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CEOs are hugely expensive – why not automate them?

newstatesman.com

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Re: CEOs are hugely expensive – why not automate them?

#61

Post by whoisjuan »

This article is just an aimless rant about CEO high wages. At no point there was a coherent argument or explanation of how such automation could be achieved.

The author seems to think that just because there's AI that is relatively good at taking decisions then that's enough to argue that CEOs should be superseded by said AIs. "If an AI can make it, why pay millions of dollars to human CEOs?"... As it was that simple.

The author also ignores completely the basic laws of economics. Does he think that this is some sort of AI that you will be able to buy from a shelf? Provided by a SaaS Vendor at 100 USD a month? Because that's the only way you can make a meaningful economic argument around this. But the reality is that if this is even remotely possible, it would have a huge R&D price tag and it won't be a product that can be sold at scale by a vendor.

That would defeat the economic incentives behind having a good decision maker taking the crucial decisions of your company. All decisions would look the same across several competitors if those decisions are taken by the same type of AI. This effectively makes such AI obsolete and operationally disadvantageous. So, you must build a proprietary replacement for your CEO and building such AI could be several orders of magnitude more expensive than hiring and paying a CEO.

CEOs can't be automated. At least not soon. People who believe abstract decision-making jobs can be automated don't understand what automation is about or what's capable of. AI as it exists today can't automate CEO jobs or any kind of job where the output of a worker is to take extraordinarily complex and multi-variable decisions.

Re: CEOs are hugely expensive – why not automate them?

#63

Post by ForHackernews »

ARandomerDude wrote: post #42

CEOs aren't paid for the day-to-day value they provide to the company. They're paid for the long-term, strategic value the owners think they might provide the company in comparison to other candidates. So if you think CEO Candidate X will make you a 3x return on your investment, but CEO Candidate Y will make you a 5x return, it's almost certainly worth it to pay him/her the extra $200K to get you there, if that's the…

The problem is there's no way to evaluate if CEO($10M) is actually that much better than CEO($2M). How would you retroactively test the counterfactual of hiring the cheaper candidate?

Maybe in the future the stock price of robo-CEO companies can be used as a baseline. If you can't beat the robot index, then you're fired. (Obviously this will never happen because the board members are other CEOs, but you get the idea).

Re: CEOs are hugely expensive – why not automate them?

#64

Post by xboxnolifes »

chrisseaton wrote: post #45
klyrs wrote: post #10

Why is paying them less not seen as an option? I've seen multiple startups struggle because their CEO makes more than 10 qualified technical staff, where the employees burn out because there's no budget to hire the technical staff the company needs.

> Why is paying them less not seen as an option? I don't understand - do you think companies are voluntarily paying them money that they don't have to? If you won't pay them what they want they'll go elsewhere to someone that will. Just like you would, I presume.

Yes, but that implies that they bring something valuable to the company if companies are still willing to pay these premiums instead of just moving up an employee to CEO. So, what is the problem in the first place?

Re: CEOs are hugely expensive – why not automate them?

#65

Post by dominik-2020 »

k__ wrote: post #59
chrisseaton wrote: post #45

Earlier quoted context omitted.

> Why is paying them less not seen as an option? I don't understand - do you think companies are voluntarily paying them money that they don't have to? If you won't pay them what they want they'll go elsewhere to someone that will. Just like you would, I presume.

"the people who hire CEOs are the boards of companies and the boards of companies are mainly staffed by CEOs of other companies who unsurprisingly are incentivized to advocate for higher CEO pay."

Very often investors sit on boards, too

Re: CEOs are hugely expensive – why not automate them?

#66

Post by skapadia »

PragmaticPulp wrote: post #47
klyrs wrote: post #10

Why is paying them less not seen as an option? I've seen multiple startups struggle because their CEO makes more than 10 qualified technical staff, where the employees burn out because there's no budget to hire the technical staff the company needs.

> I've seen multiple startups struggle because their CEO makes more than 10 qualified technical staff, The fully loaded cost of a qualified developer begins in the six figures. A CEO earning 10x that would be earning 7 figures. I've never seen an actual startup with a CEO earning 7 figure cash compensation. I don't think any reasonable investors or even board members would allow that. Startup CEOs are largely compens…

This.

Re: CEOs are hugely expensive – why not automate them?

#68

Post by devilduck »

ARandomerDude wrote: post #42

CEOs aren't paid for the day-to-day value they provide to the company. They're paid for the long-term, strategic value the owners think they might provide the company in comparison to other candidates. So if you think CEO Candidate X will make you a 3x return on your investment, but CEO Candidate Y will make you a 5x return, it's almost certainly worth it to pay him/her the extra $200K to get you there, if that's the…

Meanwhile even if a CEO completely fails at their job, the amount of compensation they receive for doing a poor job could be better used for something else.

Re: CEOs are hugely expensive – why not automate them?

#69

Post by Taek »

harperlee wrote: post #60
ARandomerDude wrote: post #42

CEOs aren't paid for the day-to-day value they provide to the company. They're paid for the long-term, strategic value the owners think they might provide the company in comparison to other candidates. So if you think CEO Candidate X will make you a 3x return on your investment, but CEO Candidate Y will make you a 5x return, it's almost certainly worth it to pay him/her the extra $200K to get you there, if that's the…

They should then be compensated with a leveraged long-term derivative product that pays based on the stock difference between their company and the industry, 5 to 10 years apart. "You want to be insanely rich? Here's a huge company that's not yours as a resource, now make it so it is the best one in 10 years!"

The problem is that the best CEOs might not go for that. There are a lot of long term things that can impact a company for the negative, and you don't want your CEO bailing to a different company the moment that some macro event (semiconductor shortage, new competitor, global pandemic, etc) comes along and alters the long term upside of your company.

You want a CEO who is going to stick around and make the best possible decisions to improve the company's trajectory, even if that mostly means keeping the company flat as opposed to faceplanting.

Re: CEOs are hugely expensive – why not automate them?

#70

Post by cma »

harperlee wrote: post #60
ARandomerDude wrote: post #42

CEOs aren't paid for the day-to-day value they provide to the company. They're paid for the long-term, strategic value the owners think they might provide the company in comparison to other candidates. So if you think CEO Candidate X will make you a 3x return on your investment, but CEO Candidate Y will make you a 5x return, it's almost certainly worth it to pay him/her the extra $200K to get you there, if that's the…

They should then be compensated with a leveraged long-term derivative product that pays based on the stock difference between their company and the industry, 5 to 10 years apart. "You want to be insanely rich? Here's a huge company that's not yours as a resource, now make it so it is the best one in 10 years!"

Wouldn't it only make sense to gamble away the company in that scenario? Heads you win and the options pays out big, tails bankruptcy, but the option is worth the same as if you just did mediocre (worth nothing).
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