the philosophical anthropology of the 1%

Will Hutton poses the not unreasonable question, why is it necessary for a CEO to earn 190 times the average wage? Of course it's not necessary, by any conceivable economic or psychological rationality. The logic of incentives doesn't cut it here, and has been heavily undermined by work in hedonic psychology and behavioural economics showing that relative changes in income are what matters, rather than absolute levels. And unless one subscribes to a 'war for talent' ideology, it's difficult to see how this is an efficient labour market, even if orthodox economics struggles to identify the precise ways in which it isn't.

So we have to view it as political, that is, CEOs are able to exploit organisational opportunities for rent extraction. That is scarcely very surprising. But I would go further, and suggest that it also has certain metaphysical-political elements to it, in which particular anthropological claims (namely that a minority of individuals have a freakish, inexplicable talent, making them incomparable to the general mass) and economic practices (salaries of 190 times those of the general mass) are constantly propping each other up.

Both of these have to be viewed as equally foundational. If rampant salary inflation were explained purely in economic terms, there is the grave risk (from the beneficiaries perspective) that it could be falsified using economic evidence, namely that these rewards don't translate into performance, as it is well-understood that they don't. It needs, therefore, a substrate which suggests that these people are not ordinary, culturally or anthropologically, and can therefore not be measured using the yardsticks familiar to the rest of us. They are exempt from ordinary modes of evaluation and criticism, indeed their leadership status makes them the authors of new modes of evaluation and criticism. Moreover, seemingly unjustifiable levels of income are then profferred as examples of how unusual these people are. The more they are paid, the harder it is to subject them to any public measure of evaluation, because the less they appear to be normal members of society, and the more they seem like an eruption of genius or glorious violence. They don't claim to have 'earned' their money, any more than Roger Federer claims to have 'earned' his back-hand; their money is one manifest symptom of how different they are from the rest of us, and must be tended accordingly.

In my forthcoming book, I suggest that Schumpeter is the key figure here. Through his emphasis on entrepreneurship, Schumpeter implicitly offers an anthropology of difference, that is, his economic theory rests on the assumption that there are certain individuals who do not or will not operate according to the same rules as everyone else. They are exceptional and amoral, transcending the norms and standards which the rest of us allow to constrain us. They produce the institutions of capitalism, while the rest of us inhabit those institutions. It stands to reason that only a very small minority can be classified in this exotic way.

While it would be a little unfair to represent Schumpeter as a defender of the '1%', he was undoubtedly a theorist of capitalism's dependence on unruly 'talent'. I try to show that there is a latent Schmittian political philosophy underlying the Schumpeterian worldview, in which a tiny minority take decisions, and the vast majority obey rules. The leader is sovereign, because he decides; the rest are not sovereign, because they obey. End of story. Schumpeter transposes this anti-normative political philosophy into the economic realm (Corey Robin makes a parallel case for other Austrian economists transposing a Nietzschean anthropology into the economic realm. One important difference, as the very impressive New Way of the World points out, is that for figures such as Mises, everyone can be an entrepreneur of some sort, not only those in leadership positions).

This isn't to suggest that we should let CEOs get away with this. Even on Schumpeterian grounds themselves, there is plenty of good reason to accuse them of behaving fraudulently: there is nothing very disruptive or heroic about financial restructuring, stock buy-backs and imbibing managerial fads out of airport books. More importantly, critique needs to work as hard as possible to extend public measures of worth to include this minority of self-identified 'exceptions', and drag them back into the public sphere. My point is simply that we should recognise what is for them a virtuous circle, in which extreme levels of material inequality can be used to indicate their unusual existential quality (for better or worse), and that unusual existential quality is the legitimating basis for further increases in wealth and income. Hutton is entirely right to pose the question, but until the Schumpeterian-Schmittian idea of exceptional individuals is also challenged (not only in business, but in culture, sport, politics and so on) the individuals concerned will be difficult to pin down critically.

Comments

[Ian Christie]

Very interesting and compelling analysis - thanks Will.

