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CEOs are hugely expensive – why not automate them? (newstatesman.com)
280 points by nixass on April 26, 2021 | hide | past | favorite | 344 comments



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.


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!"


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).


And so they go for stock buyback strategies. Reduce the supply, the stock skyrockets, cash in, leave.


You need profits for stock buybacks. Buybacks are just superior to dividends as a way to return capital.


>You need profits for stock buybacks.

You merely need capital. Lots of buybacks are funded by debt


Leveraged buybacks reduce the multiple. It’s not a cheat code to make your stock go up.


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.


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."


this is another one of those things you learn in business school, a commonly disdained yet imminently useful education, particularly for engineers.


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.


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?


They should, and they should use the money to do the corporate activities you mentioned.


A lot of the companies getting into debt have their own cash reserves.


> funded by debt

Or recently, government support packages.


Which is debt.


Dividends ought to not be at a tax disadvantage over capital gains for this reason.


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.


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


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.


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.


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.


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.


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.


Replace option contracts with RSUs or a vesting cliff and see how closely that resembles the VC fiefdom


this all sounds a lot like CEO talk to me...


I mean

Just make a contract to pay them a decent amount of the company doesnt go tits up


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.


> 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.


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.


> 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


> 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.


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).


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!


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.


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).


what makes you think this isn't already the case? CEO comps often include stock options.


If you prevent CEOs from selling their stock for the next X years, sure.


Isn't that also usually the case? There's generally a vesting period.


So what incentive does that CEO have to be cautious with my capital?

That just encourages extreme risk.


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.


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.


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.


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/


They should be compensated however their board says they should be compensated. You don't get a say in that.

I could say that all German people should wear purple shirts. It doesn't much matter unless I have a proposed method to enforce it.


All incentive models for ceos miss the point, that incentives do not work. People will just fulfill the metric, without incentive most people will do what is best for the company.


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.


Sure. Quite. But why not try developing an AI to replace them that can make you a >5x return?


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.


> 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.


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.


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.


I have mixed feelings between your response and the response you are replying to. One one hand I can clearly see how what you're saying makes sense. On the other, I still am inclined to believe that if you really distilled the actual purpose of everything you mentioned, it could be formulated in a way that doesn't require AGI.


I think one thing to consider is the non-stationary distributions in the problem space.

We may be able to formulate our current understanding of what it takes to be a CEO in every feasible future context that we can imagine, and create an agent (not an AGI) that does that.

But then what would happen when the distributions change out of sample in an unforseeable way? Suppose two countries go to war and this drastically changes the operating environment of the business. The agent would need to learn how to operate with human-level capability in this novel environment which it wasn't trained specifically to do. That's why I'm thinking it requires an AGI.


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.


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.


Because they may be so expensive precisely because it’s difficult to automate them.


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.


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.


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.


How are resources allocated in this utopia?


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.


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...


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.


Do you really think the people who wouldn't make their own meaning are finding tons of purpose in their current jobs?



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.


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.


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.


The ones that were able to keep their anonymity and didn't engage in fiscally irresponsible behavior like drug purchases and $200k+ vehicles are probably very happy after 10 years.


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).


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.


This. A more practical approach would be to embrace the fact that no one really knows what's going to happen & plan accordingly.


Lots of people said the same thing about market traders and yet a great deal of their activity has been successfully automated.


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.


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.


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.


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.


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).


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!"


Extremely well paid CEO’s fail all the time. There is zero evidence that rewarding CEO’s with absurd amounts of money makes any difference to the long term outcome of the companies they manage. Any idiot can buy back shares to boost share prices and/or cut cost to make the company more valuable short term and fail long term.


After dealing personally with a few CEOs (good and bad), I’ve come to the conclusion they’re paid proportionally to the amount of damage they can cause.

This probably applies to many other professions. Doctors come to mind. Teachers and police don’t, though.


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.


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.


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.


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


> ...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.


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.


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.


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/


I think you might be missing the part that says "All numbers in thousands" on that table you've linked.


No he isn't.


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/walmart...

[1]https://finance.yahoo.com/quote/WMT/financials/


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.


Thank you for actually helping!


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.


You seem to be misunderstanding what "Gross Profit" represents.


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?


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.


Do you honestly think they would come out ahead in this scenario?


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.


That assumes you can predict which CEO will do better, not at all a certain thing.


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...


