9 minutes | May 26, 2020
Tax the Rich
It's a common refrain: "Make the rich pay their fair share." But what does "the rich" mean, and why does nobody define what "fair share" is? Let's discuss.
12 minutes | May 22, 2020
How We Are Paid
You are listening to Forbidden Opinions, discussing things we are not supposed to talk about. I am Mr. Book, your humble narrator. When the COVID-19 pandemic hit us, we saw a lot of memes going around that said, now we know who is essential, giving examples of delivery people, cooks, chefs, grocery store workers, healthcare front liners. And at that time people were saying, look, we don't have any celebrities. We don't have any performers. Now we know who the real important people in this society are. And that's absolutely true. However, there's an erroneous line of thinking there that says, therefore these people are the ones who should be getting the millions of dollars that athletes and stars get. But it fails to take into account one fundamental thing. Everyone else is basically not paid based on how important they are. That's not how things work in a free society. And I say free society in that some people may point to capitalism as being the reason that this pay structure is corrupted, but basically anything, any economic system in which people are freely able to buy and sell what they want on their own terms. In that situation, this law applies and it comes down to basic thing. How replaceable are you? How replaceable is any given individual in any role? Yes. Being essential means that your job function is irreplaceable. If no one was there to drive the truck full of grocery deliveries to the stores and grocery stores would quickly be empty, people would panic, run out of food and looting and riots would happen. So yes, grocery store delivery drivers are essential. 100% However, the reality is that any given grocery store delivery driver is not in and of themselves essential. They are replaceable. Is this something we don't like to hear that we as people, as workers are expendable. That's a reality regardless of your economic or political situation. So when it really comes down to is why are professional athletes, for example, paid so much more than teachers or chefs or the aforementioned grocery store delivery driver? It's because the combination of skills and experience to become one of the best basketball players in the entire world, it's sufficiently uncommon. In fact, it is so rare that you can go through thousands and thousands and millions of people and not find somebody with matching or higher skillset. Whereas even though teachers teach the next generation of workers and citizens, finding a replacement teacher for any classroom is not as difficult as finding the next Kobe Bryant may he rest in peace. A thought experiment example that kind of demonstrates this as this is recorded, we are in the midst of the coven 19 lockdown and there is a race for a viable vaccine to protect society from future infections. Let's say you were the only scientist in the world who had the ability to create that vaccine. What price could you ask for and yes, some people will say, well, you shouldn't ask for it. You could ask for a hundred million dollars for your services and you would be readily paid for that if not by a government than by a billionaire or some pharmaceutical firm that would snap you up instantaneously. Don't get me wrong. I think that holding out a vaccine that would protect society from a pandemic in the future is not the right thing to do. Holding it ransom for the very few richest people, that isn't the right thing to do, but Wright and Abel are entirely different things in the world, especially in a free society. If you want people to not be able to do bad things, then you have to take away freedoms. Overall, that is a different discussion and worthy of its own debate. Having free choice means having the ability to make bad decisions. People often mistake, should be able to versus can do. That's a problem. What we should do instead is recognize that these societal or forces of nature exists and try to figure out how to compensate for it in a lot of situations and there's a fine line and a balance because I believe that the scientists that used his or her expertise to come up with the viable vaccine in that case should be rewarded for their knowledge, experience, and creativity. And yes, it takes creativity to solve complex problems. So simply confiscating it and say, this is for the greater good here. Thank you. Having an award and a handshake. I don't think that that's fair either, but all this hypothetical point was to underscore the original thought that I was trying to demonstrate that scarcity creates value. Again, a small but common reference is 12 ounces of water is much more useful and valuable to a human being than 12 ounces of gold yet which costs more. Their price is not related to their value to sustain life. So back to the workers, the humble workers advice that I would give to anyone who wants to make a comfortable salary is to become the person in any organization, any company, any business that is as irreplaceable as possible. If you're the only one in a company with a particular skill and there's nobody for 200 miles that can do that same skill and the company needs that skill, then you have a lot more leverage in claiming your own pay scale or terms of employment. I think that's a problem with what we teach college students. We sell them a bill of goods with degrees that are not worth the tuition for which they pay to get it. And we don't