Tuesday, October 13, 2015

Transparency trends gather steam

First an announcement...

Edward Snowden and David Brin will among the keynote speakers at the Bard College conference, Why Privacy Matters, held October 15-16. Register online. Should be interesting! (One of the two will be attending by Skype.)

Again with this transparency thing!

Reaction has been mostly favorable to my editorial in the Global Post, wherein I suggested that cameras are becoming a Great Equalizer in urban America, the way the Colt 45 was in the Old West... and that small investments in cam-technology for minorities might fundamentally alter power and safety on our city streets. In addition to "black lives matter" why not also chant for the pragmatic thing that's making the biggest difference?  "We want more tech!"  Now, let's try to actually implement it.


With this in mind have a look at The ACLU's policy on cop cams.

The latest news is actually a qualitative shift. "Arlington Texas Police Chief Will Johnson on Tuesday said he had fired officer Brad Miller over the shooting of Christian Taylor. Johnson says he's troubled by some of the actions Miller took while responding to a reported burglary at a car dealership early Friday morning."  


Notice the differences in this case. There was no video footage, yet a white officer is being held accountable, despite the fact that the fellow he shot was probably in the act of committing a felony, at the time.  Read further and you'll see this is exactly along the line of progression that I have forecast... that a time would come when decent cops will gather the guts -- partly in their own interest -- to start cleaning house of their bad-apple colleagues. Stay tuned and see if this spreads.

== Change is Unstoppable ==

Online “security expert” Bruce Schneier’s blog surveys the most recent wave of online ideas and revelations and offers new terminology for a phenomenon that has been monthly, without let-up, since the last century:  "Organizational Doxing".  Hm... nice. And welcome to the light side of the force, admitting at last that:

(1) the tsunami of revelation is unstoppable, but that

(2) it needn't be the end of the world - or even of some privacy - if we acquire habits of reciprocal accountability, and do it...

(3) ...thorough-militant sousveillance-supervision of elites.

One might have hoped for reference to earlier works on this topic, such as The Transparent Society (1997)... if Schneier finally got around to reading it, and thereupon took note of how diametrically opposite his earlier strawmanning-missives were, to the book's actual content. 
Well, better late than never.

Along these lines, see this from a review of a forthcoming book:  Windows into the Soul: Surveillance and Society in An Age of High Technology, by Gary T. Marx:

"We live in an age saturated with surveillance. Our personal and public lives are increasingly on display for governments, merchants, employers, hackers—and the merely curious—to see. In Windows into the Soul, Gary T. Marx, a central figure in the rapidly expanding field of surveillance studies, argues that surveillance itself is neither good nor bad, but that context and comportment make it so.  In this landmark book, Marx sums up a lifetime of work on issues of surveillance and social control by disentangling and parsing the empirical richness of watching and being watched. Using fictional narratives as well as the findings of social science, Marx draws on decades of studies of covert policing, computer profiling, location and work monitoring, drug testing, caller identification, and much more, Marx gives us a conceptual language to understand the new realities and his work clearly emphasizes the paradoxes, trade-offs, and confusion enveloping the field. Windows into the Soul shows how surveillance can penetrate our social and personal lives in profound, and sometimes harrowing, ways. Ultimately, Marx argues, recognizing complexity and asking the right questions is essential to bringing light and accountability to the darker, more iniquitous corners of our emerging surveillance society."  

== Miscellaneous Items ==

What level of disclosure is appropriate? How can public accountability be balanced with the privacy essential for scientific inquiry?   An editorial exploring this as a zero sum tradeoff… "Transparency versus harassment..." a concept I do not actually accept. 

I am not so sure about this next item… Under the new Chrome feature “Dmail,” email panic or regret can be fixed by clicking the "revoke" button after a message has been sent. When sending a message, users can also decide whether they want the message to self-destruct after one hour, one day, one week or never. This is different from an earlier feature: Google’s "undo send" feature unveiled in June giving Gmail users with email panic or regret up to 30 seconds to take back the offending message. 

Should someone be able to send you a hateful email and deny you a record of it?  Weigh in on this.

The app Jott’s AirChat feature allows users to send data and texts without a connection to the Internet. Jott uses Bluetooth and Wi-Fi radios to create a closed network with other devices that are within 100-feet of each other, needing no smart phone or data plan. 

You might check out the novel Darknet, by Matthew Mather, about an AI that develops out of a Wall Street hedge fund's automatic trading system. A scenario I've long held to be the most dangerous of all possible sources of AI.  

The future of the internet looks a lot like BitCoin: "the same technology that secures transactions on the Bitcoin network—and thereby renders them transparent, nearly instantaneous, censorship-resistant, and free of the need to trust anybody—can be used to process other, more complex financial negotiations and to securely store any kind of digital information on the Internet."  The mighty SF author Karl Schroeder looks into the future of chained trust transactions in a story contributed to our transparency-based sci fi anthology, Chasing Shadows, which will appear next year.

== Hackers and Worrisome Devices ==

The dating website Ashley Madison, whose slogan is "Life is short. Have an affair," purports to have 37 million members as cheating spouses. Now hackers are threatening to release all of the site's personal information — including its members' sexual fantasies and financial information — if the company doesn't take Ashley Madison offline. Of course this was to be expected. Anyone who actually believes promises of confidentiality in this modern era is so foolish that such delusion would normally disqualify a creature in any other species from breeding. On the other hand, do the hackers actually believe they have accomplished anything? 

The Electronic Privacy Information Center (EPIC) sent a letter last week to the Federal Trade Commission and the Justice Department asking regulators to look into “always on” technology. The group cited technology from Microsoft, Amazon, Google and others as worrisome. 

Examples: Google Chrome is reportedly able to remotely install code that allows the software to listen to users without their knowledge. The code was originally designed to support Chrome’s new “OK, Google” hotword detection. The Samsung SmartTV has a built-in microphone that is equipped with voice recognition technology that allows users to give verbal commands to the TV. In order for Samsung to convert your speech to text, the voice commands are sent over the Internet to a third-party for interpretation. However, since the TV is “always on,” the microphone is recording every word you’re saying at all times.  Others of concern include NestCam and Canary Connect, Amazon Echo and Microsoft Kinect. 

