[HN Gopher] CEOs are hugely expensive - why not automate them?
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CEOs are hugely expensive - why not automate them?
Author : nixass
Score : 258 points
Date : 2021-04-26 15:01 UTC (8 hours ago)
(HTM) web link (www.newstatesman.com)
(TXT) w3m dump (www.newstatesman.com)
| jordanpg wrote:
| I would love it if someone could explain to me like I'm 5, why it
| is exactly, that CEOs are so highly paid.
|
| I get that it's hard. I get that there are long hours. I get that
| it requires long-term strategic thinking. None of that helps me
| understand O(100M) "compensation."
|
| I'm pretty sure that executives get paid so much because of (a)
| their rolodex (ie. their ability to get certain people on the
| phone) and (b) because the world has -- not accidentally --
| become convinced that it must be so and now it is that way. And
| everyone believes that were it not for O(100M) CEOs companies
| would fail.
|
| Lots of jobs are hard and require _extremely_ smart, gifted
| people. And yet somehow only executives get huge "compensation."
| Someone please break it down for me Barney-style because it seems
| like bullshit to me.
| anigbrowl wrote:
| Read this book (or its more academic cousin if you want a
| quantitative treatment):
| https://en.wikipedia.org/wiki/The_Dictator%27s_Handbook
|
| CEOs are basically dictators with mercenary/conscript armies
| (depending on market and market conditions) which engage in
| economic rather than military competition. There are two parts
| to the job: expanding the size of the profit pie, and slicing
| it up in such a way as to keep stakeholders happy.
|
| founder-CEOs are in a special position, eg Mark Zuckerberg
| structured FB so that a large chunk of the stock has no voting
| rights; if shareholders want to remove him they have to resort
| to the courts (obviously, the reality is more complex than this
| thumbnail sketch).
| koonsolo wrote:
| That is simple: because CEO's need to be the best of the best.
|
| Most professions require an average performer. Building my
| house didn't require the best of the best. Programming software
| doesn't require the best of the best.
|
| But there are other professions where you need (to be) the best
| of the best: athletes, musicians, authors, ... . Coincidentally
| also the professions where the top performers make a crazy
| amount of money, and the average ones starve.
|
| If you invest your money into a company, and hire an average
| CEO, you company will be crushed by a competitor that hired the
| top of the top CEO.
|
| That is why shareholders are willing to pay so much money,
| because they are fishing in the same pond as their competitors,
| and will be crushed when picking the average performer.
| jordanpg wrote:
| I don't agree that they are the "best of the best." Or at
| least it's not obvious to me that they are, in the same way a
| talented musician or athlete is.
|
| The supply/demand theory only explains the high cost of CEOs
| if there is an extremely limited pool of them. Because I
| reject the premise that they are _just so incredibly
| talented_ , there shouldn't be a limited pool of them.
|
| I suspect the pool is limited, but not because CEOs are _just
| so incredibly talented_. I don 't know exactly why, but I
| doubt it's raw talent. I suspect it has more to do with
| access, background, friends, networks, gumption, dedication,
| and luck.
|
| Anyway, my objection is to the grotesque size of their
| compensation. Since I don't believe the "talent pool" theory,
| no matter how talented they may be, it cannot possibly be
| worth that much. Thus, the numbers are so high for some other
| reason, and now everyone is post-hoc convincing themselves
| that it makes sense. It does not. It makes no sense at all.
| The emperor has no clothes on. It is self-evidently absurd to
| imagine that this limited pool of executives has so much
| talent and is so small that they deserve to be paid 1000s of
| times more than the best physicists, physicians, artists,
| etc. the world has. It's bullshit. /rant
| koonsolo wrote:
| Let's say you invest $10M in your company, and I also have
| a competing $10M company.
|
| I go the traditional route and hire a top CEO with a big
| chunk of money. The rest of the workforce gets what they
| get elsewhere.
|
| You hire a CEO that is "fairly" compensated. You will
| basically need to make a bet on someone non-established,
| and hope they can perform. With the extra money, you can
| either hire better talent or hire more people.
|
| The success of a company is so reliant on where the leader
| takes it, that 9 times out of 10 you will lose.
|
| And that is why my company will survive and have a CEO that
| is grotesquely compensated.
|
| Funny part is that when you win, either your CEO will be
| snatched away for a grotesque amount of money, or you will
| have to pay that amount to keep them.
| jordanpg wrote:
| You're just reiterating the premise that higher-paid CEOs
| are more talented.
|
| I'm saying I doubt that that's actually true. I think
| higher-paid CEOs bring something to the table, but it
| isn't talent. It's something more connected to an
| entrenched, corrupt system that has--incredibly--achieved
| buy-in from global capital markets. I suspect it has more
| to do with access, background, friends, networks,
| gumption, dedication, and luck. But not talent.
|
| My point is that anyone could have those things. To the
| extent there is a true supply and demand aspect to this,
| it is mostly just simple luck.
| impulser_ wrote:
| Supply and Demand.
|
| The supply of great CEOs is very limited, but the demand is
| very high.
|
| Therefore the price of CEOs are very high.
| thehappypm wrote:
| Kyle's dad is the coach of your soccer team, right? Kyle's dad
| gets really really excited when you do well. He makes it fun,
| and you love going to practice! And you guys seem to win a lot!
|
| Do you remember last year, when Mike's dad was the coach? He
| yelled a lot, you hated going to practice, he made you cry? And
| you never seemed to win?
|
| Because Kyle's dad is a better coach, you win more. He's worth
| more to the team. Even though Kyle's dad isn't actually playing
| on the field, he makes you guys win. That's what a CEO does --
| he makes a team win.
| jordanpg wrote:
| Right, lots of wins are good, but why does the coach need to
| get paid $100M? Why is $1M not good enough?
|
| Let me guess: because being a coach is so hard, and requires
| so incredibly much smarts and talent that only a precious few
| people have?
| JohnPrine wrote:
| If this is true, why don't companies just higher people who
| are willing to be CEO for less money?
| nunez wrote:
| Amazing ELI5 on the value CEOs bring to the company.
|
| Only difference: instead of coach Kyle making just _you_ feel
| great, he's actually running the US Olympic Junior Team and
| has to hire five or more coaches under him that make _you and
| your teammates_ feel great and perform well.
|
| That's why CEOs get paid well: their impact has a much wider
| scope.
| slantaclaus wrote:
| I'm not sure I could adequately explain this to a 5 year old,
| but it really just comes down to the perception of supply and
| actual demand.
|
| I say perception because even though a "random person off the
| street" might be able to successfully run a Fortune 500
| company, most of them wouldn't and the boards/shareholders
| won't tolerate the risk of allowing untested leaders to run
| massive companies. On the flip side, just because someone has
| experience and a good track record of results doesn't mean they
| will succeed in future endeavors--a good example of this is
| that Pepsi guy (John Sculley) who took the helm at Apple and
| drove its business to the brink of death, this despite being
| paid in 1987 the highest salary of any company in the valley.
| villasv wrote:
| > Lots of jobs are hard and require extremely smart, gifted
| people. And yet somehow only executives get huge
| "compensation." Someone please break it down for me Barney-
| style because it seems like bullshit to me.
|
| The higher your position in leadership, the higher
| responsibility of your decisions. Higher responsibilities are
| associated with higher financial risk. Higher financial risk
| yields higher financial returns.
|
| It's the same reason consultants get paid so much for
| delivering mediocre projects. They are paid well not because
| they're great, but because they de-risk whoever is above.
|
| A board of directors want a CEO that de-risk their fiduciary
| obligations and they will pay for it in excess.
|
| I know a few companies that are not paying CEOs that much,
| because they're stable businesses. Little risk, less need for
| top-notch smooth-talking and cold blooded decisions.
|
| Most big companies are facing more risk than you imagine,
| though, because those risks are measured possibly in decades of
| strategic decisions and impact in future shareholder value.
| king_magic wrote:
| Reads like it was written by someone who is _absolutely clueless_
| about the current state of AI and how close we 'll be to being
| able to "automate a CEO" anytime soon.
| contingencies wrote:
| _The real job of upper management in the 20th and 21st century is
| to learn things, because change is the constant thing that 's
| going on._ - Alan Kay (2017)
|
| ... via https://github.com/globalcitizen/taoup
| brodouevencode wrote:
| No one has mentioned yet that not all CEOs are large enough to be
| listed/Fortune 500/etc. Take a look at the state of California -
| Q1 2020. 0.1% of all business had 1000+ employees:
| https://www.labormarketinfo.edd.ca.gov/LMID/Size_of_Business....
| In fact 71.1% of all business presumably with a high level of
| incorporation, have 0-4 employees. In this case the CEO is also
| most likely filling all the roles of the C-suite, including lead
| <worker role here> and janitor.
|
| It's casually flippant to say that all CEOs must be automated out
| of their jobs without looking at the details and nuance of what
| the data bear.
| spamizbad wrote:
| At the very least, you could do a hybrid model: An AI that makes
| 80% of the decisions and routes 20% to a human to help guide the
| decision making process.
| polytely wrote:
| Or just a centaur model where the ai generate courses of
| actions and the human picks from those and/or modifies them.
| [deleted]
| anotheryou wrote:
| Touches on an interesting point. I think the data input is
| highly unstructured and the output not very regular.
| spamizbad wrote:
| Sounds like the first step is figuring out a new standard to
| structure executive information.
| anotheryou wrote:
| That's certainly an interesting one. Clean, standardized
| Data is already often the bottleneck. And the CEO needs
| more than just data from inside the company.
| williesleg wrote:
| Because China. What we need to automate is lawyers.
| ouid wrote:
| CEOs are expensive because they form a clique, They sit on the
| boards of other companies and install CEOs who are on the board
| of the company they themselves CEO. Normally you would call this
| practice embezzlement, but because it only requires the most
| tacit of collusions to pull off, we call it _shrug_.
| whoisjuan wrote:
| This article is just an aimless rant about CEO high wages. At no
| point there was a coherent argument or explanation of how such
| automation could be achieved.
|
| The author seems to think that just because there's AI that is
| relatively good at taking decisions then that's enough to argue
| that CEOs should be superseded by said AIs. "If an AI can make
| it, why pay millions of dollars to human CEOs?"... As it was that
| simple.
|
| The author also ignores completely the basic laws of economics.
| Does he think that this is some sort of AI that you will be able
| to buy from a shelf? Provided by a SaaS Vendor at 100 USD a
| month? Because that's the only way you can make a meaningful
| economic argument around this. But the reality is that if this is
| even remotely possible, it would have a huge R&D price tag and it
| won't be a product that can be sold at scale by a vendor.
|
| That would defeat the economic incentives behind having a good
| decision maker taking the crucial decisions of your company. All
| decisions would look the same across several competitors if those
| decisions are taken by the same type of AI. This effectively
| makes such AI obsolete and operationally disadvantageous. So, you
| must build a proprietary replacement for your CEO and building
| such AI could be several orders of magnitude more expensive than
| hiring and paying a CEO.
|
| CEOs can't be automated. At least not soon. People who believe
| abstract decision-making jobs can be automated don't understand
| what automation is about or what's capable of. AI as it exists
| today can't automate CEO jobs or any kind of job where the output
| of a worker is to take extraordinarily complex and multi-variable
| decisions.
| rglover wrote:
| That's all well and good until your automated CEO decides to
| pivot the company to being a dildo manufacturer because it finds
| an arbitrage opportunity in Amsterdam.
| johbjo wrote:
| One aspect of leadership is symbolic. If the company falls on
| hard times and needs to restructure/fire people, we can let the
| current CEO be associated with all the ugly stuff, and then bring
| in a new CEO to raise hope.
