Too Many CEOS: The CEO Mentality & How Wide-Spread CEOS Can Hurt The Economy Rather Than Support It-Part One-
Succession, White Lotus, Richardson, Billions, Progressive Development. As 9-5 Americans, we used to pay lip service to the potential of everyone becoming their own CEO – and the only thing separating us from the big office is grit, stick-to-itiveness, and other great words for work ethic. But each of those award-winning shows feature children who have fully inherited their wealth and their job. Most notably, they are about rich hairs squabbling for control over daddy's company. Living life as a high-powered CEO has become so abstract for most of us. It’s etched into royalty.
Real-life analogs like Benzos occupy our imaginations in the same way British nobility did 100 years ago. At the end of the Industrial Revolution, girls dreamed of marrying royal princes with vast family fortune, while young men dreamed of striking it rich in the gold rush. Today, 50 Shades of Grey features a CEO who pulls a college girl into his economic strata. In fact, CEO and Tycoon Bromance his own genre on Amazon and Goodreads.
When teenagers are asked to work a typical job or risk launching their own business, 60% say they want to be their own boss. This is according to the survey by Junior Achievement USA. CEOs have become our Prince Charming; There are royalty, and becoming CEO is the promise every self-help book makes. And yet we watch television shows about CEOs and their children. Our vision looks more like an Imperial Dynasty and less like a bootstrap story.
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Joe: So Todd, you and I have talked about something on this podcast which is the idea that we are all rich in our own way.
Todd: Yes, we all have different skills, and we are all geniuses in who we were meant to be.
Joe: Right. We've done episodes about how optimism, family and social consciousness make you rich, and not just in a touchy-feely way; You honestly get more wealth in your lifetime by being socially conscientious than anything else.
Todd: As well as inheritances; It's soft skills and social skills.
Joe: Right, and education. Now there's also the idea that we are rich just in the time we're living in. You can't be poor in today's economy because we all have access to food easily. Like, we're not starving, we are only suffering because we're all going to McDonald's too often. And we all have shelter of some sort, even if we don't have houses - we still live under something. And we have smartphones.
Todd: The statistic is that if you live in this country, you're the 2.2% richest in the whole world just by living here. You could be homeless here, and you still have it better than most.
Joe: There is a congressman named Jason Chaffetz who kind of got infamous because he basically was saying that the reason why poor people are poor is because they keep buying iPhones or smartphones. I mean, everybody's doing everything on their phone so you can't live without one. But also, that is the most modern version of “let them eat cake” that I've ever heard. So, I wanted to start this episode with a little bit of a downer with statistics just to sort of prove that thought wrong. Yes, we all want to be our own CEOs, but there's a reason for that. We have a desire to rise above, but where does the desire to bootstrap your way to the American dream start. And I think that in this era of people, it's not a generational weakness. A lot of people think that the upcoming generations are weak or that Millennials are weaker compared to Boomers, or the Boomers are weaker compared to The Greatest Generation. But I just want to kind of splash some statistics on us, and then we go from there. Like, we build up, we start from, what does that bootstrap look like when it starts and then lets all bootstrap our way to being CEOs today.
Todd: I could certainly use the raise. This show is not paying what I promised you it would.
Joe: No, I am not swimming with tigers and cocaine. Okay, so at least we are doing slightly better than serfs from the middle ages. So that's where we're starting. We want to take it back to basically the start of pay, or the start of annual taxes and annual income and annual pay. So there are a couple of viral articles that circulated a few years ago about serfs and the idea was medieval peasants only worked about 150 days a year. That's a lot of vacation time. And at the time I read this, I was going through covid work. Meaning, like I was at work every single day of the week and people who are working during covid are often overworked and overstressed. So I actually did the math on it just for the research of the show and because I don't value my own time enough. I wanted to work out exactly how much a labor craftsman in the medieval period would make so I could prove that the congressman who said that we're all rich for having iPhones was full of it. So, a labor craftsman back in the era of serfdom would earn 500 to 1500 pence a year, which a gallon of Ale is about a pence. And if we're just talking beer math, a good craftsman would be earning about four gallons of beer a day, which basically means about 50 bucks a day. So they were making half as much as minimum wage in some states. So, they're not doing great money-wise, but then again, they did have a heck load of time off. Their rents to the landlords were about 10% of whatever they grew, whereas Americans spent closer to 50% of their income on rent. So I'm going to say it suck at Congressman Jason Chaffetz. The reason I'm taking us back also to serfdom is we compared CEOs in our opening narrative to royalty - Imperial CEOs. That's not a term that this podcast is coining. That's a term that I believe British Magazine coined and the idea that a CEO is ultra-wealthy and they are making all the decisions. And basically, we're going to play the game here of what if everybody was king all at once? What if everybody in the world all got their wish? What if we were all CEOs at the same time?