 Oh and… “Through a Wi-Fi connection and a built-in microphone, the new Barbie is able to hold (unsupervised) conversations with a child.”

There is only one solution.  I have been saying it for decades.

66 comments:

David Burns said...

In a previous post's comment section, Duncan wrote: 'The idea that somebody is "earning" more before lunch than you earn all year is incredibly corrosive,'

I read the scare quotes as meaning that this person is actually cheating someone rather than earning anything, in which case the cure would be to have the referees do a better job of catching cheaters. But what do we think of a person, whether they exist or not, who actually creates more value before lunch than you earn all year? Or is this just impossible?

Tony Fisk said...

Australia's data retention laws have just come into force. All phone and internet 'metadata' (whatever that means, no one is too sure) is to be retained by ISPs and phone companies for two years. Police and 'authorised parties' (aka 'crackers') may access data without a warrant.

Oh, I feel safer already! (glancing at the https prefix in the LHS of the browser display. Not a guarantee of security, but a deterrent.)

Turnbull is on record as saying this legislation is a load of crap: easily exploited and easily avoided. As PM he can't just do a 180 on it, but I suspect it will quietly be rescinded, as 'delays', and 'problems', and 'costs' in implementation pile up. We can only hope that this occurs before we encounter another Ashley Madison situation.

Paul451 said...

"When sending a message, users can also decide whether they want the message to self-destruct after one hour, one day, one week or never"

This is the wrong scale. I'd like the see the scale start at 10 years and move down, 5yrs, 1yr. Not starting at an hour, with anything more than a week being "never". (And to be able to send the destruct code whenever you want. "Delete anything sent from my account older than...") Ie, in response to Google's desire for gmail users to never delete mail. It gives you the ability, the right, to have your old correspondence forgotten. Important material (business archives, legally/criminally important material) should be downloaded to an archive long before then.

[Yes a "regret" window of a few minutes should be possible, basically up until the recipient reads the email (after which the request to delete would merely be a flag on the email.) God knows how many times I've clicked Send without attaching the file I'm meant to be sending... But that's different from a "self-destruct after reading".]

Re: Ashley Madison

The thing I find strangest, amidst all the alternating hand-wringing and giggling over the revelation of "cheaters", is that most of the media and pretty much all of the commentariat ignored the greater revelation: That there were virtually no women on the site. That the "cheaters" were cheating with a poorly programmed chat-bot designed solely to get you to upgrade your membership. (The only members who actually had sex via the site were those paying the top rate for a "guaranteed affair" who were linked by the company to a local escort agency.)

Ie, the entire company was a giant fraud. (Even more than most dating sites, which merely exaggerate the number of female members, or ignore that they're primarily being used by prostitutes.)

Aside:
Data retention laws have started in Australia, allowing warrantless trawling of metadata by multiple govt agencies. This has reportedly sparked an upsurge in interest in TOR/VPNs/RedPhone&Signal, etc, which our host would suggest is largely worthless. But there is no reciprocity in the laws, no transparency, no oversight; in fact it's hard to even work out what they are collecting. And it's been enacted by a party where "mission creep" seems to be built into their party platform. So maybe "making it a bit harder for them" (and encouraging as many people as possible to do so, even if they don't "need to") is the only tool we have.

(Personally, I'm not bothered trying to get around the new laws; too white, too boring. But if my Isp (which claimed to stridently oppose the laws) actually put their money where their mouth was and set up their own overseas VPN-nets, and made it easy to use, I'd tick the box just as a lazy form of protest and then forget about it. But what I really wish they'd do is actively violate region-locking. I'd pay extra if I could spoof a foreign identity using my existing Isp. It's insane when illegally torrenting something is actually easier than legally buying it.)

Paul451 said...

David Burns,
"who actually creates more value"

The CEO myth. Surely the actual workers created that value? Why should the senior manager make more than 50 times the average worker, as was common in the 1950s?

Chris Heinz said...

Each Bitcoin transaction now consumes the energy it takes to power an American household for 1.5 days. Avg American household consumes ~1 MWh/ month, per day => 33 kWh, so Bitcoin transaction ~= 50 kWh. And, of course, grows and grows and grows.
Criminal. An environmental disaster. But totally makes sense, since Bitcoin is unhackable based on, it can win a computational arms race.
And, given that at some point RSN it will create the last bitcoin, it is inherently deflationary, also a disaster. An interesting 0.3 experiment in a crypto-currency. But, if crypto-currencies can only exist by nature of being able to reliably win a computational arms race, then they are BAD TECH. The planet cannot sustain such bad tech. Shut it down NOW.

Alfred Differ said...

I don't see how a self-destruct method is going to eliminate the hateful mail evidence. Copy the clear text you see to another file. Don't use email clients that prevent this.

I think a 'gone stale' flag would be useful, though.
Delete after this date if you please, but it's an optional setting in your mail client.

David Burns said...

So, Paul451, are you saying it is impossible, or just not responding to the thought experiment?

The value probably can't be created without the workers. But if it is something that happens between breakfast and lunch, I don't think they are the ones who thought it up.

Why do board members offer such high salaries to CEOs? I can think of several hypotheses, and maybe there are more.

1) board thinks CEO is worth the money
2) board is participating in kabuki theater, and this is their role
3) board are participating in a religious ritual
4) emergent property of distorted rules
5) they're all looters dividing the spoils (but then, where did the spoils come from and how did they get their hands on them?)
6) covering their asses?

I must lack imagination, because #1 is the only one that I both understand and find sort of plausible. The question after that, of course, is why on earth would they think that? How can they think that can hold on to their seats?

Or maybe someone can offer more hypotheses.

David Burns said...

Chris Heinz, what does "Shut it down NOW" mean?

Chris Heinz said...

David Burns: Boycott Bitcoin. Or get your legislator to pass legislation banning it.

locumranch said...


"Anyone who actually believes promises of confidentiality in this modern era is so foolish that such delusion would normally disqualify a creature in any other species from breeding"[DB]

Confidentiality, according to Collins English Dictionary, is defined as "the state of being secret; secrecy", and the same reference defines "Privacy" in synonymous fashion as "the state of being secret; secrecy", meaning that the modern electronic-mediated death of confidentiality (aka 'secrecy') equals the simultaneous death of privacy (aka 'secrecy'), and only a fool undeserving of breeding would argue any different, either in public or in secrecy.

