Adam Smith in action

That Adam Smith, man.

Of course, violating those unofficial no-raise pacts is what capitalistic markets are supposed to do. Eventually the heat or pressure of demand for employees or profits gets them to defect, unless they get the agreement/cartel in a legally enforceable fashion.

Eventually the heat or pressure of demand for employees or profits gets them to defect…

Yes, all will be well once the transitional period is over and full capitalism is achieved.

Brett, I would find your faith in markets charmingly naive in a 10 year old. Do you still believe in Santa and the Easter Bunny?
I suppose greed would eventually cause the cartels to break down. But how much collateral damage would be done by then.

Brett’s own example gives a partial answer to the implied question. The DeBeers monopoly lasted from roughly 1888 to 2000+, i.e., more than a century. If you are willing to sacrifice several human generations until the market “corrects” itself, you may be an economist, but you’re not much of a human being.

Debeers managed a monopoly on a luxury good that was produced only in a few geographic locations. Complaining that they have a monopoly is like complaining that the French have a monopoly on champagne. How much human suffering do you think slightly higher diamond prices caused the world? And they’re the most nefarious example you have? Color me unimpressed with the scourge of monopoly.

Thank you for the helpful information Mr. Rawls.

The word high performer alone makes me think of McKinsey and start to vomit.

@Cassander

DeBeers is the rare exception, too, hence my “even the DeBeers Diamond Monopoly” point up-thread. Almost no unofficial cartels last that long unless they’re sitting on an effectively irreplaceable piece of land or resource that no one else can legally get at. It’s just too easy to undercut them or defect if there’s a major profit in it.

I mean, imagine trying to set up an unofficial cartel on maize production, or the production of towells so you can keep the price high. It’d be almost impossible, if not impossible.

A three-course meal (first course, main and desert) will set you back $85 at Canlis. Four courses for $100. A bottle of wine or a couple of drinks will add significantly to the bill. Canlis is generally booked in advance with little opportunity for drop-in dining. If you are male and are seated next to a window you must wear a sport coat or suit. Really.

The idea that Canlis can’t accommodate paying its staff $15 an hour is ludicrous. BTW, I’ve never eaten there. The information above comes directly from the Canlis web site.

Canlis is also one of the oldest restaurants in town and has always catered to the old Seattle money types. It’s known for its obsequious service (servers used to wear kimonos) and the fact that it is pretty much the only restaurant in Seattle with a dress code.

Cassander@9 – “How much human suffering do you think slightly higher diamond prices caused the world?”

Probably a non-trivial amount in the form of blood-diamonds and the like.

He pays all his employees the same flat salary irrespective of performance ?

No, he is raising the salary floor, not leveling wages for all. The article is worth the time. He seems to have the right kind of convictions (not the ones you work off as a guest of the state).

Adam Smith is not talking about a cartel, unspoken or not. Don’t let Brett derail the thread with that nonsense. He is talking about class loyalty, which the capitalist class has successfully maintained for several hundred years now. Why do you think bosses support austerity politics even though they know full well it will destroy a good portion of their businesses, for example? Because it strengthens their class position long term. On the other hand, what Price did is class treason even and especially if it increases his business.

What makes that guy particular weird is that he A)appears to have had a specialist job with no one in a remotly similar position to compare his performance to B)was pretty much at the bottom of the company salery hieararchy thus not particular valued for his specialist knowledge or high performance to begin with

But raising the pay of his workers in a way not even dependent on mythical “merit” … is dangerous to other bosses, as it goes counter to a lot of core tenets of neoliberal ideology.

I see the point. Still, it will be interesting to see whether these maverick CEOs (e.g., Price, the guy at Aetna whose name is escaping me, and maybe there are one or two others) will have any broader impact on pay scales/differentials.

Honestly, I don’t know that I’d generalize a whole lot from one west coast techie, that whole type seems to me not terribly representative of the rest of society, even contemporary US society, fucked up as it is (@ several).

What is amazing is the customers that quit despite the fact that their cost did not change at all, and the one example has Gravity significantly cheaper than at least one competitor. How big an a-hole do you have to be to do that?

