A Thought on The Record Powerball Jackpot ...

[1StrongBlackMan]

$550,000,000 is a lot of money (almost $400,000,000, after taxes).

But just think ... The CEO of Apple makes that much EVERY YEAR!

Question: What on Earth does he do, relative to the person that actually builds or even designs the chips, to "earn" that much money?

[TrueBlueinCO]

1. You don't think that running the largest, most profitable company deserves a high compensation?

[leftstreet]

2. He doesn't 'run' it, the workers do

He represents those who 'own' it, and he fleeces their lucre off the backs of the workers

[TrueBlueinCO]

3. No. The shareholders own it.

The CEO runs it.

[leftstreet]

5. yeah

corrected, thx

I read it wrong

[coalition_unwilling]

4. Technically, Apple's shareholders 'own' it and elect a Board of Directors to

oversee the CEO and all below him.

[HereSince1628]

7. In the old days we'd say pay the CEO enough not to rip-off the company

while providing expert knowledge of the business and sound decision making.

in today's corporate world with pirateers as CEO's they may know nothing about the business and no amount of pay is enough to keep them from destroying a company, and every decision that they make for good or not is worthy of not just ordinary salarly but a whopping bonus.

[1StrongBlackMan]

11. Yes ...

But what does he do to garner that much money?

His every move is dependant on far less compensated people. Would Apple be as large or profitable without the person that designs or builds the chips? Would Apple be as large or profitable without the person that records sales or the clerk that accepts payment for that I-phone?

This CEO is making more in one year than any of the underling, upon which he depends, will in their next 6 generations.

[TrueBlueinCO]

13. He makes the strategic decisions that determine what those workers do

and has ultimate responsibility as to whether the company succeeds or fails.

I own a small business. I spent a significant amount of money and years of time to build it. I now have employees who spend more time than I do laboring for the business. Do you really think that they should earn more than I do?

[A HERETIC I AM]

14. You may be surprised at how many DU'ers would answer that with ......

"Yes"

[TrueBlueinCO]

18. I feel sorry for them...

but they also scare me a little.

[RagAss]

43. You deserve to earn what you do. You started a small business and you provide the direction...

and make the decisions based on your experience and hard work over the years. But the CEO of a major corporation is a different kettle of fish altogether from a small business owner. After 35 years as a technician in corporate America, trust me, there are folks in the mailroom that can make strategic decisions
every bit as effective as 90% of the CEO's I've known.

[1StrongBlackMan]

17. Good for you ...

I mean that!

Strategic decisions that, at his level, are based largely on someone else's analysis of the data ... a someone makes far less than the strategic decision-maker.

Strategic decisions that, at his level, are based largely on someone else's analysis of the data, that was gather and compiled in a readable form by a someone makes far less than the strategic decision-maker.

My point is, the grossly out of line compensation relative to contribution.

And further, imho, it is fantastiful thinking to compare your small business, or any small business, to an Apple. This is the "small business" fallacy that is being pushed by the right.

You as the owner, personally contributed equity into your business; you contributed hard work into your business; and you took the risk ... after Jobs took Apple public, the personal contribution component that merits direct, and even out of line, compensation was broken; everyone that followed is hired help.

[RagAss]

44. So true...even the best CEO's are right only 60% of the time....

The bad ones are right 40% or less of the time. As I said up-thread, after 35 years in corporate America I'm convinced that folks who work in the mailroom can do that job and turn in the same performance.

[EOTE]

22. Who the hell is saying they should make more than you do?

Sure as hell not anyone on this thread. There are people who think, as I do, that you making 400X as much as your employees do is sick and obscene. If you're going to make an argument, you should at least try to make an honest one.

[Sekhmets Daughter]

28. Nope,

but are you earning thousands of times what they do? The iPhone 4 had a gross margin of 51%...haven't looked at figures for the newest model.

[nadinbrzezinski]

37. Show me anybody saying that?

Oh sorry, you won't find that many. What people are saying, if you cared to listen, is that yes, you should make more money, but that 200-300 times as much is out of balance and leads to conditions that lead to social strife.

[EOTE]

38. Actually, you won't find ANY.

At least not here. But that's not going to stop the idiot from throwing out the strawmen.

[nadinbrzezinski]

40. True, I was thinking both here and other places.

[EOTE]

39. Cat got your tongue?

Or are you just exhausted from lying and putting words in peoples' mouths?

[Marrah_G]

25. I think there is a difference between a high salary and ...

..more money then he will ever need.

It's hoarding resources from the community.

When the divide between those who have little and those who have much becomes to wide, eventually the poor will rise up.

[Sekhmets Daughter]

26. No, I don't.

[RomneyLies]

6. $550 million was the annuitized, and it went up to $587.5 million before the drawing.

Annutized jackpots pay out evenly over 30 years in the Powerball.

Cash value was something around $380 million. So after taxes still getting close to a quarter billion.

Two tickets won, so something south of $125 million each in cash after taxes.

Just sayin'.

[A HERETIC I AM]

15. Actually the Powerball's annuity payments are stepped up every year ...

Increasing by 4% to cover inflation.

The Mega Millions is equal payments though.

[Sekhmets Daughter]

27. But does the first payment

payment equal 1/30th of the jackpot or some lower number in order to reach the stated jackpot after 30 years? If it equals 1/30th, then the final number is way more than the stated jackpot at the time of the drawing.

[A HERETIC I AM]

30. I tried to find an annuity calculator online to give you a definitive answer...

But none of the ones I looked at gave the option for entering a specific percentage increase.

But to the best of my knowledge, the answer would be no, the first payment would not equal 1/30th of the jackpot.

