The Shallowest Generation

http://www.ritholtz.com/blog/2008/11/the-shallowest-generation/

by tortilla • 18 years ago

49 51 18 years ago

tortilla2• 18 years ago

Interesting Graph:

CEOs’ average pay, production workers’ average pay, the S&P 500 Index, corporate profits, and the Federal minimum wage, 1990-2005 (adjusted for inflation)

http://www.ritholtz.com/blog/wp-content/uploads/2008/11/ceo-...

time_management4• 18 years ago

The problem's not that they're a shallow generation. Actually, I think the Baby Boomers were a very idealistic generation, and this (paradoxically) has led to the corrupt leadership. The civil rights activists, hippies, and leftists (with a few exceptions) didn't swing around to become the yuppies, sellouts, and corrupt political figures. Different people did.

My father's pretty similar to me in worldview, ethics, and politics. When he was growing up, he couldn't have even imagined working at a hedge fund; the concept of working for money was considered crass, if not repulsive. (He was actually quite incensed when I first said I was interested in trying out trading.) In 2007, it was perfectly normal for a liberal, idealistic young person to go and work for an investment bank or hedge fund, because that was seen as the best way to establish oneself and go far later (e.g. Jeff Bezos worked at Shaw before founding Amazon).

I would note that the problem with the Baby Boom generation isn't that they're "selfish". My parents aren't bad people. Nor were most of my teachers; they were great. On the whole, the Boomers aren't worse than the rest of us. The difference between them and us is that the better half of them almost entirely eschewed the career paths that led to power-- finance and corporate leadership-- leaving the shameless and greedy bastards to take control.

ojbyrne4• 18 years ago

I think this is orthodox Neoconism. The baby boomers were hippies who did drugs, attacked the Vietnam war, questioned authority, promoted "free love", and so on. Most importantly, their independence of thought is what makes them "selfish."

Contrasting them with the "Greatest Generation," whose lives were basically dictated to them when WW2 started, and supported the House Committee on UnAmerican Activities. Can we call them the "Pleasantville Generation?" instead.

anamax3• 18 years ago

< The baby boomers were hippies who did drugs, attacked the Vietnam war, questioned authority, promoted "free love",

How'd that work out?

> Contrasting them with the "Greatest Generation," whose lives were basically dictated to them when WW2 started, and supported the House Committee on UnAmerican Activities.

And the Soviets later revealed that there were Communists in the US govt and that they were trying to "influence" Hollywood.

> Can we call them the "Pleasantville Generation?" instead.

Whenever it comes down to "squares" vs "cool", you can be pretty sure that the "cool" will screw things up more.

In other news, truth is not beauty and you have to be pretty stoned to think otherwise.

time_management4• 18 years ago

Neocons are an altogether strange phenomenon. Neocons aren't conservative or liberal, so much as they're opportunistic authoritarians. In the 1960s, when they were young and believed the Left stood a decent chance of overthrowing the US government, they were communists. They weren't the same people as the hippies or civil rights activists; they were the ones mobbing and beating up returned veterans in San Francisco. In the 1980s and '90s, when their generation and the conservative movement were firmly in power, they swung from the authoritarian left to the authoritarian right, which really aren't very far apart.

DanielBMarkham• 18 years ago

isn't "orthodox neocon" an oxymoron? How can you have a long-standing standard for a completely new phenomenon?

ryanwaggoner3• 18 years ago

Interesting article, but the author's selective memory and faulty logic continually undermines the point he's trying to make. My favorite was this gem:

"Past U.S. generations invented the airplane; invented the automobile; discovered penicillin; and built the Interstate highway system. The Baby Boom generation has invented credit default swaps; mortgage backed securities; the fast food drive thru window; discovered the cure for erectile dysfunction; and built bridges to nowhere. No wonder we’re in so much trouble.

This completely ignores developments like the personal computer revolution, the Internet, modern telecommunications, satellite technology, space exploration, advances in biotechnology, dramatic reductions in global poverty, etc, etc. I'm sure I'm forgetting some, but you get the idea.

The author would have done well to acknowledge that the reality of the situation is more nuanced than the picture he attempts to paint.

jrockway• 18 years ago

the author's selective memory and faulty logic continually undermines the point

His chart doesn't help either:

http://www.ritholtz.com/blog/wp-content/uploads/2008/11/debt...

Yes, if you cut the Y-axis in arbitrary places, you can make small changes seem important. Too bad they aren't.