Seriously (and literally), MYOB.

“Or he figured that he could get more money working elsewhere. After all, what better way to show to future employers that you are a high performing employee than rejecting a guaranteed salary?”

This could only work if he’s in a labor market elsewhere – perhaps on Mars. And the ‘guaranteed salary’ bit is a red herring – all employers have pay scales which start at some minimum, so all employees enjoy a ‘guaranteed salary’. What’s happening here is not that the salary is being guaranteed, but that the pay scale minimum is being raised.

“Do they think high paid workers sit around all day and do nothing?”

Yes, more or less. They think that high pay is a reflection of past value, not present value. You perform well, they like you, they increase your pay. Much later, they look at their budgets and ask why your comp is so high. They question your supervisor about performance and whether they’re getting full value from you. As time goes on, they convince themselves that your pay is a reflection of your longevity, that your skills are outdated, and that you’re complacent and unmotivated. The best you can hope for then is that they’ll tolerate you. Don’t make a mistake, though.

Yes, but only the west coast ones!

If we need new kinds of looking-down-on, can we do it with GHG emissions? That way citizens of highly developed countries, and pretty every citizen of anywhere who’s not Chinese, can look down on China for emitting far more CO2 than any other country. Citizens of developed countries can also sneer at #3 India for increasing CO2 emissions faster than developed countries. China, India, and most of the world’s population can sneer in turn at the richest countries for having much higher emissions per capita. We can have a totally circular, sustainable system of contempt. There can be endless arguments over the moral implications and scientific implications of different CO2 emissions patterns. “It’s wrong that Chinese people should each be required to emit much less than Canadians by accident of birth.” “It’s wrong that Chinese people should be taking Canadian forests’ ecosystem services without compensation.” “It’s wrong that impoverished India should have to decrease coal use while Canadians are so much richer.” “It’s wrong that Canadians should have to cut back because Indians kept having big families.”

It could go on forever! I’ll start the ball rolling by proposing that North America completely phase out coal for electricity generation and winter heating. That will give ample grounds for superiority over any region that heavily uses filthy coal, even if that region’s combined emissions are not higher. We can recruit certain authoritarian follower types by dog-whistling that the places that still use coal for more than half of their electricity are not majority-inhabited by people of European descent*, if you know what I mean. If circular climate jingoism escalates to trade barriers and trade wars between major economic regions, that’s another improvement for the climate, because recessions decrease CO2 emissions more rapidly and predictably than most policy interventions to date.

*With notably rare exceptions. Greece because Greeks are lazy, Poland because of Popery, and Australia because, hmm, suitable cause linked to “national character” yet to be determined.

Anderson, it’s more than that. Moran is a hero in the way a significant number of Americans think. He’s speaking truth to deluded, foolish power. I’ve already seen comments to that effects show in friends-of-friends traffic on Facebook. The people Rich Pulchasky writes about didn’t just stumble into their views and aren’t just doing it as a lark – they feel it as one of their values, as sincerely as I feel mine. Their lives are built on it, and they get a lot more official reinforcement and reward than I get for mine, come to that.

Dr. Ngo, thanks. :) Also, since I can’t drink booze, feel free to have my share.

Bruce Baugh: “they feel it as one of their values, as sincerely as I feel mine. Their lives are built on it, and they get a lot more official reinforcement and reward than I get for mine, come to that.”

Yes. Bruce Wilder’s “but what about the authoritarian followers? How’s the left going to speak for them?” is a related variant of this. Once the left lost its presumed ability to say what people’s interests really were, it lost its ability to dismiss people with different value systems as being deluded.

I don’t see it as a core left value that everyone has to *believe* in equality in some abstract sense, as long as they accept that people should be treated equally. If we managed to (as an example, not as a likely outcome) get people to agree that everyone should get the same, basic guaranteed income, it wouldn’t matter if a quarter of the people had religion as their highest source of value and sneered at the people who didn’t live godly lives, and another quarter liked to work and sneered at the slackers, and another quarter partied a lot and sneered at the squares, and another quarter spent their time writing and teaching people and sneered at the willfully ignorant. We could pay the “work should be compensated according to skill and effort!” people in tokens of some kind that they could obsessively compare against each the total tokens of other workees.

