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From: eder@ssc-vax.UUCP (Dani Eder)
Newsgroups: net.politics.theory
Subject: Re: Risk vs. Reward
Message-ID: <507@ssc-vax.UUCP>
Date: Mon, 11-Mar-85 17:12:17 EST
Article-I.D.: ssc-vax.507
Posted: Mon Mar 11 17:12:17 1985
Date-Received: Wed, 13-Mar-85 00:00:01 EST
References: <792@utcsri.UUCP> <1184@amdahl.UUCP> <458@ssc-vax.UUCP> <118@ubvax.UUCP>
Organization: Boeing Aerospace Co., Seattle, WA
Lines: 69

> >      Employees more or less get full value for their labor.  They
> > also have very little risk.  Working, as I do, for the Boeing Company,
> > 
> > Dani Eder / ssc-vax!eder / Boeing
> 
> Define what is meant by value, please.
     The shareholders are betting that they can rent the employees
time for less than the labor is worth to the eventual buyers of the
product.  The excess of money received from customers over costs,
including employee salaries, is the profit.
The value of the labor is what the customers who buy the product
are willing to pay over the other costs of making the product (in
other words the 'value added' in the eyes of the customer)
In the case of my company, 5/6 of that value added goes to the
employees as wages, 1/6 goes to the shareholders as dividends and
retained earnings.  That is what I meant by 'more or less full value'.
> 
> Since Dani doesn't explain what risk is in comparing laborers and
The risk of an employee is the wages an employee has earned but
has not been paid for yet, times the small chance the company will
not pay those wages on the next payday.
The risk of the shareholder is his invested capital times the
chance he will get back less than he invested.  In the first case,
it may be hundreds or a few thousand dollars times a small fraction
of a percent chance of getting nothing.  In the second, it is the
dollar amount invested times 10-40% chance of losing money, depending
on the company.  In venture startups it is a 80-90% chance of losing
most or all of your money.  With more established companies, you seldom
lose most of your investment.
> 
> A laborer's investment strategy, I'd suggest, involves heavy fixed
> investment (in housing, education, accumulated community ties [friends,
> counselors, etc.]), and high overhead (fixed and regular maintenance
> costs), relative to income received.  In situations of high unemployment

     On a discounted present value basis, my current job is worth
hundreds of thousands of dollars.  The years I put in to be able to
acquire such a job were well spent.  Even a minimum wage, minimal skill
job has a present value of $80,000. There the acquisition costs are
small compared to the value of the job.  For a skilled employee, the
question is whether additional education will return enough of an
increase in income to make it worthwhile. 
> (i.e. most of the real world), the peaks and valleys of economic cycles
> may not permit an adequate income stream to maintain the laborer's fixed
> investment, since the maintenance of that income stream depends on the
> success of an all-eggs-in-one-basket investment -- the current job.
> The ability of a laborer to spread her investment is limited by the
> transportation and time constraints inherent in her physical form.  None
> of these constraints limit the capitalist who can deploy his money
> worldwide.
> 
> Any all-eggs investment strategy is high risk.  No investment
> analyst would ever recommend an all-eggs strategy to a conservative
> investor.  That almost all laborers carry out the investment strategy
> I've outlined above (and often the fixed investment becomes more
> extensive as the strategy enters its later phases), implies that said
> strategy involves a high level of risk, since no conservative investor
> in his right mind would ever pursue such a strategy.

And what do you call a two wage earner family?  I call it diversification.
At one point a few years ago, my brother and I, and both my parents were
all working simultaneously(not all full time, though).  That was serious
diversification. 
> 
> Tony Wuersch
> {amd,amdcad}!cae780!ubvax!tonyw
Dani Eder / Boeing / ssc-vax!eder

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