|
| There is a need for the employees to believe the CEO is
| important. Pay is one dimension in which this can be
| accomplished.
|
| CEO pay functions as an aspirational goal for all career paths in
| the company.
|
| I think the actual role of CEOs is symbolic, in these and many
| other ways.
| BugWatch wrote:
| I nominate Firefox Corporation and their CEOs as a proving
| grounds and guinea pigs, respectively.
| MattGaiser wrote:
| > If a role can be outsourced, it can be automated.
|
| This line alone makes the article ludicrous.
| neonate wrote:
| https://archive.md/sT77U
| alexgmcm wrote:
| I can't help but feel that CEO's are over-valued and it's
| fundamentally an attribution problem as it's hard to know how
| much value they actually add.
|
| A comparison would be to fund managers and how the rise of index
| funds showed they actually added very little value in many cases,
| and weren't worth their fees.
| indymike wrote:
| The truth is that some CEOs are over-valued, and some are
| under-valued. And the same CEO one year may be overpaid, and
| perhaps dramatically underpaid in other years. It's
| complicated.
| CPLX wrote:
| The issue with CEO pay, as well as pay for fund managers, is
| basically the same. It's clearly understood as a
| principal/agent problem, to use economics jargon.[0]
|
| Here's how it works:
|
| 1) Money is invested in companies by a diffuse set of
| investors. That diffuse group is unified and the decisions are
| made by people responsible for managing money.
|
| 2) They invest it with the intention of having it go into the
| productive activities of a business, such as staff and plant
| and equipment or technology or software or marketing. That
| money when received by the business is managed by the company
| management led by the CEO.
|
| 3) What actually happens is that each of these gatekeepers is
| taking as much as they can get away with. It really isn't all
| that much more complicated than that.
|
| Everyone involved will concoct increasingly complex
| rationalizations and call it "performance" and launch decades
| of public relations campaigns and fund business schools and
| business publications to rationalize and create a sheen of
| reasonableness about why this is all the natural order of
| things.
|
| But, at the end of the day what is happening is that the people
| who are responsible for distributing resources to a common
| enterprise are taking more and more of it and keeping it.
|
| Because they want to, and because the system lets them.
|
| [0] https://en.wikipedia.org/wiki/Principal-agent_problem
| visarga wrote:
| > at the end of the day what is happening is that the people
| who are responsible for distributing resources to a common
| enterprise are taking more and more of it and keeping it
|
| I bet you think business is a zero sum game.
| skystarman wrote:
| There are CEOs that are truly world class and transform
| companies and provide tons of value and are worth many more
| times what their comp is. They are the exception not the rule
| though.
|
| It's almost impossible to know if you've found the next Bob
| Iger, Nadella or a John Sculley when you hire them. Of course
| with hindsight you can point to certain things but it's hard in
| the moment.
|
| And for the most part boards pay people based on their belief
| that they've found the next Iger, not pay them like s/he could
| nearly destroy the company like Sculley almost did with Apple.
| kaczordon wrote:
| There was a Danish study that showed that a death in the family
| of a Danish CEO led, on average, to a 9 percent decline in the
| profitability of the corporation. If it was the death of a
| spouse, the decline was 15 percent and, if it was a child who
| died, 21 percent.
|
| From the study: "Interestingly, similar deaths experienced by
| individual members of the board of directors do not
| significantly affect firms' outcomes. Our results provide
| strong empirical support for the idea that CEOs are extremely
| important to firm performance."
|
| So I'd say they add significant value.
|
| https://www0.gsb.columbia.edu/mygsb/faculty/research/pubfile...
| nrmitchi wrote:
| It sounds like that only shows that they have the ability to
| cause a negative impact, not that they add significant value
| the rest of the time.
| dfxm12 wrote:
| This more likely shows poor planning (by the CEO). If your
| firm is so reliant on one person, even if it is the CEO, it
| is poorly run. I believe it is a function of a CEO to enact
| that type of strategy, whether it be succession planning,
| proper delegation, identifying backups, instilling self
| reliance, etc.
|
| This probably shows some perverse incentives. A CEO can
| clearly prove their worth by otherwise sabotaging the firm
| when they're out.
| ForHackernews wrote:
| Technically, doesn't this study only demonstrate that a
| distracted CEO is a risk to firm performance? Sounds like all
| the more reason to replace them with robots that don't have
| families.
| skystarman wrote:
| My Amazon Alexa has like a 60% success rate when I ask it
| basic questions that take me 10 seconds to google on my
| phone.
|
| Something tells me AI isn't quite there yet to run multi-
| billion dollar firms and won't be for a while.
| makapuf wrote:
| To be honest, this shows that a dysfunctional CEO (for
| completely understandable reasons) leads to a nonprofitable
| firm, not that value is added. You could say that people with
| no or defective keyboard have a hard time programming, but
| the best keyboard does not add significant value to a
| developer.
| rybosworld wrote:
| Agreed. If anything, this study makes the case that one
| person with sweeping decision power is at best a liability.
| koonsolo wrote:
| In that case, take away the CEO and see what happens. It
| can't be that hard.
|
| You don't know any companies without CEO's? Exactly!
| makapuf wrote:
| Let me take away your keyboard and let's see how you fare
| at c++ or Javascript.
| rybosworld wrote:
| A famous one is DPR Construction:
| https://www.dpr.com/media/blog/wsj-ceo
|
| They have 3 people (the co-founders) sharing the
| role/responsibilities of CEO.
| koonsolo wrote:
| Strange reasoning: "Show me a person without a car".
| "Here you go, this person has 3".
|
| So 3 founders are running the company, nothing special
| about that.
|
| Please show me a company _without_ a CEO.
| 2OEH8eoCRo0 wrote:
| Isn't the assumption here that if they didn't provide any
| value then a death in their family shouldn't affect the
| company?
| koonsolo wrote:
| I like the keyboard analogy, because you won't notice a
| good or great CEO, but will notice a bad one.
|
| The only thing that you didn't consider is in CEO or
| management world, most keyboards are broken, and only a few
| work decent enough to do proper programming. That's why
| they are so valuable.
| anigbrowl wrote:
| Conversely, you could infer that board members are largely
| decorative, and of course any effect would be a) inversely
| proportional to the # of board members, b) proportional to
| the small time commitments that directorships typically
| involve, and c) mitigated by the fact that board members
| are/have somewhat supportive peers whereas the CEO does not.
|
| It's an interesting data point but the conclusion seems
| overbroad. One might equally draw on this conclusion to say
| that families of regular people probably need proportional
| levels of economic support following the death of a family
| member.
| majormajor wrote:
| That demonstrates that a CEO can definitely affect results,
| but what's the baseline? Would the "null CEO" script robot
| produce the same value as the non-grieving CEO, or the same
| value as the grieving one?
| Invictus0 wrote:
| If Amazon didn't have Jeff Bezos, it would probably still
| be a bookstore today.
| rightbyte wrote:
| There is probably a bias in that study for small companies,
| where the CEO do grunt work.
| pcurve wrote:
| CEOs play important roles, but I agree they are very much
| overpaid. It's inefficiency in the specialized labor market
| being exploited by a small group of people. Equity based
| compensation is a big factor. They shouldn't be rewarded for
| riding the sector-specific or broader market rally.
|
| I feel there are ways to be more targeted in calculating
| contributions. I also feel the hiring process for CEO and
| executives are inefficient.
| woeirua wrote:
| I too used to think that CEOs were a waste of resources, and that
| they had minimal if any impact on most companies. But I think
| people grossly underestimate how important CEOs are, because the
| vast majority of them do a decent job. When you swap out somebody
| who does a decent job for another person who performs at about
| the same level it's not really that noticeable.
|
| That said, you'll come to appreciate those "decent" CEOs after
| you've had an experience with a truly bad CEO. One such
| experience was enough for me to decide that who runs the company
| at the top is _critical_ to the success of most companies.
| koonsolo wrote:
| I think this is the case with any manager. A great manager will
| not be noticeable. Things just seem to run fine.
|
| But when you come across a bad manager, you will surely notice!
|
| Sad for them that they only get noticed when they are bad at
| their job, not really when they are good or great.
| throwaway823882 wrote:
| > who runs the company at the top is critical to the success of
| most companies.
|
| I think it's culture and power/organizational structure that
| determines this. Culture is disseminated from the top down, due
| to the power structure. If you remove the power from the CEO,
| their value goes away. If you change the culture without the
| CEO, their value goes away. So you don't need a CEO if you can
| force the company to change its culture and power structure a
| different way.
| BuyMyBitcoins wrote:
| Indeed, and the majority of a CEO's direction and decisions are
| fundamentally different from those that the other employees
| make. As a software engineer I'm simply not privy to the kinds
| of choices the CEO is making and "no news is good news" is
| often the case with C-Suite decisions. But, if they are making
| some bad choices it _really_ shows.
| hh3k0 wrote:
| I do agree, in German we have an idiom "Der Fisch stinkt vom
| Kopf her" ("a fish rots from the head down") to describe
| precisely how bad management cause ripples all the way down.
| That being said, CEOs are still prime candidates for
| automatization. I mean, surely nobody wants to replace good
| CEOs with bad software but rather with equally or better
| performing software equivalents. Additionally, one day it might
| be easier to ensure an AI CEO makes better moral/environmental
| decisions than his human counterpart.
| newsbinator wrote:
| I google'd around and I can't find anything conclusive about
| whether a fish literally rots from the head down.
|
| I'd be curious if it's merely an expression or a true thing
| about fish.
| xmprt wrote:
| The problem I have with CEOs is when they're doing a good job
| they make $$$ but when they're doing a bad job they still make
| $$. When a company goes down, they have golden parachutes to
| ensure that they're safe. Meanwhile, workers get shafted.
| Isthatablackgsd wrote:
| That and I have a problem with CEOs that demands to increase
| their pay by double, triple, quadruple amounts without
| increasing their employees pays. Not only CEOs, K-12 Boards
| did the same thing, increasing the superintendent pay without
| increasing the pay for teachers and school employees. Non-
| profits did the same, look at Mozilla. This is one reason why
| the ratio (employer:employee) is so obtusely off. American
| employees don't have such protection against this.
| robertlagrant wrote:
| CEOs are workers. If you're talking about people who don't
| work for the business, you might be thinking of shareholders?
| nataz wrote:
| I'll second this comment.
|
| Armchair evaluation of CEOs suffers from survivorship bias.
|
| Decent/good CEO keeps the business moving. A bad CEO can sink a
| company.
|
| Boards/owners (dependant on corporate structure) can mitigate
| results.
| mottosso wrote:
| > When you swap out somebody who does a decent job for
| another person who performs at about the same level it's not
| really that noticeable.
|
| Which interestingly is the same effect as swapping out
| somebody who does nothing for someone else who does nothing.
| bigwavedave wrote:
| > When you swap out somebody who does a decent job for
| another person who performs at about the same level it's
| not really that noticeable.
|
| >> Which interestingly is the same effect as swapping out
| somebody who does nothing for someone else who does
| nothing.
|
| I disagree. Swapping out a decent senior dev for a decent
| senior dev doesn't have a net negative effect like swapping
| out a senior dev who does nothing for another senior dev
| who does nothing. In scenario one, you have a senior dev
| who ramps up in a decent amount of time, does the work
| they're paid for, and isn't a waste of time and money like
| a bad hire. In the second scenario, you have a senior dev
| who's just as damaging as their predecessor, but you've
| lost the time and money you've invested in onboarding them
| while also paying the ongoing opportunity cost you could
| have avoided with a decent hire and any technical debt they
| accrue gets tossed on the pile with the rest of the debt
| their predecessor accrued. It would have been better to
| have just kept the first guy instead of wasting time,
| money, and morale on someone new.
