"Information asymmetry" cuts both ways

They pretend to pay us, and we pretend to work.

 – A Soviet-era political joke according to Wikipedia, though I've only seen it in an English text describing the C++ object model

Having been born in the USSR, #talkpay – people disclosing their compensation on May 1 - put a series of smiles on my face, expressing emotions that I myself don't quite understand.

The numbers certainly left me pleased with the state of the oppressed proletariat (web designers, computer programmers, etc.) in the rotting capitalist society. I do hope that the $125K/year proletarian will not feel resentment towards the $128K/year guy in the next cubicle. I hope as well that the second guy's manager won't deny him a promotion so as to avoid further offending the first guy.

"Hope", yes; "count on" – no, which is why I won't be tweeting about my compensation. Because my numbers are almost certainly either lower or higher than yours, and why needlessly strain our excellent relationship – am I right, dear reader? (The other reason is having no Twitter account.)

So, yeah, a series of smiles and a range of emotions. But today I want to focus on one particular bit – the one mentioned by Patrick McKenzie:

Compensation negotiations are presently like a stock exchange where only your counterparty can see the ticker and order book. You’d never send an order to that exchange — it would be an invitation to be fleeced. “I happen to have a share of Google and want to sell it. What’s it go for?” “Oh, $200 or so.” “Really? That feels low.” “Alright, $205 then, but don’t be greedy.”

The spot price of Google when I write this is $535. Someone offering $205 for GOOG would shock the conscience. …folks have received and accepted employment offers much worse than that, relative to reasonably achievable market rates.

All very true, except that with a share of Google, they're all the same and you arguably know what you're buying, and with an employee's services, they aren't and you don't.

There seems to have been a string of Nobel Prize-winning economists who founded "X economics" – such as "behavioral economics" or "information economics." The common thing between "X economists" is, they all (correctly) tell me that I'm irrational and misinformed. But then they conclude that it's them and not me who should manage my money. I believe the latter does not follow from the former. But I'll save that discussion for another day.

In particular, Stiglitz, the information economics guy, opened his Nobel Prize lecture with an explanation of his superiority over other economists. This state of things arose, according to him, due to having grown up in a small town in Indiana, where things didn't work as predicted by standard economic models. Specifically, the proletariat got shafted, prompting Stiglitz to come up with formulas predicting how badly one can be swindled due to his ignorance of the market conditions.

Which is probably very true and relevant, but it cuts both ways. A guy paying me to work on a conveyor belt could measure my productivity perfectly, and probably knew the market for my labor better than I did – clearly he had an advantage. A guy paying me to program, however, might know more about wages than I do. But he certainly doesn't have the foggiest idea what I'm doing in return for his money, even if he's a better programmer than I am.

Basically the "knowledge worker's" contract is something like this:

We'll give you a precisely defined salary and a benefits package. In return, we request that you handle some problems that we're told we're having. We hope that you'll solve them well enough to prevent us from having to know what they were in the first place. Please help us maintain the feeling that we own an asset similar to land or gold or something. Please keep the realization that we're more like the operator of a flying circus than a landowner from disturbing us. And certainly, never, ever ask us what to do with any of the moving pieces of this flying circus, because we seriously have no idea.

Of course, most people have a direct manager overseeing their work in the flying circus who knows more about it than the owner. But, ya know… "…then for the next 45 minutes I just space out", as the quote from Office Space goes. Seriously, it's bloody hard to tell if you're only working at half your ability – the only guy who knows is you. And this information asymmetry seems to me kind of symmetrical with that other asymmetry – employers being better at tracking the labor market, negotiating, etc. So, see the "Soviet" joke at the top of the page…

(Of course it's much better with an actual market for labor – I'm just saying that it's still far from perfect, and it'll get increasingly farther from "perfect" as the knowledge becomes more widely dispersed and you basically just have to trust experts at every step. An economy of dishonest experts – now that's a bloody nightmare. And by the way I actually think we now have enough newfangled technology together with ages-old fallibility to get there. AAA-rated MBSs is just the beginning.)

For a closing remark, I think it's fitting to mention all those bozos saying how "higher compensation does not increase motivation." (A management consultant saying something else might not get his management consulting gig, so I understand where they're coming from.)

To that I say: for me, at least, higher compensation leads to higher awareness of "spacing out" and such – call it "guilt" if you like. Pay me enough and I will think things like, "I'd really like to ignore this here shit, and it's SO ugly, and nobody will ever know. But, sheesh, they paid me all this money, just like they promised. And I sorta promised that I'll take care of the flying circus in return. And so it's seriously not OK to leave this here shit unattended. I better tell someone, and what's more, this here patch is definitely mine to clean, so here goes."

One danger in underpaying someone is it might prevent those thoughts from entering their minds. So, employers – caveat emptor. 'Cause goodness knows that the easiest way to raise one's compensation in the knowledge economy is to simply space out more while getting paid the same.

#talkpay…

36 comments ↓

#1 a on 05.05.15 at 9:07 pm

aa

#2 Eric S on 05.06.15 at 3:37 am

I couldn't figure out what about #talkpay was rubbing me the wrong way, but I think you've pretty much nailed them all.