Nice. We finally found the guy who believes this fairy tale!


Anyone who pays a CEO well believes this. Can you find a large company that doesn't believe it?


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.


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.


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.


> 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.


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.


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?


> 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.


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.


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.


  In reality, it is the guts of fish that rot and stink before the head. 
Source: https://www.phrases.org.uk/meanings/fish-rot-from-the-head-d...

  The guts of fish will start to rot quickly and spread terrible bacteria and disease throughout the entire fish.
Source: https://www.reddit.com/r/Survival/comments/mv04em/is_gutting...

Hope this helps. I'm not sure why you were downvoted for expressing curiosity about fish biology.


At a guess (a wild-ass one, I admit): Some of the softest, most porous tissue of a fish, with the highest surface-area-to-volume ratio, and most exposed to the environment with all its microbes -- as opposed to most of their flesh, that is contained within skin and scales -- are the gills. So it feels very plausible that the gills are the first bit of a dead fish that would start to rot.

Well, those or the guts, of course: Assuming fish have an intestinal microflora like land animals, their guts would have a head start on rotting (Heh!) over even the gills. But I guess that's where skin-and-scales-as-container comes in again, only the other way around: the possibly rotting guts are hidden away inside the critter, so not as immediately noticeable as any rot starting from the gills up at the head.

This is all my private speculation, though, and most probably influenced by (i.e, my self-rationalisation of) precisely the saying you're enquiring about.


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.


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.


CEOs are workers. If you're talking about people who don't work for the business, you might be thinking of shareholders?


I don't think he's complaining the the CEOs get paid a salary. I think he's saying that even when a CEO massively screws up - they get a multi-million dollar golden parachute.


Everything they do is massive. People are paid relative to the size of their potential success or screwup, and pay is not withdrawn based on which they did.

I get the point that golden parachutes are annoying, but yeah. It's all part of the compensation package, and the reason for it is in the above paragraph.


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.


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.


> 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.


The example I would think of is getting a budget lawyer for something important.

You need someone that can give the time and attention - except you would be better off with a human that can do the right thing poorly, instead of a robot that can do the wrong thing well.


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.


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...


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.


Agreed. If anything, this study makes the case that one person with sweeping decision power is at best a liability.


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!


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.


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.


Doesn't seem like 'strange reasoning' at all. Since the comment was like 'having only 1 driver is likely to be a liability', to which you responded 'show me a vehicle with no drivers' and you got a response saying 'this vehicle has 3 drivers'

The strange reasoning is taking the the statement that said "just one driver could be a liability" and asking for vehicles with no drivers.


Not to mention the person you are replying to edited their comment after the fact (possibly as I was replying). It originally said something to the effect of "show me a company without a CEO". Which I think is significant, as I took "A" to mean "singular".


Let me take away your keyboard and let's see how you fare at c++ or Javascript.


If someone dies in you family you can still write a printf statement. Without a keyboard you can't. Bad analogy.


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.


Isn't the assumption here that if they didn't provide any value then a death in their family shouldn't affect the company?


Seems like an illogical assumption. What it shows is just that having a dysfunctional (again, quite understandable in this case!) CEO can subtract value, which is not the same as an ordinary one adding any. Maybe Tom Hanks's pal Mr Wilson would work just as well as all the other ones.


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?


If Amazon didn't have Jeff Bezos, it would probably still be a bookstore today.


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.


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.


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.


There is probably a bias in that study for small companies, where the CEO do grunt work.


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.


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.


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


> 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.


Hopefully they do, because it is.

I bet you think the economy is the same as "a business".


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.


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.


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.


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.


> 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.


This is a startup that is in fail mode, unless the CEO is raising obscene amounts of money and the business is progressing.


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


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.


This.


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.


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?


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.


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.


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...


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".


They why do people who own the companies not oust board members who are wasting their money?


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.


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?


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.


Why are the people in b) okay with overpaying for something?


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"


So a significant portion of owners employ each other at each others’ companies?


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...


What about private equity firms?


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.


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.


> 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.


Why don't we see more private equity firms snapping up companies and hiring cheaper CEOs then?


isn't the solution, then, to put the workers on the board?


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 £100K-£200K, even at financial companies. (about $140K-$240K) whereas in the US, I think it is much higher.


What kind of Mickey Mouse start-up is that? CEO cash pay should be low and stock pay high.