| Spivak wrote:
| How in a forum of techies man of whom have spent the good
| part of their careers trying to get companies to not see IT
| and Ops as a cost center and "nothing is wrong so why are
| we paying you" do we so casually dismiss other people's
| work?
| toast0 wrote:
| Benign neglect is what I'm looking for from top management.
| A CEO might be like a fire extinguisher; you need to have
| one, but it rarely does anything but sit there; but, when
| it's needed, it better work?
|
| Actually though, setting up and maintaining the
| organization so it can self manage is harder than it looks.
| Of course, some CEOs have good results with meddling too.
| It's hard to have two CEOs and A/B test them, although
| RIM/Blackberry had two CEOs for a while, and there's some
| other companies that tried it too.
| zaychikk wrote:
| The value of a CEO is in the soft value that they produce. Be it
| within the organization as a leader, or externally when dealing
| with gov't or a counterparty. In the best case, this soft value
| is translated into hard value for the shareholders, when someone
| like Tim Apple does what he's done for the past ten years.
|
| If you consider an outlier like Elon Musk, the reason many CEOs
| can't be automated is even clearer: his cult of personality has
| added at least $100B to TSLA's market cap alone, and I say that
| while thinking that he's generally a pretty bad leader.
| imsofuture wrote:
| This is exactly the general hypothesis behind
| https://100dollarceo.com
| jxramos wrote:
| Yah, but they're a deal compared to the alternative!
| karaterobot wrote:
| This article isn't actually suggesting that CEOs can be
| automated, it's making a modest proposal in order to point out
| that CEOs are overvalued and that automation is eliminating jobs
| for a lot of undervalued workers. Just putting that out there.
| koonsolo wrote:
| prices are set by supply and demand
| MayeulC wrote:
| Because that's how you end up with paperclip maximizers?
| https://www.lesswrong.com/tag/paperclip-maximizer
|
| Realistically though, they are supposed to be here for liability
| purposes. I've read of some companies decreasing CEO salaries and
| employing people just out of university, only to fire them a few
| months later to satisfy the board.
| abeppu wrote:
| The subfield of AI for handling decisions which are context
| dependent and which yield rewards (or minimize costs) is
| reinforcement learning. Even a shallow familiarity with this
| family of techniques raises a number of reasons why automating a
| CEO is deeply challenging:
|
| 1. Specifying the problem to be solved can be very subtle. The
| article throws in an example of scheduling maintenance in a
| transit system. That's a case where someone can specify some
| utility function around service disruptions, cost, etc. Companies
| are complex.
|
| 2. The space of actions available to a company at any point is
| extremely broad, and also hard to specify.
|
| 3a. An agent needs to learn from something. This can take a
| couple directions. Roughly, "off-policy learning" learns from the
| actions and outcomes of _another_ agent with different internal
| rules etc. Perhaps we have incomplete data of this sort (business
| school case studies etc leave much information out). But you need
| a _lot_ of data, and it needs to cover the same sorts of
| situations that your agent would get around to. And some actions
| probably the software agent _cannot_ copy (e.g. doing an
| interview on Sunday news program).
|
| 3b. "On-policy" learning is improving your agent from the past
| actions/outcomes of its own decision-making. Normally this means
| we need some simulation environment in which to let the agent
| learn. How do you simulate the whole economy, and market forces
| with which a company interacts? After learning in a simulated
| environment, you likely need to further improve (and test) in the
| real world. In this domain, I think that means you have to be
| prepared to let a computer program run many companies into the
| ground.
|
| 4. Without a decent model of the world around them, RL agents
| have a harder time attributing outcomes to specific past actions.
| You beat your earnings estimate, but which of the bajillions of
| decisions made over the past several quarters is most responsible
| for that? I think human CEOs actually do a questionable job of
| this, but an automated one would be worse.
| caffeine wrote:
| Unlike CEOs, authoring idiotic clickbait IS a job that is rapidly
| being automated away..
| venantius wrote:
| I don't normally go in for insults, but the author of this
| article is a fool who clearly has no idea what the job of the CEO
| actually is. We are a very long way from being able to automate
| the job.
| Ericson2314 wrote:
| This is all very silly.
|
| Upper management is payed a lot _in stock_ to assure loyalty to
| ownership. This is a crucial component to enforcing the
| shareholder theory of value: a legal prerogative that was being
| eroded in the mid 20th century as industry became more complex,
| workers became more empowered, and absentee ownership had a
| harder time holding onto the reigns.
| rightbyte wrote:
| Do you mean that the stockholders need to pay a ransom to not
| have the executives wreck the corp? It has long been mine
| suspicion too.
| Ericson2314 wrote:
| Not wreck, but just run in their own interests.
|
| The modern corperation is internally a very large feudal
| society ("manors within manors"), shareholders are completely
| absentee, and the secondary markets do not directly effect
| the balance sheet.
|
| I should cite the posts in
| https://jwmason.org/slackwire/tag/corporate-governance/, some
| of which I were paraphrasing, and others which I haven't read
| before but are also interesting in a forum ostensibly run for
| "founders" by "friendly VCs"!
| sunstone wrote:
| Well this would certainly diminish the jockeying for position of
| those hoping to succeed the CEO.
| lm28469 wrote:
| Good luck automating an Elon Musk or a Steve Jobs. Your algorithm
| would never come up with new ideas like Amazon or Space X
|
| So far "automation" means a bunch of if/else statement or at most
| a biased deep learning algorithm, this is why they're used on
| entry jobs, because they're fundamentally not very useful for
| anything other than pre defined repeatable and easy tasks
| egypturnash wrote:
| "Sell shit online" is such an inobvious idea. I don't know how
| Bezos thought it up! Completely unexpected.
| lm28469 wrote:
| Then why is he the richest man on earth and you're not ?
|
| It's always obvious and easy when you look back at history
| ...
| netflixandkill wrote:
| The keys to wild success are getting in early and being
| lucky.
|
| I'm entirely sure a lot of the early people at Amazon were
| in fact quite bright and hard working, and many good
| decisions were made, but plenty of other people knew
| selling stuff online was going to happen but couldn't get
| the stars to align on funding, or had a key member suffer a
| personal setback early on, etc.
| ramtatatam wrote:
| I remember when in early 90's somebody was saying there
| will be a computer in each house. At the time I thought -
| good luck with that, computers are so expensive (I was in
| my early teens back then so my opinion was not particularly
| useful because I had no money and computers in my country
| were very expensive compared with average wage).
|
| Then in late 90's somebody said internet will be in each
| house - again I could not believe :)
|
| Later somebody said people will do shopping through
| internet - guess what my opinion was ;)
|
| Later somebody said everyone will have a smartphone - at
| this point I thought my gut feeling is probably wrong -
| even if I was happy with my mobile I thought my spending
| habits are different than those of majority.
|
| Later somebody said everyone will be connected to the
| internet 24/7 on their smartphones.
|
| So I missed most of the wave purely because I had no
| imagination and no business acumen.. I can image value of
| people who do see those trends early.
| anigbrowl wrote:
| I had a bunch of such 'obvious' ideas when I was an eager
| young computer whiz back in the late 80s/90s, including
| internet service via cable instead of dialup, online
| warehouse sales etc. I didn't get rich because I was young,
| had no capital, and no social network. I worked at banks
| and also for a somewhat innovative company that prefigured
| social networking (think GUIs for online forums during the
| dialup era). although I tried to get people interested in
| my ideas/cultivate mentor relationships/gain business
| skills, most efforts were shrugged off with a response like
| 'go to business school and come back in 5 years.'
|
| I was smart enough to hire for technical work, from
| development to training and documentation, but lacked the
| social skills to negotiate or build so I spent a lot of my
| 20s doing Very Clever Things for which other people reaped
| all the economic and strategic rewards. So you can be very
| competent and have a lot of imagination, but if you're not
| in the right place at the right time or work in an
| environment with a lot of gatekeepers, you may not be able
| to capitalize successfully. You can also find that you're
| so good in a particular role that people who pay you for it
| have an incentive to _not_ help you with career
| development.
| egypturnash wrote:
| Because he spent a lot of time and energy trying to get
| richer, while I spent a similar amount of time optimizing
| my life for "lazing around, drawing stuff, and not working
| very hard".
|
| I'm pretty sure there's a lot of morally dubious things he
| was willing to do in the pursuit of being the richest
| motherfucker on the planet that I'm not willing to do,
| either.
| [deleted]
| throw_away wrote:
| Automate management before they can automate us
| chriselles wrote:
| Can leadership be automated?
|
| Persoanlly, I don't see automated CEOs as a viable option for the
| foreseeable future.
|
| Automation usually works best with consistent and repeatable
| functions right?
|
| And automation usually works worst with diverse, infrequent, and
| unusually functions right?
|
| Could a CEO's roles and responsibilities be somewhat split(with
| some grey area delineation) between hard and soft skills?
|
| Automation support for senior leadership hard skills seems like a
| logical extension of recent automation capabilities.
|
| In fact, I could imagine a well branded AI/human teaming decision
| support service becoming the new high-end executive health
| service status symbol.
|
| If companies are willing to expand and experiment with very high
| end health care support to senior leadership as a means to ensure
| high cognitive functioning then it would be a natural extension
| to include bespoke AI/ML decision support for senior leadership.
|
| Where else would bespoke AI/ML decision support for individuals
| originate and gain traction?
|
| It seems inevitable that it would originate where the opportunity
| cost is greatest.
|
| So CEO/AI teaming seems ripe for exploitation today, but a fully
| automated CEO still seems completely unreachable.
|
| However, if it emerges I would imagine it will do so first in
| business units with extremely high simplicity, repeatability, and
| predictability.
| camjohnson26 wrote:
| Because people will figure out how to exploit the algorithm.
| hammock wrote:
| As if no one has ever figured out how to exploit the CEO...
| nix23 wrote:
| Ha!! My miniskirt says true ;)
| watwut wrote:
| The high level paid positions dont seem to be filled with
| women in miniskirts. They are more likely to be filled by
| men according to pretty much all studies I have seen.
|
| If anyone is exploiting CEOs for personal benefit,
| miniskirts are not that.
| corpMaverick wrote:
| Someone in the position of exploiting the miniskirt loop-
| hole. Is probably smart enough not to become a high level
| executive. And rather become the ex-trophy-wife and enjoy
| half the money with none of the responsibilities.
| watwut wrote:
| It is better to be executive then trophy wife. You have
| more agency that way, more respect and money are actually
| yours. Trophy wife are there to be looked at. Plus
| executive is not tied to n narcisstic partner that don't
| respect him. It is pretty easy to use money to controll
| trophy wife and let her know money are not hers. Harder
| with executive.
|
| And you can be pretty incompetent and still be failing
| upward if CEO likes you. There is no stress from
| responsibility if such thing does not stress you out.
|
| Smart mini skirt would took higher paid position and all
| those advantages of that was available. But, it is not.
| CEOs are I fact exploited differently and ultimately by
| dudes.
| [deleted]
| ARandomerDude wrote:
| CEOs aren't paid for the day-to-day value they provide to the
| company. They're paid for the long-term, strategic value the
| owners think they might provide the company _in comparison to
| other candidates._ So if you think CEO Candidate X will make you
| a 3x return on your investment, but CEO Candidate Y will make you
| a 5x return, it 's almost certainly worth it to pay him/her the
| extra $200K to get you there, if that's the market demand. You're
| paying for experience, contact network, etc. in a job like that
| much more than you are how many widgets they can produce on an
| assembly line.
|
| So it seems that the idea that a CEO could be automated misses
| the point of what CEOs do and how they get hired.