Best





sociotard said...

So, did you know Geoffrey Marcy at all, Dr. Brin? Not often a California Astronomer gets so high profile in the news.

Oh, and in transparency news:
Whistleblower whistleblower blows whistle on whistleblower department, whistleblowers fire whistleblower

Duncan Cairncross said...

Hi David Burns
IMHO it is simply impossible

CEO's "earn" huge sums because a small number of "golf buddies" effectively run all US corporations,
Each board intends to pay "above average" for it's CEO so you end up with a never ending spiral

The board think that the CEO is worth that money - because he is on the other board that determines their salaries
A nice incestuous love feast

Why is it "impossible"?
Intelligence - like all human characteristics has a distribution
If we compare height which is easily measured
we can see that it's NOT a "normal" distribution
(Outside of mathematics I don't think I have ever seen a normal distribution)
It is a skew normal distribution with hard "edges"
There is a biological minimum and maximum height
Intelligence will follow the same type of distribution
You will be able to find some poor person with a small fraction of "average" but you will NOT find anybody as much as twice as intelligent as the average
So a CEO can be (at max) twice as intelligent, work twice as hard, know twice as much, work twice as long
2 x 2 x 2 x 2 = 16 times as much
So I believe that anything over 16 times as much as the median is unjustified
OK add another doubling just for luck - 32 times

IMHO if the martians abducted the "top" 1% of humanity their deputies would take over and we would not see any effect
If the took the top 10% - then yes we would see an effect but the top 1 or 2 percent would have no effect



Cory SEO said...

Everyone seems to be picking on Paul 451, to be honest i think that he has a pretty good point. If you don't like the points he is making then just ignore them as some of us agree with him.

Tim H. said...

Administrative talent is a valuable thing, but when it's compensation is decided by people who highly value it, one sees spectacles like well established businesses compensating CEOs at a higher rate than those who created value in ways new under the sun. A management team that pulls a too conservatively run organization back into market relevance might also be worth something more, a team that claims to be doing so and instead multiply decimates their business into non-existence, not so much.

Tim H. said...

Back to the general vicinity of the topic, historically, newspapers have been an instrument of transparency. They financed news coverage with advertisements and subscriptions. Craigslist took an enormous bite of the newspaper's classified revenue, and one of the checks on the powerful is crippled. Many bloggers are, in some ways, but not quite, filling this gap, blogs tend to be read by those who largely agree already, so limiting exposure to other points of view, where in days past, the whole city saw the newspaper, uncomfortable essays had wide exposure and readers had less parochial attitudes. Perhaps an opportunity for a news aggregator, "Other Perspectives", maybe?

reason said...

David Burns
I guess you really don't understand rent. Rents are up for grabs and the CEO class really are looting it. So (5) is definitely on the money - they are paid that much because they can be.
Also, there is no way that the average CEO is that much better than almost any alternative, the problem is that boards really don't know how good they will be, and so take the safe position of bidding up the price for people with a record of achievement. So that is (6).
The belief in the importance of the CEO (read some Chris Dillow - Stumbling and Mumbling - the cult of the manager) is quasi-religious so (2) and (3) are also not so far off.
Then again there is the fact the board is largely appointed by the CEO and dependent on him, so point (4) is also not exactly wrong.

So it seems to me that point (1) is probably the least accurate of your hypotheses.

Laurent Weppe said...

* "The CEO myth. Surely the actual workers created that value? Why should the senior manager make more than 50 times the average worker, as was common in the 1950s?"

headship fetichization: I suspect that once we started living in sedentary civilizations with well established ruling classes, the first thing the rulers did was solidifying their preferential access to material comforts, and to justify that, they single-mindedly kept claiming, generation after generation after generation after generation after generation, that whoever's giving the orders is necessarily "the most important" person in the group and therefore the one deserving the lion's share of rewards.

***

* "IMHO if the martians abducted the "top" 1% of humanity their deputies would take over and we would not see any effect"

If aliens abducted the 1% smartest people, civilization would have a rougher ride for a few years.
Now if aliens abducted the 1% most influential people, it would include so many inept heirs and parasitic frauds that it's very possible that the benefit of getting rid of these would outweigh by a sizable margin the loss of the smart 1%ers abducted alongside the parasites (We lose Obama, but we also get rid of Putin and the House of Saud, Merkel disappears, but so do Wolfgang Schäuble, tech savvy billionaires are lost, but humanity's doesn't have to sustain Sheldon Adelson or the Koch, Dassault and Lagardère dynasties anymore, etc...)

Jumper said...

I once visited a unionized plant in our division. It turns out it was making a tidy profit, unlike some other factories, and their union was not the Teamsters Union, and as far as I could tell all was well. (They did have a tendency to assign either "management" or "worker" status to people, and as a research tech who worked for the Head Office, they had some difficulty pigeonholing me!) But I was eating lunch with a mid-level manager there and he was really grousing about union pay scales. I mentioned the fact that the whole factory was making a good profit so whatever the union was doing wasn't too awful. He finally let the truth out: he wasn't mad that they made good pay, and he insisted he was satisfied with his own pay. What bugged him was that he made the same as they did, and he felt shorn of - status.

Herkolez said...

Whey don't add to what everybody is saying the crimes of the no touch torture that someone is using AL kind of frequencies and all kind of electromagenetic weaponry to achieve it and all kind of eyes spying eyes that is to steal by it all kind of innovations and all other intlctuoal property in bright day light .

Jonathan S. said...

"There is only one solution. I have been saying it for decades."

Uplift the dolphins and chimpanzees?

Laurent Weppe said...

"Uplift the dolphins and chimpanzees?"

Give power to dogs, and ask them to uplift us

Alfred Differ said...

@jumper: The best manager I ever worked for admitted her kind was a dime a dozen and shouldn't cost much to a company. She dealt with that risk by trying to learn some of the technical skills her people had. In a lay-off pinch, she could back-fill a tech position (weakly) and she felt this made her less of a pink slip target. Our company went through a few such events and she survived every one of them.

