Because some “exceptional” paths actually make the world worse. While some humble ones make the world better in some small way.
The CEO of TurboTax makes the US worse by leading a company that lobbies to keep taxes complicated so they can remain an expensive middle man. A line cook is doing infinitely more good for the world.
I believe it. The consultant may change more things in the world but I don’t see how that change is necessarily a “contribution”. More like an optimization for a small set of people. The line cook however is creating from raw something that literally nourishes.
I think you're just falling on a lack of imagination. You can easily see what the line cook is producing, and it's much harder to see what the consultant is "producing" cause it's the stuff of thought and ideas, often. But that doesn't make it any less valuable - and often it's more valuable. The market certainly thinks it's more valuable and rewards it as such, which is a fairly good proxy for actually providing a contribution.
Also, you say:
> More like an optimization for a small set of people.
As if that's a bad thing or a not-as-worth-it thing. But this is what a lot of software is. I personally work with schools, and one of the things I do is create tools to make teachers and school administrators more efficient and effective at their jobs. It's a fairly small subset of people that I'm helping, but I believe I make their lives a little bit better by providing them better tools that are time-saving.
Is what I'm creating less valuable than a line-cook? I don't think so.
> The market certainly thinks it's more valuable and rewards it as such, which is a fairly good proxy for actually providing a contribution.
I've often wondered why 'the market' doesn't understand that if garbage men disappeared, my city would look like a hellscape in a week. Or why my cousin whose team keeps an entire county electrified, makes shit pay compared to me.
My conclusion was that 'the market' isn't a fairly good proxy for actually providing a contribution but as with all things human, there's also politics involved.
> I've often wondered why 'the market' doesn't understand that if garbage men disappeared, my city would look like a hellscape in a week.
I think that's a fundamental misunderstanding of the market. I didn't understand this either until I (self-) studied a bit of economics.
The classic question in economics was this - why are diamonds more valuable than water? Without water you're dead. Without diamonds you're mostly no worse off.
The answer to this led us eventually to the theory of supply and demand. Sure, without garbage workers, the city would be terrible. That's why we pay them. But the supply of garbage workers is apparently much larger than the supply of e.g. software engineers. If you have 100 people who can do one job, vs. person who can do the other job, that 1 person has a lot more leverage and you have to pay them more. Even if both jobs are equally important.
That's how a market works. If your friend quit his team, he would presumably be easy to replace. If you quit your team, it would be harder. That is eventually reflected in your salaries.
It's not perfect - since no one has perfect information, a lot of this stuff is based on guesswork and consensus. But you can very clearly see that the principles are correct.
> My conclusion was that 'the market' isn't a fairly good proxy for actually providing a contribution but as with all things human, there's also politics involved.
That's a fair conclusion, but I disagree with it. I think it's really true that one Einstein contributes more to the world (on average) than one garbage worker. One software engineer contributes more to the world (on average) than one garbage worker. And so on. It's mostly due to scale effects - one garbage worker can only do so much. One software engineer does a lot more because their work is easily duplicated and scaled and affects a lot more people.
I've also self studied economy and am jaded with all the examples that go to the root of the economic theory while reality is oftentimes more complicated. Such as in the example with me working for a VC backed company, my friend working for the utility company and GPs consultant working for whoever pays the money.
> The classic question in economics was this - why are diamonds more valuable than water? Without water you're dead. Without diamonds you're mostly no worse off.
Would people pay more for diamonds if they were dying of thirst? People pay more for diamonds vs. water only if the water problem is already handled. The economy is such a complex model of every interaction that I find it disingenuous to base the assumption that market rate == usefulness on pure theory.
> That's how a market works. If your friend quit his team, he would presumably be easy to replace. If you quit your team, it would be harder. That is eventually reflected in your salaries.
In this particular circumstance, no. He's a lot harder to replace in terms of quality and knowledge than I am in my current team. We were lucky to get injected with millions of dollars of capital while he works for a utility company. He is useful for thousands of people. My lines of code have not been used by anyone yet and possibly will never be.
> It's not perfect - since no one has perfect information, a lot of this stuff is based on guesswork and consensus. But you can very clearly see that the principles are correct.
The principles are correct; is it possible that they are correct because they are fundamental, and not the actual reality where politics come into play? If we'd be designing for the real world like we study physics in high school (no friction, perfect spheres...) there'd be a lot of difference between the theory and practice. I'm not sure why people suggest economy is otherwise.
> That's a fair conclusion, but I disagree with it.
