply. This was despite him having a very successful tenure at Apple. The pricing should factor in the uncertainty and risk of the performance of someone in the position of CEO.

I have probably have not touched most of things that could be issues here, such as corruption, and that some CEOs are just extremely incompetent. I remember a CEO that was given 250 million dollars to leave because he had that much negative impact on the company he was running. This was someone that the board thought was a great hire.

Anyway, I find the post I am replying to is way too simplistic and looks at CEOs with extremely rose coloured glasses. There is a lot more to consider.

blfr• 11 years ago

The same could be said for any other employees. Programmers, warehouse workers or whatever.

Some programmers, maybe, but very few could move large company's revenue by 10%. And almost certainly no one moving physical stuff around in a warehouse could.

yummyfajitas3• 11 years ago

No, this can't be said for every other employee. The best warehouse worker is not adding $1B or anything close to it to the bottom line.

It can be said for some programmers and these programmers do tend to make lots of money. (Though in many cases they are given titles other than "programmer", e.g. "managing director" of a team of 0.) See also top traders - at many firms they can make more than the CEO.

The fact that not all CEOs are perfect doesn't contradict this claim. In fact, if you are attributing JC Penny's 32% loss to the CEO you are supporting the claim of gizi.

sokoloff• 11 years ago

The pricing should factor in the uncertainty and risk of the performance of someone in the position of CEO.

This is what options/share-based compensation seeks to do in large part.

Still, when those packages pay off, people get all kinds of jealous butt-hurt over that as well...

freddref• 11 years ago

There's a lot of pretty big "if"s in this comment. Good example of the line of thinking discussed in the article.

jib• 11 years ago

This is an argument that a lot of people make in a lot of business cases. It is not a correct argument.

Find huge amount. Say "if only X%" (usually 1% or something else low) then increase of 1%*huge amount which is still a huge amount!

Somehow the argument of "if only X%" is meant to avoid the need to prove that you can, in fact, do X%.

1% of extra revenue is hard. 1% time save across the board is hard. If you claim 1%, you better have some strong arguments as to how you can achieve 1%, not do "handwavy do something with synergy or extra information - even if we just get 1% which is a low number, 1% of something huge is still huge. We think we can do more than 1%!".

It is almost as pervasive as hindsight arguments that ignore risk costs. "I put all my money on black at the roulette table and my business is up 100% in the last year - I will bring huge wins to you".

jacquesm• 11 years ago

It is a partially correct argument. If you apply a method to something small and it has an x% effect then your compensation will always be limited by that upside. Applying that same method (or knowledge) to a larger entity potentially has a larger upside and so your room for negotiation expands. Whether or not the difference in percentage is the same is of course debatable but if there is an upside in both cases then the upside is likely to be larger in absolute terms when applied to the larger company. And so those large companies will be able to pay higher compensation for the same skill levels.

That's not at all the same as playing roulette and it does not mean this argument is not correct. It's correct in principle, you may want to argue about the degree to which it transfers from smaller companies to larger companies.

paulsutter• 11 years ago

Do you have a methodology for determining the revenue impact attributable directly to the CEO?

Something that doesn't involve insta-cloning all the other employees and customers for A/B tests.

TheOtherHobbes• 11 years ago

You have a good point, but it's clear that CEOs do have a huge effect on company fortunes. When you get a rockstar CEO, the upside is obvious. And when you get an idiot CEO, so is the downside.

Kind of. One problem is that Wall St isn't great at distinguishing between idiot CEOs who sweat companies in the short term but kill them in the long term, M&A shopaholic and management-by-rebrand CEOs who flap around doing a lot of useless stuff with no actual clue, rock stars who grow companies with a vision, and bullshit CEOs who churn through investor cash and wishful thinking but create no real profitability.

RobertoG2• 11 years ago

I think that if it was my business, I would prefer to hire a good CEO, instead of a star, and use the rest of the money to hire one hundred talented CEO assistants with different expertises. Sounds like a better investment.

vlehto2• 11 years ago

Lets assume that CEO can fuck up so bad that it will bancrupt a company.

Star CEO has 0,1% chance of fuck up/year. Good CEO has 0,2% chance. And completely mediocre would be about 0,4%.

Hire three mediocre dudes to CEO the company so that they are always deciding on everything together. You have now 0,064% yearly chance of bancrupty, while you can easily pay them just 300k each.

It seems like high CEO pay is often a result of CEO holding the company as hostage. Not not necessarily conciously, but from shareowners point of view. Distribute the risk of bad moves and you should get OK performance cheaply.

anon4• 11 years ago

You can get the exact same increase in profits by investing 10 million a year in a talented group of developers and having them produce mobile games. Or a fleet of truck drivers. Or anything, really. 10mil/yr is enough to finance a small enterprise, so you can realistically branch out into anything that makes money.

andrewclunn• 11 years ago

Well yeah, if I just make up numbers and imagine a world where a single CEO would have the same impact on multiple companies. Of course that's not reality at all, well unless the increase in revenue comes from political connections that supply legislation that favors your business of course.

restalis• 11 years ago

Imagine a company doing $12 billion in yearly revenue. If "the right guy" manages the joint, it will do $11 billion. Are you willing to pay 10 million a year for this person?

lmm• 11 years ago

If a given CEO really is 10% better than the guy who'd do it for $49 million less, then sure, he's a bargain. But is there any evidence that he's actually 10% better?

