The Self-Exploitation of Intellectual Capital: How Returns to Labor Have Eclipsed Returns to Capital

Social security only began keeping track of salaries over $50 million in 1997. (In 1990, the highest group it broke out were folks making more than $5 million.) In 1997, 13 people made more than $50 million in salary. By 2018, that had increased to 211.

In the last 50 years, arguably only the returns to entrepreneurship have grown more than the returns to elite labor. This huge gain in wages is easiest to see with CEOs and professional athletes. 

In 1969, Willie Mays was the highest paid major league baseball player at $135,000. In 2019, Mike Trout was the highest paid player at $37.7 million. (Willie made about two-thirds what we paid Nixon to be president; Trout makes 94X as much as we pay Trump.)

In 1969, the ratio of CEO to average worker pay in the S&P 500 was 32. In 2019, it was 264. (Which means that S&P 500 CEOs make per day what their employees do per year.) 

Median wages between 1990 and 2018 grew about $4,700. Meanwhile, wages for those in the top 1% grew about $114,000. (Both numbers are adjusted for inflation.) Folks making median wage had about $90 more per week; folks in the top 1% had an extra $2,200 per week.

The old models still suggest that capital is the source of income inequity. The new data suggests that it is increasingly returns to labor - unique skills and intellectual capital - that drive big differences in income. 

As Daniel Markovits points out in The Meritocracy Trap, one of the fascinating things about this is that to be rich once meant you owned land and capital and could afford to be idle. Those assets worked for you. Increasingly, being rich means working more than the poor, not less. Bankers used to work 10 to 3; now investment bankers report working 17 hours a day. In 1962, elite lawyers were expected to bill about 1,300 hours a year; now they are asked to bill 2,400 hours a year, which means working long hours six days a week. To be rich now means having to put in the hours to get a return on the skills or intellectual capital you have created. The old, financial capitalist exploited the worker; the new, intellectual capitalist has to exploit him or herself.

Information on social security here.

Information on CEO to worker pay ratios here.

Pittsburgh Pirates Get Into Playoffs for One-Third of What It Cost the Dodgers

A 3-bedroom home in Los Angeles costs $695,000. In Pittsburgh, a 3-bedroom home costs only $143,000. Given players can get a place for their family for less, the Pirates don't have to pay as much. It's not something GMs think about but apparently it can make a big difference in payroll costs.

Because living expenses are lower in Pittsburgh, the Pirates were able to make it into the playoffs at a cost per victory of less than a million dollars. By contrast, the Dodgers had to pay about $2.3 million per win.

Here is the ranking of price paid for victory for the teams that have (so far) qualified for the playoffs.

A couple of notes.
The number to the left of the name indicates the ranking - out of 30 teams - for total payroll.
This is the payroll they started the season with. It might be different now.
As of today - 24 September 2014 - there are still more teams that will join this list. None will get in for as little as the Pirates.

Baseball Player Salaries vs. American Presidents'

When a reporter asked Babe Ruth to justify making more money than the president (this at the dawn of the Great Depression), Babe replied, "Well, I had a better year than him."

Today, even an average baseball player is 8X as valuable as the president.

The Future of Baseball?

Team uniforms are ... well, so uniform.

I wonder how long before we'll have a professional team named, say, The Las Vegas Rebels, or the Santa Cruz Non-conformists whose team members are free to dress as they please. The pitcher in retro-uniform, the Left Fielder in his college jersey, the first basemen in shorts and t-shirt because it is hot.

The beauty of it is that whatever you wore to the game, you'd be showing your support for the team.

Hurtling Myself Belly First Onto the Bandwagon - Little League World Series Reporting

I live in Chula Vista, CA. Because of our local Little League All Star team, more people have now heard of it. (Second biggest city in San Diego County - located halfway between downtown San Diego and Tijuana, along the coast - or Bay, actually.)

Here are some stunning stats for the kids, only two games into the Little League World Series and just qualified for the quarterfinals today. Scrap all the "long way to go" talk and let's look at what they've done so far.

* They scored 113 runs and hit 45 home runs in the seven games before today's
* In tonight's game, they scored 12 runs with 11 hits (in just the sixth inning)
* Chula Vista now has a World Series-leading 10 home runs. The record for most home runs in a Little League World Series is 13, by Hawaii in 2005. Chula Vista, it is worth reminding you, is only 2 games into the opening round.
* The scores for their first two games in the World Series? 15-0 (a game stopped by the 10 run mercy rule) and 14-0.

They call these kids the Blue Bombers. I guess it helps to have a 6', 205 pound 13 year old who can pitch shut out ball and bat 1.000, but I'm pretty sure all this just reflects on who we are. While other communities debated the efficacy of putting fluoride in the water, we've been experimenting with the proper mix of steroids and human growth hormone. If we can repeat this for a couple more years, we might just have a formula worth marketing.