Likewise. We can agree to disagree. But taking politics aside, I am glad that at least on some level, one can find a software engineer in a poorly managed country making less than a garbageman in a well managed one. So, somewhere in the world there exists a garbageman that provides more value to society than a software engineer.
Bravo. You understand that textbook economics (and a huge chunk of research economics) is a hilariously oversimplified model of the fiendishly complex field of human interactions.
I believe it is simply useful for many people to be able to state textbook economic orthodoxy as "a fact", even if it is almost trivially broken (as the supply and demand curve story is on many levels) or historically wrong (as the fable of money arising from barter). This lets people justify all weaknesses of the current economic system by simply saying "It may suck, but this is what it is, a law of nature. We can change it about as well as we can reverse gravity. Conform, and propose no change."
> The economy is such a complex model of every interaction that I find it disingenuous to base the assumption that market rate == usefulness on pure theory.
I agree, but I think this is also generally true. It really is true that a garbage worker is generally less valuable on a societal level than a software engineer (in terms of work output - they might be far more valuable for other things which are just as important!)
> We were lucky to get injected with millions of dollars of capital while he works for a utility company. He is useful for thousands of people. My lines of code have not been used by anyone yet and possibly will never be.
Look, that's true of a lot of software that gets written. There is a lot of waste. For sure if you look back and see that lots of code written was never used, that code in particular wasn't better for society than something more concrete.
But I look at it like with science. Lots of scientists are conducting research that won't ever pan out, doing experiments that end up going nowhere, etc. Was that value-less for society? I don't think so. If we could know ahead of time what would work and what wouldn't, then of course that wouldn't be valuable. But throwing out 100 bad ideas and ending up with a lightbulb is still worth it for society, and the markets react as such.
In your case - the reason VCs even have that money is because in the long run, given enough bets, they make money back, which for the most part translates into "they created enough value." Even if individual bets ended up not mattering.
> The principles are correct; is it possible that they are correct because they are fundamental, and not the actual reality where politics come into play?
Oh for sure there's a lot of distortions, both for good and ill. No argument there.
I just think that for the most part things are correct and adhere to the economic theory, and outliers are relatively rare. As opposed to
> I am glad that at least on some level, one can find a software engineer in a poorly managed country making less than a garbageman in a well managed one. So, somewhere in the world there exists a garbageman that provides more value to society than a software engineer.
Ahah, funny but true. This btw is itself the result of regulations - if people were free to e.g. change countries as much as they wanted, fairly rapidly wage gaps like this would disappear, which would be good for the world IMO. At least economically speaking.
> In your case - the reason VCs even have that money is because in the long run, given enough bets, they make money back, which for the most part translates into "they created enough value."
The VCs get the money from their limited partners. As a rule the VCs don't have meaningful skin in the game. They invest other people's money and get paid a percentage of the money they invest. They don't reinvest their winnings either, that money goes back to the LPs!
Most VCs are also pretty bad at their jobs. They're totally undifferentiated, are not able to recognize great startups, and don't have much to offer to founders. You wouldn't expect an industry with those characteristics to do very well. VC investment is much riskier than investment in some boring 60/40 stock bond portfolio, so venture as an industry has a high hurdle to clear if they want to deliver superior risk adjusted returns.
How many venture bets in the past 15 years have produced companies that will become the next Google or Microsoft or Apple or Facebook? Zero. It's those winners that make the venture business work on paper, and when they don't show up for a decade the entire industry is in the red.
You can postulate that venture must be profitable because otherwise how could it possibly exist. But if nobody is investing their own money (not the VCs, not the LPs, not the startup founders) you're not going to get an efficient market.
I think a lot of this is about perceived value. A gardner gets to see the products of their labour around them every day. A software developer at a bank might write lines of code and never even know when they are run, but those lines of code might, protect against a risk that would otherwise have brought down the company, or optimise investments for a pension fund that help generate additional tens of millions of dollars for people's pensions over the lifetime of the code. A lot of code makes only a tiny difference, but it can make that difference for millions of people over decades.
The entire idea that money is a good representation of value to society boils down to a really poisonous just world fallacy built on a lot of ugly assumptions.
I disagree. Do you have a reason to think you're right? Or a better way to represent value?
(Note again: I'm talking specifically about productive value to a society. Someone without a lot of money can still be enormously valuable in many other respects, e.g. a beloved family member.)