Here is a chart comparing my apples to oranges:

    1000.0001 -             ******
              -             ******
              -             ******
              -             ******
    1000.0000 -  ******     ******
              ~  ******     ******
              +---------------------
                 Apples     Oranges

Wow, there are 3 times as many oranges!

newt0311• 18 years ago

read the chart again. 0.7 projected vs. 1.0 actual. That is a very significant change. Then just think about the 1.0 number. The total amount of debt is what everybody in the US earned in year. A scary thought in of itself.

ken• 18 years ago

Also, half his examples weren't done by any "U.S. generation". The automobile was invented by a German, and Penicillin was discovered by a Scot.

palish2• 18 years ago

The automobile was invented by a German, but it was popularized by Henry Ford. Also, consider that if that German hadn't invented the automobile, Ford still would have. i.e. Ford wasn't inspired by that German, because he was already working on an automobile. His autobiography is very good: http://www.gutenberg.org/dirs/etext05/hnfrd10.txt

time_management4• 18 years ago

This reminds me of "America, Fuck Yeah" in Team America, wherein U.S. credit is taken for sushi, Christmas, and books.

nsrivast• 18 years ago

In other words, to summarize: "kids these days!".

mellow5• 18 years ago

"dramatic reductions in global poverty", lmfao. Quote me wrong.

jraines• 18 years ago

http://www.ted.com/index.php/talks/hans_rosling_shows_the_be...

Check out the movement in the graph starting around 7:40. A huge portion of East Asia and South Asia (where a large part of the world's population lives) experienced a large gain. (We might not consider a move from $1/day to $10/day significant, but it is)

As another commenter pointed out, this isn't something we can attribute to some "U.S. generation", but there it is.

ryanwaggoner3• 18 years ago

I'm speaking of reductions in extreme global poverty:

http://en.wikipedia.org/wiki/Poverty#Measuring_poverty

jd• 18 years ago

Is it just me, or does the author use a lot of unintentionally funny analogies?

Anyway, I'm going to chip in on the issue of CEO pay. Many, including the author, are outraged that they're paid 500 times the wage of the average worker. But the CEO job is generally given to somebody who

a) has proven himself (5mm <= net worth < 15mm)

b) is willing to work 80 hours per week

c) is willing to pick work over family/friends, no matter the circumstances

The CEO must:

a) focus on quarterlies at the expense of long term vision (maximize shareholder returns per quarter)

b) focus on quarterlies at the expense of employees and the company itself

Aside from perhaps the prestige and power that comes with the job, it's not going to be a lot of fun. So why would somebody who's already rich be willing to do this? Money. And lots of it. Does that make them sellouts? I guess. But if working for 2 more years means the CEO can retire and sustain his current lifestyle for the rest of his life it's probably pretty tempting.

You shouldn't ask yourself - does the guy deserve 500 times the average worker's salary? Ask instead - why did it take 500 times the average worker's salary to convince him to take the job?

I think that the CEO should focus on generating true value, both in the short and long term. And I don't think that's possible when you're only held accountable for short term results. Only CEOs like Steve Jobs can work on their vision, short term results be damned. His annual salary is $1. Why? Probably just to prove his independence.

Everything boils down to incentives. Whether it's CEO pay, greed on wall street or credit cards (ab)use. People do what's in their best interest. Fix the incentives, and the rest should fix itself.

blackguardx3• 18 years ago

I hate to go off-topic, but when did mm come to mean million?

When I first look at it, my brain says, "millimeters."

I know it is one thousand thousand in roman numerals, but being an engineer I find it hard to recognize mm as such. If anything, you should use capital M for million because that is the accepted prefix.

blackguardx3• 18 years ago

I think many people enjoy being CEO for the same reasons people enjoy founding startups or going into politics. You say, "aside from the prestige, power, and money, it's not fun." If someone's job provides all three, I would say that they are doing pretty well!

Also, CEOs that focus on quarterly numbers do so only to enrich themselves (via stock options) to the detriment of the company. At my own company (a large test and measurement company), our leadership constantly makes big changes based on the stock price. Since my company pays no dividends, there is no "shareholder return" to maximize. My company will never do an additional offering so steering by the stock price doesn't make sense for the company in the long term. We are constantly delaying capital purchases to make the numbers look good. In reality, these delays cost our project's schedules to suffer. That hurts the company.

By focusing on quarterly numbers, who benefits? It may help somebody make a buck that quarter, but why should the company want to help traders? True investors think long term. It is the management team that is benefiting. Shareholder value is a myth. The only shareholders that matter are the management team.