| harperlee wrote:
| They should then be compensated with a leveraged long-term
| derivative product that pays based on the stock difference
| between their company and the industry, 5 to 10 years apart.
|
| "You want to be insanely rich? Here's a huge company that's not
| yours as a resource, now make it so it is the best one in 10
| years!"
| mellavora wrote:
| what makes you think this isn't already the case? CEO comps
| often include stock options.
| nathanappere wrote:
| If you prevent CEOs from selling their stock for the next X
| years, sure.
| lbriner wrote:
| Isn't part of the problem the overlap between action and
| effect?
|
| I might join a business as CEO and it does really well for 5
| years because of the previous CEO, I could claim that it is
| my leadership and ask for my bonus.
|
| On the other hand, maybe I do well but my successor is an
| idiot and makes the company tank so now I won't get my 10
| year bonus because they screwed it all up.
|
| Unless your idea only works for CEOs who are prepared to stay
| for 10 years? That then brings in the complication of when
| you need them to leave quietly because they are rubbish but
| you don't want your shareholders to know!
| aapppwe wrote:
| this is the problem with any leadership position in
| general, congress, president.... etc
|
| I think the best way to address this is to provide
| standardize kpi monitoring.
| mason55 wrote:
| _When a measure becomes a target, it ceases to be a good
| measure_
|
| Especially for a CEO, who has quite a bit of power to
| optimize for any measure, it's going to be very hard to
| craft a measure that gives the results you want and can't
| be gamed. The most likely outcome is something that's
| just a worse version of the stock price, because the
| stock price is just a forward-looking approximation of
| net income, which is what you'd mostly want to optimize
| for anyway (ignoring things like B corps).
| Taek wrote:
| The problem is that the best CEOs might not go for that.
| There are a lot of long term things that can impact a company
| for the negative, and you don't want your CEO bailing to a
| different company the moment that some macro event
| (semiconductor shortage, new competitor, global pandemic,
| etc) comes along and alters the long term upside of your
| company.
|
| You want a CEO who is going to stick around and make the best
| possible decisions to improve the company's trajectory, even
| if that mostly means keeping the company flat as opposed to
| faceplanting.
| whimsicalism wrote:
| > the best CEOs might not go for that. There are a lot of
| long term things that can impact a company for the negative
|
| You could develop a financial services company selling
| hedges for that risk to CEOs/executives?
|
| > alters the long term upside of your company
|
| I don't see how this is worse than short-term stock
| compensation
| MattGaiser wrote:
| > I don't see how this is worse than short-term stock
| compensation
|
| The CEO has an incentive not to destroy the existing
| value in pursuit of large gains. With compensation based
| on the industry spread, they may as well risk any
| existing value as it is worthless to them.
|
| Currently: A CEO who does nothing but keep the stock
| price where it is would get 2 million. If he performs as
| well as average, he might get 4 million. If he beats the
| industry, he gets 6 million.
|
| With leveraged spread system: A CEO who does nothing but
| keeps the stock price stable gets 0. A CEO who performs
| as well as industry gets 0. If he beats industry, he gets
| 6.
| SavantIdiot wrote:
| > The problem is that the best CEOs might not go for that.
|
| We created that system, we can change it. CEO entitlement
| is part of the problem because it has become burned into
| our culture that they are demigods. They are not.
| hluska wrote:
| Ever worked for a company with a truly garbage CEO?? Good
| heavens, when you've got a moron there, you might as well
| be an air traffic controller at asshole airport.
| cma wrote:
| Wouldn't it only make sense to gamble away the company in
| that scenario? Heads you win and the options pays out big,
| tails bankruptcy, but the option is worth the same as if you
| just did mediocre (worth nothing).
| hervature wrote:
| I find it funny that people throw out decades of history.
| Options contracts, as you propose, introduce the incentive
| for extreme risk taking because doing "normal boring" things
| literally doesn't pay. It's one of the main arguments for
| stock compensation because if the company does poorly, the
| CEO directly feels it where it hurts (the wallet).
| SerLava wrote:
| I mean
|
| Just make a contract to pay them a decent amount of the
| company doesnt go tits up
| sn41 wrote:
| And so they go for stock buyback strategies. Reduce the
| supply, the stock skyrockets, cash in, leave.
| MattGaiser wrote:
| You need profits for stock buybacks. Buybacks are just
| superior to dividends as a way to return capital.
| hctaw wrote:
| I think most criticism of buybacks would go away if we
| eliminated the capital gains tax and treated income
| equally regardless of where it comes from.
| andromeduck wrote:
| Dividends ought to not be at a tax disadvantage over
| capital gains for this reason.
| MattGaiser wrote:
| The problem is also unrealised gains vs realised ones. I
| don't pay any tax on the stock price increasing. I have
| to pay tax on dividends.
|
| If I don't need the money, I can just let it continue to
| grow tax free.
| wrigby wrote:
| Are they not? I thought qualified dividends (that is,
| dividends on stocks that have been held long enough to
| qualify for long-term capital gains) are taxed at the
| long-term capital gains rate.
| freeone3000 wrote:
| You still have the one year of dividends taxed at the
| short-term rate, since dividends are taxed on
| disbursement whereas capital gains is only taxed on stock
| sale.
| toast0 wrote:
| Dividends are taxable at the time of distribution; the
| price effects of a buyback are taxable when shares are
| sold [1], and delayed taxes are preferable to immediate
| taxes.
|
| [1] unless the holder has elected for trader tax
| treatment, in which case shares are marked to market at
| the end of the tax year
| xyzzy21 wrote:
| Strictly no. You need "free" zero interest money from the
| Fed! That's how MOST stock buy-backs are financed - it
| going onto the balance sheet as debt which someday will
| bite them.
|
| This is the shitty side of many modern CEOs. But the
| legal and tax incentives combined with Wall Street
| demands create the environment for it.
| hammock wrote:
| >You need profits for stock buybacks.
|
| You merely need capital. Lots of buybacks are funded by
| debt
| enos_feedler wrote:
| This is pretty insane actually. Is there a common metric
| that captures which companies are funding buybacks with
| debt? or is it easy to figure out? I am not a finance
| person.
| sokoloff wrote:
| With interest rates as low as they are (on both
| government backed and corporate investment grade bonds)
| and a reasonable forecast of higher inflation ahead, why
| _shouldn 't_ companies borrow for a variety of corporate
| activities, both operational and treasury?
| imtringued wrote:
| They should, and they should use the money to do the
| corporate activities you mentioned.
| hammock wrote:
| No. But it's generally common knowledge. Here are some
| articles
|
| https://fortune.com/2019/08/20/stock-buybacks-debt-
| financed/
|
| https://www.cnbc.com/2019/07/29/buybacks-companies-
| increasin...
|
| https://crsreports.congress.gov/product/pdf/IF/IF11393
|
| From the last one: "Data on the percentage of buybacks
| that are leveraged are inconsistent. For example, the
| bank J.P. Morgan Chase reported that leveraged buybacks
| accounted for 14% of overall buybacks during 2018, which
| it said was the lowest percentage since 2009. But Yardeni
| Research, a respected securities market research firm,
| reported that they were 56% of the total."
| clairity wrote:
| this is another one of those things you learn in business
| school, a commonly disdained yet imminently useful
| education, particularly for engineers.
| georgeecollins wrote:
| If the long term debt increases during a period of
| buybacks, particularly more than net income, than yeah
| this is the case. And yes that happens.
|
| BTW, this is exactly what private equity companies do
| when they take a company private. They borrow a lot of
| money to buy the outstanding stock. Often the company
| they are buying with debt (held by the company) is not
| profitable. And sometimes the company goes bankrupt.
|
| So yes this happens.
| [deleted]
| Griffinsauce wrote:
| > funded by debt
|
| Or recently, government support packages.
| Bayart wrote:
| Which is debt.
| xadhominemx wrote:
| Leveraged buybacks reduce the multiple. It's not a cheat
| code to make your stock go up.
| imtringued wrote:
| A lot of the companies getting into debt have their own
| cash reserves.
| imtringued wrote:
| The only reason I dislike stock buybacks is that they
| encourage "riding" the bull market. Number goes up,
| people buy into the company, company does a stock buyback
| to keep the momentum, numbers go up even further, even
| more people buy into the stock, none of them caring about
| the actual company they are buying into, they just see
| the numbers.
|
| Dividends are boring, we need more boring companies doing
| boring productive work.
| anonymouse008 wrote:
| Replace option contracts with RSUs or a vesting cliff and
| see how closely that resembles the VC fiefdom
| pkdpic_y9k wrote:
| this all sounds a lot like CEO talk to me...
| DaniloDias wrote:
| I find this statement strange. Curious if others experience
| aligns with mine:
|
| Being a CEO is all consuming.
|
| You don't want to be a parent and a CEO, cause the company
| comes first.
|
| You don't want to be married and a CEO, because the company
| comes first.
|
| If you could "automate" this job, the developers behind the
| scripts become de facto CEO. Their scripts cannot fail. They
| will have to make the same sacrifices as the meatspace CEO.
|
| I dunno if it's an Icarus thing or what, but the closer I am
| in interactions with ceos, the more I pity them.
|
| Asking these people to trade their lives for the possibility
| of no payout seems doomed to fail. The only reason people
| trade their lives for this role is because it is worth the
| personal damage and risk.
| munk-a wrote:
| When I worked in the game industry QA folks were regularly
| asked to put in twelve to sixteen hours a day - they're
| sacrificing their health and lives for their jobs but
| without any promise of payout. Ditto for pretty much anyone
| else working on the bottom 3/4ths of the economy.
| DaniloDias wrote:
| My immediate reaction is the diff between CEO and QA is
| that QA doesn't negotiate well.
|
| They're willing to endure bad work for limited pay. You
| don't want this type of person leading a company.
|
| I've also worked (and left) the field of gaming QA. FWIW,
| I'm not trying to being controversial- this is my
| sincerely held belief. I think gaming QA is a good foot
| in the door to a career in tech, but something that
| should be abandoned as soon as you get a feel for what it
| takes to work in an agile environment and make your
| deliverables. The gaming industry seems like the place
| where you go to kill your health and happiness to me. As
| long as people keep signing up for the work, conditions
| will be awful.
| munk-a wrote:
| I would suggest a different take-away, it takes power and
| stability to negotiate power. Basically, you need to have
| a powerful position to gamble on securing better
| compensation. If minimum wage were a problem unique to
| QA[1] then that explanation might ring true but I think
| the fact that you see the same pattern of exploitation in
| fast-food and the service sector at large paints a
| clearer picture that our educational system is just
| failing to teach people they have personal value.
|
| I do agree that the difference between a good CEO and a
| terrible CEO can be pretty stark - but I also think that
| the best CEO can't turn around a company rife with
| nepotism and other organizational diseases - the plebs
| contribute a lot more to company health than they're
| given credit for... That's my primary source of
| disagreement on CEO compensation - everyone else is being
| undervalued and so the creation of value is being
| misattributed to a CEO. The CEO should probably be the
| highest earner at nearly every company - but only rarely
| should the CEO earn five or six times that of someone in
| the mail room and we shouldn't see the 200:1 ratios that
| are relative common today[2].
|
| 1. It does have a unique exacerbating factor, every year
| a bunch of new grads think "Oh man, video games - I want
| to work on those" and thus there's a large pool of people
| willing to be paid peanuts to work in the field. This
| causes the experienced QA folks to have their labour
| devalued to compete with the large pool of free labour. I
| very much agree with your last few sentences - that's
| what seems to be the take-away for the gaming industry
| for me as well.
|
| 2. A random study - I know the numbers are in this
| ballpark but I'm not familiar with the specifics
| https://www.epi.org/publication/ceo-compensation-2018/
| MattGaiser wrote:
| So what incentive does that CEO have to be cautious with my
| capital?