The World Series and Instant Karma

A couple of weeks ago, I heard an amazing story from my old buddy Jim. He lived in the Bay Area during the 1989 Earthquake. His roommate had just bought a BMW and went to watch the San Francisco Giants - Oakland A's world series game. As if it were not drama enough to have teams from across the Bay play each other, the earthquake hit just before the game - an earthquake that was so severe that officials decided to postpone the game until later. (We Californians scoff at Pennsylvanians who think that rain is reason enough for a delay - we play until devastating earthquakes hit.)

Jim's roommate went out to the parking lot to drive home. There was, however, a little problem. His car had been stolen.

It took the police only hours to find his car. When the earthquake hit, the four men who stole it were driving on a section of bridge that collapsed. The car had been crushed down to about two feet high and the car thieves were instantly killed.

Yesterday, the Phillies completed a game that spanned three days because of weather. It is not obvious that the good people of Philadelphia believe in karma the way folks in the Bar Area do; I have heard no reports of car thieves whose enjoyment of the series was interrupted by this same bad weather.

The Mighty Casey Has Shot Up

Oh, somewhere in this favored land the sun is shining bright;
The band is playing somewhere, and somewhere hearts are light,
But when the report confirmed the rumors, fans let out a groan
Casey, mighty Casey is ingesting human growth hormone.

[with apologies to Ernest Thayer]

To no one's surprise the new Mitchell report on baseball revealed that players are using steroids and human growth hormone as a way to improve performance. Personally, I'm not entirely sure that this is such a big deal, but I'm no expert.

I'm sure that I've attended more than one concert in which the performers have used drugs. I still enjoyed the music. It was entertaining, just like a ball game. Further, every generation of players has looked for an edge, has included cheaters.

But the biggest reason that this might not be such a big deal? I'm convinced that in 50 years, everyone will be using some kind of performance enhancing drug. Who would not take a drug to enhance memory (one I'd take in my old age if it were available and if my mind had begun to fade), and a drug to make the muscles remain flexible and strong? Athletes are probably going to become the early adopters of what will become wide spread - the use of drugs to arrest the effects of aging and to enhance general performance.

Pete Rose got 4,000 hits. It is a very big deal when a player gets 3,000 hits and Rose got more than 4,000. His was an amazing career. But Pete can't be in the Hall of Fame because he bet on the game. (Fiercely competitive, Pete only bet on his team to win - but he bet.) In 2000, the Sycuan Indian Casino became the official sponsor of the San Diego Padres - incorporating their name into the Padres uniforms and marketing. Pete Rose is barred from the Hall of Fame because of his association with gambling. The San Diego Padres now proudly advertise their association with gambling. What seemed renegade in one period becomes the norm in another. This may well be the case with players and drugs.

And finally, it is only a game. But Americans seem to take nothing more seriously.

Bonds to Tie Hank Aaron this Weekend

Barry Bonds is here in San Diego for a three-game series. My prediction? He's going to tie and / or pass Hank Aaron this weekend.

It seems fairly certain that Bonds has used some kind of steroid, growth hormone, or substance to move from hero to superhero this late in his career. But there is one other possible explanation for his home run surge of the last five or six years.

Bonds has always done well against the San Diego Padres. In seasons when he'd hit, say, 43 home runs he would hit 13 of them against San Diego. For years he's feasted on the Padres. One explanation for his surge? Noticing this, his batting coach simply told him, "Imagine that they're all wearing Padres uniforms."

Top 9 Reasons That I'm Glad It's Baseball Season

9. Baseball is not a violent sport. The pitcher tries to throw the ball past the batter, not at him.

8. Baseball seems to me such a civilized game, played at a conversational speed that encourages discussions and friendships among the fans.

7. Baseball is a humbling sport. Even the best teams lose about 60 games a season. Even the best hitters are put out two-thirds of the time. Players tend to be a little more philosophical about pacing themselves through a season of 162+ games.

6. Baseball has a tradition that allows fans to compare numbers over the course of a century - that’s tradition.

5. The numbers that get compared are so fuzzy (it wasn’t until 1950 that whites had to compete with blacks, baseball fields vary greatly in the ease with which they accommodate home runs, of late players were probably “juicing,” etc.) that comparisons between players inevitably provokes great arguments (see point 8).

4. Baseball is played outdoor in the late spring and summer. If it rains, everyone comes back later to play and watch the game. In this sense, baseball comes with a good weather guarantee.

3. Baseball is scalable. Kids who are 12 can play an engaging game as can college kids who are 20 and professionals who are 30. As long as the players are roughly matched in ability, the game promises to be interesting.

2. Baseball lets the fans feel superior. Batting champs strike out, Cy Young Award winners give up home runs. They make grown men wear those funny little uniforms. A guy making $30,000 a year can holler at a guy making $3 million.

1. There is almost no correlation between athleticism and the ability to hit a 95 mph curveball. There is no classic hitter’s physique, giving the sport an everyman look in spite of the fact that only about .0003% of the population can consistently hit a 95 mph curveball. Lean, chubby, and muscular players, Japanese or Latino guys who speak little or no English, black guys or white guys who talk too much, serious guys and silly guys – the great players seem to defy any stereotype of personality, intellect, or physical characteristics.