Todd: Do you think that the higher class CEOs think us common folk wouldn’t be able to handle all the hard work and all the management of staff? Do they think we are incapable?
Joe: In preparation for these three episodes, I read a couple of books written by CEOs and then I read some articles written by people who studied CEOs and Wall Street Traders and then I read there's going to be so many articles that we're going to link off in our studies that are about the study of how the minds of high-powered CEO works. And basically what it's looking at is most CEOs know they're lucky, most of them know that they're privileged, most of them feel like they did the work to get there, so they earned it, and you're right, most of them think that people couldn't handle what they do. And by and large, I actually believe they're right. I think most CEOs for modern companies are doing something is extraordinarily niche and most humans can't do it but at the same time, when we get into how they are compensated and what that structure looks like, I believe that most CEOs are compensated to a degree where the motivation is no longer money, the motivation becomes almost a scorekeeping against the American system. That sounds bizarre. I should probably reverse that question. Todd, in your experience, when you have CEOs, does it seem like they have skills that a normal human doesn't have? Do they seem like geniuses?
Todd: I almost see it like an athlete. They have this extremely serious and extremely intense stoic presence.
Joe: I think that's really accurate.
Todd: I feel like we're all a bunch of bugs around them except for their inner circle; they're usually closely guarded.
Joe: One of the journalists says that most, if not all the CEOs don't consider themselves geniuses at all. They consider themselves very street-smart to the point where that's their Olympic sport.
Todd: I can see that, swinging through these vines of this corporate jungle and all the backstabbing that goes on and all the copying people on the emails; they were the slickest of all those that they knew who to partner with. It's like a really good game of Survivor. And the stakes weren't a million dollars in total, it was a million dollars a month.
Joe: That's a really good way of looking at it. It is a sport that they honed themselves to get good at and the argument that I may be making by the end of this and that I think a lot of people do is - what are they bringing to the table as far as resources and economy. The capitalist argument is yes, they're providing jobs and they are providing innovation. When we get into how Corporate Buybacks work, we're going to really kick that sand at that argument, but for now, how much do you think a CEO makes in this country? Just take the average of all of them.
Todd: I would say the median one makes probably 1 million dollars a year.
Joe: That is extremely close; The median pay for a CEO is 790K a year. So it may be lower than some people thought because we all think like the CEO of Apple or the CEO of Pepsi or something, but a lot of CEOs are running little businesses. Regardless, CEOs are vastly overpaid. If you just look at history CEO pay, since 1978 alone, has skyrocketed by 1,322%. We have corporate political gamesmanship in the office, and the people that win make a thousand times more than a Rockefeller did. So we are not even comparing things properly. CEOs are paid 351 times as much as a typical worker in 2020. That's increased since then. By the way, countries vary on this; some countries actually cap what a CEO can make to stop them from doing shady things.
Todd: From my studies, there's stuff that goes on in America that wouldn't go on in other countries. And I have a theory that the government is so corrupt that they're like, hey, you guys aren't going to steal. That's our job.
Joe: Right? Okay, I listened to a podcast called Adam Ruins Everything, and he had a great episode about talking about the difference between politicians and CEOs. They were saying that American corruption is just more advanced than Chinese corruption. We laugh at it, we say obviously politicians are skimming and stealing and their CEOs are not as good at it as ours are, we have had so much more time and we've gotten so much better at building a tax system that can benefit CEOs. That's really what it is. We just built a really advanced tax system that will help CEOs the most.
Todd: That makes sense.
Joe: If anyone's like, we're making it up about how much our tax system and laws benefit CEOs, there was a Princeton Study that came out back in 2012, where they looked at just all bills passed ever, and they looked at if the general population wants it and if CEOs want it. They found that it did not matter what people voted on. However, if the elite people in America wanted it, if CEOs and lobbyists wanted it, it passed. It’s insane in America because we've built a system that favors them almost exclusively. That said, let's start with our first big myth. Our first big myth is could the economy handle 60% or more of us becoming CEOs. I assume it would be a disaster if everybody got their CEO money and owned their own company all at once. If everybody became the median CEO, not just Imperial CEO and withdrew 1% of their annual income from the bank all at once, we'd run out of printed money immediately.
Todd: So we're not producing enough; there's not just enough flow.
Joe: Right. Talking pure wealth standing. we're not there. The country would not be set up for something like that. I guess we could get away from federal debt easier because, I mean, last year, we were in about 28 trillion federal debt. So if we're all CEOs, we could just all donate 10% of our annual income and America would be out of debt, But I don't know if we even want that because I've heard the argument from an economist that debt actually makes us keep peace with other countries. So here is the biggest part though - If everybody was CEO rich, nobody would feel rich. It’s called the Easterlin Paradox, which is people would rather be poorer than they are now if it meant their neighbors were even poorer so they could be the big fish.
Todd: So, American billionaires, over the last 13 months, their wealth in tough times has grown 55%. Isn’t that crazy?