|
| That just encourages extreme risk.
| lolthishuman wrote:
| Then try that and see if it's better. There shouldn't be a
| one way forced option.
| DeonPenny wrote:
| The issue is what if the CEO refuses. If he's good at his job
| or the business is in need he could always go to a different
| company and get paid what he can negotiate for.
| anigbrowl wrote:
| Lots of people said the same thing about market traders and yet
| a great deal of their activity has been successfully automated.
| thorwasdfasdf wrote:
| That assumes you can predict which CEO will do better, not at
| all a certain thing.
| effingwewt wrote:
| Hahaha found the CEO?
|
| 'Jesus Christ himself isnt worth 500x the worker's wages'
|
| CEOs provide no real value, period. They also get golden
| parachutes even if they sink the ship.
|
| It's inexcusable and I'll bet dollars to donuts 99% of
| companies don't even need one.
| ForHackernews wrote:
| The problem is there's no way to evaluate if CEO($10M) is
| actually that much better than CEO($2M). How would you
| retroactively test the counterfactual of hiring the cheaper
| candidate?
|
| Maybe in the future the stock price of robo-CEO companies can
| be used as a baseline. If you can't beat the robot index, then
| you're fired. (Obviously this will never happen because the
| board members are other CEOs, but you get the idea).
| devoutsalsa wrote:
| This. A more practical approach would be to embrace the fact
| that no one really knows what's going to happen & plan
| accordingly.
| texasbigdata wrote:
| You're spot on. That's why Harvard Busiess Reviews "best CEO"
| list is a trailing version of multi-year TSR (total
| shareholder return) combined with some ESG metrics. It's the
| best you can currently do.
| ab111111111 wrote:
| Sure. Quite. But why not try developing an AI to replace them
| that can make you a >5x return?
| eloff wrote:
| If one could automate that job, one could automate every job.
| That's AGI territory.
|
| Very creative jobs involving leading people will be the last
| jobs to fall to automation - assuming that's even possible.
| boringg wrote:
| No reason not to try. That said I don't think it's possible.
| I love the thought that we can automate that but
| realistically not viable in the next 50 years. Maybe a bot
| version of a CEO but that provides little value.
| runeks wrote:
| Because they may be so expensive precisely because it's
| difficult to automate them.
| mytailorisrich wrote:
| Careful what you wish for here.
|
| I suspect that if an AI can replace the job of a CEO then all
| other jobs will be gone as well.
| warent wrote:
| The fact that the western society finds job automation to
| be a danger (or dystopian) is an indicator that something
| is severely dated at best--or dangerously corrupt at worst
| --with our economic system.
|
| Such a thing would be a _utopian_ outcome. If this kind
| work can be automated in a humane way, then the vast
| majority of work can be automated. That means people can be
| freed to spend every waking moment on art and play.
| quickthrowman wrote:
| How are resources allocated in this utopia?
| fighterpilot wrote:
| My personal guess is - assuming that democracy is in
| tact, redistribution will be voted in with landslide
| support.
|
| In a hypothetical future where almost nobody can compete
| with an AGI and 90% of voters find themselves completely
| useless in the economy, the proportion of voters who are
| against redistribution will drop precipitously.
| mytailorisrich wrote:
| Then what?
|
| Everyone is allocated the same by the state? A society
| where no-one has any function to society and where the
| state allocates resources to individuals sounds more
| dystopian than utopian to me...
| fighterpilot wrote:
| I was merely stating what I expect to happen, not what I
| want.
|
| It sounds pretty bad to me as well. Not worse than
| poverty, but meaningless and boring otherwise. Some
| people will make their own meaning, but many won't.
| warent wrote:
| Going off on a tangent here, but I'm curious to know what
| would be meaningless and boring about it. This would
| permanently solve the first two foundations of Maslow's
| hierarchy of needs so people can focus on the top three.
|
| It could be argued that the truth is actually the
| reverse: it would enable _most_ people to find a much
| deeper meaning, while only an exclusive few (probably
| mostly pathological people, like sociopaths and
| narcissists) won 't.
| fighterpilot wrote:
| You're possibly right, but do people who inherit millions
| or win the lottery strike you as particularly happy after
| 10 years?
|
| Admittedly, I only have anecdotal data on that.
| danaris wrote:
| That's not generally a good measure, because a) the
| people who play the lottery _tend_ to be poorer, and b)
| poorer people _tend_ to have poorer financial literacy
| /education.
|
| This means that they don't know what to do with that
| massive windfall, they manage it poorly or are taken
| advantage of, and end up unhappy. And the ones who _do_
| know what to do with it tend to do very boring things
| (set up iron-clad structured annuities or something, I
| imagine--I don 't claim to have enough financial
| education to do it well myself!), and we don't hear about
| them because "guy won $500m 20 years ago, is living a
| comfortable but unremarkable life now" doesn't sell
| papers.
|
| Note that this is also very different from how a UBI
| would affect people, because that would be moderate
| amounts of money regularly for life (y'know...rather like
| an iron-clad structured annuity); there's no way to "blow
| it" and end up with nothing.
|
| People who inherit very large sums of money, but are not
| themselves born into wealth, are so rare as to be
| essentially a myth. There certainly aren't enough of them
| to make a reasonably rigorous sample size for a
| scientific study.
| JohnPrine wrote:
| Do you really think the people who wouldn't make their
| own meaning are finding tons of purpose in their current
| jobs?
| fighterpilot wrote:
| I might be wrong:
|
| https://users.nber.org/~confer/2001/midmf01/oswald.pdf
| [deleted]
| fighterpilot wrote:
| Doing this would require an AGI, which is currently out of
| reach.
|
| A more useful/practical question would be: what tools can we
| build to assist CEOs in their decision making and make them
| more productive? I think the answer will come out as "not
| much", since the job is so high level and abstract. You'd
| have a better time targeting lower-skilled jobs or technical
| jobs like software engineering.
| visarga wrote:
| > A more useful/practical question would be: what tools can
| we build to assist CEOs in their decision making and make
| them more productive?
|
| They are called data scientists. An AI would be able to
| crunch numbers, but someone needs to read and interpret the
| results. You can't automate that part yet, humans are still
| the best in interpreting data into social and business
| context.
| teawrecks wrote:
| Explain why an AGI is needed? Because to me, invoking the
| need for an AGI sounds equivalent to saying you don't
| understand the problem space.
| fighterpilot wrote:
| The job of a CEO would need AGI because it's the type of
| job that requires understanding of human social dynamics,
| market context, regulatory context, etc. Such cross
| domain multi faceted expertise is the type of thing that
| needs general and broad intelligence to do effectively.
|
| Hire people, fire people, pitch investors, manage direct
| reports across multiple business lines, understand what's
| going on in the world and market, set a product
| vision/direction, shape the culture of the org, etc etc.
| That's AGI territory.
| dvfjsdhgfv wrote:
| Because ML (this is what people mean when using the term AI
| which is ambiguous) needs some data to learn from, and this -
| apart from the fact that learning on a living organism like a
| company can be extremely expensive - poses several problems:
|
| 1. What data do you use? Past data of the same company? Data
| of other companies? Which ones? Past best performers?
|
| 2. Actually identifying all pieces of information that are
| relevant for decision making is a challenge in itself, as
| we're not talking about internal metrics but also external
| events and trends. Choosing and collecting all these is a
| challenge in itself. Moreover, it is not a one-off action, it
| needs to be reevaluated regularly, i.e. you need to be
| actively looking for factors influencing the performance of
| the company. Mind you, not all of them are readily
| measurable.
|
| 3. Part of the work of CEO is creative, i.e. not
| extrapolating based on past events but looking for completely
| new avenues and opportunities. Building such a complex system
| would be extremely expensive, although I agree this challenge
| is very interesting.
|
| Not to mention the fact that an extremely important job of
| the CEO is to deal with people, not just the data. This point
| alone can make a difference between a well- and badly-managed
| company.
| 3GuardLineups wrote:
| Because all evidence points to such an endeavor being out of
| reach for the foreseeable future
| z3t4 wrote:
| One person cannot by her/him self return 3x or 5x profit. Its
| always about the team. And good team leaders are very hard to
| get by.
| crazygringo wrote:
| That doesn't matter, because it's generally the CEO who puts
| together the team, motivates it, keeps it accountable, etc.
|
| Obviously the board has input on the rest of the C-suite, but
| it's still most fundamentally the CEO who is responsible for
| the team.
| edanm wrote:
| That's probably not true, at least in the sense that op
| intended.
|
| It's almost certain that Steve jobs or Elon musk were much
| more than 3-5x more productive than the next best options
| facing their companies, for example.
| [deleted]
| devilduck wrote:
| Meanwhile even if a CEO completely fails at their job, the
| amount of compensation they receive for doing a poor job could
| be better used for something else.
| hintymad wrote:
| A CEO also gets high pay because of their performance can be
| measured. Stock price, how soon a crisis is handled, employee
| attrition, and etc. I forgot who discussed it in depth, maybe
| Paul Graham, and the conclusion was that engineers should learn
| from the lesson, and figure out a way to show measurable
| impact, the true visibility, of their work.
| mellosouls wrote:
| This seems to miss one of the main points of the article that
| they are happy to dish out automation to other roles but can't
| quite bring it to bear on themselves...
| bmmayer1 wrote:
| There's another thing that CEOs do which is provide values
| guidance and inspirational leadership for a company. That's not
| something a robot can do...yet.
| lbriner wrote:
| That might be what they are supposed to do but apart from my
| current company, this has happened in precisely none of my
| previous employers (about 5 of them).
|
| At one company, I didn't even know who the CEO was. We had
| some company party because we won an award and I had to ask
| my colleague who the guy was who was speaking. Awkward (but
| at least I didn't have to ask the CEO who he was).
| throwawayboise wrote:
| LOL that happened to me once. I was at some unrelated event
| and was wearing a company shirt. Someone mentioned to me
| that her husband worked there. She said his name, and I
| remarked that I didn't know of him. She sort of stared at
| me and said with a tone of incredulity, "he's the company
| vice president!"
| tonyedgecombe wrote:
| _They 're paid for the long-term, strategic value the owners
| think they might provide the company in comparison to other
| candidates._
|
| Mostly I think they are paid according to a compensation
| committee made up of board members and other executives. It's
| not a surprise that these people have voted for huge wage rises
| for each other.
| egh wrote:
| Nice. We finally found the guy who believes this fairy tale!
| robertlagrant wrote:
| Anyone who pays a CEO well believes this. Can you find a
| large company that doesn't believe it?
| zelon88 wrote:
| The performance of a business can be measured by a machine in
| finite metrics. Things like opportunity cost are a reliable way
| for machines to make this determination. You give it your
| business metrics and tell it which ones are variable. Then run
| the simulation over and over with different levels of risk
| tolerance, risk appetite, political factors ect and see which
| ones result in the highest opportunity cost. Then you run the
| next simulation assuming the previous one is reality and keep
| extrapolating a beneficial future for the company. 24/7/365.
|
| It is naive to think that every other position within a company
| could be eliminated except the CEO. Of course it could be, and
| eventually you can expect that it will be. It's when humans are
| no longer the shareholders that we all need to be concerned. If
| we're still alive.
| temp667 wrote:
| And you have only one CEO - so their comp is expensive, but not
| hugely expensive relative to total org costs.
|
| Apple has Tim Cook. In terms of investors evaluation of his
| ability to generate profits - let's say apple is going to do
| $400B in sales, and you think Tim's approach over time will
| yield a 3% improved margin. Is he then worth $12B/year? CEO's
| have enormous influence on a companies direction.