That happens with non-profits too...


> 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.


"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."


Why would investors vote for board members that waste their money?


Class solidarity.


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?


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.


In other words, normal market forces. The same reason you're paid whatever you're paid.


The "invisible hand" of plutocrats isn't the traditional meaning of "market forces", is it?


Rich people's evil plan to give other people money and drive wages up. Got it.


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.


> 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.


You think investors pay money out of their own pocket to CEOs out of altruism?


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?


You made the value judgement, not me. I'd put it down to "keeping up with the Joneses", personally.


"keeping up with the Joneses" by... pushing the Joneses up? Does not compute.


The problem is this market is disproportionately influenced by the people it's pricing.


Very often investors sit on boards, too


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?


> 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.


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.


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).


> 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.


Thank you for positing something other than the brilliance and talent of executives! :)

However, while I understand the idea of de-risking to minimize financial and legal risk by hiring certain executives and consultants, it still doesn't help me understand why that translates to paying certain individuals so much money.

No matter how this is presented, it seems to always boil down to 2 possibilities. One, these people are really so talented (in the sense of rare athletes) that they are worth O(100M). I think this theory is patent nonsense, because I simply don't agree that what they do is difficult in the same way that, say, theoretical particle physics is hard.

Or two, various synthetic legal and historical forces have gradually driven the compensations of these people astronomically high in such a way that the economy depends on it, and people believe that it makes sense, like some kind of religion. This is hand-waving and conspiracy-sounding, I know. But it is the only way I can make sense of it.


Well, to us, it obviously looks like too much money. But do you agree that CEO's decision making could take a company stock to anywhere between -5% and +5% its current value in the next year? That's a lot of value at risk. It's orders of magnitude higher compared to the risk related to decision making of regular top management (who already earns in excess of millions).


I agree about the magnitude of the risk, but it is not obvious to me that risk magnitude is proportional to compensation. Clearly there is some relationship between the two, but I don't see why it would be directly proportional.

If we think of executives as machines or devices, then it makes some kind of sense, from the standpoint of a balance sheet. If there's a $5M risk, you might buy a $3M device to mitigate it and still clear $2M.

To this I would observe that executives are unlike machines in several important ways. There is no guarantee that they will perform the way they are advertised, or as well. They are generally guaranteed to be lavishly paid, whether they succeed or not.

Most importantly, if, as I believe, the compensations are synthetically high and there is no genuine supply and demand basis for these compensations, then there is no economic need to pay them so much. Those same jobs could be done by those same people for less. There is nothing particularly special about these people other than their ability to be identified as a magic, oh-so-wise business executive.

My central premise (that I assert without evidence) is that the astronomically high compensations of these people is a social construct. It is shored up by years of legal and corporate machinations that have worked a bit too well. Not any sort of basic economic force. And now it is fait accompli.


Most responses are trying to tell you why they ‘deserve’ their pay. True or not, this is irrelevant. CEO pay is set by the board in the same vote that sets their own compensation. ‘The company’ is not a sentient being. Nobody is looking out for its best interests.

5-year-olds from most cultures would have a hard time understanding this because it breaks their understanding from adult-child stewardship.


It reminds me of the immortal line from The Usual Suspects: "The greatest trick the devil ever pulled was convincing the world he didn't exist."


We shouldn’t moralize this. The point is that CEOs and board members are going to act exactly like anybody else in their position. Find a different structure if you want a different behavior.


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.


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?


Many people with the skills to be CEOs of important companies would consider $1M a rounding error. It makes no difference to their economic outlook.

Also, there are many ways to make $1M without the risk and responsibility of being a CEO (among other things, just making low-risk investments with a $20M portfolio).

So between the comparative ease of making $1M elsewhere, and the low impact of $1M (to someone with tens of millions in the bank), it's not surprising why such people cannot be had for that price.


Are you saying that, as a result of being so incredibly talented, by definition, executives are already rich and therefore have to be paid more to keep them around for their valuable services and wisdom?


I take no position on talent or wisdom, but yes the kinds of people capable of being F500 CEOs are mostly already in this category of richness.


If this is true, why don't companies just higher people who are willing to be CEO for less money?


Why don’t companies hire software engineers who are willing to write code for less money?

People tend to want to be paid market value


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.


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.


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.


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


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.


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.


I agree that they also need to bring those things to the table. But "talent" is a personal trait right, so I guess that includes dedication and gumption.