Great article! Thank you

#3 Ian Ferrel on 05.06.15 at 4:09 am

The last paragraph is describing an economic concept called "efficiency wages". Paying above market rate because it'll either make employees feel morally obligated to do a good job, or make them do good work to protect their expected future above-market wages.

#4 Mat on 05.06.15 at 5:47 am

Brilliant!

My favorite quote from that article was warning about putting your actual salary on a job application because it would limit your offer to within 5% of your current salary.
Why is the 5% limit a problem? If I currently make $80k and I *want* to make $100k, why would I put $80k on the application instead of, say, $99k? The company to which I am apply doesn't know what I currently make; another asymmetry!

#5 Ilya on 05.06.15 at 1:45 pm

Why, it is used still. "Мы делаем вид, что работаем, а они делают вид, что нам платят"

#6 Steve on 05.06.15 at 4:27 pm

#5, I am guessing (without google translate) that that quote is the famous "As long as the bosses pretend to pay us, we will pretend to work."

#7 Dmitry on 05.06.15 at 10:42 pm

Mat,
Some companies will ask you for a copy of your latest paycheck and if you lied on the application, you're screwed…

#8 b on 05.07.15 at 8:18 am

bb

#9 Daniel on 05.08.15 at 6:42 pm

As a note, your income and wealth (as counted by the tax people) is more or less public knowledge in Norway. As of recently you have to log on to see it on the web, and you can see who has looked at yours – but there's still a paper version you can look at anonymously.

It's not perfect – it's after deductions, so it can be hard to estimate what the paycheck sum was. Still, it does make the labor market a tad more transparent.

#10 Yossi Kreinin on 05.09.15 at 11:33 am

Makes the market very transparent, I guess. I wonder what this does. I think Norway is generally a bit special in that it has a small population, a comparatively huge amount of natural resources, and a long history of development prior to the discovery of these resources, so it's not like any other country.

#11 Avy on 05.10.15 at 9:17 pm

The quote also appears on the first chapters of Paul Seabright's "The Company of Strangers"[0], where he discusses monetary systems vs. bartering.

http://www.amazon.com/The-Company-Strangers-Natural-Economic/dp/0691146462

#12 evpo on 05.19.15 at 4:19 pm

I thought about it too. When talking about programmers and their compensation, we need to consider http://en.wikipedia.org/wiki/The_Market_for_Lemons . To rephrase its concept for our scenario, we can say this: since the employer doesn't know the quality of the good (which is developer), he/she will be willing to pay for it only the price of a programmer of known average quality. So unfortunately in sometimes it not beneficial to be a good programmer because you will get the average compensation anyway. Some of us are only good programmers because they cannot be bad programmers. It is against their nature. It is as difficult to degrade the quality of your work as it is to improve.

#13 Anonymous on 03.23.19 at 11:08 am

Hi, I wanted to get a backlink for my website

It's related to online marketing and SEO, so anything that is related
it would work for me

Any text link in your website would work for me.

Please let me know the pricing

Thank you
Regards
David Wright

#14 Aly Chiman on 03.31.19 at 9:36 am

Hello there,

My name is Aly and I would like to know if you would have any interest to have your website here at yosefk.com promoted as a resource on our blog alychidesign.com ?

We are in the midst of updating our broken link resources to include current and up to date resources for our readers. Our resource links are manually approved allowing us to mark a link as a do-follow link as well
.
If you may be interested please in being included as a resource on our blog, please let me know.

Thanks,
Aly

#15 Aly Chiman on 04.11.19 at 11:20 am

Hello there,

My name is Aly. Would you have any interest to have your website here at yosefk.com promoted as a resource on our blog alychidesign.com ?

We are in the currently updating our do-follow broken link resources to include current and up to date resources for our readers.

If you may be interested please in being included as a resource on our blog, please let me know.

Thanks,
Aly

#16 Ashlie Lopez on 04.17.19 at 1:34 am

Hi,

Hope you are doing well. I just wanted to know if Ii could send some great article ideas for a guest post on your website.

If you like the ideas i put forward, i will provide you with high-quality free content/articles. In exchange, all i expect is a back link from within the main body of the article.

Do let me know if you like this proposal and if i can begin sending you some topic ideas.

Best Regards

Ashlie Lopez

#17 Fredric Otero on 04.23.19 at 8:21 pm

Looking for more customers?

Nothing can help: bit.ly/nothingcan
yosefk.com

#18 Knorr on 04.24.19 at 10:06 pm

Hochwertige Waren vom Produzent. Fabrikverkauf.
Versand am gleichen Tag aus Frankfurt. Bis 80 % günstiger als auf dem Markt.

Reifentüten mit und ohne Logo.
Stretch Folie. Alle Größen / Sorten.
Kartons.
Klebebänder.
Malerkrepp. Malerfolie. Werkzeug.
Spänesäcke.

Alles für Umreifung. Umreifungsband, Verpackungsband, Klemmen, Hülsen, Spanner…….