Many of the people who are extremely wealthy did so by exploiting society and corporations are well known for consistently dumping their externalities on society to deal with while reaping the benefits for themselves and their shareholders.
To say that money is a good proxy for value to society seems incredibly naive at best and downright disingenuous at worst.
I know yours is a common view. I just think it's wrong.
There are certainly some wealthy individuals who "exploited society". But I don't think that's a majority (depending on how you define wealthy.) I also don't think most corporations are just dumping externalities on society and reaping benefits. The age of corporations is also at least partially the age with the best standards of living and the best life for most people, at least in terms of wealth.
> I also don't think most corporations are just dumping externalities on society and reaping benefits
Are you measuring most in terms of where the money goes or just the number of corporations? Because some of the biggest are quite literally causing climate change, poising the land, and getting people killed (if not killing them directly).
Of those that are left I'd still make the argument that they're destroying public health through marketing, but apparently "having ads shoved at you all day every day damages your mental health and that damages society as a whole" is somehow a controversial statement because marketing helps people make money.
> one Einstein contributes more to the world (on average) than one garbage worker
And so does one Putin. Your point about scale is valid but the implied value judgement of choosing Einstein is not (whether you intended that or not, choosing Einstein ensures everyone will read it that way).
One software developer or engineer working for a big nasty corporation like Shell or Facebook does create more change in the world than one garbage collector, undoubtedly. But it's fully possible for the change they create to be entirely negative. An engineer who creates a faster rainforest cutting machine, for example, or a better method of catching fish that results in destruction of an ecosystem, or a developer who writes ever more sneaky ways to invade your privacy. More change does not equal more value.
Even the most naive don’t believe that a perfect capitalist market exists today, so that’s irrelevant. He isn’t arguing that “in a perfect system this would be true”, he is arguing that in this system, it is true.
Because it requires the literal use of government force to suppress market forces, ie to prevent the slaves from refusing to work and running away to find better opportunities.
That doesn't work. You're effectively saying that if I create an army and simply steal from you, that is capitalism because its my own private army. It violates many tenets of capitalism. Buyers and sellers must act voluntarily and enslavement against the will of the slaves, certainly seems to violate this.
That said, even if you simply view the slaves as property with no agency of their own, my original point was more that you can't compare the net worth of the slaves against the slave owners in terms of value created.
>Buyers and sellers must act voluntarily and enslavement against the will of the slaves, certainly seems to violate this.
Can you go into this a bit. In general sellers can acquire materials (oil say) by invading a country and mining it. If that seller then sells the oil acquired thus, I can't see how the buyers and sellers are not acting voluntarily? Is war/violence antithetical to Capitalism in some way that I'm not aware of?
Do you have examples of widespread slave economy that did not require a government framework to support it? All examples from modern civilization i can think of involved laws specifically blocking slaves from participating as equals in the market economy, ie anti capitalist?
> I've often wondered why 'the market' doesn't understand that if garbage men disappeared, my city would look like a hellscape in a week
Maybe it's because "the market" believes you would be a garbage man if there weren't enough garbage men, because the price of garbage men would exceed what you were willing to pay for it.
That one doesn't trouble me as much as this one:
> Or why my cousin whose team keeps an entire county electrified, makes shit pay compared to me.
Now is it so much easier to hire people to electrify a country than to hire nerds to make cool shit?
Maybe so... Some of these big tech companies have massive headcounts and rarely (if ever) make anything cool after the first thing that made them rich. How big is your cousins' team and how many electricians are there in your country?
But one day, everyone will want to be a programmer... what will happen then?
Having spent some time working for the city there are very few difficult jobs at a technical level. It’s almost the definition of the job existing as the city level. Everything that is hard is outsourced and paid accordingly.
The problem here is that you're equating market value with everyday value. A bit like when people say evolution is just a theory, and there's a line between scientific theory and everyday theory.
Only in this case, why should we think the market value is the only thing to care about? Sure the market gives a number to every good and service, but are we not entitled to dispute whether that number is the right number?
> The problem here is that you're equating market value with everyday value.
As I said somewhere else, water is far more valuable than diamonds. But selling water doesn't earn you nearly as much.
That's not a sign of the "market value" being different than "everyday value". That's a sign that water is plentiful, so however much you want and need water, me selling you water is not really helping you - you can just go get water yourself.
> Sure the market gives a number to every good and service, but are we not entitled to dispute whether that number is the right number?
Of course. And it's sometimes wrong. We have lots of rules and regulations that try to make the market more in line with other things we care about.