There is a large literature by now on the myth of the Transformational CEO. But it naturally makes no impression on the Nietzschean uber-class of CEOs who need to believe in their own hype. What is surprising is how little difference that data and experience have made to shareholders and board members and remuneration committees, who all keep voting to be taken for a ride.
Part of the trouble is a collective action problem among boards: the fear that dispensing with their Randian Superman creatures will simply mean that they will be snapped up by a competitor and might actually perform as advertised for them. See the case of Wayne Rooney at Manchester Utd, awarded an £85m deal after performing mediocrely for ages. The club would be far better off selling him and buying a lot of more loyal and committed (and better) players; but if they sold him, someone else would have him, and he might actually play for them as if his pay packet were justified.

[Will Davies]

Ian - I think you're still assuming too much rationality in amongst all of this. The idea that Man Utd keep Rooney, for fear that he might perform for someone else, suggests at least a grain of reason (a sort of Prisoner's Dilemma problem). I would suggest that the Rooney situation is the perfect demonstration of something far more rooted in a complicated mix of anxiety, hubris, fear, aggression, and not knowing what else to do. Man Utd are suddenly under-performing at football, so splashing out £85m on a very famous footballer represents a symbolic indication that they are still a big bad club. Whether this represents 'good value for money' or not is no easier to specify than whether spending 60% of GDP on saving the banks represented 'good value for money'. We're outside of the realms of plausible valuation here. I guess Veblen might be the go-to theorist for this sort of thing.

[Slide_guy]

No need for much speculation on this. Andrew Carnegie echoed the sentiment over 100 years ago in his essay Gospel of Wealth.

[cfinkle]

There a simple explanation for these amoral, above-the-law CEOs: they're sociopaths.

[Tom F]

Are professional athletes "sociopaths" for making 100 times as much as their teams' low-paid stadium staff? Nobody questions that athletes and actors deserve their earnings, because differences in their skill are so clearly apparent. The resulting 'war for talent' in sports or film surprises no one. Why is it impossible that being a CEO also requires some hard-to-find skills that are worth paying for?

[Aguillon-Mata]

Having a paycheck 100 times larger than my coworkers' does not make me a sociopath, but perhaps having a full understanding of that unbalance and fighting through lobbies, politics and media endeavors to maintain it--as CEOs do in this country--could be consider a symptom of sociopathy. By "a full understanding of that unbalance" I mean knowing not only the fallacy of "the philosophical anthropology of the 1%"--which might argue that "one is worth what's worth", as I recently saw someone saying in The Daily Show--but also its obviously unethical grounds and its corrosive effects in other people's lives. At the end, though, the label "sociopath" seems insufficient to address the problem. I've seen it thrown at the 1% more and more often, and it's starting to sound like a tantrum. I'd recommend to move on, to not satisfy ourselves with that false diagnosis--which actually works more as an accusation in this context.

About the Rooney example, I'd like to point out that big clubs like Manchester Utd often spend money not to improve their game but to feed their brand; Wayne Rooney is part of a brand. His performance hasn't been a priority for anybody in the club for years already. But as a celebrity--in the same way reality TV participants become celebrities by circumstantial means instead of merit--he means business. This is true for other juggernauts like Real Madrid or Bayern Munich--in soccer: sometimes their calls don't make sense on the pitch, but they do make business sense.

Good talk, everybody.

[Richard Lyonn]

>Are professional athletes "sociopaths" for making 100 times as much as their teams' low-paid stadium staff? Nobody questions that athletes and actors deserve their earnings, because differences in their skill are so clearly apparent.

Actually many people question whether these people deserve their earnings.

But even if they do, in what sense is CEO skill or talent apparent?

Many CEOs leave a trail of corporate wreckage behind them. If ROI is the true measure of value - and not self-justifying narcissism - then these CEOs are the last people you'd want to run a business you plan to invest in.

>The resulting 'war for talent' in sports or film surprises no one. Why is it impossible that being a CEO also requires some hard-to-find skills that are worth paying for?

Because there is no evidence that CEOs have any such skills. There are a few - very few - exceptions. Occasionally CEOs appear who demonstrate genuine innovation and leadership.

But many CEOs are *clearly* incompetent fools. They don't understand their businesses, they don't understand business in general, and they actively destroy value.

Tech companies are famous for hiring buffoons, paying them ridiculous sums, and watching shareholder value either plateau or crash.

This is why the Cult of Narcissism is so destructive: it's the exact opposite of what it claims to be.

Instead of promoting talent it promotes and rewards incompetence and self-important blather.

Instead of punishing failure it insulates mediocre individuals from the consequences of poor decision making.

At some point business has to grow up and start dealing with reality by becoming evidence-based.