The Widdershins

The American Delusion…

Posted on: May 30, 2014

Good afternoon. This just in from the “you can’t make this stuff up” file — real and true headline from yesterday’s Pop News Section of my newspaper, Fox News Hires Clueless Actress as Contributor. I know you are thinking, “Isn’t it redundant to mention ‘clueless’ in any sentence containing Fox News?” In any event, Fox hired Stacey Dash, best known for her roles in the Clueless movie and television series as an “on air“ contributor.  Seemingly her depth of expertise:  Supporting Romney over Obama in 2012.

Some explanation is warranted today. We of the WWW (World Wide Widdershins), being always eager to please, are trying something different for the next few weeks. Our Friday posts will stay up throughout the weekend. As usual, they will be open threads. Feel free to post any thoughts or just a simple hello.

Meritocracy Measurement Cartoon


This week a few articles brought home a subject I’ve been wanting to write about for quite some time — the fallacy of meritocracy. Although it dates back to the 2nd Century B.C. during the Han Dynasty, meritocracy has only been part of our lexicon and a pervasive cultural hallucination since the late 1950s.

So we can all start from the same jumping-off point, meritocracy has nothing to do with government. Meritocracy is an ideology. An ideology that flourishes in both political parties because of the glitter of whatever “American exceptionalism” is. Meritocracy is the belief, however misguided, that people are solely judged based upon their merits whether those merits be intelligence, morality, general aptitude, or work ethic.

The articles stirring me up were seemingly innocuous — unless you read them with an admittedly jaundiced eye. My eyes and I plead guilty. The first article was the Wall Street Journal coming out with their annual compensation survey of 300 large company CEOs.

Stop the presses and forget the 99 percent, the sad tale painted by the list of CEOs was one of unfathomable inequality among these Templars of the meritocracy and the tiptop of the 1%. The top three — Larry Ellison or Oracle, Leslie Moonves of CBS, and Michael Fries of Liberty Global — raked in more than the bottom 50 CEOs on the list combined. Just think about a mere 1% of the 300 pulling in more than the bottom fifty. The inhumanity of it all!

Yacht with just one basketball court...

Yacht with just one basketball court…

Let’s take Larry Ellison for example. In 2013, Ellison had to scrape by on a meager $76.9 million in direct compensation. Spending $100 million to win the America’s Cup, or racing fellow billionaires with your BMW Oracle race team, or building a yacht with just one basketball court — those things take serious scratch. This is not to speak of his new mortgage payment — paying for the whole island of Lanai, the sixth largest Hawaiian Island.

An average chief executive now makes about 257 times the average worker’s salary, up from 181 times in 2009. For the companies listed in the S&P 500, the median CEO salary reached a new high in 2013, a breathtaking $10.5 million.

Paying lip service to the critics of high salaries, boards of directors have tweaked compensation policies placing more emphasis on payment in stock instead of cash and stock options. Quite coincidentally and I‘m sure unplanned, this policy has become a boon for CEOs because a 30 percent surge in stock prices last year drove pay packages up accordingly. I guess sometimes good things just happen to good people.

Island of Lanai, 141 sq. miles created by volcanic meritocracy...

Island of Lanai, 141 sq. miles created by volcanic meritocracy…

The other article, Choosing Profits Over Productivity is a more esoteric economics piece. I’ll summarize it this way, a key indicator of the country’s economic health is worker productivity. With the sluggish economy, worker productivity growth has stalled since 2009. This is a big deal. For the last thirty years, workers have become consistently more and more productive because of and through the use of technology.

A major reason for this stall in worker productivity is a decline in spending on computers and software known as “capital services.” A practice totally devoid of a basic tenet of great leadership and management, that of making sure “your workers have the tools and materials to do their jobs effectively.“

It’s not as if companies don’t have money to spend. Corporate cash reserves have increased almost 70% over the past four years to more than $2.0 trillion or about the size of the Russian economy.

Instead of spending on capital services, corporations are spending their cash on increasing dividends and buying back stock. With corporate profits being inordinately high, conversely employee compensation as a percentage of GDP fell to a 65-year low in 2013. All the while Larry Ellison was moving into his own Hawaiian Island and managing to make do with just one ocean-faring basketball court.

Chart productivity and earnings

What makes this bit of economic research alarming is the stock market has not punished, but rewarded companies that have not invested in worker productivity with higher stock prices. Simply put, Wall Street is rewarding practices leading to making “less stuff” by putting more cash in the pockets of investors — in other words, rewarding doing the wrong thing.

The learning is this: Just as higher productivity creates wealth that’s shared by both workers and business owners, low levels of productivity make businesses less efficient, leading to lower wages, and inevitably increasing income inequality.

Now, what has this got to do with the misguided beliefs associated with meritocracy?

Everything — well not everything, but a lot.