Gewebesäcke. Kartoffelsäcke. Laubsäcke.
Raschelsäcke. Zwiebelsäcke.
Luftpolsterfolie.
Baufolie. Estrichfolie. Gartenfolie. Teichfolie. Abdeckfolie. Schutzfolie.
Panzerband. Doppelklebeband. Teppichband.
Handschuhe.
Müllsäcke und Vieles mehr.

Info auf: folmax.de

Mit freundlichen Grüßen

#19 Gemma Robin on 04.25.19 at 11:24 am

What if you could automate all of your social media channels in a compliant way that allows you to get more leads and conversions while you focus on doing what you love?

It is now possible to automate Messenger, Facebook, Instagram, Linkedin, Pinterest, Reddit, YouTube, and Twitter with robotchatbot.com.

Robotchatbot.com is compliant social media automation that is approved under each social network’s strict API and review process.

If you are tired of responding individually to posts, moderating comments, or having to upload each post individually into its own campaign for each social media channel, then you really should check out robotchatbot.com.

Still not convinced? Then you can try it FREE for 14 days. Just the time saved from streamlining posting to your social media profiles is a game-changer not to mention all of the automation features packed into to robotchatbot.com.

You can also make Messenger bots that help customers and upload them to your website and so much more!

Try it for 14 days free at robotchatbot.com.

#20 sohbet on 04.29.19 at 12:19 am

farklı vede özel bir site

#21 Sal Kriesel on 05.15.19 at 4:47 pm

5/15/2019 Like the website– extremely easy to navigate and a lot of stuff to see!

#22 cheatbreaker download on 05.15.19 at 8:49 pm

I am not rattling great with English but I get hold this really easygoing to read .

#23 krunker hacks on 05.16.19 at 1:27 pm

Good Morning, happy that i saw on this in yahoo. Thanks!

#24 aimbot fortnite on 05.16.19 at 5:22 pm

stays on topic and states valid points. Thank you.

#25 nonsense diamond on 05.17.19 at 7:38 am

Just wanna input on few general things, The website layout is perfect, the articles is very superb : D.

#26 fallout 76 hacks on 05.17.19 at 11:01 am

Hi, here from yanex, me enjoyng this, will come back soon.

#27 red dead redemption 2 digital key resale on 05.17.19 at 4:11 pm

I have interest in this, danke.

#28 redline v3.0 on 05.17.19 at 7:15 pm

Thanks for this site. I definitely agree with what you are saying.

#29 badoo superpowers free on 05.18.19 at 8:41 am

Enjoyed reading through this, very good stuff, thankyou .

#30 forza horizon 4 license key on 05.18.19 at 3:33 pm

Your website has proven useful to me.

#31 JamesChili on 05.19.19 at 12:47 am

According to ecotoxicologist Vera Krischik of the University of Minnesota, who was not involved in the study but reviewed it in detail, the data is solid and troubling. A dose of 192 parts per billion is enough to kill a honeybee, she says, and dozens of studies have found impairments in bee navigation, memory and foraging ability at between 4 and 30 parts per billion.

[url=http://www.rolinn.us/]rolinn.us[/url]

Spoilers, duh.

[url=http://www.truefir.com/air-max-90-c-1.html]New Air Max 90[/url]

For me this was the arena where I grew up: Slowly, imperfectly, with a fair amount of collateral damage. This is my hometown, and the hometown of a lot of other people.

The story of Batman is more suited to reimagining — it’s been everything from campy to deadly serious — but it’s every bit as overexposed. Fox’s new series “Gotham,” premiering Sept. 22, comes between the Christopher Nolan “Dark Knight” trilogy, which concluded in 2012, and the forthcoming “Batman v Superman,” planned for 2016; it proves how little new there is to say about the venerable superhero. The show is competently made, but who craved another new story about Batman?

[url=http://www.truefir.com/air-max-270-c-166.html]Air Max 270[/url]
[url=http://www.eztook.com/nike-kyrie-5-oreo-black-white-cheap-wholesale-p-7582.html]Nike Kyrie 5 "Oreo"[/url]

[url=http://www.cheap2019jordans.com/new-release-nike-air-max-97-parra-whitepure-platinumpinkblue-p-4424.html]New Nike Air Max 97[/url]

#32 mining simulator codes 2019 on 05.19.19 at 7:35 am

I am glad to be one of the visitors on this great website (:, appreciate it for posting .

#33 smutstone on 05.20.19 at 12:13 pm

Hi, here from baidu, i enjoyng this, I come back soon.

#34 Aly Chiman on 05.20.19 at 11:29 pm

Hello there, My name is Aly and I would like to know if you would have any interest to have your website here at yosefk.com promoted as a resource on our blog alychidesign.com ?

We are updating our do-follow broken link resources to include current and up to date resources for our readers. If you may be interested in being included as a resource on our blog, please let me know.

Thanks, Aly

#35 redline v3.0 on 05.21.19 at 7:45 am

Great, this is what I was looking for in google

#36 free fire hack version unlimited diamond on 05.21.19 at 5:04 pm

I was looking at some of your articles on this site and I believe this internet site is really instructive! Keep on posting .

Leave a Comment