We Get Paid What We Are Worth (At least most of the time)

The man who says I can and the man who says I can’t are both usually right.
(attributed to Henry Ford)

This year Kobe Bryant will earn a base salary of $23.5 Million. Last year his base salary plus various incentives and bonuses topped out at $30.5 Million. In addition he picked up $31 Million from endorsement contracts. That’s a total of $62 Million in one year for playing basketball. I could be wrong but I doubt that Kobe averages 30 hours a week practicing and playing basketball. How much is that an hour?

Why does Kobe Bryant earn $62 Million a year? Because the marketplace believes he is worth it. When he signed that contract he was the best basketball player in the world. The owner of the Los Angles Lakers, his general manager, his head coach, and all those companies intent on cashing in on his name believed that Kobe’s presence on the court would generate that kind of income for the Lakers organization or increased sales of somebody's basketball shoes. Age and injuries are slowing Kobe down. It is unlikely he will get that kind of money from his next contract—if there is a next contract.

By comparison Howard Schultz the CEO of Starbucks earns a paltry $21.8 Million a year. He was the son of a poor truck driver, who went to work for Starbucks when it was a small unknown company. When the management of Starbucks wouldn’t listen to Schultz’s vision for the future of their tiny company, he left to start his own coffee bar. He didn’t have anywhere near the $400,000 he needed to open his business, but a rich doctor impressed with his work ethic and ability to take a calculated risk bankrolled his first shop. Two years later Howard Schultz bought out Starbucks for a measly $3.8 Million. His drive and energy has built Starbucks into a world respected brand with over 21,000 stores in more than 65 different countries. Men like Howard Schultz don’t work 40 hour weeks. I expect 60 hours or more a week would be typical.

If I was a shareholder I would vote to give him a raise. I think Howard Schultz is underpaid.

Currently baristas earn between $7.63 and $10.63 per hour. Although a particular barista might be a fine person, he is basically a human robot performing a number of simple repetitive tasks. The marketplace, the law of supply and demand, determines his economic value to the marketplace. Walmart and Starbucks have both recently announced blanket increases in salaries for entry level employee. Walmart was honest. They said they could no longer retain the kind of employees they want given their current wage scale. I couldn’t find a reason for the Starbucks announcement, but I bet their thinking is similar.

In addition Howard Schultz is now offering his employees free college tuition in any major they choose, not just those that might benefit the Starbucks organization. Think about it. He has a sweetheart deal with the online branch of Arizona State University, a well respected school. Given the cost of the Georgia Tech online Master’s in computer science that might cost Starbucks something like $3,500 per employee per year. Businesses using low skill labor typically have high employee turnover. Schultz will get to keep intelligent, highly motivated employees for a minimum of four years at an additional cost of maybe, a $1.75 an hour.

Oh, by the way, Starbucks employees give their employer a four star rating on the Glassdoor website. That is a pretty decent endorsement of a low wage employer.

Freedom guarantees inequality.

Meta-narratives are important. Once I was talking with a first generation Asian co-op at our lab about his high school experience. He casually, thoughtlessly, dropped a bombshell. In passing, he observed, “Of course I do well in math. I’m Asian. We all do well in math.” Besides working as a co-op at a Government laboratory to juice his college applications, he also ran a car detailing business on the side. He was very proud of his business.

If your meta-narrative includes statements like I can’t, or it doesn’t matter if I try because…, or the little guy doesn’t have a chance, or I deserve special treatment because I have special needs, I can predict the outcome of your financial life with a reasonable level of accuracy.

I don’t want to ever be found guilty of telling people what they can’t do. I don’t want to tell them they need special treatment because they can’t make it on their own. I want you to find a way to turn your skill set and opportunities into financial freedom, whatever that means to you. No matter your current condition you can do better; you can do more with life.

There are no guarantees. Life isn’t always fair. I know people who have seriously screwed up financial lives because of misfortunes beyond their control. However, I can make the statement that certain types of behaviors will produce certain kinds of results within a given range with a reasonable degree of confidence.

Take some time. Look at your own personal meta-narrative. As Doctor Phil says, “How’s that working out for you?” If you believe that life is basically unfair; that there is no hope for the little guy; that there is no use in trying; it pretty likely you will never fulfill your destiny. Instead, look for opportunities; commit to out working the completion; and never, ever give up.

The Chinese call America the golden mountain. When they come to this country they say they have come here to climb the golden mountain. You have that same opportunity. Make the decision. Make it today. Go out there and climb that golden mountain.