Mikeb852• 11 years ago

Yet most CEOs don't increase performance to that degree. Steve Jobs was a founder, not an MBA placed on the job.

dikdik• 11 years ago

Upping the revenue from 10B dollars to 11B relies on the infrastructure, capital, corporate relationships, etc, etc that were previously built by a company. The new CEO didn't just create 1B of additional wealth out of thin air, he was provided a lot of expensive tools to carry out his vision.

Donwangugi• 11 years ago

One item I believe that is missing from this obersavation is that modern design is all about getting the user to trust and love the product. In reality users should treat their products with more respect than trust, especially when considering privacy and security concerns. Even if something is useful, that does not mean it should be trusted.

dualogy• 11 years ago

"We are seeing the emergence of an anti-visual design movement, as more and more customers are becoming distrustful of smiling faces, soft tones and soft language."

Not seeing that yet but it can't come soon enough.

rm_-rf_slash2• 11 years ago

Ultimately little will change but the tactics. The propaganda industry has learned time and time again that ever more "personalization" is an ever greater means to control people as they become so wrapped up in their primitive desires they ignore the blatant manipulation being performed by them.

The hippies thought that consumerism's end was just around the corner. Then Madison Avenue learned the value in simulating self-actualization, and catering to those desires. The hippies became the hipsters.

hderms• 11 years ago

Did you watch "The Century of the Self", by chance? Great movie, either way.

profeta• 11 years ago

compelling example but naive. it fails to look at how social media is evolving to handle that as well. Companies PR are now abandoning the smiling white families in banners because they know it won't work. They are now using your relatives smiles. We are eating the same spin, but now it is disguised as our friends' opinions.

kfk• 11 years ago

Putting things in perspective: half million makes up to about 20-25k per month once you take out taxes in Europe. While huge, it is not incredibly huge. A semi-decent doctor can get close to that amount (it's easy when you charge euro 100 per visit and you forget to pay taxes).

I am just saying that paychecks tend to be overestimated by people in the low to medium income brackets. Most of those half million folks work 24/7. Once you divide by the amount of crazy hours they work, they are making more or less like a decently paid engineer...

I am more upset by how much doctors make, for many of them in the end do an office job (they don't have hundreds of families futures in their hands). Also because, in many cases, those incomes are high because of stupid laws rather than market value. While CEO do tend to be more on market value.

SwellJoe3• 11 years ago

"While CEO do tend to be more on market value."

When market value is set by the CEOs themselves, the trend in market value is ever upward, as long as there is no pressure in the opposite direction. The highest paid executives have seen their share of the pie grow drastically over the past couple of decades, while fantasy stories of their importance and value get passed around to convince everyone that a CEO making 250 times the average worker salary is perfectly reasonable.

Competence has value, but the royal treatment of C-levels is absurd.

yummyfajitas3• 11 years ago

The market value is set by the board of directors, not CEOs.

Furthermore, supposing there were some sort of absentee owner effect (boards of directors are comprised of other CEOs, and they conspire to raise each other's pay), you'd expect to see a different market value in closely held corporations. Strangely, the price of a CEO for a closely held corporation closely tracks the price of a CEO for absentee shareholders.

http://scholarship.law.duke.edu/cgi/viewcontent.cgi?article=...

The obvious way to fix this is with increased shareholder activism (ala Gordon Gekko), and reducing regulations on hostile takeovers. Possibly also regulating things like poison pills, staggered board elections, etc. Do you favor such rule changes? If not, why not?

jondubois• 11 years ago

Farmers have often been at the mercy of corporations and it's not uncommon for them rise up and form their own unions in an attempt to sell directly to customers.

Modern capitalism rewards those who can capture value over the those who create value. It's not about the product or service; the scales are tipped in favor of those who have access to the money (essentially; those who have access to the customers).

That's why marketing is such a powerful force in our society. People tend to trust marketing more than they trust their own senses... A lot of popular brands offer horrible quality products - Particularly in the food industry, but that doesn't stop people from consuming them to great excess.

Mikeb852• 11 years ago

the scales are tipped in favor of those who have access to the money

Yup, pretty much. Turns out Piketty (and before him, Marx) are right.

Of course, since democracy depends on marketing, politicians have done a great job marketing a political system that doesn't work for the common person, yet they still vote for it. As long as they have a shiny toy in their hands, and something to entertain (distract) them, the masses are placated...

The era of distrust and disloyalty

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