10 But he quit as a complaint that others’ good fortune was excessive instead of enjoying his own good fortune. … Given the choice between increased prosperity that levels social distinctions or an austerity that heightens them, a non-trivial number will pick to be poorer if it means they have poorer-yet people left to look down on.

23 But raising the pay of his workers in a way not even dependent on mythical “merit” (hence Grant Moran’s reaction) is dangerous to other bosses, as it goes counter to a lot of core tenets of neoliberal ideology.

28 What Price did came as a cultural shock to nearby businesses, customers, family, and employees.

40 How will they know that they are better than other people unless they are paid more? Even if they are really currently paid less than others in the company — how will they know that they are better than poor people?

If a superficial reading of this one NYT story did not comport with personal prejudices, who would be so quick to draw sweeping conclusions about something like whether this came as a “danger” or “shock’ to other businesspeople? The article says reactions “were split on whether he was a brilliant strategist or simply nuts,” which strikes me as the obvious reaction to a business move that gets you (1) lots of new customers; (2) lots of ex-customers; (3) profiled in the NYT; (4) sued by your own brother. I think the “danger” and “shock” idea, despite a couple of wacky (now I know why I’ve never eaten at Canlis – and all this time I thought I just didn’t hang out in the right circles) anecdotes, is pretty much wishful thinking. Note especially (1); Adam Smith’s point may be less relevant to an industry with lots of slack.

And if a superficial reading of this one NYT story did not comport with personal prejudices, who would be so quick to draw sweeping conclusions about Grant Moran’s underlying motives for quitting? Grant Moran’s (who actually offers multiple reasons for quitting, not just the pay issue, but anyway) reactions to the pay changes are not really that different from Maisey McMaster’s (the other employee who quits). She also thinks the structure of the raises were fundamentally unfair, but somehow escapes being called an “asshole” by any CT commenter.

“He gave raises to people who have the least skills and are the least equipped to do the job, and the ones who were taking on the most didn’t get much of a bump,” she said. To her, a fairer proposal would have been to give smaller increases with the opportunity to earn a future raise with more experience.

A couple of days after the announcement, she decided to talk to Mr. Price.

“He treated me as if I was being selfish and only thinking about myself,” she said.

Maybe if his business goes south, he can spend lots of time commenting on CT. He’ll be welcomed as a kindred spirit!

F 08.01.15 at 12:32 am
Canlis is also one of the oldest restaurants in town and has always catered to the old Seattle money types. It’s known for its obsequious service (servers used to wear kimonos) and the fact that it is pretty much the only restaurant in Seattle with a dress code.

This, exactly. I’ve been there once, when I turned 18, I think. the food was extremely good (though not extremely interesting, as I recall), and I hated it. The view, though, was tremendous – as I recall, it’s on a bluff overlooking Lake Union.

It’s probably not still the most expensive restaurant in town, though it probably was when I was growing up – there’s a lot of more hip-to-the-moment New Money places in town. But it has always been the restaurant of Old Money Seattle, as F says, and (1) the idea of this icon of privilege lowballing its employees is disgusting; and (2) it’s quite likely the reporter knew exactly what this source would represent when she chose him. To anyone who knows a bit about Seattle, quoting a Canlis executive on the need to show the poors whose boss is a deliberately charged act.

…yet it’s not clear that their ‘class solidarity’ was any less solid in the ’50s”.

Mark Blyth’s Great Transformations teaches us that despite the latent tendency of the economic elite to form a cohort, capitalists really put that into gear in the 1970s. He suggests that the effective political organization of capital explains much of the neoliberal era and the way we think/discuss workers/labor.

This episode I think reflects both the latent tendency and the way in which capitalists have shaped the public discourse regarding labor, as well as good ole American ‘rugged individualism.’

anon/portly: “(2) lots of ex-customers”

Who are ex-customers for no good reason except —-?

