The Comparison Trap or Why CEOs Make So Much Money

In a well known study (Solnick and Hemenway, 1998) people were asked whether they would prefer to make $50,000 when everyone else made $25,000 or $100,000 and everyone else made $250,000? Assume that prices for goods and services remain the same in both scenarios.

Which would you choose? Would you rather make $50,000 more (in the second scenario) or would you rather make twice as much as everyone else (first scenario)? The majority chose the first option. That’s interesting and “irrational” because a person is willing to give up $50,000 in real income for the privilege of having more than the other guy.

One thing that tells us is that we measure our own happiness (or at least what we think will make us happy) by comparing ourselves to others.

In the book Predictably Irrational, Dan Ariely explains that in 1993 federal regulators forced companies to disclose details about the pay of their top executives. The thought was that if those salaries and bonuses were made public, there would be a kind of “public shaming” and corporate boards would be reluctant to keep increasing what many thought were already outrageous compensation packages.

Guess what happened? Their plan backfired. Once salaries were reported, the media naturally ran stories on the highest paid CEOs comparing their pay with others in similar positions and as a result executives salaries skyrocketed. In 1993 when the public disclosure was mandated the average CEO was paid 131 times as much as the average worker. Now they are paid 369 times as much.

Comparison explains a lot of our unhappiness. We will always know someone who is more attractive, more fit, has better behaved kids, makes more money, has a cleaner house, has a better marriage, takes better vacations, is more organized, is a better hostess, got accepted to a better college than us. Therefore if our happiness depends on “being better” than others we know, it’s going to be a long and miserable life.

Is it possible to opt out of this comparison game? Consider this from the NYT…

James Hong, a co-founder of Hotornot.com, a dating site, found that his $55,000 Porsche Boxster had come to symbolize the trap he often saw others in Silicon Valley fall into. Mr. Hong, 33, says Hotornot’s success allowed him “a very comfortable life without ever needing to get a job — freedom money, as they call it.” But he nonetheless saw himself succumbing to the envy malaise.

After all, his best friend, Max Levchin, was a founder of PayPal and has a net worth probably in the tens of millions.

So in a conspicuous move to get out of the game, Mr. Hong has decided to sell his sports car and has bought a Toyota Prius.

“I don’t want to live the life of a Boxster, because when you get a Boxster you wish you had a 911,” he said, referring to a much more expensive Porsche. “And you know what people who have 911s wish they had? They wish they had a Ferrari.”

Mr. Hong said his most effective coping mechanism for feeling outstripped by his friends’ wealth — beyond his choice of cars — is to try to put it out of his mind.

“The only way I’ve dealt with it over time is to consciously decide not to care,” he said. Still, he confesses: “Every now and then, when I hear they’re getting a certain valuation, I think, ‘I need that, too.’ There’s a little devil inside all of us that says, Why not you?”

 Those paragraphs are chock full of insight from Mr. Hong.

1. No matter how much we have or how successful we are, we always know someone who’s doing better than us. That’s why no one thinks of themselves as “rich.” The “rich” are those they know who have more than they do.

2. No matter what we have we aren’t content with it but want the next thing. If we get the next thing, then we will be happy. Hong saw this when it came to cars but it’s, of course, true about anything in life. The hole in our soul can only be filled by Jesus. Until we come to him, we will never be satisfied. By his grace may we learn that Jesus plus Nothing equals Everything.

3. Finally Mr. Hong gets to the heart of the matter when he says that it’s as if there’s a little devil inside us that says, “Why not you?” If your co-worker can drive that car, why can’t  you? If your neighbor can take that vacation, why not you? If your friend looks like that, why not you? After all you deserve it.

Comparison leads to a deserving attitude and there’s not much more dangerous to our contentment than thinking that we deserve better than what we’ve gotten. People who think of themselves as deserving are never happy with what they have because they always know someone who has more.

The Bible says that because of our sin what we truly deserve is God’s wrath and judgment. We don’t want what we deserve. We want grace that can only be given by God. Everything that we have, every spiritual, relational, physical, and material blessing comes to us (undeserving sinners that we are) from the hand of a good and gracious God.

When we see that God has been exceedingly kind to us, it steals the power from the question “Why not me?” Why not me? I can give you a thousand reasons. The real question is “Why has God been so good to a wretch like me?” If God wants to give others something different than he’s given me, that’s his business, not mine (Matthew 20:15). All I know is that he’s given me far better than I deserve.

Leave a Reply