It was a basketball coach, though, who taught me the worker-bee's can be worth a whole lot more than management. Seems kind of obvious in sports, but his lesson was that it extended to other industries. A company that tries to stick to the old, hierarchical ladder for compensation might be able to function, but it might need some protection against competition that doesn't. I took this lesson with me in my life as a worker-bee, manager, or executive. Some people really ARE worth a ton of money. Some aren't. Yes... some are even worth 100x someone else on their team. Write software for long enough and you'll meet these folks. 8)

raito said...

Yet another inevitable consequence of transparency:

http://www.nytimes.com/2015/10/14/us/live-streaming-florida-woman-charged-with-drunken-driving.html?_r=0

Jeff B. said...

The Bad Astronomer Phil Plait, on recent anomalous findings from Kepler:
http://www.slate.com/blogs/bad_astronomy/2015/10/14/weird_star_strange_dips_in_brightness_are_a_bit_baffling.html

Star KIC 8462852 apparently has an extremely unusual light signature, with irregular light output dips up to 22%. These don't fit any plausible explanation so far (debris/thick gas or belt, collision debris clouds, comets...).

So while further exploring the other hypotheses, the team is considering and trying to rule out technological artifacts, i.e., the possibility of a partial constructed Dyson object.

As noted, unlikely, but intriguing...

David Burns said...

Chris Heinz said, "Or get your legislator to pass legislation banning it."

Does your legislator have jurisdiction in China?

Duncan wrote: "CEO's "earn" huge sums because a small number of "golf buddies" effectively run all US corporations"

These board members are either large stockholders or elected representatives of large stockholders. So I guess you're saying representative democracy doesn't work. ;-)

This explanation is still far from complete. Somehow, the corp. got some profits from somewhere, and then these looters took over and started bleeding the stockholders. The stockholders, in the ideal, shouldn't put up with it. But in reality, they do. What is going on? Every corp. where this is the case should be vulnerable to a hostile takeover, assuming there is still a kernel of profit still alive.

"Each board intends to pay "above average" for it's CEO so you end up with a never ending spiral"

Lake Woebegone CEO salaries.

"Intelligence - like all human characteristics has a distribution"

Do we know that a CEO's marginal impact on profitability is proportional to intelligence? It seems sort of reasonable, but would an intelligence test tell us that Sun Tzu was a genius?

"IMHO if the martians abducted the "top" 1% of humanity their deputies would take over and we would not see any effect"

That's 70,000,000 people. It might have to be the deputy's deputy's deputy. The US census says there are about 6 million corporations in the US, but only about 18,000 have more than 500 employees. I got this from quora, but the guy side-stepped estimating the number in the world. Or are you talking only US?

Reason wrote: "Rents are up for grabs and the CEO class really are looting it." This explains everything. Not. Why do the purported owners of these rents allow the grabbing?

"there is no way that the average CEO is that much better than almost any alternative"
How much better? If they hired their second choice, how much $ would they save? I guess they could get some recent MBA grad for cheap.

"boards [...] take the safe position of bidding up the price for people with a record of achievement."

Cover their asses (6).

"The belief in the importance of the CEO (read some Chris Dillow - Stumbling and Mumbling - the cult of the manager) is quasi-religious so (2) and (3) are also not so far off.
Then again there is the fact the board is largely appointed by the CEO and dependent on him, so point (4) is also not exactly wrong."

So, is our answer _all of the above_?

Jumper said...

arxiv.org/pdf/1509.03622v1.pdf
The paper the speculation is based upon.

Hendrik Boom said...

According to Samsung, the voice recording is sent to headquarters only when the user uses voice to specify a web search. All other speech recognition (such as to control the television) is done entirely locally.

-- hendrik

Zepp Jamieson said...

I've gotten a fair old bit of hate mail over the years, usually in the form of mindless abuse ("Stupid librul commie, you know Hitler was a librul, right?") but every once in a while I get something that is openly threatening, and in such cases, I usually get all the headers and text and forward it to the ISP, or on rarest of occasions, law enforcement. I rarely hear anything back on those, including from the sender.
If they can revoke email, if I get something dodgy, I get the headers, and make screengrab images of the offending letter and the headers. That way, if it vanishes an hour later, I still have evidence. Evidence that hopefully will never ever be needed.
I do, however, approve of revokeable email. I feel that people's rights to privacy supercede the nuisance of the occasional abusive email

Alfred Differ said...

I finally finished The Transparent Society.

The interlinkages between posts here make more sense now. 8)

Paul451 said...

David Burns,
" "there is no way that the average CEO is that much better than almost any alternative"
I guess they could get some recent MBA grad for cheap."


Well that explains your problem, if you think that an MBA grad is good for a company.

Catfish N. Cod said...

Topical link alert: the scenario Dr. Brin described in the Transparent Society twenty years ago plays out in Talledega, AL:
Alabama late night jogger vs. cops -- jogging while black? Now does this solve everything? Not quite sure this is so, for I can't see teenagers always being this reasonable. But if you could get the kids to believe that a webcam is also a weapon to be wielded in their defense, you would have come a long way indeed.

So much of gang violence is likewise driven by fear and unaccountability and the need to defend. One could envision a future with vidgangs and darkgangs, as the neighborhood gangs that are primarily practicing collective self-defense use cameras in their arsenals while those who commit crimes on the streets shun them. Or cameras might only be used in public while the crime burrows in private buildings.

--------------------

Two thoughts on the subject of CEO pay:

(1) The President of the United States receives salary of $400,000 plus a generous array of benefits that probably total $10-$15 million a year. (Upkeep and staffing of the White House is $4M/yr alone.) I don't care what their business is -- no CEO has a harder job than POTUS, not in terms of budget, personnel, job stress -- nothing. Therefore I consider any CEO making more than the President's sum of salary and benefits -- nebulous, but in the $10M range -- to be overpaid.

(2) Perhaps we are thinking of the issue of CEO pay backwards, though. Supposedly the pay is for what they do. Could it possibly be actually for what they don't do?

Tim H. said...

You're saying a suit's mind is the Devil's workshop, so let's pay them enough to distract theirselves?

raito said...

Multiple comments today:

On management:
Part of it is that the perception of 'promotion'. We seem to be conditioned to think that the person who tells us what to do is somehow better than we are, and therefore should have more money. It works in reverse, too. If you can tell others what to do, you should get more money. I think the Mars books had it right in a lot of cases. Labor owns the company, and hires management as contractors.