Oh, that guy Moran: “Mr. Moran also fretted that the extra money could over time become too enticing to give up, keeping him from his primary goal of further developing his web skills and moving to a digital company.”

Well, he can live at the same level for a year, bank $15K, and be in much better shape for starting his own company. And the first thing that would happen whenever he started his own company is that his salary would reset to $0, anyway.

In the end, it’s resentment.

Yes. In my office a co-worker is paid more than I am (6% more). When you look at her long track record of high performance, she should be paid a lot more.

“Who are ex-customers for no good reason except —-?”

Who knows? I thought one of my main points was the dubious value of drawing conclusions from one NYT article (which, again, I suspect that no CT commenter would do from any NYT article that didn’t happen to comport with their ideology). You’d have to ask those customers.

“It’s the guy who became a millionaire while pushing his employees long hours, then decided to share the wealth not by rewarding those who had put in long hours in the past (or present) – the people who you’d think a lefty CT commenter would think the most exploited! – but in a more arbitrary, “statement” sort of way, that some might interpret as a touch self-aggrandizing.”

1 For the kingdom of heaven is like unto a man that is an householder, which went out early in the morning to hire labourers into his vineyard. 2 And when he had agreed with the labourers for a penny a day, he sent them into his vineyard. 3 And he went out about the third hour, and saw others standing idle in the marketplace, 4 And said unto them; Go ye also into the vineyard, and whatsoever is right I will give you. And they went their way. 5 Again he went out about the sixth and ninth hour, and did likewise. 6 And about the eleventh hour he went out, and found others standing idle, and saith unto them, Why stand ye here all the day idle? 7 They say unto him, Because no man hath hired us. He saith unto them, Go ye also into the vineyard; and whatsoever is right, that shall ye receive. 8 So when even was come, the lord of the vineyard saith unto his steward, Call the labourers, and give them their hire, beginning from the last unto the first. 9 And when they came that were hired about the eleventh hour, they received every man a penny. 10 But when the first came, they supposed that they should have received more; and they likewise received every man a penny. 11 And when they had received it, they murmured against the goodman of the house, 12 Saying, These last have wrought but one hour, and thou hast made them equal unto us, which have borne the burden and heat of the day. 13 But he answered one of them, and said, Friend, I do thee no wrong: didst not thou agree with me for a penny? 14 Take that thine is, and go thy way: I will give unto this last, even as unto thee. 15 Is it not lawful for me to do what I will with mine own? Is thine eye evil, because I am good? 16 So the last shall be first, and the first last: for many be called, but few chosen.

Perhaps your idea of a “lefty” is arbitrary, Portly Anon.

Moran didn’t quit in protest when Price was making a million dollars and he was making $41,000, so it’s obviously not some even handed principle of “you must be paid according to the hours you put in” driving him. The CEO was not working 1400 hours a week to justify his old million dollar income over Moran’s old $41,000.

I heap scorn on Grant Moran because the numbers he provided make him out to be ridiculous. He was in line for a 71% pay raise thanks to the new policy and that’s when he chose to quit? AFAICT he quit because he thinks income is your life’s report card, not just how you pay the bills, and the teacher graded other people unfairly easy. At only 29 years old Grant Moran is already thinking and behaving like George Costanza.

I don’t know if Gravity Payments will be successful in the long run. Most businesses don’t survive in the long run. They go out of business or get absorbed. I don’t even know if the $70k pay floor will prolong or shorten the life of Gravity Payments. But the quoted criticism of Gravity Payments from ex-customers and ex-employees isn’t about whether or not the company can succeed while spending that much on salary. None of the quoted critics said anything like “Gravity Payments was spending too much on Price’s salary before, and reallocating it among lower-level employees is a lateral move for a company that needs to trim costs.” They expressed resentment and unease that the undeserving may get the princely income of $70k. If median household income in the USA had tracked overall economic expansion since 1970, the median household income would be closer to $90k.

