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CharlieKellyKingofTheRatsHamilton Nolan
7/01/16 12:15pm
This reversed system wouldn't work, because people wouldn't invest in companies that don't prioritize responsibility to investors. Without capital investment, we would struggle to start new companies. Existing companies would struggle if they needed capital and workers would eventually take the hit as well.
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  Hamilton NolanCharlieKellyKingofTheRats
  7/01/16 12:18pm
  What do you think people will do with all their capital? Nothing?
  
  Also, just because investors are not prioritized before workers does not mean investors will get systematically screwed. It’s a question of priorities for companies.
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  CharlieKellyKingofTheRatsHamilton Nolan
  7/01/16 12:19pm
  Invest in foreign companies that hold investor gains as the most important metric.
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BobbySeriousHamilton Nolan
7/01/16 12:16pm
What amazes me is how people are under the delusion that the current hierarchy you outlined is not just the only way things must be in order for an economy and society to succeed and flourish, but that such a hierarchy which is dictated by the unlimited greed of the few at the top is a good, perfectly acceptable organizing principle for a society.

Our culture’s entire mindset is so incredibly twisted and fucked. Normal, average, work a day citizens genuinely think the greatness of a country is gauged by how rich any one single person can get, regardless of negative consequences on the rest of society as a result. This never fails to just blow my mind.

Of course none of this is by accident, it’s all by design. The unending propaganda that permeates every aspect of our society and the policies that got us here were mapped out like a math equation a long, long time ago.
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  toothpetardBobbySerious
  7/01/16 12:18pm
  externalities do take a bite, don’t they?
  
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  Fred Garvin Male Prostitutetoothpetard
  7/01/16 12:24pm
  “That’s my sister”
  
  GIF
  
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Doofenschmirtz, Inc.Hamilton Nolan
7/01/16 12:12pm
I think you need to rethink that list. If the merits of society are the first priority, Gawker and similar outfits would not be allowed to exist and you’d have to do actual work in investigative journalism. Bickering and gossip is not in the interest of society.
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  toothpetardDoofenschmirtz, Inc.
  7/01/16 12:13pm
  I disagree.
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  Jeb! & The HologramsDoofenschmirtz, Inc.
  7/01/16 12:14pm
  Hamilton will not appreciate you pointing out that he collects a paycheck to impotently whine about and pine for a day that has never existed and never will.
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ghostandgoblinHamilton Nolan
7/01/16 12:17pm
The problem is, of course, what does “society” mean? Lloyd Blankfein made some waves he said his company (Goldman Sachs) is doing “the lord’s work.” These people really do believe that maximizing returns is what is best for society. They believe full throated capitalism is what is good for society. They just do. It’s self-interested sure, but is it any more self-interested than the young people who voted for Sanders and support student debt forgiveness who oh, just happen to have tons of student debt?
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  benjaminalloverghostandgoblin
  7/01/16 12:26pm
  You’re asking whether there’s any difference, in terms of objective good to society, between Lloyd Blankfien’s self-interest in personally extracting billions from the market, and the debt generation’s self-interest in mitigating that economic crisis?
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  StorminMike2000benjaminallover
  7/01/16 1:32pm
  The counter argument is that capitalism was the rope that pulled humans from the quicksand of feudalism. Markets created a world where people could rise up without the benevolence of the man with the biggest sword. Capitalism made the world better for everyone at the expense of making the world REALLY good for a few. But at least today we have options.
  
  Has anyone ever presented an overarching economic system to successfully replace capitalism? Hegel and Marx’s system failed. The last great “communist” society is filling up with tech billionaires and opening up their markets to foreign investors. The only thing China has in common with the revolution now is the single party system.
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butcherbakertoiletrymakerHamilton Nolan
7/01/16 12:15pm
This very topic was given a full week of coverage on Marketplace recently, and there was much to be learned from it.

http://features.marketplace.org/priceofprofits…
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  JimBJ9butcherbakertoiletrymaker
  7/01/16 1:51pm
  I have been meaning to listen to this. I caught a bit of one of the shows on NPR last (?) weekend and found it fascinating.
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  butcherbakertoiletrymakerJimBJ9
  7/01/16 2:09pm
  It’s excellent. Podcast it and listen during your commute, if you have a moderately long one.
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MattHamilton Nolan
7/01/16 12:19pm
If they can only get 1%, they will still take that over 0%.