Plus, being able to perform under high stress, being a great communicator, organiser, putting processes into place, dealing with all kinds of personalities, convincing customers, providing certainty in an uncertain environmemt to customers, employees and investors, etc.

Your claim that anyone can do that is simply not true.


> That is simple: because CEO's need to be the best of the best.

I don't think this is the case at all. The prime criteria are: 1) Have you been a CEO before of at least a medium sized-company? If so you'll probably be able to handle lots of CEO-type situations. 2) (Not crucial.) Have you done it in this sector already? If so we can talk to others in the sector and figure out a bit about you and your relationships.


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.


"If a role can be outsourced, it can be automated."

I really don't see the logic in this statement.


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.


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.


I'm building a house right now, and I sure am excited to learn that I cab replace all these expensive subcontractors with robots!


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.


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.


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!


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.


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.


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.


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.


Write trading bots with enough capital to trigger gamma squeezes?


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.


> 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.


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.


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.


>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


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.


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.


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.


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.


Do you have a link where I can read more about this? Nothing came up from my googling.


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.


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.


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


I wasn't going by market share but by pricing. MBB charges the most per amount of "value" /"intangibles" delivered.



haha this.

This is exactly 'Scapegoat as a Service'.


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.


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


This exists and is called management consulting.


this niche is apparently quite packed with individual contractors.



I'd actually like to invest.


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.


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?


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.


That liability is already outsourced to consulting firm, unfortunately.


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.


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.


> 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.


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.


Oh for fuck's sake, its a message board, not a goddamn missile defense system. Get off your high horse.


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.


So you never voice opinions about topics that you aren't in expert on, otherwise you'd be a flaming hypocrite, right?

Cool!


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.


Sorry, us plebes down here in the dirt bow to your lofty white high-horse.


I am also plebes, but I would love to learn from successful people.

Uninformed opinions teaches me nothing.


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.


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.


I'd be interested in hearing about this experience if you'd be willing to share?


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.


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...


I like his post downstream on 3 factors of CEO pay:

https://www.reddit.com/r/explainlikeimfive/comments/210to8/e...


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.


prices are set by supply and demand


Prices of fungible commodities are set by supply and demand.


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.


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.


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.


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.


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"!


Automate management before they can automate us


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.


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.


> 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”


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.


> If a role can be outsourced, it can be automated.

This line alone makes the article ludicrous.


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.


I'll go against the common thought here. CEO pay is ridiculous. They can only pay that much because the workers have to work to pay their mortgage and pay for their health concerns. Noone would agree to making other people rich otherwise. The whole system is a mess and ready to be disrupted.


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.


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.


Well this would certainly diminish the jockeying for position of those hoping to succeed the CEO.


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.


Unlike CEOs, authoring idiotic clickbait IS a job that is rapidly being automated away..


Board still needs a throat to choke somewhere...


They could undervolt the CPU too XD


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.


> 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.


Fair enough - I agree that the sentiment towards certain topics has changed over the years.


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.


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


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.


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.


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.


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.


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.


Or just a centaur model where the ai generate courses of actions and the human picks from those and/or modifies them.


Touches on an interesting point. I think the data input is highly unstructured and the output not very regular.


Sounds like the first step is figuring out a new standard to structure executive information.


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.


I read "executive information" as information about executives, not for them... (But looking back up this sub-thread, I now guess I got it wrong.)


This is exactly the general hypothesis behind https://100dollarceo.com


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


“Sell shit online” is such an inobvious idea. I don’t know how Bezos thought it up! Completely unexpected.


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 ...


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.


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.


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.


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.


Somebody have to make new CEO salary formula. (Standard salary * improving current performance ) - increasing debt + reducing debt + (long term strategy completion % by expenses)

No stock options. If he wants stocks, he/she needs to buy.


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


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.


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.


Because people will figure out how to exploit the algorithm.


As if no one has ever figured out how to exploit the CEO...


Ha!! My miniskirt says true ;)


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.


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.


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.


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!


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.



I nominate Firefox Corporation and their CEOs as a proving grounds and guinea pigs, respectively.


At least here CEO take the legal liability if like the company files bancruptcy to late, etc.


I wonder what a fully automated Steve Jobs would have scaled Apple into.


Yah, but they're a deal compared to the alternative!


Seems like an advertisement for DAOs




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