I think it is important to understand that the Powerball people did not have $587 million on hand. What they had was the "cash option" amount and the jackpot figure is always stated as "estimated".

So for the sake of argument, let's say the cash option at the time of the drawing was $300 million. If the winner(s) decide to take the payments, Powerball buys what is known as a "Single Premium, Period Certain annuity" with a "return of principal provision" and an annual 4% "step up". On their website they indicate that the investments made inside the annuity are mostly US Treasury Bonds. They pay an initial payment to the winner and then they buy the annuity with a 29 year period certain. The insurance company the annuity is bought from will take the money and invest it in a bond portfolio that will have bonds mature every year on or about the payment date in order to cut the annual check. This portfolio is structured so that each successive payment is 4% higher than the one before and with the 29th payment the annuity is exhausted. Most annuities have something left over, called the "death benefit". That goes to the heirs or the estate of the annuitant. The Powerball annuity has no death benefit. That isn't to say that if you die before you collect all 29 payments you lose the rest, rather the remaining payments go to any beneficiaries you would name.


Hope that helps a little

[Sekhmets Daughter]

31. I am sorry

you went to so much trouble.... But it would be interesting to know just how they determine that initial payment. It would seem that it would have to be more than 1/30th of the cash on hand. I don't have a calculator (or Excel) that would be capable of figuring out just how much would be paid our after 30 years if the initial payment was 1/30th of the COH and stepping up 4% each year thereafter.

Thanks for all you effort.

[A HERETIC I AM]

34. It was no trouble, but I must admit I could be totally wrong!

One fact that may shed a bit more understanding on the math;

Currently, the cash option is about 65% of the stated jackpot. It has reset to $40mil and the cash option is stated at $26.2 mil.

Back in 2006 when the yield on the 30 year Treasury Bond was 5%, the stated cash option amounts were always less than 50% of the jackpot, closer to 40%. The reason it is so much higher now is because, as I said earlier, they buy an annuity primarily using Treasuries. The present yield on the 30 year is around 2.75% - very low by historical standards. The effect that has is there is less interest paid to the annuity during its life and therefore they need more money to start with to pay out a specific amount.

[Sekhmets Daughter]

35. Hmmm,

I thought the reason for the cash option increase was due to the new ticket price. I do seem to remember that until it went to $2. the cash option ran 50 to 52% even when T-bills were paying much less than 5%. Perhaps it's a bit of both?

[A HERETIC I AM]

36. It seems to me the ticket price increase covers 2 things

First, they raised the starting minimum from $20 mil to $40 mil.

Second, they guarantee that that each rollover will increase by a minimum of $10 million, up from the previous 5 mil.

When they made those changes, they also dropped 4 of the powerball numbers (36 thru 39) thus lowering the overall odds of winning from 195 million to one to 175 million to one.

The $2 price serves to facilitate those newer, higher guarantees.

[Sekhmets Daughter]

45. I see.

I enjoy playing and never paid a whole lot of attention to the workings until recently. Once a month I buy tickets for the next 9 drawings.... Then on those nights when I wake during the middle of the night and don't fall right back to sleep I spend my prize money...it's much more fun than counting sheep and usually puts me to sleep very quickly....

[coalition_unwilling]

8. He is responsible for duping a bunch of 'hipster dufuses' (the character of Elaine on Seinfeld

coined the phrase) into purchasing ITrash they can endlessly diddle 24-7.

No one is any happier, nor is anyone any smarter. So goes humanity.

[TrueBlueinCO]

9. Yup. And made the shareholders billions of dollars in the process.

[coalition_unwilling]

10. Full disclosure: I've discovered that the various mutual funds in my IRA

between them control a few shares of Apple common stock (and possibly some bonds, although I'm less clear on that). Don't mean to bite the hand that feeds me. But I can still recognize the obscenity involved in CEO compensation that averages 500x the level of the average worker's compensation.

[1StrongBlackMan]

12. You are not alone ...

But I guess we must maintain the system, so when we are discovered for the genius that we are, we too can garner incredible wealth!

[onethatcares]

16. better question

what does one do with $550,000,000.00 ?

Using it to squash others seems like the plan de jour.

There are only so many cars you can drive, houses you can live in, boats you can steer.

If sleeping on a mattress of hundred dollar bills is your dream, it just seems to be a sad small one.


and in answer to a question further upstream, no, I don't think your employees should make more than you do. but I don't think you should make 452x what your lowest paid employee does. If you got it, spread it around.

[redqueen]

19. +1

[onethatcares]

20. thanks

I needed that.

[AlexSatan]

21. Bingo

When I was thinking about what I would do if I actually won, all I could think about is what a headache it would be to deal with that much. Even finding worthy charities to give much of it too would be a big time-sink. I also worried about what it might do to the relationship between my wife and I. I think we'd be OK but it is still a concern when you see the stories of other winners.

I can't fathom, and would not want, getting that much for multiple years. It really makes you wonder why people even want it.

[shanti]

23. that has always been my question

but i realized that the only possible reason to bring home 500 mil a year, is to use it to make certain that you KEEP that 500 mil growing...

[redqueen]

24. There is no justification for it.

None.

[1StrongBlackMan]

29. And even less ...

in year two!

[gravity]

32. Running a business is more respectable than gambling

The reason he earns that much more money is because he brought even more value to the business.

He might be overpaid, but at least Apple grows its business by innovating rather than laying off workers. There are a lot more CEOs who are worst.

[NoOneMan]

33. Which destroys the earth more?

Or is that not factored into "respectable"?

[nadinbrzezinski]

42. Well externalizing costs is not something we

Want to talk about.

[nadinbrzezinski]

41. When they bring production back to the us

Which they could afford to do... I love my IPad, but seriously, the cost would increase by 20 bucks or so.