The idea that the second person who quit (I haven’t ignored her) was “exploited” by Price not sharing the wealth is an interesting one. She didn’t get a pay cut, so she didn’t lose anything. She had no legal right to “the wealth” that Price chose to redistribute, which was his (perhaps produced by prior exploitation of workers — but good luck demanding it for that reason!) So she lost nothing and only did not gain what she thought she should have gained in comparison to other people, out of money that was freely given away. If Price had given away all that money to the Cecil the Lion Sentiment Fund, she presumably would have either applauded or at least said that it was his money and he could do what he wanted with it. It’s only because it went to her co-workers that she objects.

In other words, this fits my thesis exactly. It’s an anecdote, yes, which is kind of unavoidable since the whole thing is an anecdote. But the problem is not that we aren’t reading it carefully.

>The more I think about it, it’s really amazing that so many lefty CT commenters read this article and then choose to heap abuse on Grant Moran.

When I actually look at the comments instead of simply examining the stuff inside my own portly head, I discover that up to the point of this comment, which was comment # freaking 49, the name Moran had only showed up 4 times.

I almost never label people as trolls, but the more I think about it….

Academic Lurker @ 12

This would have come as no surprise to Thorstein Veblen a century or so ago.

Matt @ 41, if you want something to sneer at Australians about, just recall that many of us are descended from deported criminals, which is why we steal more “Game of Thrones” episodes than anyone else.

63 Matthew 20:1 (“For the Kingdom of Heaven is like unto a man that is a householder…”)

So, salvation by faith, not acts, means that Grant Moran is wrong to feel that a particular ongoing remuneration scheme is unfair? Maybe….

Okay, Grant should be happy if he makes 50K and Bob in the mailroom, who puts in fewer hours now, was not around to put in the long hours needed in the past, and does work that requires less education and who was planning on leaving once his band lined up a tour, also makes 50K. Grant is morally wrong to object.

What if they give Bob 100K? Still wrong to object? What about Bob the VP making 2200K? It seems to me that you can only rely on the bible verse to make an argument that everyone should make the same income, regardless of effort. Once you have differential incomes, then extending this logic would seem to suggest that we should not care about income inequality. If we go to a system where one person works 1 hour per year, another works 3000 hours, both make 50K, everything is fine. But maybe my thinking is flawed.

Meanwhile we’re all sure John 8:7 doesn’t apply in the least to comment 42?

If he were upset that pay doesn’t reflect hours worked he should have been more upset with the old system where the CEO got 25x his pay without putting in 25x the hours. If he were upset that pay doesn’t reflect education he should have been more upset with the old system where the CEO got 25x his pay without acquiring 25x the educational credentials.

Productivity? Maybe. I don’t even know how you could compare that across a web designer, a mailroom clerk, and an executive. They don’t receive the same inputs or produce the same outputs.

You can rewrite it all you want. The fact is, a couple of people quit because they were bitter that the salary floor got raised, and that helped other people more than it helped them. They were completely content with an alternate reality where the CEO got a lot more money and all of the employees got less.

Fools like that deserve to be mocked almost as much as arrogant libertarians on comment threads do.

There is an interesting parallel here with the early days of the dot.com boom. When many of the early internet companies went public, their entire staff, including admins, receptionists, and mail-room employees, received huge stock-option payouts and became millionaires overnight. Somehow there wasn’t the same outrage over “why should the receptionist get a million too”, (except when it got to Forbes and they started to complain about stock options as robbing real shareholders by diluting future earnings). Now, granted the receptionist getting stock-options had often worked there a while and done long hours too (though not always if they were fussy about non-exempt overtime), but the situation has a certain rhyme.

@81

OTOH, I have heard hourly employees deciding not to put in for overtime (i.e. to put in for 40 hours/week when they worked 60 or more), on grounds that they’re a public company and they get stock options. And in the same breath talk about how responsible and orderly they have to be, now that the company is publicly traded.

It’s interesting what range of opinions can be comfortably expressed in comments here. These workers were unlucky enough to be named in an article in a paper that’s notorious for not reporting things the way participants think is accurate (probably notorious only because it’s famous otherwise, admittedly). Their actions could have been framed differently and everyone here would be supporting them.