If I might make an observation that piggy-backs off of this one: And even if investors decide to take their ‘ball’ [read: money] and [read: stop investing and/or shutter businesses], this still won’t kill the economy. Why? Because it will do nothing to eliminate the demand for a wide variety of goods and services. This is a long winded way of saying: someone else will come along to take their place. If Walmart shuttered tomorrow, it would cause some problems in the short term but within a few years, we’d have a suitable replacement. Either other big box stores like Target would fill the void, or we might actually see a reveres of the ‘Walmart effect’ with smaller, niche businesses flourishing that offer various goods that Walmart previously acted as a central hub for.

Same with things like fast food. If McDonalds closed tomorrow, other fast food chains and independent restaurants would fill the void because people aren’t going to suddenly stop wanting hamburgers. Of course, I’m of the same opinion as HamNo: it won’t happen in the first place. There may be a few millionaires and billionaires that are content to just let their wealth sit in a bank account accruing interest, but the majority of them are accustomed to a type of lifestyle that pretty much necessitates that they continue to engage in the market economy, regardless of whether they’re making as much money as they previously had. At the end of the day, the principle of ‘Something is better than nothing’ is going to win out.
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  toothpetardMatt
  7/01/16 12:22pm
  were money to disappear instantly we’d all be running around in the street torching each other while the means of production looked on, unchanged.
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  RadioRaheemMatt
  7/01/16 1:48pm
  The whole “if they can get 1%, they’ll still take that over 0%” just isn’t true across the board. First, it ignores the fact that investors will just go abroad to places where they can get a better rate of return. And secondly, 1% (or whatever the rate of return might be here in this new system) won’t be enough of a return to offset many investors perceived risk.
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SoapBoxcarWillieHamilton Nolan
7/01/16 1:18pm
Every business school student learns (if they didn’t know it already) the story of Henry Ford paying his workers $5/day, which often allowed them to purchase one of his Model T cars, increasing his sales and leading to a virtuous cycle. And while paying workers more in the hopes that they’ll buy the company’s products may not work for all companies, it would probably benefit our economy greatly.

Investors will always need to be prioritized to the point that they’re willing to invest, which (assuming the investor is rational) is to allocate their capital to the investment with the highest return (after-tax for most investors, although institutions may have different considerations) for a given level of risk, relative to all other opportunities. It’s hard to understand how in our somewhat low-growth/low-inflation economy, investors have still been able to demand returns as large as they have for lower-risk investments. It’s hard to buck the trend of paying workers as little as possible when it will almost certainly have the short term effect of a lower return on investment.

Longer term, the case is not as strong. Over time, if work is devalued and there’s a lot of employee churn, it can lead to higher retraining costs, higher rates of defect, a loss of a strong company culture and other things that will impair the company’s long term earnings and survival prospects. Unfortunately, with so many investment managers demanding high and consistent growth in the short term (because of how and when they are compensated), it has forced a shorter term focus throughout the industry.

Of course, it’s ironic that the investors in hedge funds and private equity funds are often the pension funds of the workers (those that still have pensions) who are being given the shaft. They’re literally paying people to cut their own pay. They could, however, put more restrictions on the use of their monies to invest in companies that outsource, or convert full-time jobs into part-time ones, but then their returns would almost surely suffer (at least in the short term).

Executives get paid a lot of money, and as I’ve argued for investment managers (who are probably the highest paid people on the planet) it’s hard to see how they wouldn’t do the job for less if these things were actually negotiated a bit more. What can you do with $100MM/yr that you can’t do with $50MM/yr that will actually make a difference in your happiness or quality of life, aside from the annual CEO/Hedge Fund Manager/ PE Manager dick measuring contest that takes place on a secret private beach in the Hamptons? At the same time, the optics of executive pay may be worse than its actual effect effect on earnings per share, but it stands to reason that for every million dollars you don’t pay the CEO you can pay 1000 employees an additional $1000/yr that will probably make a big difference in their lives (and will almost certainly be spent).

The pendulum is always swinging in one direction or another—the current shareholders-first movement is the result of the corporate bloat of the 1970's and 1980's, where executives ran companies like little fiefdoms (although employes were paid more than they are now) and passed the leftover crumbs along to the shareholders. After relentlessly pursuing efficiency over the past 30-40 years, we’re starting to see that it also has its limits. I don’t see how we’re not going to start swinging back in the direction of paying workers better—whether it happens by choice, by government action, or by popular uprising.