In the coming months with the midterm elections, we are often going to hear the tired old saw, “If you work hard Uncle Samenough, you can do anything.” More often than not, it is going to come from the CEO-types who are comfortably sitting on third base and claiming to have hit a triple.

No one I know resents the success of the people occupying the highest echelons of the corporate world. I know I don’t resent their success, but what I do resent is the justification through the perpetuation of the meritocracy fallacy.

In our cultural vernacular, meritocracy has become synonymous with fairness and justice. We have somehow painted a mural lionizing the elites who justify their success by implying the rest of us laggards deserve the disenfranchisement flowing from income and opportunity inequality. Since we have conjured a fantasy of the successful being morally superior, we, as the sociological detritus, have no standing to question.

With this societal drunkenness around the concept of meritocracy, we have forgotten for every Steve Jobs there are calvaries of Enron guys who not only see themselves as the smartest guys in the room — they most likely are. For every Bill Gates, there are legions of Bernie Madoff wannabes. Reaching the highest rungs of the meritocracy ladder does not ensure moralistic behavior since behind every bootstrap story lurks an even more layered tale of “what ifs.”

My classmates have voted meCan anyone say the distribution of wealth and power based upon inherited genetics is really fair? Can we ever say it is meritorious for a woman to be many multiples better than any man in order to share in power? Can we ever wring the race-based prejudice out of a system allocating wealth? Can we take pride in Ivy League schools that perpetuate elitism through family legacy admission programs?

And foremost, can we worship a meritocratic ideology where CEOs are allowed to trade worker productivity for personal profit by making self-serving decisions? Making those decisions while knowing full well they are deleterious to workers, the corporation, and ultimately the economy as a whole?

Former Federal Reserve chairman Ben Bernanke put it this way during a commencement speech at Princeton last year:

We have been taught that meritocratic institutions and societies are fair…Think about it. A meritocracy is a system in which the people who are the luckiest in their health and genetic endowment; luckiest in terms of family support, encouragement, and, probably, income; luckiest in their educational and career opportunities; and luckiest in so many other ways difficult to enumerate — these are the folks who reap the largest rewards. The only way for even a putative meritocracy to hope to pass ethical muster, to be considered fair, is if those who are the luckiest in all of those respects also have the greatest responsibility to work hard, to contribute to the betterment of the world, and to share their luck with others. As the Gospel of Luke says: From everyone to whom much has been given, much will be required; and from the one to whom much has been entrusted, even more will demanded.

So on this last weekend of May 2014, here’s the challenge: Let’s not let the opinions of others become our reality when it comes to the fallacy of meritocracy. There is no inherent morality in the good fortune of genetics. There is no special meritorious aptitude in traveling down a particular birth canal. We should not, for a moment, be complacent when the successful label us lacking according to their hackneyed moral compasses.

When a floating basketball court surpasses ethical imperatives, I might consider meritocracy as the ideology of the ultimate American dream. Until that time, for me at least, meritocracy will remain the American delusion.

Have a great weekend and this is an open thread.



12 Responses to "The American Delusion…"

Not only is wealth based upon inherited genetics, but also on inherited wealth. Plus wealth obtained by any means fair or foul enhances life, health, education, and other factors as well.

@1, in many ways it belies the old Western cowboy rancher myth, “the rancher with the most cattle was the most successful” without taking into consideration, if you have more cattle, you will make more cattle.

Prolix said: boards of directors have tweaked compensation policies placing more emphasis on payment in stock instead of cash and stock options.

And I’m sure there is some way that works out to be advantageous tax-wise for the dear CEOs. (snort)

Just saw this: Shinseki resigned from the VA. Not a big surprise and his head on a platter isn’t going to really help anything.

Going along with my comment above: Obama goes on tv to announce resignation of Shinseki and people who were watching “The Price is Right”, go apesh!t on Twitter.

He traded Shinseki for what’s behind door number three,

Even my parents, who are not liberal, always say that anyone who has millions could not have earned them honestly.

@3, there are certain tax benefits based upon the structure, but more immediately, they are making out like bandits with the stock market hitting record highs this year. It is no coincidence that the Boards of Directors heard the drumbeat of reducing cash salary outlays and replacing it with stock. Structuring the stock options give CEOs tomorrow’s increases at yesterday’s prices.

@6, Shinseki is the equivalent of Kate Capshaw in “Indiana Jones: Temple of Doom.” It is somewhat ironic that Shinseki is the person who instituted the 14 day rule at the VA and now he is resigning over it.

@7, something I always watch for in biographies are those moments of true honesty where the ethical sacrifices or the “cutting corners” are revealed. What I always told my leadership students, if you have a biography without those moments being mentioned, reading the book is a waste of time because it isn’t honest.

Phew! My Tigers pulled out a win in their first game at the regional. I was worried there when the game was tied at the bottom of the 8th but SE La committed about 3 errors in a row and the Tigers took advantage of it.

I’ve got to run, I’ll stop by tomorrow. Everyone have a great evening.

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