Re: David Faber Report : Putting 2 and 2 together

Mike wrote:
On Tue, 17 Feb 2009 00:37:01 -0600, John Galt wrote:

Mike wrote:
On Mon, 16 Feb 2009 22:25:39 -0600, John Galt wrote:

Mike wrote:
So, they respect the industrialists, while we either ignore
(choosing to read People instead) or revile them. Forget all the
other stuff -- that's one of the main reasons why we may end up a
fifth rate economy in half a century. We (well, you) pretend that
the have no real skills that qualify them for those positions,
preferring the fantasy that their abilities are no different from
the guy on the shop floor. Success in business is now politically
incorrect.
that's the second time you've falsely claimed that it is my position
that workers are the equals of top execs. i've never said anything
of the sort. what i have said is that a top exec is not worth
$billions more than an average worker, which is a far cry from saying
that they are equals.
I'm pretty sure that I agreed with that. I just pointed out that none
of these guys are getting "billions" -- for the sake of accuracy.

yes, they are getting $billions. i didn't say that was their annual
salary. but over a period of several years they get $billions.
They tend not to last that long. The billionaires are, in general, the
ones who found their companies and stay with it for decades. You don't
make that much money by going to work for somebody.


that never was my point. as i said, the billionaires use corporations in a variety of ways to extract their $billions, founding them and milking
them over time, playing the strip & flip game of the corporate raiders (or whatever they call them these days, private equity i guess) or in the case of the recent banking crisis, as a source of nearly unlimited debt which they invested and used the gains to pay themselves $billions but lost the principle. but you'll never find a $billionaire who provided products/services that wouldn't have been provided by others who would have done it for a lot less had they not been shut out by the anti-
competitive practices of the $billionaires.

My point was that the billionaires are usually the founders of their company. They become billionaires not by "extracting money", but by virtue of the fact that they owned thousands of shares on the day they went public, and the value of those shares increased as their company succeeded over time. In this way, successful companies possibly creates a billionaire, but also creates hundreds of millionaires for every billionaire.

I don't see how that process, played over and over again during many expansion cycles over the last 30 years, fits into your view of the process, particularly with the term "extract", and I have no idea how you are seeing the process as "anti-competitive", since it is actually a VERY competitive process at its core.

A share of stock is owned property, and it is that stock that creates the millionaire and, on occasion, the billionaire. Are you suggesting that there should be some sort of ceiling on the value of a person's personal property? If so, how do you square that with the concept of personal property rights?




i don't know about your statement: "they tend not to last that long". that may be true and if so it's probably because because they either give the money to charity or to heirs (that never have the business mind of the parent) who just lose/blow it.

No. THEY don't last that long. CEO's are not usually CEOs for long periods of time. Founders may be, but for most CEOs who are hired or rise through the ranks, they reach that position sometime in their 50's, and so even if they avoid trouble and don't get fired, they maybe get a decade in the position before they retire.

in the case of charity, people are
quick to give praise, but why should one person be in charge of distributing to charity the wealth that was created by hundreds of thousands of workers?

Because it's theirs.

and as to heirs, from a purely economic standpoint, there's no justification for them to have it (not saying $billionaires don't have a right to give it to their kids, they do. what i'm saying is that the system is flawed that allows $billions to be accumulated by one person in the first place)

And that's back to where we were above. How would you, in a society and a system that is needs people to take risks and build companies, incent them to do so if there exists a formal or informal deterrent from profiting from it?

I'm trying to get a grip on this. I form a company, hire some people, it's key to the company's success to maintain a tight ceiling on compensation so we survive and continue to grow. So, everyone gets stock and the hope for future reward. We're successful. We go public. All my employees profit nicely, some handsomely, some hugely, and I'm suddenly a wealthy man. I continue to run the company, working hard, succeeding against my competition. As a public company, I can't give away options like I did before, because of the financial implications. I hire a lot of people, I'm successful, the value of the stock goes up, I become a very rich man, possibly a billionaire, if enough time goes by.

OK. At some point in that process, in your view, I magically transmuted from a good guy to a bad guy. Why? How? What is the rational basis for determining the transition?


all
billionaires come from involvement with corporations, either directly
or indirectly (inheritance), there's no other way to get that kind of
money. it comes in the form of salary, stock options & a host of other
avenues (if you want to get fancy we can talk about how private equity
firms extract wealth from corporations by a process called "strip &
flip") but it's all value extracted from the corporations one way or
another:

http://en.wikipedia.org/wiki/List_of_Americans_by_net_worth

dice the pie however you want, in the end corporate fat cats wind up
with all the $billions and workers get the scraps.
Eh. Cost of a constitutional democracy and free market system. A few
guys get big buckloads of money. Compared to that, even somebody making
250K a year is "scraps."