I usually don't get too worked up about CEO compensation. The only things that don't make sense are massive golden parachutes like the former CEO of Home Depot had and paying executives in stock if they meet quarterly numbers. A company's vision should be long term. Making executives excessively interested in the stock price is dangerous.

palish2• 18 years ago

I wish Hacker News allowed us to upvote or downvote individual paragraphs. I upvoted you because of your first paragraph, but would have downvoted otherwise. (Shareholders besides the management team still matter. :P)

gaius• 18 years ago

500x is a figure I'm deeply suspicious of. Average worker in the entire economy vs CEO of a Fortune 100, maybe. The "average" CEO is just the owner of a small company and probably makes <5x more than even their lowest paid worker.

time_management4• 18 years ago

But the CEO job is generally given to somebody who

a) has proven himself (5mm <= net worth < 15mm)

b) is willing to work 80 hours per week

c) is willing to pick work over family/friends, no matter the circumstances

I'm not convinced that B and C are good things. Sometimes, it's necessary to work 80 hours per week, but doing that for years on end is unhealthy and counterproductive. Most of the long hours in upper-tier corporate result not from any benefit to those extra hours worked, but rather from oneupmanship.

As for C, consider this. In a corporate environment, where one is working to enrich other people, putting work ahead of family and friends is, generally, a very bad decision. After all, the probability of becoming CEO is very small, and a person who laid up 70 hours per week only plateau at the VP level is just a loser who made bad choices and wasted his life. The only difference between the CEO and that moron is that the CEO won the lottery while the also-ran lost.

Following the lottery analogy, you wouldn't take financial advice from a crackhead who bought twenty Powerball tickets every night, and happened to win $200 million. So, do you really think it's a good thing for large companies to be governed by those who wasted their lives in a relatively pointless quest for power?

So why would somebody who's already rich be willing to do this? Money.

Status. The status, in this case, comes from the money.

Ask instead - why did it take 500 times the average worker's salary to convince him to take the job?

It doesn't. People would gladly take the job for 10x. If you haven't figured it out, corporate compensation is the result of a fellatio daisy chain. The board is staffed by executives of other companies, who allow the CEO to raise his pay, because he is on their boards and will vote in their favor if they do so for him.

tortilla2• 18 years ago

"fellatio daisy chain"

If I could up-vote you more I would.

likpok• 18 years ago

People have tried the CEO pay thing. Ben and Jerry's, specifically. They limited to something like 10x. And completely failed to find any qualified candidates who were willing to work for that.

Then they raised it slightly (14x?) to get someone, who turned out to be a bad CEO, and had to fire him and raise it more (30x?) to get someone decent.

The fact of the matter is that CEO's are paid for the value they bring to the company. The reason they are so well paid is market forces, much the same reason why you are paid the wage you are paid.

callmeed3• 18 years ago

True, though I don't think it "boils down to incentives" only.

Frankly, I'm tired of people crying about CEO pay. Yes, there are examples of ridiculous compensation and severance packages (former Home Depot CEO got a $210M severance when leaving, for example). But I think it also boils down to demand and human capital.

A good CEO can do things the average person in the labor force cannot. No two ways about it. And, as economies/industries grow over time, the is greater demand for these people.

Robots and offshore workers in Ukraine cannot lead publicly-traded US companies.

Psyonic• 18 years ago

Which is why the CEO's of Toyota, Honda, etc make around 1 million USD per year, and are actually able to manage a company successfully? People aren't bitching about 1 million a year. Unfortunately, excessive bullshit like the Home Depot situation is more common than you'd apparently like to believe.

theoneill• 18 years ago

...so far. Wait till everything is run by the generation that grew up on Ritalin and gaming.

mellow5• 18 years ago

'The Baby Boom Generation will never be mistaken for the Greatest Generation that survived the Great Depression and defeated evil in a World War that killed 72 million people', is one of the greatest opening sentences I have ever read.

Almost as good as 'It was the best of times, it was the worst of times; it was the age of wisdom, it was the age of foolishness; it was the epoch of belief, it was the epoch of incredulity; it was the season of Light, it was the season of Darkness; it was the spring of hope, it was the winter of despair; we had everything before us, we had nothing before us; we were all going directly to Heaven, we were all going the other way'

krschultz• 18 years ago

He clearly states his bias: "Our Government bureaucracy, which contributes nothing to the advancement of our society, now is a larger portion of GDP than manufacturing."

Somehow I don't think our past experience with trying to get roads, power, plumbing, and the Internet into rural areas agrees with statement.

anamax3• 18 years ago

> Somehow I don't think our past experience with trying to get roads, power, plumbing, and the Internet into rural areas agrees with statement.

"trying" is the important word. And, the federal govt didn't have much involvement in most of those things.

And, even if it did, do you really think that they explain or justify 30+% of GDP?

sdurkin• 18 years ago

http://news.ycombinator.com/item?id=160218 http://news.ycombinator.com/item?id=340482

I'm going to do this every time one of these absurd stories is posted.

The Shallowest Generation

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