Monday, March 23, 2015

First class tickets for ships that have sailed

[A quick side note. Bob Chipman, a film critic and pop culture historian whose work I enjoy and which I cited recently is no longer with the Escapist. If you want to keep up with his work, you can check out his blog here.]

The following is a nice example of putting popular culture in a business context. It also relates to an ongoing discussion I've been having with Joseph.

Joseph and I were discussing this very point about collectibles a few weeks ago as part of a larger conversation about investments and compensation, specifically cases where people made decisions in the hope of events repeating despite the fact that they were almost certainly a one time payoffs.

Growing up in Arkansas my go-to example is the Walmart millionaire box boy. Years before the stock took off, Sam Walton's wife convinced him to start a program that rewarded employees with either stock or stock options. When the boom came, a number of long-term employees found themselves very well compensated. As a result, virtually everyone in the area either knew someone or knew someone who knew someone who had become a millionaire from working a fairly low-wage job at Walmart.

These stories floated around for decades. They helped enourmously with morale and recruitment. People will tolerate a great deal for the possibility of a multimillion dollar payday down the road, but of course the boom was a one time event. By the time that people heard about the multimillionaire box boys, the last one of these had already been minted.

Joseph and I both saw a similar phenomenon working for you high-growth company in the early part of the millennium. The corporate folklore was filled with examples of people who had either gotten tremendous payouts from stock options or who had gone from the bottom to the top ranks of the company with shocking speed . Interns and secretaries who had become millionaires and vice presidents in the space of a few years.

For the most part, these anecdotes were true but that was largely beside the point. A few years earlier the company had been a start up now it was a major corporation. The career path and compensation associated with that particular transition were huge but there was no way they could be replicated once the company had arrived.

Of course, these stories didn't just spread by themselves. The companies in question did their best to make sure their employees knew that in the past there have been big pay offs . The result was a kind of false compensation. "We are not saying that your menial job here will lead to great wealth and position, but it has happened before." It is probably not a coincidence that Walmart's increasing labor problems seem to have picked up steam as the legends of millionaire cashiers faded.

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