But you do have to provide an alternative. And I know of no better mechanism than markets to, in general, give a price to something. Almost everything else is flawed and/or biased in some way.
And btw, parent comment wasn't providing a nice justification for why the pay of consultants is flawed - it was just quipping that they are clearly not worth the money. Which is offensive to me, I dislike just writing off a whole profession. That's why I asked for clarification!
The way I see it marginalism gives us some numbers, but given some constraints. For example, you can't be sending kids down your mine. The market then gives you an alternative figure for the price of diamonds. The question then is what constraints are reasonable. That whole discussion is a debate about our values in another sense.
About consultants (the MBB/B4 kind), all I can really say is that they tend to confess on their own that they don't provide much value. Everyone I know in the profession seems to say so. They find it utterly baffling that 23 year olds can be rented out at about 6x their salary to do presentations to managers with decades of experience. They often tell you that they are simply rubber stamping some internal decision with some nice slides, and that the slides have no real insights.
There doesn't have to be a contradiction either, it may well be that these guys are scarce like diamonds, but also like diamonds, they aren't really valuable in another sense.
Why did you feel personally attacked? OP didn't mention software.
OP specifically mentioned Mckinsey consultants, i.e. "advice givers" and PPT generators who mainly exist to provide cover for higher ups. I'm inclined to agree with them.
I’d assume we’re arguing about general principles, not about specific jobs, it seems like navel gazing if we’re truly having a discussion strictly about “who is more valuable a garbage man or a McKinsey consultant”.
It’s merely an illustrative example to stoke the broader question of “are people who are more highly paid actually more useful to society?”
The premise is still worth challenging. It's not inconceivable that some of this thought-stuff is actually bad, or bad from a certain perspective, and the contribution is outright negative.
I agree that that can be true. But I don't think it's true in general, certainly not such that you can simply dismiss an entire profession as not providing any value.
An executive for the Coca Cola company or Marlboro will be paid more than the Mexican line cook as well but they are also actively more destructive. Salary is more of a proxy for impact, less so for value.
>The market certainly thinks it's more valuable and rewards it as such, which is a fairly good proxy for actually providing a contribution.
The market has really bad metrics when it comes to contributions. One can see it very well with entertainment for example. What do people like MrBeast exactly do other than simply specialise in creating viral videos and therefore wasting the time of millions on individuals?
Look, I don't mean to be offensive, but this reads to me as "people like things that I don't like, therefore they're wrong and the market is wrong".
People like MrBeast! That's why he's successful. What is he actually doing? Creating entertainment for people. It might not be your cup of tea, but there's no inherent difference between what he's doing and what Shakespeare did. One generation ago people lamented reality tv, before that tv in general, there was a time that books were considered bad, etc.
This is exactly why a market mechanism is good! Because I don't want your views, or mine, to be what decides whether something is "worth it". You and I have different tastes, and we have different tastes to millions of other people, we shouldn't get to decide what they find valuable - they should.
I see a clear difference between what he does and Shakespeare. People like MrBeast focus on exploiting the human brain simply to get more views with thumbnail design or keep you watching with sophisticated editing. Moreover they focus on exploiting the algos on these sites. In fact they specialise on everything but true and valuable content.
Shakespeare focuses on exploiting the human brain simply to get more people in to see his plays, by playing on people's emotions, giving them empty feelings not connected to the real world, writing stories whose sole purpose is to keep people engaged until the end to find out what happened, etc.
What's the principled difference except that you like one and don't like the other? Or that society considers one "valuable" and the other less so?
Do I think MrBeast is doing anything as deep and rich as Shakespeare? No, I don't. But I don't think I get to make that choice for other people. I love reading fantasy novels and think they are often every bit as deep as Shakespeare, sometimes more so. Many people in the world look down on that and think they're not as valuable as "real literature". Luckily, I get to decide what's good and what isn't, what's valuable and what isn't.
The problem is the relationship between what those people do and what they gain. Why should videos in which you throw eggs from a bridge wrapped in drinking straws give you millions each year?
this is just obvious wrong allocation of resources in the market.
I also don't think throwing a basketball really really well should earn you millions, nor do I think that creating new fashion styles should earn you millions. And lots of people don't think that Shakespeare's plays are any good and that he should've earned anything off of them.
Maybe the world would be better off if I (or you) were a dictator and could impose our views on everyone else. But I don't really trust anyone to do that, so a market mechanism is better than anything else. And whether we like it or not, more people find watching MrBeast or Michael Jordan "worthwhile" than other things that we care about more.