At least in the last couple companies I've worked for, the CEO's are also the founders and owners. And you can't really tell the owners how much they can pay themselves.

And:
More hypocrisy on the right in WI. The same party who gerrymandered the districts in a law office in order to invoke client privilege so that no one would find out about what was actually said is now complaining that the GAO (which they wish to eliminate) was breaking open meetings laws.

Paul451,

My wife is an MBA. And an engineer. I think an awful lot of it comes from why a person pursues an advanced degree. For example, I have a friend who has an advanced degree in chemistry and also a law degree. When she was in law school, there was also a guy who had an advanced degree in engineering. It's popular to characterize law school as somehow harder than other graduate schools. I think that's wrong. According to my friend and her classmate, it was no harder than their other grad schools. However, instead of having chem and engineering students, law school was made up of people for whom the endgame was the law degree, and who took relatively easy undergraduate degrees. They weren't prepared for law school because they hadn't had to work very hard in college up to that point.

And my wife got her MBA because she does a lot of capital projects, and wanted a sound basis in finance in order to do her job better.

David Burns said...

Paul451 wrote "Well that explains your problem, if you think that an MBA grad is good for a company."
I have many problems that are all beside the point. I am trying to imagine what their options are. They can get someone for cheap, but that person won't have much experience. That's not saying the experience is actually worth what it's getting paid.

Since you seem to disagree with something, maybe you could explain your view?

You had asked, "Why should the senior manager make more than 50 times the average worker?" I've sort of modified that to "why do CEOs get paid so much?" Is the answer obvious, or you don't know, or don't care? Is it just rigged? Why can't the unions get into the game and rig it for the workers? They have plenty of money for donating to politicians, why not start a new business or buy a few corrupt businesses and run them honestly?

Jonathan S. said...

Mr. Burns, you haven't answered the question - you've changed it, then not-really-answered the new question.

The question is why should the CEO make fifty times as much as the average worker? Does he provide fifty times the value to the company? Would the CEO going on strike bring the company's production of whatever they produce screeching to a halt? Where is the justification?

I'm interested in finding if anyone can answer that question with anything other than, "It's not justified."

David Burns said...

Catfish wrote: "no CEO has a harder job than POTUS [...] Therefore I consider any CEO making more than the President's sum of salary and benefits [...] to be overpaid."

Not much overlap between candidates for CEO and president (Fiorina an unusual exception), so its not really the same market, whether harder or not. Apparently there is more demand for experienced CEOs than for POTUSes. Shareholders, or their representatives - the board, seem to think that they must bid high to get the best. Apparently voters and their representatives don't feel the same way. I'm not sure about CEOs, but I doubt that we would get better POTUSes for higher bucks.

What is the average shareholder thinking? "This game is totally rigged, but maybe I can make money anyhow?" or "Yeah, if that CEO can make the share price go up, great"? Why don't they rebel more often? They're likely to think more about the stock price and dividends than what's happening to CEO salaries and board games, but aren't the two connected?

"Could [the pay] possibly be actually for what they don't do?"

Hmmm... Interesting. But the second-place candidate does that for free? I think you need to spell it out. Are you saying they get to loot a little bit, so they aren't tempted to loot even more?

David Burns said...

Jonathan S. challenged me: "The question is why should the CEO make fifty times as much as the average worker?"

The sort-of naive answer is, because the people paying the CEO are willing to pay that. But that just pushes the question back one notch, eh? Is the person who hired the CEO paying with her/his own money? Deluded? Defrauded? Playing some other game entirely?

"Does he provide fifty times the value to the company?"
Why is this any of my business? Either the person who hired the CEO thinks so, or they are cheating the shareholders. The shareholders have plenty of options for dealing with this, if they care. Perhaps we wish to help the shareholders, in the interest of equality or whatever, but let's think, if we just place a limit on the amount of the CEO salary, they would immediately begin gaming that with benefits or whatever. If you really want to take control of this, you have some work cut out for you. Who knows? Maybe there is some elegant solution in a surprising location. Accountability and transparency?

"Would the CEO going on strike bring the company's production of whatever they produce screeching to a halt?"
Obviously not. OTOH, just as obviously, the rules of the company would determine who inherited the various responsibilities of the CEO during the interim, and some aspect would suffer at least a delay. What are we really trying to get at? The CEO has a vague "leadership" and "strategy" role, like the commander of an invading army. If a lucky shot from the enemy takes out the commander, the commander's army may still win the battle. But without Ghengis do the Mongols take over China? If Stonewall Jackson does not die from friendly fire, how long is the Northern victory delayed? The general serves a purpose, and so does the CEO, presumably.

I guess we could try to devise a corporation that operates on the principle of emergent order. I've heard of some surprising experiments in the area of non-hierarchical business structure. (E.g. Morning Star Tomato http://morningstarco.com/index.cgi?Page=Self-Management, having trouble remembering the others.)

"Where is the justification?"
In the ideal, the person hiring a CEO and paying the CEO's salary would have a good estimate of what the CEO is worth to the company. Obviously, we have thought of a lot of problems that might arise in reality, and CEO salaries just seem bizarre. But what is the justification of any price, other than a willing and well-informed buyer? Clerics and philosophers have spent plenty of ink on the idea of the just price, but in my estimation they failed.

Catfish N. Cod said...

David: The candidate pool has not been similar until recently, but the skill set is actually similar; the political skills required are somewhat greater, but the real difference is the targets of the political skills, and thus the career pathways leading to the job are different. Also the supply of POTUS jobs is necessarily limited; the tradeoff is that a POTUS has more power, and more kinds of power, than any single CEO. People go for the job of POTUS for the power, not the money (though they'll get lots) -- for a CEO, both the money and the power are motivators.

My theory of high CEO pay is that the pay is to maintain loyalty to the theory of "shareholder value"; the concept that was spread starting in the 1970s to justify making corporations the tools of a pyramidization of American economics. Prior to this, companies commonly understood themselves to have multiple obligations: to shareholders, yes, but also to employees, contractors, suppliers, and the community, understanding all of these to be contributors to prosperity and sustainability of not just the business, but the business model. The Shareholder Value Theory replaces this model with the rhetorical concept that the entire company, including the CEO, has only the duty to make money, and everything must be clearly subordinated to it. In practice, this really means tighter controls for short term profits and clear documentation of how all expenditures directly contribute to profitability: community service has to be justified in terms of PR or suchlike, or it's out because the company benefits are not easily quantifiable. Immiseration of employees becomes more likely. Aggressive tactics are used with suppliers, rather than cultivating relationships and enhancing value over time.