emphasize enough that financial utility coming out of the other side, it's a friend of mine talked about a in a more rural part of the United States where doctors get paid very, very well more than any one individual needs to be paid. I asked why they pay such a high premium for doctors over there. The answer was because it is hard for the hospital to convince doctors to relocate to that area and therefore that's the going rate essentially. And yes, nobody needs to be paid such a high premium but need isn't the issue. Again, scarcity is, so you might ask, well what happens if we force a compensation to the scarcity? Well, an example that has happened is in Venezuela where due to various other factors, milk became more scarce in the cities. It became harder to transport, it became harder to process and prepare for sale. So, although I don't know the specific numbers, let's say it costs $2 and 25 cents to transport and get on the shelves and process and get ready for sale. However, the government of Venezuela had a law that said milk could not be sold for more than $2 per gallon. Again, these numbers are not exact. They are just demonstrative of the issue. So what was the response by the stores? Well, they had two options. They could sell milk for $2 a gallon and lose 25 cents for every gallon they sold, or they could stop selling milk. Well, we know which one they chose. So even though there was milk available in the country, there was none on the shelves because the laws that were intended to prevent milk prices from going out of the range of affordability of most citizens actually prevented the milk from being sold in the first place, thus depriving everyone of milk in a free society. The stores would be able to decide how much to charge for that milk and some would say $3 a gallon and some people would pay it and therefore they were be milk available and other stores would be in a position to offer milk for slightly less and therefore attempt to convince customers to purchase from them instead of the other stores. That's how prices naturally balance out. Ultimately for the benefit of the most people. It's a pie in the sky to think that you can just by Fiat say that anything should be charged at any other price and have it readily available. All this comes down to again is scarcity. Let's go back to that hypothetical situation about the magic doctor who invented the immunization. Well, if there is only one is that doctor could claim his price. However, if 20 firms are working on a solution and half of them come up with an option, well then that doctor can no longer claim any price he wants because he has to compete with the others. This is why competition is good. Back to our humble workers. There's been a lot of debate recently about living wages and minimum wages. For example, in fast food employees. I'm looking at a job board right now that says how many hours of training do McDonald's employees have to complete? Now granted your mileage may vary and I'm not going to attest to the accuracy of it, but looking at a trend here, it says every store is different. Another one says they don't train you per se, that you watch a video and then you kind of jump into it. Some people specify that they are still learning new things constantly, which I think goes for any job, but the question is how many hours of training does it require for you to start working in the restaurant? And the answer seems to be measured in hours or days. What that means is a typical fast food worker probably takes hours or days to replace. So that's why fast food workers who are more useful to society than rock stars were more useful to society than an actor who are more useful to society than a lot of high paid celebrities, for example, aren't able to name their price. Another thing to consider that as a huge factor in how wages are paid to various employees is scalability. A fast food worker may serve a couple hundred people a day, but they can't serve thousands or millions a day. Then you can switch to the.com world and you can look at social media for example, and people who code for social media, they get paid considerably more than the aforementioned fast food workers because one, it takes a lot longer than a day or two to train a coder to write the next Twitter, WhatsApp, TikTok. Furthermore, the product of their creation, the product of their labor can service millions of people simultaneously each day. The scalability of that alone makes their work hugely valuable to the company. If you are the top coder, you can name your price. So all of this is to say if you want to be well paid, become the most irreplaceable expert at any given firm. One who's output creation, work services the most number of people simultaneously, not just one at a time. And this needs to be in an organization whose output is in demand, not necessarily needed. Again, nobody needs a super bowl, but millions and millions want one. And that's what makes it valuable. So go out there and make yourself, you're replaceable and scalable and you will be well paid. That's all for now. If you've enjoyed listening to this, please go to forbiddenopinions.com and leave a comment. If you think there's something I've missed, by all means, I want to hear it. Leave a challenge or a question at forbiddenopinions.com and I will attempt to address as many as possible in an upcoming episode. If you know somebody who would enjoy or should hear this as well, or think about these things, please share this with others. Thank you for taking a moment to listen. Until next time.