CAMBRIDGE – One of the defining economic challenges of our time is how to distribute the value generated by groundbreaking technologies, such as generative artificial intelligence and recent innovations in biomedicine and manufacturing, which rely on massive computing power. To improve living standards, the benefits of transformative technologies must be widely shared. So far, however, these benefits have been monopolized by a small cadre of tech billionaires.

Tesla CEO Elon Musk is a prime example. Most people recognize that Musk did not deserve the $56 billion in annual compensation that the company’s board of directors attempted to give him in 2018, given Tesla’s relatively modest profits and years of losses. Nevertheless, the board argued that this enormous sum was necessary to incentivize Musk to remain at the company – an argument so baseless that a Delaware judge recently invalidated the board’s “unfathomable” compensation package.

But Musk is hardly alone. Other tech behemoths, such as Alphabet (Google’s parent company), have similarly lavished their CEOs with hefty salaries and stock options under the guise of retaining top talent. In reality, however, the actual contribution of star executives is often unclear. Notably, a classic 1991 study by Nobel laureate economists Bengt Holmström and Paul Milgrom suggests that incentive pay works only with simple tasks that have measurable outcomes and are executed by a single worker; in such cases, compensation can be directly linked to individual performance.

QOSHE - Sharing the Tech Wealth - Diane Coyle
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Sharing the Tech Wealth

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22.02.2024

CAMBRIDGE – One of the defining economic challenges of our time is how to distribute the value generated by groundbreaking technologies, such as generative artificial intelligence and recent innovations in biomedicine and manufacturing, which rely on massive computing power. To improve living standards, the benefits of transformative technologies must be widely shared. So far, however, these........

© Project Syndicate


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