(If I were a dictator, I'd put most of our resources on advancing scientific discoveries, with an emphasis on figuring out how to make humans immortal, and a huge part of our resources would go to figuring out AI safety, then to AI. That is the correct way to allocate resources in this point in time, IMO. How many people would like to live in such a world?)
There's a big problem here. MrBeast does what drug dealers do, in a less obvious way: they change the apparent value of the thing they're selling. Essentially a trick: use this product and your desire to use this product increases.
That is not how the conventional free market is supposed to work. I'm happy to give that the market wants weird things, but the basic thing that's missing here is a feedback loop: you go and eat at a restaurant, you like the meal, you come back because your guess about the subjective value of the meal to you was correct.
The market for addictive experiences breaks this loop. You snort some drugs, and you feel you need to break into people's houses to get money to buy more. Ask any recovered drug addict whether they think it's actually worth it, and they will tell you of course not but the addiction is so compelling. People in this situation are robbed of their freedom, the essential ingredient in a free market.
Now I don't know a heck of a lot about Mr Beast, but a lot of internet influencers do the same thing as candy salesmen. It's bad for you to eat loads of candy, you don't want to be fat and get diabetes, but in the moment you make the wrong decision. Influencers do the same, it's a cheap thrill designed to make you forget you're in control of yourself.
Shakespeare is the opposite. You're supposed to be thinking about human nature, but you don't get your dose of satisfaction without quite the mental strain. You can't overdose on Shakespeare; you'll fall asleep first. People can and have overdosed on silly internet videos, staying up until 3am.
Because it's entertaining. It's more entertaining to me than reading most of Shakespeare.
I imagine that if you gave the choice to a person to watch what you described or to read Shakespeare then the vast majority would choose to watch the eggs.
Well it depends on what you mean by "contributes to the world". For sure I don't think we can measure people's contributions only based on their work.
But assuming that's what parent was talking about (since that's the only thing they mentioned) - the market is sometimes wrong, for sure, but not as a general rule. If someone is earning a lot of money, they are giving some value that is worth it to the company that is paying them. More money = more value.
This doesn't always track with "contributions to society", because you can do things like e.g. stealing, which "gets you money" but doesn't contribute to society.
But consultancies as a general rule aren't stealing, they aren't as a general rule doing unethical things, etc. They are, for the most part, helping businesses. And that help is worth real money. This isn't theoretical either - if a consultant helps a business be more efficient in some process, that means real money to the company, which means real-world additional wealth is generated, which is a good thing.
The parent just made a quip because (I imagine) they think consultancies are a waste of money. And sometimes they are! But c'mon, I've known plenty of good, smart people working as consultants and I wouldn't want to jokingly quip that their job is meaningless. It's not worthy of a site like HN where we try to actually talk about things thoughtfully and critically.
You skipped over the part where we consider if the concept of a business is a good thing for the world.
In a capitalist society, these are basically competing entities seeking to maximise their own profits. This entails minimising expenses. That is, in capitalist society, businesses work to charge as much as possible, give back as little value as possible, and put as much pressure on their suppliers as possible to lower prices.
The argument that this is a net positive for society could use a little substantiation.
> The argument that this is a net positive for society could use a little substantiation.
The majority of societies that have tried anything different were/are significantly worse for the average person. That seems like more than a little substantiation.
I don't necessarily disagree with your sentiment but I think at this point it is good to take a step back and consider the magnitude of the statement you just made.
Consider the extent of human societies that have existed, what it is that we know of them and through what lens we know of them. What do we mean by the words "significantly worse"? Where does this idea of "worse" stem from? And let's not forget the average person. How do we measure what's good for this average person?
Sorry for the random remarks your comment caught my eye for some reason. The point here isn't for some bogus relativism but merely to state the obvious, that the human condition can be far more complicated than we give it credit.
What is the alternative to businesses. A centralized authority that dictates what is made and who gets to make it?
All the reasons you say businesses suck are also the reasons why they work well. They need to react instantly to market pressures. If someone is making something no one wants they will crumble, if a new demand springs up businesses will instantly be created to meet it. I can't think of another system that is instantly responsive to a changing world and doesn't require much oversight.
> The argument that this is a net positive for society could use a little substantiation.
I can make the theoretical argument all day, but really, we've lived in a world that has done this experiment for us. I look at capitalist countries, I look at communist countries, and I think it's pretty clear which ones are better to live in.