|
| Investors will automate MANY MANY things before they automotive
| the CEO's job.
|
| Let's be a bit serious. What would make Walmart investors more
| nervous:
|
| 1) Being asked to pay all workers $35/hr, or
|
| 2) paying the CEO an extra $1M/year?
|
| 1.6M employees * 40K+ pay increase = $64 Billion per YEAR.
| Let's get a grip on what
| newobj wrote:
| Walmart's annual _profit_ is ~$130B so what I 'm seeing is
| that yes in fact it's perfectly feasible for 1.6M Walmart
| employees to get a $40K/yr raise.
| incrudible wrote:
| You're looking at _gross_ profit, but you really need to
| look at net income, which averages about $13B.
|
| Companies like Wal-Mart generally have low profit margins,
| because there's not much of a barrier of entry and no
| valuable brand or intellectual property.
| temp667 wrote:
| Please don't make up stuff on HN - if you don't have
| something accurate to share or if it wouldn't support your
| point please still avoid making things up.
|
| Walmart's profit margin is generally 2-3% and is generally
| $10 - $20B per year. [1]
|
| And if Walmart were making $100B, the comp for their CEO be
| far from a major expense to the corp.
|
| [1] - https://finance.yahoo.com/quote/WMT/financials/
| shuntress wrote:
| I think you might be missing the part that says "All
| numbers in thousands" on that table you've linked.
| fpig wrote:
| No he isn't.
| shuntress wrote:
| I think you might be misunderstanding what "All numbers
| in thousands" means on that table she linked.
|
| EDIT: To be clear, Walmart's revenue in 2020 was 559
| Billion with a B[0].
|
| We can see on that table[1] that if we take the values
| listed in the "Total Revenue" row (559 Million with an M,
| 523 Million with an M, etc) and multiply them by 1,000
| according to the directions ("All numbers in thousands")
| on the chart that we get a result which aligns with
| reality.
|
| To be _even more clear_ , we can take the values listed
| in the "Gross Profit" row, multiply by 1,000 as
| instructed by the directions, and see that yes Walmart's
| annual *gross profit* is ~130B
|
| 138,836,000 * 1,000 = 138,836,000,000
|
| [0]https://www.forbes.com/sites/shelleykohan/2021/02/18/w
| almart...
|
| [1]https://finance.yahoo.com/quote/WMT/financials/
| incrudible wrote:
| You're looking at the wrong number. See how it says
| "Operating Expenses" right below "Gross Income"? You're
| going to need to subtract that, then you're at operating
| income. Subtract operating income expenses and you're at
| _pre-tax_ income. Subtract the tax and then you have what
| you might actually consider "profit". It's less than 10%
| of your original figure.
| shuntress wrote:
| Thank you for actually helping!
| fpig wrote:
| Why are you trolling on HN?
|
| Edit: yes, Walmart's revenue is 500+ billion. What does
| that have to do with anything discussed here? temp667's
| comment is correct.
|
| Edit 2: first you didn't understand what "revenue" is,
| now you don't understand what "gross profit" is.
| gwright wrote:
| You seem to be misunderstanding what "Gross Profit"
| represents.
| throwawayboise wrote:
| It's also perfectly feasible for them to pay more rent for
| their stores, or pay their suppliers more for their
| products, but why would they?
| shuntress wrote:
| The general idea is that if your workers are well paid
| and the store is well kept (if you would accept that "pay
| more rent" is generally the same as "spending more on the
| building") then customers will be more happy/satisfied
| and thus return more often, spend more, and recommend
| your store to friends thus increasing your revenue.
| tick_tock_tick wrote:
| Do you honestly think they would come out ahead in this
| scenario?
| throwawayboise wrote:
| Yes, comparing CEO compensation to what line workers make is
| a standard play for the outrage promoters, but it really
| isn't related. When one slice of the pie is already small,
| making it smaller doesn't make a lot more available for
| everyone else.
| incrudible wrote:
| > ...you think Tim's approach over time will yield a 3%
| improved margin
|
| It's not so much about a little extra yield, it's about _not
| running the company into the ground_ , which is far harder
| than it may appear.
|
| If a CEO manages to leave the company in as good a condition
| as they found it, that's already worth a fortune.
| andi999 wrote:
| At least here CEO take the legal liability if like the company
| files bancruptcy to late, etc.
| iambateman wrote:
| There's talk on this thread that boards choose a CEO based on
| their marginal competence.
|
| I doubt there's much evidence this is true.
|
| Boards select "the best person they can justify to shareholders."
| Being expensive is a feature. A board member invents reasonable
| criteria for choosing a candidate: years of relevant industry
| experience at the VP level, advanced business degrees, charisma
| and "It" factor, recommendations from influencers, etc.
|
| As a result, the candidate pool shrinks from "honestly, lots of
| people could do this job" to "we have to choose one of three
| candidates."
|
| From there, it's all supply and demand curves, where the company
| has artificially crunched the supply and the price skyrockets.
|
| The solution isn't to automate the leader. The solution is to
| admit to ourselves that a highly-relational project manager with
| a decade at the company could lead it as well as the CEO, if not
| better.
| PeterisP wrote:
| The owners (or, for public companies - which most companies
| aren't - voting shareholders) are free to select whatever
| criteria they want for CEOs and appoint whomever they want.
|
| If selecting a highly-relational project manager with a decade
| at the company would allow them to save a lot of money, they
| can try that out and potentially outcompete other companies due
| to slightly lower costs; and if selecting a very expensive
| outside CEO saves them some worry, that's a "service" they can
| choose to buy. If in the end the performance is the same and
| it's a waste of money, in the end it's their money (not, for
| example, the workers) to waste as they wish.
| motohagiography wrote:
| People who have a problem with high wages need to have a problem
| with commanding high budgets, but none of them do. The entire
| issue is a canard.
| peshooo wrote:
| "If a role can be outsourced, it can be automated."
|
| I really don't see the logic in this statement.
| dcolkitt wrote:
| I'm building a house right now, and I sure am excited to learn
| that I cab replace all these expensive subcontractors with
| robots!
| yowlingcat wrote:
| It's based on the faulty presumption that labor outsourcing
| motivations are purely based on cost minimization. Obviously,
| this falls apart if one considers that outsourcing also occurs
| for specialized labor that firms prefer not to keep in-house.
|
| A great example of this is legal. If you rewrote the title as
| "Lawyers are hugely expensive -- why not automate them?" it
| would sound patently absurd.
| Strangs wrote:
| https://www.cnbc.com/2020/02/06/technology-is-changing-
| the-l...
|
| There may be more validity in this whole approach than it
| would appear at first glance.
| yowlingcat wrote:
| I'm not saying that there isn't -- but another common
| fallacy you'll see is conflation of rote work automation
| with decision automation. Rote work automation is very
| doable and quite helpful, but it helps create a force
| multiplier for the human who is at the end of the day doing
| the job.
|
| Decision automation is not easy at all -- whether for
| executives or for legal. There's a lot of root cause
| analysis, presumption unpacking, and other complex problem
| definition that's intrinsic to the nature of the role.
|
| But that's a crucial distinction -- if you can't automate
| the decisioning, you're not necessarily going to make CEOs
| (or lawyers) less expensive; on the contrary, you may
| rather just increase the scope of what they're capable of
| doing (because there were all these other things they
| would've done had they had the resources and tools to do).
|
| I think of that the same way I think of the "Software
| engineers are expensive -- why not automate them?"
| question. Maybe some of it can be automated, but some of it
| is just plain human problem solving. Not all human problems
| can be solved with automation. Especially if/when faulty
| automation is what created those problems in the first
| place!
| ridethebike wrote:
| Same as with this one: >> If a single role is as expensive as
| thousands of workers, it is surely the prime candidate for
| robot-induced redundancy.
|
| There's no logic, it's just catchy sound bite that when said
| makes some people feel smart and forward looking.
| nocommentguy wrote:
| To outsource something you have to be able to unambiguously
| specify requirements (otherwise costs blow up as you go back
| and forth). Once you've made it truly unambiguous, the next
| logical step is automation.
| WJW wrote:
| This does not follow, since there are things that machines
| cannot yet do but that humans can. Producing new humans is
| one such example. It is not at all clear whether "CEO-ing" is
| another example.
| unfamiliar wrote:
| This is ridiculous. A spec like "grow the market cap of this
| company by 4x in 3 years" is entirely unambiguous, where do
| you even start automating it.
| DarmokJalad1701 wrote:
| Write trading bots with enough capital to trigger gamma
| squeezes?
| UncleMeat wrote:
| It might be different now, but prior to ML approaches working
| for captchas people absolutely paid for outsourced labor to
| solve captchas all day. And that was an intentionally un-
| automatable problem.
| lainga wrote:
| >otherwise costs blow up as you go back and forth
|
| I've seen that and it's apparently a viable business
| decision. I don't know why - I'm not an MBA
| jacobr1 wrote:
| Inability to drive internal decisions and/or CYA.
|
| You can see it even more clearly with "consultancy." The
| reason consultancies can get away with using so many newly
| minted MBAs, is that what most of them do is just reflect
| back the to the company what their employees already knew,
| but in a form that is consumable and justifies the business
| case for that action.
|
| There is some internal reason why the organization can't
| just make the decision, even though plenty of employees
| know what needs to get done. It could be weak leadership,
| inability to take risks, analysis paralysis, fear of
| unfamiliar territory, unwillingness to own the risk (CYA)
| and even more dysfunctional characteristics (like different
| teams unwilling to talk to each other). Brining in someone
| external can cut through much of that mess.
| burntoutfire wrote:
| Not all automation is economically efficient - i.e. it's
| cheaper to hire outsourced janitors than building state of
| the art cleaning robots to automate their jobs.
| mschuster91 wrote:
| > Not all automation is economically efficient - i.e. it's
| cheaper to hire outsourced janitors than building state of
| the art cleaning robots to automate their jobs.
|
| And a trap many companies large enough to afford full time
| janitors don't realize: with outsourcing janitors they're
| relinquishing a _lot_ of control towards the service
| provider and the work quality. The result more often than
| not is disgruntled employees waiting for days for stuff
| such as replacing a cracked toilet seat to be done.
| lbriner wrote:
| I think the logic is that if you can describe what you need
| delivered (by the contractor) then an automated system could
| take the same inputs to deliver the same output.
|
| It is not necessarily always true right now (you can't get
| robot building contractors just yet) but that is not to say the
| logic is true that the outsourced work _could_ be automated.
| diego wrote:
| There isn't one. It's just not true. There is lots of creative
| work that is routinely outsourced and cannot be automated yet.
| A CEO of a startup constantly outsources tasks to people,
| whenever they cannot be automated easily.
| sn41 wrote:
| That's because it is illogical. A company may outsource some of
| its creative inputs, like graphics design or music for a game.
| That does not mean that creative work can be automated.
|
| There are different reasons for outsourcing - lack of talent
| in-house, lack of time etc. Cost reduction may not be the only
| issue, and not every "cheap" task can be automated, either.
| bilater wrote:
| Seems like an advertisement for DAOs
| ridethebike wrote:
| When I was in university(mid 2000s) we had this subject called
| "AI fundamentals" - series of lectures + testing in the
| end(~2hours per week for 6 months), taught by respected faculty
| member (or so we thought), it was going to be awesome. What it
| actually turned out to be - lecture were dude talking non-stop
| things like (almost a quote by the way) "AI is not like regular
| app, it should be capable of taking task in form of 'go somewhere
| don't know where and bring me something I don't know what' and it
| would actually solve it. Having that would be true AI and that's
| what this all is about" and how great would be to have such AI
| and how close humanity is to it and yadda yadda yadda AI/tech
| dreamy stuff that you'd see in general media. Once in a while he
| would mention one or two concepts from AI theory and that would
| be it. And like that 6 months went by, we learned nothing, passed
| his "test" (which was pretty much questionnaire about all that
| blue-sky thinking) to get some default "pass" marks into diploma
| and that was it.