Since there are economic benefits to *not* running companies this way, the BODs have to ensure that responsibility doesn't break out like a rash. Keeping the job market hot with high pay is one way to make sure that some hotshot is always ready to grab your chair. The hot market is then used to "justify" the high pay, creating a reverse causation deception.

In theory the high pay also restricts embezzlement/looting, but in practice the CEO is also a major shareholder and director.

David Burns said...

Catfish, I hear you saying that business focuses on the short term gain and sacrifices the long term. But you didn't really explain why the board wants this. Is it just an ideology? Can't they make more money and sleep better at night by taking the long view? Is there some weird game theory equilibrium happening, everything else gets sacrificed to keep the share price high this quarter?

Paul451 said...

Cory SEO,
"Everyone seems to be picking on Paul 451"

It's David Burns who is being dogpiled onto.

(Actually I assume that was just a spambot and my name was picked at random and inserted into one of fifty prepared messages. ...Ask me what I think of SEOs.)

Raito,
"My wife is an MBA. And an engineer."

I have no problem with people who move into senior positions expanding their knowledge to match that position, but I'm assuming the engineering experience came first and was the reason for her promotion(s). What I do object to is the idea that "an MBA" (ie, a person whose only qualifications and experience is their MBA) is any kind of desirable manager.

Jonathan S,
"The question is why should the CEO make fifty times as much as the average worker?"

Actually, my question was "more than". I mentioned that in the '50s, the top executive salary in the largest companies was not more than 50 times the average worker in the company (in smaller companies it was obviously much less.) Today it's multiple times that (350 times is the usually quoted figure.) Are CEO's doing 7 times the work they were doing in the '50s? I can accept a hierarchy of pay, but the effect of extreme CEO pays does not seem to have led to a better nation, so why should the nation accept extreme CEO pays? As either you or LarryHart have put it before, "Does society exist to serve the economy, or does the economy exist to serve society?"

David Burns,
"These board members are either large stockholders or elected representatives of large stockholders. So I guess you're saying representative democracy doesn't work."

Hmmm, maybe this is why a certain part of society believes they should be able to buy their way into government. It's the environment they exist day-to-day.

"So I guess you're saying representative democracy doesn't work."

Or that BoDs are not representative democracy and therefore don't work.

(All German companies with more than 500 employees have representatives of the workers on their boards, 50/50 split with other Directors. Google "co-determination".)

Duncan Cairncross said...

I agree with Paul451 about MBA's

I'm an engineer and I have half an MBA (Diploma in Management Studies)
This was after I had been working as an engineer and later manager for nearly 20 years

This was actually very useful - I learned a lot BUT it would have been much less useful without the background of my engineering degree and work experience

As far as CEO's are concerned
(This is about the 99% of CEO's who work for existing companies not the less than 1% who built their own company and are effectively the owners as well)
I have found that the higher you go up the corporate ladder the more the people are concerned about themselves and NOT their companies
Senior engineers and some chief engineers tend to be quite task focused,
Vice Presidents and above are uniformly "me focused"

Which is exactly as you should expect - two people one concentrates on getting promoted - the other on doing his job - which gets promoted first??
So with this selection process you end up with "me focused" individuals in the top jobs


There is another very serious problem with sky high CEO pay

Sensible people work until they have enough plus a margin for a rainy day and to leave to the family.

Once they have that they are “satisfied” – and don’t need to put major effort into that part of their lives

Given that being a CEO is a difficult ball aching job that takes you away from your family
Why do they continue to do it do it?

The present CEO’s are “insatiable” they literally cannot be filled
This is a well-known type of mental illness

A “satiable” person would take the salary for a short time and leave

What has happened is the “sane” and “satiable” people in those type of positions leave
Leaving behind the “insatiable” and “insane” people

The old saying is
“Pay peanuts and get monkeys”
We should add
“Pay millions and get loonies”


David Burns said...

Paul451 wrote: " the effect of extreme CEO pays does not seem to have led to a better nation, so why should the nation accept extreme CEO pays?"

Assume the nation decides they do not accept it. What shall they do to improve the world?

"maybe this is why a certain part of society believes they should be able to buy their way into government. It's the environment they exist day-to-day."

Or established track record?

"BoDs are not representative democracy and therefore don't work."

Could you parse that out for me? One share-one vote fails where one person-one vote succeeds? Are you saying an oligarchy of shareholders are exploiting their fellow shareholders, and no oligarchy of voters are exploiting their fellow voters?

"(All German companies with more than 500 employees have representatives of the workers on their boards, 50/50 split with other Directors."
Why pick only on the big boys? Isn't that a bit arbitrary? Or just too absurd to think that a small firm will hire someone under such circumstances? I wonder how many lawyers it takes to keep that game from going out of bounds?

Wikipedia disputes some of your details: "The Drittelbeteiligungsgesetz provides for one third of the supervisory board to be elected by workers in companies with more than 500 employees. For companies with more than 2000 employees the Mitbestimmungsgesetz requires half of the supervisory board (Aufsichtsrat) to be representative of the workers (subject to the chairman of the board being a shareholder appointee). In the coal, mining and steel industry the Montan-Mitbestimmungsgesetz allows complete parity between workers and shareholders for companies with over 1000 workers.

"In December 2005 there were 729 companies with supervisory boards regulated by the Mitbestimmungsgesetz and around 30 under the Montanmitbestimmungsgesetz."
https://en.wikipedia.org/wiki/Codetermination_in_Germany

David Burns said...

Duncan makes a more serious critique: "with this selection process you end up with "me focused" individuals in the top jobs"

Would this go away if CEO pay were reduced?

If this problem were solved, would CEO pay be reduced? Would it matter?

Alfred Differ said...

Any company owned by a large number of unique owners would be smart to represent labor on their board, but there is no law saying they can't be dumb. There is plenty of tradition in the other direction instead.