I might propose a slightly different ordering:

1. Society

2. Workers

3. Customers

4. Investors

5. Executives

Executives should serve their investors, benefit when their investors benefit, and not when they don’t. The only thing that is optically worse than executive pay is its asymmetric nature—it’s good to encourage a little risk taking, but the payoff for taking a risk is too high when it works out, and way too high even when it doesn’t. Think of the investment banks leading up to the financial crisis: would they all really have engaged in such risky behavior if they were still private partnerships, where any partner’s home could be sold to pay the company’s debts? Instead, they made fistfuls of money leading up to the recession, and fought like hell to keep their high compensation (which they were able to do, especially John Thain) when everything turned to shit and they got bailed out by the taxpayers. The lesson they learned is not the one they should have been made to learn.
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  Hamilton NolanSoapBoxcarWillie
  7/02/16 11:37pm
  Thanks for a good comment.
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whatisuptampaHamilton Nolan
7/01/16 12:23pm
This hierarchy has been attempted before, it leads to poverty. It was tried in China and the Soviet Union after WW2, it caused widespread famine and death to millions. It is being tried now in Venezuela with similar, reproducible results. Capitalism has lifted more individuals out of poverty, and has brought clean water, better lives to more people than any other system of commerce/government. It is ridiculously naïve to deny. Of course its not perfect, can it be made better, yes. The fact remains if you want to improve lives of those living in the poorest parts of society, make it easier to conduct business, easier to trade, easier to buy and sell goods.
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  JaboosMeltedButterwhatisuptampa
  7/01/16 12:37pm
  So you assume that if we deregulate business, business will do good things just because? I mean, we had huge chunks of our history where we had little to zero regulation, and regulation occurred because the corporations acted in very horrible ways.
  
  Quick question for you: which is the most important factor, capital or labor?
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RealAmurricanHamilton Nolan
7/01/16 12:48pm
Unfortunately, the moral argument here has already been rebutted through years of misinformation; useful idiots will argue that inequality is a natural consequence of our efficient markets, with no alternatives.

But the extent to which the investor class has prioritized short-term gains over long-run sustainability is keeping our entire economy from actually maximizing returns on capital.

By underfunding public goods like education we forego trillions of dollars in lost productivity, and in maintaining a working class that can barely escape poverty levels we lose out on billions of dollars in potential demand. We are actively shrinking the size of the overall economic pie in order to allow investors to reap a larger and larger slice.

At best, this strategy is successful for a family like the Waltons, who are actually able to gain so much during their own lifetimes that it does indeed extend far beyond the wealth they’d accrue in a more sustainable system. But the fact that half our country serves as misguided lackeys to that type of wealth, cheering and encouraging that pursuit at everyone else’s is fucking mind-numbing.

Also, this assumes that their only interest is in capital, and that their is no utility to be achieved from a society that has nice things (like a lower crime rate, a thriving culture, and ya know, some semblance of a morality to match our own rhetoric and supposed values...)
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  SungodlyRealAmurrican
  7/01/16 2:24pm
  Nicely said. Dialing the profit microscope down to quarterly reports has done more damage to our economy than practically anything else. Those at the top can grab their share quickly at the expense of a sustainable economy or even business model, and parachute out to a life of leisure, or, more likely, another CEO job somewhere that sees only that they have experience running another company.
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  RealAmurricanSungodly
  7/01/16 3:44pm
  Yep! And the investor class is too arrogant to consider their own possible shortcomings, and the Conservative underclass is too tribal, spiteful, and sycophantic to realize what useful rubes they are.
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Wile_EHamilton Nolan
7/01/16 12:57pm
I’ve worked for “Employee Owned” companies where employees are given “shares” in the company based on years of service and their base salary. Twice a year, employees are paid out on their “shares” based on the net profit of the company. It gives all employees extra motivation to help the company succeed and also shows the value the company places on employees.

Every metric shows that when the employees have job satisfaction, the company overall performs better. It isn’t a utopian idea that employers should value their employees.

At the same time, we need to recognise market forces influence salary. Namely, the more people in the employment pook who can do your job as well as you can, the less valuable you are. Someone who stocks shelves all day is less valuable than someone who can run the warehouse inventory software and manage the flow of materials in and out of the warehouse.
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  Lex Luthor's Saintly TwinWile_E
  7/01/16 1:24pm
  HamNo’s idea that all corporations hate their workers is bullshit. If it results in higher productivity/profits, companies are more than happy to invest in workers.
  
  If you work in fast food or at Wal-Mart, though, what’s the point in investing in you? None.
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  RidgeR5Wile_E
  7/01/16 2:00pm
  Plenty of shitty companies have profit sharing, too. Doesn’t mean they’re altruistic.
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