|
| Lots of smart-y talk, ~zero useful content.
|
| This is what this article is.
|
| HN community provided way more substance in a single (of several)
| threads on "is ceo pay fair" topic.
| hammock wrote:
| Board still needs a throat to choke somewhere...
| [deleted]
| anaganisk wrote:
| They could undervolt the CPU too XD
| ctocoder wrote:
| That's my goal, make it to CEO, automate my job and take a huge
| salary at 1000x the average scale to infinity. Then in 10,000
| years make enough to resurrect me to enjoy it.
| spullara wrote:
| The comments in here are hilarious. If you think the CEO doesn't
| matter in a company you have never been on a board of a company
| and had the responsibility to hire and fire them.
| nataz wrote:
| Their comments matter, but they aren't well informed.
|
| Hacker news is full of bright ambitious folks who think they
| are very smart, or they can change the world, or they can make
| a lot of money. It's all about their personal impact.
|
| HN celebrates individual contribution. Which is fine and good.
|
| That said, I'd argue that many folks here would benefit from
| spending time on how to be better leaders, or gasp, managers
| and executives.
|
| Most people, by definition, aren't going to be 10x or 100x
| engineers. But a good manager, supervisor, executive will make
| everyone around them better.
| SavantIdiot wrote:
| > you have never been on a board of a company and had the
| responsibility to hire and fire them.
|
| Think about that statement, just for 5 seconds. Please.
|
| You do realize very, very few people meet this criteria. And
| their opinions still matter because they are impacted.
| anm89 wrote:
| I don't think you follow.
|
| It really does not matter at all what those people think
| about this topic and it doesn't matter what percentage of
| people this excludes. The topic is hiring decisions for CEOs.
| If you aren't hiring CEOs, then you don't get a say.
|
| You may think this isn't nice or isn't fair or whatever but
| it does not change the fact that those people get absolutely
| zero say on this topic.
| koonsolo wrote:
| I don't know if you are a programmer, but next time when you
| make a technical or architectural decision, make sure you
| consult your users, because their opinions still matter
| because they are impacted.
|
| Your statement is absurd because being impacted has nothing
| to do with having the knowledge to talk about a subject.
| spullara wrote:
| People in the comments are making definitive statements that
| you can't evaluate CEOs. They should think about it for 5
| seconds and realize that they are not experts in the domain.
| SavantIdiot wrote:
| So you never voice opinions about topics that you aren't in
| expert on, otherwise you'd be a flaming hypocrite, right?
|
| Cool!
| koonsolo wrote:
| The thing with opinions is that everybody has one.
|
| I much rather read insightful knowledge from people that
| know what they are talking about.
|
| And that is my opinion.
| SavantIdiot wrote:
| Sorry, us plebes down here in the dirt bow to your lofty
| white high-horse.
| [deleted]
| [deleted]
| smoldesu wrote:
| The reason we don't automate CEOs is liability: the board of
| directors/shareholders want someone to hold accountable when bad
| decisions start getting made. If you pay $4000 for a brand new
| iCEO that lays off your entire staff, you can really only scream
| at whoever minted the software making that decision, which often
| comes with limited liability licenses.
|
| Remember, corporate structure is about minimizing your own work
| and maximizing your leverage against your co-workers. None of
| these shareholders want to live in a world where something can't
| be fixed by shouting at someone over the phone.
| alpha_squared wrote:
| I can imagine a scenario where an approval board of 3 or 5
| people paid 1/10th a CEO's cost must approve the actions that
| the iCEO is suggesting rather than give it full autonomy to act
| indiscriminately. They'd effectively become executive
| assistants with veto power. If there aren't many things for the
| iCEO to do, then the board doesn't even need to be employed
| full-time and perhaps it could even be offloaded entirely onto
| the company board with a rotating schedule. Though, I imagine
| many board members don't like the idea that their involvement
| would then become more involved and they wouldn't be able to
| sit on as many boards collecting some nice comp/benefits.
| jrwoodruff wrote:
| But I don't think they're suggesting getting rid of the entire
| executive team, or carte-blanche implementing whatever iCEO
| says to do. They're saying replace the most expensive position
| with some AI, and let the executive team debate that.
|
| Seems like we could figure out a way to find accountability in
| that model by assigning it to whoever is best aligned with the
| decision - and could provide an interesting balance for the
| board to debate: Why did you decide to go against the machines
| recommendation?
| cdirkx wrote:
| My new SAAS startup idea; scapegoat as a service.
|
| For a few million dollars you can hire me, put all the blame on
| me, I say "I take full responsibility" and resign my position.
| [deleted]
| baq wrote:
| this niche is apparently quite packed with individual
| contractors.
| goatherders wrote:
| Years ago, Nordstrom had an employee at the store that was to
| be fired when a customer got super angry. They would be
| hauled out from the back and fired. "Fred, this lady doesn't
| like her pants. I believe that is your department. You're
| fired. Please accept our apologies, ma'am. " Then Fred would
| go back to the break room and read the paper until it was
| time to be fired again.
| tyingq wrote:
| See Boston Consulting Group, Deloitte, Ernst & Young, KPMG
| and PwC. And then the second tier below that.
|
| They also offer the lead-in service of making your idea into
| pretty slides with their logo, so it's clear later that they
| endorsed the idea from the get-go.
| Aperocky wrote:
| haha this.
|
| This is exactly 'Scapegoat as a Service'.
| fakedang wrote:
| Uh, I'm pretty sure BCG is in the first tier, and the
| others you mention are in the third tier, when it comes to
| the Scapegoat as a Service business.
| tyingq wrote:
| I don't mean the tax/audit arm of those companies. They
| all do the generic management consulting. I left several
| off. Here's a market share chart:
| https://imgur.com/a/O1Urjkm
| pedrosorio wrote:
| https://hackingthecaseinterview.thinkific.com/pages/top-
| best...
| fakedang wrote:
| I wasn't going by market share but by pricing. MBB
| charges the most per amount of "value" /"intangibles"
| delivered.
| Ecstatify wrote:
| https://youtu.be/yjfrJzdx7DA
| rhacker wrote:
| I'd actually like to invest.
| CPLX wrote:
| This exists and is called management consulting.
| anigbrowl wrote:
| You jest but there are some real people like this. My spouse
| once worked at small (1-200 staff) but profitable
| SaaS/service firm in a niche market. Another firm bought it,
| the Founder/CEO and some other top execs cashed out. The new
| parent firm folded the software and book of business into its
| own operations, and brought in a new CEO for the
| subsidiary...who methodically ran it into the ground over the
| course of a year or two, basically wrecking it by stages so
| that staff could be laid off without violating employment
| laws.
|
| Mystified by this apparent gross incompetence (my spouse had
| been an early hire and knew the firm's operations inside out;
| they still had a healthy client base in addition to the
| software portfolio), we looked into the background of the CEO
| and discovered the person had done the same thing at several
| other firms.
| _ZeD_ wrote:
| In italy a classic movie series "Fantozzi" has a scene
| dedicated to a "career" as scapegoat[1]. I really cannot
| suggest the first two movies (and the original book) enough.
|
| [1] (partially NSFW)
| https://www.youtube.com/watch?v=7EJ3VyM12qM
| ab111111111 wrote:
| There's a whole world of outsourcing shouting angrily at people
| over the phone. That's what call centres are. And their workers
| normally cost a lot less than CEOs.
| klyrs wrote:
| Why is paying them less not seen as an option? I've seen multiple
| startups struggle because their CEO makes more than 10 qualified
| technical staff, where the employees burn out because there's no
| budget to hire the technical staff the company needs.
| myrandomcomment wrote:
| This is a sign of a startup you should not work at. CEO comp in
| a startup should be tied to the success of the company in the
| form of stock. Generally in a tech type startup the salary
| (cash) of the key developers and the CEO are around the same.
| The highest comp is on the sales side. The sales team joins
| late (the founders and CEO should drive sales at the start) and
| tend to get way less stock. Their comp is based on a base
| salary and commission which should be uncapped.
| unfamiliar wrote:
| Presumably because the market dictates their salary, not a
| vague notion of what they should be paid.
|
| Or, to reframe the question: why don't people hire cheaper
| CEOs?
| hn_throwaway_99 wrote:
| > Presumably because the market dictates their salary
|
| Ahh yes, when the "market" is primarily made up of _other_
| CEOs (i.e. who sit on corporate boards), whose primary vested
| interested is to ensure CEO salaries stay astronomically
| high.
| JohnPrine wrote:
| Why don't we see more private equity firms snapping up
| companies and hiring cheaper CEOs then?
| pasquinelli wrote:
| isn't the solution, then, to put the workers on the board?
| Traster wrote:
| The simple answer is that people don't hire cheaper CEOs
| because the people who hire CEOs are the boards of companies
| and the boards of companies are mainly staffed by CEOs of
| other companies who unsurprisingly are incentivized to
| advocate for higher CEO pay.
| lotsofpulp wrote:
| They why do people who own the companies not oust board
| members who are wasting their money?
| ForHackernews wrote:
| Because the people who own companies are either a)
| disinterested index funds, or b) members of the same
| plutocrat class as the board members and CEOs.
| JohnPrine wrote:
| What about private equity firms?
| lotsofpulp wrote:
| Why are the people in b) okay with overpaying for
| something?
| klyrs wrote:
| Because they're also getting overpayed in a similar
| situation at a different company. It's in their direct
| interest to raise the "market rate"
| lotsofpulp wrote:
| So a significant portion of owners employ each other at
| each others' companies?
| ThalesX wrote:
| You're talking about employment as if they're working 9 -
| 5 in construction. These people are amplified by their
| networks, they don't work for eachother. The better their
| networks performs, by connections, or by value, or by
| whatever metric you want to monitor, the more they
| perform...
| vajrabum wrote:
| Likely because most public companies are mostly owned by
| funds of one sort or another which either don't hold the
| stock long term or own the stock because of indexing. In
| the former case, the incentive is to select for CEOs who
| raise the stock price in the short term. In the latter
| case, there is no incentive for fund managers to
| influence management at all.
| lotsofpulp wrote:
| The discussion is why the board does not select cheaper
| CEOs. In the case of these supposed funds that are not
| interested in the stock long term, is the claim that a
| more expensive CEO will deliver them better short term
| results? If not, why would a fund that cares about short
| term results want to overpay for a CEO?
| xwdv wrote:
| Wrong. You hire a cheap CEO, you will get what you pay for.
| The best people aren't going to work for cheap, so you'll
| get a shitty or mediocre CEO who will wreck the company.
|
| Maybe sometimes you get lucky and get a great CEO for
| cheap, but that's not sustainable. You're fighting the
| trend.
| NovemberWhiskey wrote:
| The average size of the board of a company in the S&P 500
| is 10.8 directors. However, only 43% of CEOs serve on any
| outside boards. The implication is that the vast majority
| of board directors are not CEOs of large companies.
|
| Data from https://www.briefinggovernance.com/2016/12/board-
| composition...
| Traster wrote:
| It's more appropriate to think of this as a class of "the
| pool of people who might become CEO". It's CEO, CTO, CIO,
| board members who also have their compensation decided by
| similar mechanisms, retired CXOs.
|
| Let's take Intel as an example - Retired CEO of
| medtronic, CEO of Intel, Sequoia, Senior position at
| Square, former CEO of a foundation, Professor, EVP and
| CFO Boeing, former CEO of HP, CEO of EA, Darwin Capital.