Regarding CEO salaries, I usually stick to the position that it's the owner's problem to resolve. Pay too much and you are only harming yourself. If you don't like what the other owners are willing to pay, sell your shares and move on.

LarryHart said...

Catfish N. Cod:

My theory of high CEO pay is that the pay is to maintain loyalty to the theory of "shareholder value"; the concept that was spread starting in the 1970s to justify making corporations the tools of a pyramidization of American economics. Prior to this, companies commonly understood themselves to have multiple obligations: to shareholders, yes, but also to employees, contractors, suppliers, and the community, understanding all of these to be contributors to prosperity and sustainability of not just the business, but the business model.

The modern right-wing treats government as the enemy of corporations, conveniently forgetting that a corporation is a fictional being created (chartered) by governments. And they are chartered for a social purpose. Sure, they have to be profitable enough to survive and provide enough shareholder value that they continue to have shareholders, but that by no means implies our present cancerous paradigm that says a corporation's sole purpose is to maximize profits, which is another way of saying "suck the lifeblood out of its own body, its own customers, and the rest of society."

That is the problem with CEO pay--not that CEOs in particular "make too much money", but that their salary must rise to the level at which the company itself no longer has enough operating capital to work with. I heard someone once opine that "If a CEO cuts costs, saving a billion dollars, and then pays himself that billion as a bonus, has he really provided any value to the company?" Likewise, if a corporation produces goods, but impoverishes its potential customers (or harms them via externalities more than the value of the goods produced), then why are We The People chartering these monsters in the first place?


The Shareholder Value Theory replaces this model with the rhetorical concept that the entire company, including the CEO, has only the duty to make money, and everything must be clearly subordinated to it. In practice, this really means tighter controls for short term profits and clear documentation of how all expenditures directly contribute to profitability: community service has to be justified in terms of PR or suchlike, or it's out because the company benefits are not easily quantifiable. Immiseration of employees becomes more likely. Aggressive tactics are used with suppliers, rather than cultivating relationships and enhancing value over time.


We're really not far off from what was once a joke line in Dilbert, "Job satisfaction is like stealing from the company."

David Brin said...

Duncan it's worse than that. The CEO caste pretends they are not a market cornering cartel of rent seeking raiders, who pick winners and losers on the golf course. But their hypocrisy is exposed. In any fair market, such high compensation would attract so much talent that… the pay would then stabilize! Even drop. It is called markets.

They respond they are mutant good! Like NBA stars. But NBA stars are paid according to verifiable metrics more precise and harshly analytical than any other working men, anywhere, the diametric opposite of the CEO caste cartel.

Paul451 said...

David Burns,
"One share-one vote fails where one person-one vote succeeds? Are you saying an oligarchy of shareholders are exploiting their fellow shareholders, and no oligarchy of voters are exploiting their fellow voters?"

That you can't see the difference between the two situations is interesting.

Donald Gisselbeck said...

The range of ability in human skills that can be quantified is well under an order of magnitude (excluding the disabled). You could grab a random person and they would be able to ride up L'Alpe de Huez in less than 390 min, score less than 600 on a PGA course, get a chess rating more than 280, etc. Why should remuneration be greater than that?

Deuxglass said...

Duncan Caincross,

You said
“The present CEO’s are “insatiable” they literally cannot be filled
This is a well-known type of mental illness

A “satiable” person would take the salary for a short time and leave

What has happened is the “sane” and “satiable” people in those type of positions leave
Leaving behind the “insatiable” and “insane” people”

A world of only fat, satiated people would be a lot less dynamic place are probably very boring to boot. Unsatisfied, driven people have a place in our society also. To label them as mentally ill is really going too far.

Deuxglass said...

I have no problem with CEO pay scales today. Let the markets work. If the board overpays a CEO that’s their problem. You don’t have to own shares in the company if you don’t like it.

What is this 50 times a worker’s salary stuff? Is that some type of magic metric that determines fairness? And why do we look at the 1950’s as some kind of golden era when businesses were good to their employees and CEO’s really cared about their companies? The historical record doesn’t sign off on that myth so why does it keep coming up? If you really wanted to force CEOs and management to care about their companies then you should abolish the Limited Company statute and have companies go back to the partnership structure that existed before. Of course you would be eliminating one of the great innovations that drove industrialization and lead to the wealth we enjoy today.

Tim H. said...

If a chief executive accomplishes remarkable things, like creating value that previously wasn't there, or snatching a business away from certain oblivion, than remarkable pay is in order. When an established business pays ludicrous dollars so a chair warmer isn't embarrassed on the golf course, something's out of order.
Profit is important, but it should occur because an organization gets it's core business right. When profit becomes the primary goal, the core business can suffer, see Detroit for examples...

locumranch said...


Disproportionate salaries (CEOs et al) are a system feature rather than a bug, being the direct result of a (supposedly) meritorious hierarchical model which (1) assumes that greater hierarchical position equals greater (hierarchical) importance & indispensability and then (2) offers increased pay relative to that (assumed) difference in relative importance & indispensability, so it is the systemic nature of the hierarchy (rather than corruption, cheating or oligarchy) which is to blame for sky-high CEO compensation ... meaning that you CANNOT 'fix' unequal compensation without addressing the social inequality inherent in an UNEQUAL hierarchical system).

Best

David Burns said...

Paul451, wrote: "That you can't see the difference between the two situations is interesting."

Who said I don't see any difference? Apparently you think one works and the other doesn't, and I asked about that. I know your conclusions, but not your argument.

David Burns said...

Donald Gisselbeck wrote: "should remuneration be greater than that?"
Assume it should not, what do we do about it? What formula do we impose on boards of directors?

Trim the branches or strike the root? Where is the root?

Everyone has ignored my crack about the theory of just price, but it seems to me that anyone who wants to take this seriously either needs to understand what is causing the problem or come up with such a theory. After that, you can start on a perpetual motion machine.

Locumranch, apparently many participants in the discussion think that this system, which was just as hierarchical at that time, worked fine in the forties. It is my impression also that CEO pay was not as astronomical at that time. I'm not particularly well-informed on that, though, so I could easily be wrong. Maybe the oligopoly suppressed competition for CEO "talent"?

Alfred Differ said...