Joe: So, while everybody else is struggling to stay in housing and struggling to get at-home jobs, billionaires have gotten 55% richer during covid.
Todd: Do you ever wonder what they spend all their money on?
Joe: I hear so many news stories about how they're giving it all away to charity, but honestly, I suspect it's all like Russian oligarchs where it's crazy shit.
Todd: Well, Steve Jobs spent $131M on a yacht and sadly, he wasn't able to enjoy it. Larry Ellison, the CEO of Oracle, bought 98% of a Hawaiian island.
Joe: What?! You can do that?
Todd: Here's another; CEO McClendon used his old company's money of $5.9M to buy basketball tickets to the local team - Oklahoma City Thunder, which he is a part owner of and that to me seems a little bit fishy. I'm going to wrap it up because there's just so many. This is a relocation expense, and it's crazy. This is a perk that goes to James Bernard. He's the CEO of The Shaw Group. So a lot of companies will pay their CEOs huge amounts to not compete or tell the company's secrets. So, they pay him money to keep quiet. This means, not only does he get that money, but he also gets $15M for himself and his whole family even after he's dead.
Joe: That is a weird comedy in the making. This almost makes me numb to money. Moving forward, have I ever talked to you about horse retirement homes?
Todd: You've talked to me about a lot of weird stuff, but not that one.
Joe: I don't know how I stumbled into it, but I looked up something about arguments against state-funded retirement homes. And I just randomly stumbled into somebody online who was arguing that it was their own fault for not saving enough and how they saved enough to put their horse into retirement. Turns out there are retirement homes where you go put your horse once they can't live without assistance anymore.
Todd: I like that so much more than shooting them behind the barn. But still, that is absolutely insane.
Joe: So here's a question…is selfishness a prerequisite of being a CEO or just elite in general? We've talked on this podcast about mastery, and you brought up something very interesting to me. I happen to mention that I was a very selfish person. In writing, I neglect a lot of things because writing eats up a lot of my time. Basically being a bad friend to everybody who was asking me to go out on Friday nights. And you said that mastery itself is selfish. You brought the concept up to me and I was like, oh, that's interesting. I hadn't really thought about that. So by that standard, if you become so niche and so good at something, if you're Dick Fuld and you become so good at manipulating a corporate structure around you, is it selfish? Does it take selfishness to get to that level of mastery and competence?
Todd: I think so, definitely. You don't really get anything at the highest level. It's one thing to be an achiever and to do well or be successful, but at that level, your family has to kind of obsess over and they have to be all in with all their chips on you too. Even more, you have to say no to everything that's not in line with your goals. Because everyone else is willing to do the same. Would you agree with that?
Joe: Absolutely. You just reminded me of the Warren Buffett quote, which is, you know, the successful say no to almost everything; I'm misquoting horribly. But yeah, the idea that you have to be selfish enough to focus on what you're doing to the exclusion of other things.
Todd: I don't know if you agree with this, but I think you have to fire your friends sometimes. I don't think anyone gets to that level without doing a few things that might be too uncomfortable to the weaker people…whatever we are.
Joe: I've probably asked this time and again, but did you read Rich, Dad, Poor Dad?
Todd: A long time ago. It has been so commercialized that it kind of hurts my head.
Joe: I'm asking because, in our opening, we talked about books that try to make you into a CEO. There are a lot of books that encourage you to become your own business leader. It tries to put you into an elite category by putting you in the mindset. It teaches you to be street savvy, but you can't ever take their advice literally and follow their exact path. Because it would create an economic disaster. So like one of our myths really is, could we take the same paths as other CEOs to become successful? Say, for instance, everybody took rich dad's advice and had rental properties. That's how the author became wealthy; he got rental properties and built up his properties over time. But we can't all do that. Because what that looks like is the economy we have now. We've talked about the economist from Britain, David Willetts who wrote the book, The Pinch, and it's all about how an entire generation has gotten rental properties and it has left no single starter home properties for Millennials. It's like slowly collapsing the economy. But other economies have run into the same CEO mentality where everybody tried the same thing all at once. One argument I've heard came out after the big short, and they were saying everyone just needs to invest in the corporations they believe in. If everybody was financially intelligent with their money, meaning if they invest in the economy, our economy would be amazing. But that actually happened in China during the pandemic. What that looks like is a whole economy that is overvalued. About 1.6 million new investors came out during the lockdown in China, and they have something like the S&P 500. They have a CSI 300, so it is an index fund of the top 300 companies. It jumped like 30% percent, and obviously, that's not sustainable. In fact, it's crashing right now. It was overvalued when everybody bought in, kind of like our S&P 500 is, and then China started rolling out a bunch of new regulations. My point is that I've tried to look at different self-help books about becoming a CEO and becoming your own billionaire, and their advice, if everyone took any one of their solutions, it would crash the economy…literally.