|
| So in total, of a board of 10, 6 of them are current or
| former CXOs, 1 is a professor, 2 are VCs and 1 is a
| senior CXO style position. Yet most of those wouldn't be
| counted as "CEOs" because they're "retired".
| woah wrote:
| Sounds like a board could make a killing by hiring a
| competent CEO on the cheap instead of their friends. Or
| maybe the reality is that the CEO compensation is a drop in
| bucket compared to the CEOs positive or negative effect on
| the bottom line and so it doesn't make sense to cheap out.
| evrydayhustling wrote:
| This is called the Agency Problem and is a fundamental
| challenge of organizing humans. If you start separating who
| makes decisions (e.g. the board) from who benefits
| (theoretically, shareholders), then over time the former
| will subvert the latter. But there is no simple fix if you
| want investment returns without managing the company.
|
| This is one of the better reasons to bet on startups in a
| world where power accumulates advantage. During the growth
| stage of a startup, the incentives of owners, managers and
| team members are much more aligned than they will be later
| in the trajectory.
| lbriner wrote:
| I think part of the problem is that we equate cost to value.
| Unless I am employing a CEO who previously earned big bucks
| and has taken a pay cut, someone on $50K simply doesn't seem
| to be as good as someone on $500K.
|
| Of course, there are people who could do really well on less
| but then how many of the cheaper CEOs would then ask why they
| can't be paid more if their companies are making multi-
| millions and it is a lot to do with the CEOs strategic
| decisions?
|
| To be fair, a lot of leadership is about confidence in
| yourself and people who are confident will often ask for a
| high salary.
|
| To be fair, I don't know what the distribution of salaries in
| the UK is but there are plenty of company directors and CEOs
| who are definitely earning below PS100K-PS200K, even at
| financial companies. (about $140K-$240K) whereas in the US, I
| think it is much higher.
| ABeeSea wrote:
| What kind of Mickey Mouse start-up is that? CEO cash pay should
| be low and stock pay high.
| chrisseaton wrote:
| > Why is paying them less not seen as an option?
|
| I don't understand - do you think companies are voluntarily
| paying them money that they don't have to?
|
| If you won't pay them what they want they'll go elsewhere to
| someone that will.
|
| Just like you would, I presume.
| k__ wrote:
| _" the people who hire CEOs are the boards of companies and
| the boards of companies are mainly staffed by CEOs of other
| companies who unsurprisingly are incentivized to advocate for
| higher CEO pay."_
| chrisseaton wrote:
| Why would investors vote for board members that waste their
| money?
| g8oz wrote:
| Class solidarity.
| chrisseaton wrote:
| I don't know what you're imagining here.
|
| Imagine a charity or pension fund that invests in a
| company. What incentive do you think they have to spend
| money unnecessarily on CEO compensation?
| klyrs wrote:
| The conversation around Mitchell Baker's compensation was
| particularly illuminating, I think. Why do nonprofits pay
| CEOs millions a year? Because executives expect to be
| paid that much, and it would be demeaning to pay less.
| chrisseaton wrote:
| In other words, normal market forces. The same reason
| you're paid whatever you're paid.
| klyrs wrote:
| The "invisible hand" of plutocrats isn't the traditional
| meaning of "market forces", is it?
| chrisseaton wrote:
| Rich people's evil plan to give other people money and
| drive wages up. Got it.
| klyrs wrote:
| You made the value judgement, not me. I'd put it down to
| "keeping up with the Joneses", personally.
| chrisseaton wrote:
| "keeping up with the Joneses" by... pushing the Joneses
| up? Does not compute.
| k__ wrote:
| People are always talking about the free market as if it
| was some kind of self regulating physical law of nature
| that could never be wrong.
|
| What's so absurd to think that people from one class
| (CEOs/VC/etc) want to help people from that same class
| even if it's against the laws of the free market?
|
| If I help someone who kinda identfies with me, it raises
| the chance that they will help me/my friends/my family in
| the future.
| JohnPrine wrote:
| You think investors pay money out of their own pocket to
| CEOs out of altruism?
| klyrs wrote:
| Do you think investors are, as a rule, rational in the
| sense presumed by the efficient market hypothesis? Do you
| think they might be subject to biases that lead them to
| overvalue their own self worth, and by extension, the
| worth of people like them?
| chrisseaton wrote:
| > What's so absurd
|
| Because it goes against Occam's razor.
|
| People pay CEOs a lot. Why do they do that?
|
| Likely: because they have to.
|
| Unlikely: global conspiratorial private welfare
| programme.
| dominik-2020 wrote:
| Very often investors sit on boards, too
| xboxnolifes wrote:
| Yes, but that implies that they bring something valuable to
| the company if companies are still willing to pay these
| premiums instead of just moving up an employee to CEO. So,
| what is the problem in the first place?
| chrisseaton wrote:
| > So, what is the problem in the first place?
|
| I don't think there is any problem. Everyone's entitled to
| as much money as they're able to honestly negotiate.
| PragmaticPulp wrote:
| > I've seen multiple startups struggle because their CEO makes
| more than 10 qualified technical staff,
|
| The fully loaded cost of a qualified developer begins in the
| six figures. A CEO earning 10x that would be earning 7 figures.
|
| I've never seen an actual startup with a CEO earning 7 figure
| cash compensation. I don't think any reasonable investors or
| even board members would allow that.
|
| Startup CEOs are largely compensated in equity, with their cash
| compensation being significant ($100-200K if company has
| revenue) but not overwhelming. They're often not the highest
| paid person in the company in terms of cash + bonus.
| skapadia wrote:
| This.
| indymike wrote:
| This is a startup that is in fail mode, unless the CEO is
| raising obscene amounts of money and the business is
| progressing.
| klyrs wrote:
| Yeah, you're right, I guess I've only seen ~5x at proper
| startups, but when you multiply that by the number of
| executives, it's still an egregious impediment to the product
| ska wrote:
| Event that is pretty rare in startups IME. Typically it
| might be 2x-3x a (truly) sr. dev, but CEO's in "proper"
| startups tend to be equity heavy and salary light, like
| other employees. Equity difference will be a much higher
| multiple than salary.
| slig wrote:
| That happens with non-profits too...
| [deleted]
| aerosmile wrote:
| So much "interesting stuff" both in the article and in the
| comments (my favorite is the guy claiming he knows of multiple
| startups where the startup CEOs are making 7 figures). I was
| initially perplexed when I saw this article doing well on the HN
| homepage, but I assumed that it's just some kind of an engagement
| metric that the HN algorithm is picking up on. Really
| disheartened to see that the article itself and so many of the
| comments are getting upvotes. But here's a hypothesis for why in
| my own view the quality here is so different than in other
| threads:
|
| Most of us here on HN are hunting for disruptable opportunities
| so that we can either build startups or at least inform other
| people who will hopefully go after them. Of course, many of the
| seemingly disruptable opportunities are not really disruptable,
| but their apparent inefficiency is due to some aspect of the
| problem that we're not aware of. So in order to disrupt
| something, you either have to have deep knowledge (or have done a
| ton of research) in a certain industry or you have to be
| ridiculously lucky.
|
| So that brings us back to the topic of disrupting the CEO
| salaries. At a surface level, the price is high and the
| performance is low - boom, the market must be nuts so let's
| disrupt this / solve this problem. But the issue with beating the
| market with your idea is that you have to have detailed insights
| into the price and performance of CEOs, and the reality is most
| of us have neither (special shout out again to the 7 figures
| dude). Simply saying "I can see that many startups fail, hence
| all CEOs must be idiots" is not exactly the level of deep
| knowledge you need to beat the market. Having worked directly
| with a CEO, including recruiting, firing, and replacing them,
| would be a good starting point to think about how to approach
| pricing differently.
|
| I apologize if this comment comes off as elitist - I am just
| simply stating the needed mechanics to be good at disrupting any
| problem out there, and it's really no different in this case. It
| took me many years and many failed startups to analyze my own
| issues with spotting disruptable opportunities, and I wish
| someone had told me earlier in my life how much effort and
| diligence I should be putting into validating my ideas versus
| just blindly trusting my gut.
| nemetroid wrote:
| > Most of us here on HN are hunting for disruptable
| opportunities so that we can either build startups or at least
| inform other people who will hopefully go after them.
|
| _Maybe_ that was the case several years ago, but I believe
| most people on HN are regular salaried employees without any
| particular startup ambitions.
| aerosmile wrote:
| Fair enough - I agree that the sentiment towards certain
| topics has changed over the years.
| PopGreene wrote:
| Back in the 70s, my mother was still paying her mortgage. She
| forgot one payment and the bank sent her a rather nasty,
| threatening letter. She rightly got in a huff, called them up,
| and asked them, "I've made every payment on time until I forget
| one payment, and you treat me like a deadbeat. Why is that?"
|
| Their response was that the computer did it. (This was a common
| explanation you got from bureaucracies in the 70s)
|
| This did not satisfy my mother so she wrote a letter to the bank
| president, explaining to him that she didn't but that
| explanation. "Computers are not stupid and arrogant."
|
| If what my mother says is true, you will never be able to replace
| a CEO with a computer.
| plaidfuji wrote:
| > Where automated management - or "decision intelligence", as
| Google and IBM call it - has been deployed, it's produced
| impressive results. Hong Kong's mass transit system put software
| in charge of scheduling its maintenance in 2004, and enjoys a
| reputation as one of the world's most punctual and best-run
| metros.
|
| Predictive maintenance != "automating a CEO"
| mythrwy wrote:
| Some CEOs could probably be effectively automated with a broken
| Excel spreadsheet, a copy of AutoHotkey, and a "Hello Barbie"
| series talking doll.
|
| Many however provide some serious value that won't be automated
| any time soon if ever.
| georgecmu wrote:
| As a counterpoint to whether the CEO role can be outsourced or
| automated (posted by the former CEO of reddit):
| https://www.reddit.com/r/explainlikeimfive/comments/210to8/e...
| clarkevans wrote:
| I like his post downstream on 3 factors of CEO pay:
|
| https://www.reddit.com/r/explainlikeimfive/comments/210to8/e...
| anm89 wrote:
| There's a funny thing about articles like this. There is zero
| overlap between people who actually have any control over this
| matter and the people who hold this opinion by nature of the fact
| understanding enough about how businesses work to understand why
| this makes no sense is exclusive to to being in a role to
| implement this suggestion.
|
| So basically it doesn't matter how many people believe this
| because the people who hold the opinion have zero overlap with
| the group of people who practically make decisions about CEO
| roles.
|
| I guess maybe, although unlikely, temporarily there could be an
| overlap between the two groups but that situation would quickly
| resolve itself.
| shoto_io wrote:
| I wonder what a fully automated Steve Jobs would have scaled
| Apple into.
| MINPOOL wrote:
| My understanding of a good CEO is that the main work is to build
| and maintain business contacts that lead to future large revenue
| streams for the company (which is de facto networking to build
| contacts with customers in the first place, closing deals is the
| job of the sales department). I don't think that creating a
| strategy has that much value, most like it is wrong anyway1.
|
| 1 https://hbr.org/2010/01/why-most-ceos-are-bad-at-strat-2
| xallarap wrote:
| Because CEO-bot cannot attend a meeting longer than 1 hour
| without a cache reset or it might develop a personality or become
| exploitable in some way.
|
| Also because money doesn't grow on trees.
|
| On the plus side, it would be quite convenient for the police if
| all CEOs were hardcoded to prevent all law violations and unable
| to by passivity allow a human to come to harm.
| lbriner wrote:
| Is there a principle that says that we pay our peers high
| salaries to help justify our own?
|
| If I get away with paying all my devs $30K, I can hardly justify
| my own $100K salary!
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