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CEOs are hugely expensive – why not automate them?

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

#191

Post by indymike »

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 is a startup that is in fail mode, unless the CEO is raising obscene amounts of money and the business is progressing.

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

#192

Post by fakedang »

tyingq wrote: post #75
fakedang wrote: post #55

Earlier quoted context omitted.

Uh, I'm pretty sure BCG is in the first tier, and the others you mention are in the third tier, when it comes to the Scapegoat as a Service business.

I don't mean the tax/audit arm of those companies. They all do the generic management consulting. I left several off. Here's a market share chart: https://imgur.com/a/O1Urjkm

I wasn't going by market share but by pricing. MBB charges the most per amount of "value" /"intangibles" delivered.

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

#193

Post by DaniloDias »

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!"

I find this statement strange. Curious if others experience aligns with mine:

Being a CEO is all consuming.

You don’t want to be a parent and a CEO, cause the company comes first.

You don’t want to be married and a CEO, because the company comes first.

If you could “automate” this job, the developers behind the scripts become de facto CEO. Their scripts cannot fail. They will have to make the same sacrifices as the meatspace CEO.

I dunno if it’s an Icarus thing or what, but the closer I am in interactions with ceos, the more I pity them.

Asking these people to trade their lives for the possibility of no payout seems doomed to fail. The only reason people trade their lives for this role is because it is worth the personal damage and risk.

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

#194

Post by edanm »

z3t4 wrote: post #115
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…

One person cannot by her/him self return 3x or 5x profit. Its always about the team. And good team leaders are very hard to get by.

That's probably not true, at least in the sense that op intended.

It's almost certain that Steve jobs or Elon musk were much more than 3-5x more productive than the next best options facing their companies, for example.

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

#195

Post by PeterisP »

iambateman wrote: post #128

There’s talk on this thread that boards choose a CEO based on their marginal competence. I doubt there’s much evidence this is true. Boards select “the best person they can justify to shareholders.” Being expensive is a feature. A board member invents reasonable criteria for choosing a candidate: years of relevant industry experience at the VP level, advanced business degrees, charisma and “It” factor, recommendation…

The owners (or, for public companies - which most companies aren't - voting shareholders) are free to select whatever criteria they want for CEOs and appoint whomever they want.

If selecting a highly-relational project manager with a decade at the company would allow them to save a lot of money, they can try that out and potentially outcompete other companies due to slightly lower costs; and if selecting a very expensive outside CEO saves them some worry, that's a "service" they can choose to buy. If in the end the performance is the same and it's a waste of money, in the end it's their money (not, for example, the workers) to waste as they wish.

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

#197

Post by lolthishuman »

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!"

Then try that and see if it’s better. There shouldn’t be a one way forced option.

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

#198

Post by georgeecollins »

enos_feedler wrote: post #185
hammock wrote: post #137

Earlier quoted context omitted.

>You need profits for stock buybacks. You merely need capital. Lots of buybacks are funded by debt

This is pretty insane actually. Is there a common metric that captures which companies are funding buybacks with debt? or is it easy to figure out? I am not a finance person.

If the long term debt increases during a period of buybacks, particularly more than net income, than yeah this is the case. And yes that happens.

BTW, this is exactly what private equity companies do when they take a company private. They borrow a lot of money to buy the outstanding stock. Often the company they are buying with debt (held by the company) is not profitable. And sometimes the company goes bankrupt.

So yes this happens.

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

#200

Post by aerosmile »

So much "interesting stuff" both in the article and in the comments (my favorite is the guy claiming he knows of multiple startups where the startup CEOs are making 7 figures). I was initially perplexed when I saw this article doing well on the HN homepage, but I assumed that it's just some kind of an engagement metric that the HN algorithm is picking up on. Really disheartened to see that the article itself and so many of the comments are getting upvotes. But here's a hypothesis for why in my own view the quality here is so different than in other threads:

Most of us here on HN are hunting for disruptable opportunities so that we can either build startups or at least inform other people who will hopefully go after them. Of course, many of the seemingly disruptable opportunities are not really disruptable, but their apparent inefficiency is due to some aspect of the problem that we're not aware of. So in order to disrupt something, you either have to have deep knowledge (or have done a ton of research) in a certain industry or you have to be ridiculously lucky.

So that brings us back to the topic of disrupting the CEO salaries. At a surface level, the price is high and the performance is low - boom, the market must be nuts so let's disrupt this / solve this problem. But the issue with beating the market with your idea is that you have to have detailed insights into the price and performance of CEOs, and the reality is most of us have neither (special shout out again to the 7 figures dude). Simply saying "I can see that many startups fail, hence all CEOs must be idiots" is not exactly the level of deep knowledge you need to beat the market. Having worked directly with a CEO, including recruiting, firing, and replacing them, would be a good starting point to think about how to approach pricing differently.

I apologize if this comment comes off as elitist - I am just simply stating the needed mechanics to be good at disrupting any problem out there, and it's really no different in this case. It took me many years and many failed startups to analyze my own issues with spotting disruptable opportunities, and I wish someone had told me earlier in my life how much effort and diligence I should be putting into validating my ideas versus just blindly trusting my gut.

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