Friday, March 20, 2009

Scale, or Why the AIG Bonuses are Irrelevant

It's a well-known fact that human beings are terrible at comprehending scale. And when I say "well-known", I mean well-known to myself, because somehow, even today, the majority of people don't have a firm intuitive grasp on the difference between a million, or a billion, or a trillion.

To pick an extremely relevant example, I'll copy today's XKCD, and talk about the AIG bonus scandal. 165 million dollars is a lot of money, sure, but let's put it in perspective. Out of every thousand dollars that has gone to AIG, the executives there have received about 97 cents. Given the circumstances, you can easily argue that that's 97 cents more than they deserve, but come on now. Aren't you (and by you, I mean the news networks) even a little curious about where the other 99.903% of the money has gone?

The more I think about the bonus scandal, the more it seems like a distraction. On the scale that the government is throwing money around these days, $165 million is nothing - yet, for a few days, everybody is completely focused on it, including Congress, apparently. Right now, I think there are much bigger fish to fry than the AIG execs, however much they may deserve a good frying.

Mini-post today because I have been driving for seven hours or so and I am basically dead. >_>


Æther said...

Meh, I understand your point, but I also understand why people are upset. These are just the bonuses that CEOs receive, not their salary (though I can't remember the ratio of their salary to their bonuses), and it's not just AIG that's doing this. People kind of blame the CEOs of major companies for what's happening to the economy. It's kind of arrogant of them to get such bonuses while everyone's watching them. Yes, in terms of scale, it's nothing, but a penny saved is still a penny earned and I think it's the arrogance of the CEOs that's hurting them more than anything else.

Prime.Minister said...

I agree with the opinion that its rather silly of the media to do what they are doing, but its just the blame game. Yes the CEO's should not have done that, but las week 24 senators flew down to the florida coast to "discuss policies". How much do you think that costs the tax payers, even assuming they all took the same plane? more than it would had cost if they met in the giant offices we erected for them in the capital.

I think not adding strings onto the bailout or any form of actual accountability is where this project went wrong. Congress wanted to avoid responsibility for allocating the funds (which is their prerogative under the constitution) so they left it string less so that the President (first Bush then Obama) could choose who to give the money to, effectively shifting the blame should it go wrong to that person. The president then rushed to get the $ out, again just like the TARP, and the companies violated the spirit in which the money was given. So now in a petty PR stunt by a congress who i think is the originally blame for not doing their jobs, is trying to look like the hero of the people and get all 90% of that 165 million back through tax laws? Considering the TRILLIONS (1,000,000,000,000 to scale it) of dollars we have in foreign debts, I think efforts should be spent managing the trillions rather than the AIG CEO's.