The highest paid CEO in 07 (08 numbers aren't in yet) was Ellison of
Oracle. An annoying character who spends ostentatiously, chases young
chickybabes at work (rumor has it that they have an HR person who
follows Larry around all day, and if he's observed asking some sweet
young thing out, they quickly shift her job around so she's not in a
quid pro quo line of fire) who took in 192M last year. Well, he
started the damn company with nothing, so there's that, at least.

#3 on above list, net worth $27 billion


10th was Simpson of XTO. 72M

20th was Berkley of Berkley (:-)) 54M

25th was Hess of Hess (see the pattern?) 47M

50th was Hassey of Allegheny Technologies. 32M

100th was Farrell of Dominion Resources 17M

(I don't what at what point you think comp is excessive. Personally,
when I see over 10M, it seems highly irrational, over 5M irrational.)

i don't look at it like that. the wealth these people obtain is
incidental to the real problem which is that without proper gov't
regulation there is not a level playing field and the players take
advantage of that by attaining monopoly (or near monopoly) status at
which point they literally just coin money for themselves, their
cronies (which are the top execs that i was talking about before when i
said that half of them would be booted to cut costs to survive if the
company actually had to compete) and the stock investors, but mostly
for themselves.
Don't see it that way. All these companies are subject to major
competition, particularly from abroad. They are not monopolies in any
sense of the word I am familiar with.


it doesn't take being a monopoly (which is why i add "or near monopoly" in many cases) to achieve sufficient market power to be able to strong arm the competition (often in violation of antitrust which hasn't been enforced in at least as long as bush was in, not that i've seen anyways) such that market distortions occur and the playing field becomes unbalanced and $billionaires start to form (sort of like black holes forming in space -> $billionaires sucking money out of the economy). as far as global competition goes, corporations are global so it's not like it's strictly "us" against "them" and global "near monopolies" are forming up as we speak.

I don't see it. Monopolies are bad because they destroy the pricing power of competition. I see fierce competition in every business.


They have to compete and win every
day. It is hardly a simple process of "coining money."


but it is (for the "near monopolies"). microsoft should really be a division of the u.s. mint as every dollar they make is "coined" money. they add no value whatsoever, spend years & tens of $billions to produce a product nobody wants (vista) and if it wasn't for the microsoft "tax" levied on the vast majority of PCs sold everywhere in world, the company wouldn't be making a dime.

Good example. The consumer of the PC's has complete and total power over MSFT. All they have to do is buy one of the many machines that comes without MSFT. Dell offers systems with Ubuntu, all of the netbooks come with Linux.

I don't see the problem. I have a Linux netbook sitting in my closet that I travel with.

the oil companies will be coining money again as soon as oil prices start going back up, right now the only reason they're not coining money is because of the massive recoil from the huge run up in oil prices last summer, but when the market finally gets straightened out oil prices will be going higher and they will be printing money again. and they won't be using the profits to increase oil production either (as they haven't been doing for years).

But they provide value. Oil doesn't just jump up out the ground and say "stick me in the barrel."


Ask the CEO of
Caterpillar if he thinks he has a "monopoly" with Terex and Deere and
Kubota and Mahindra running around the world.


i'm not saying there currently is a monopoly in every major industry, that was just the logical outcome of the scenario of no regulation at all.

Obviously, but free marketers acknowledge the need for government to create a level playing field to insure adequate competition. That's not in debate.

However, MOST regulations do not exist to disrupt monopolies.

and while it seems there currently is no regulation (because the
gov't stopped enforcing it) there was enforcement before (years ago) so the market hasn't yet deteriorated into the complete monopoly scenario. so, yes, there still are some competitive industries.



with your stand that corporations don't need to be
regulated, taken to it's logical conclusion, there will be a monopoly
in every major industry with all the wealth in the hands of a few
corporate robber barons and all the workers at poverty level.
If it wasn't for Taft Hartly and such laws, sure. Monopolies are
anathema to free markets, which is why we prevent them from forming.


well are you against all regulation or not? seems to me that your above statement contradicts being against all regulation, i mean if you're against it you can't use it to support a point you're trying to make.

No free marketer supports monopolies, and acknowledges the role in the government in preventing them to form.

JG




JG


177 was Valee of Avnet, making 10.2M. So, 177 CEO's behaving highly
irrationally. 301 was Martin of Pitney Bowes. 5.04M, so that many
CEO's behaving irrationally.

It's interesting to see who DOESN'T behave irrationally, although they
could if they chose to. Charles Schwab made 4.66M in 08, August Busch
of Aneuser Bush took 3.93M, Brock of CocaCola took a relatively paltry
2.99M (makes me want to buy the stock), Blake of Home Depot 2.41M
(after the fiasco of the previous CEO, who is now running Chrysler),
Michael Dell 2M, Davis of US Bancorp 1.72M (one of the largest
regional banks who is noted for avoiding subprime investing -- the guy
performed, big time), Bezos of Amazon.com 1.28M, Eric Schmidt of
Google 480,000, and Warren Buffet of course fixes his own salary at
100K.

JG




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