@Donald: The reason pay is NOT tied to skill (for CEO's and everyone else) is that it is tied to value. Those aren't the same. I consider myself reasonably well skilled in certain areas, but put me on a team that can't use those skills and I add no value. I'm exaggerating the example, but real life scenarios can extract different levels of value from the same person with a constant skill set. Owners of a company would be foolish to tie pay to skill because those of us who sell skill (labor) can often figure out what value we add. We are just as much a participant in the market as anyone else, so we price our labor according to what we think we can get.

David has a fair point about golf buddies and corporate collusion, but it is about those who cheat in an otherwise reasonable market. Value (not merit) is what matters.

Jeff B. said...

I can attest that Dr. Brin's "golf buddies" identification is apt for at least some top level executives and CEOs. In the mid-90s I was with a Federal agency that was privatized. The new company was formed as an ESOP, and as part of this I was elected as one of two employee members of the Board of Directors. Young, out-of-place, and naive (I made the faux pas of actually proposing organizational changes to management in a board meeting), the CEO and his buddies sent me to the Univ. of PA Wharton School's Director's Institute for a weeklong seminar.

Definitely the outsider, esp. when they learned that I was merely a employee, I spent my time people-watching and analyzing... While touching on other things, the emphasis was, in the seminar, on maximizing shareholder value- and networking outside. What struck me was how the "institute" seemed to be fluff, intellectual trappings that did not really teach anyone anything, and how the exercises only served to affirm what people believed. And the academic trappings had existed for so long that the instructors bought in to it, too.

And golf buddies? The seminar was held at Pebble Beach, and I can only remember one or two women in the room.

Jeff B. said...

I neglected to add that short term profit motives do appear to drive many execs and CEOs. At the upper level, current corporate "good governance" practices require the top levels to have substantial investments in company stock. The theory is that this drives these execs/CEOs to succeed, but it's fallen to the law of unintended consequences; the more short term profit-taking the company has, the more short-term profit the leadership takes.

Again, we saw this first hand in our "employee-owned" company. The CEO and the VPs were all required to invest large sums in (non-voting) stock, and ran the company in such a way that was exceedingly profitable, and destroyed the integrity while compromising the program of the federal agency we depended on for our contract. Within 5-6 years the "ESOP" was sold to a major investment firm and all the execs retired extremely comfortably.

Jumper said...

I find theories that these execs should be satisfied a bit naive; they don't play that way. It's about winning, and that means making more points than the next guy.
I also think they have the system rigged, and stockholders such as myself are getting screwed. However, I'm awful fond of the free enterprise system to start shooting it with shotguns. So, no, I don't know what to do about it.
Some smarter than me have opined that tying CEO pay to stock market value is a problem, in that almost anyone can push the earnings up in the short term by sacrificing the long term. Example, suppose McDonalds slashed what they would pay for ingredients, and just killed quality, such as it is. It would take a while before the customers got wise, and during that period profits would soar. Take a bonus, find a new job, and get the hell out of Dodge. Winner!
I do think some way of leveraging our power of continuing or not continuing corporate charters is not against our American rules.

locumranch said...


Inequality -- the idea that some people are better, worse, shorter, stronger, weaker, taller, more intelligent, less so, more able, less capable -- is the FOUNDATION of any hierarchical, non-egalitarian or merit-based system, yet here we are boohoohoo-ing the unjust & unfair inequality inherent in an inherently unequal, unjust & unfair system.

You want equality? You can't handle equality! It don't exist, except as on paper as a polite legal fiction wherein 'Blind (Allegorical) Justice' SEES (and treats) all citizens AS IF they were 'equal' and, most certainly, even our most 'egalitarian' host would be unwillingly to admit that all opinions, especially those that differ from his (obviously) correct ones, are 'equally' valid.

Etymologically speaking, the term 'hierarchy', currently defined as "A group of persons or things organized into successive ranks or grades with each level subordinate to the one above", is a linguistic corruption the term 'Heir' (as in 'offspring') wherein "the person legally succeeding to all property of a deceased person" is the designated 'heir' in a system of political inheritance, for sure as rain, just as our current hierarchical system worked "fine" in the 1940s, the race-based slavery of the now-discredited Confederacy worked (equally) "fine" in the 1840s.

Best
____
Equality is akin to Anarchy

Jumper said...

Well gee, if you want to get validation that you are better than a drunk hobo, you shouldn't find it hard to round up some acolytes to verify it for you.

Duncan Cairncross said...

Equality
Of opportunity or outcome is a chimera
And nobody - nobody at all - is saying that it would be a good thing
Some degree of inequality (of outcome) is desirable and required to make society work

The question is
How much inequality is optimum to make society work best??

So far we have a number of points on the graph,
USA, Sweden, Norway, Germany, ........

What is currently clear is that the societies with less inequality appear to work better

We do not appear to have any societies that have gone beyond the optimum point to the level that the societies performance has been reduced
We MAY have societies (Sweden) that have reached the optimum point - but we won't know that until we push beyond that point

IMHO we are not anywhere near the optimum point even in the least unequal society
But that is just an opinion

Alfred Differ said...

Part of the reason to train directors properly is other share holders can sue (and are invited to do so) if their company isn't maximizing profit. The Directors are the people most on the hook if the legal fiction regarding the company being a person is pierced, so it is important to govern legally. Usually, that means NOT telling management how to run the company and instead requiring management to tell them and then holding a vote of no confidence. A smart director delivers a hint of their displeasure before recorded meetings.

Many small 501(c)3's make the mistake of blurring the line between their board and their management. It gets them into a lot of trouble later when someone messes up financially. Blame goes in SOOOO many directions at once.

David Burns said...

Jeff, '"ESOP" was sold to a major investment firm and all the execs retired extremely comfortably.' So did they screw only the customer or also the other shareholders? Why did the investment firm care to buy?

Duncan, it's not only "are we at the optimum" but how do we get there. There are some obvious and destructive ways. I am hoping to hear about the subtle, elegant and painless ways.

Duncan Cairncross said...

Hi David Burns

Before we work on how to get there we must agree on a direction
The current level of inequality is (IMHO) awful
BUT even on this forum we have members defending that level of inequality

Before we start discussing HOW to reduce inequality we must decide that we need to reduce inequality

David Brin said...

onward

David Burns said...

"Before we start discussing HOW to reduce inequality we must decide that we need to reduce inequality"

Why?