Tim Worstall

Richard Murphy, Again

Sigh.

Question: What’s £757,000?

Answer: The average earnings of a partner in PWC in the UK last year.

Justification: There isn’t one.

Why?: They take no risk. PWC cannot fail. It’s the biggest firm of
accountants in the world. The collective governments of the world
cannot see it disappear; ergo, there is no downside risk. In that case
their should be no risk premium in their pay.

Good grief, the man is an accountant, one with an economics degree even. Hellooo! Even, Hellooo?

What risk have those who are partners taken in the past in order to climb the greasy pole in order to become partners? Do all who balance the books become partners? Do some not reach that point?

About accountants I don’t know. About law partners there have been many studies: as indeed, famously Freakonomics did about drug dealers. The average expected return to the latter when they start is less than minimum wage. Those who reach the top do very well: but that’s because of those who drop out along the way. Another way of describing this is superstar economics. In a highly competetive field, those who get to the top do indeed make fortunes while those who make the same investments fail.

D’ye think that somene with that economics degree is ignorant of this simple truth, or prefers to ignore it? Your choice.

 

In

8 responses

  1. cityunslicker Avatar
    cityunslicker

    more likely he was turned down for a graduate job at PWC some years ago and saw this as his chance of revenge, sweet revenge…

    Reply
  2. Geoff Avatar
    Geoff

    The former partners of Athur Andersen probably wouldn’t agree with his analysis either.

    Reply
  3. MikeinAppalachia Avatar
    MikeinAppalachia

    Ummm..OTOH, 30% profit on turnover does seem a little excessive. Must be due to that 3.6 multiplier on all those Jr. Auditors billing 12 hr. days.

    Reply
  4. David Gillies Avatar
    David Gillies

    It almost seems unkind to continually single out this Richard Murphy character for ridicule. My mother used to say to my sister and me as we were growing up: “don’t mock the afflicted”. Still, if you insist on standing around in a public place with your pants about your ankles, it is hardly a source of perplexity that you will draw a few catcalls.
    Tim adds: Murphy and his friends in the Tax Justice Network are actually influencing public policy. Thus the scrutiny.

    Reply
  5. HJHJ Avatar
    HJHJ

    Tim – I believe you’re missing the point.
    It may (although some of us are sceptical about the extent of this) that law and accountancy are highly competitive fields for the *individual*. Let’s say that there are few places at the ‘top’ and so, naturally, the people that get there get paid a lot.
    But the question is why there is such a small and high peak of top earners. Is it due to natural competitive market workings, or could it be that the market is insufficently open and competitive which allows a small number of providers to dominate the market and hence to inflate their earnings (and particularly those of the few at the top of these organisations) as a result. Perhaps if the market were more competitive, there would be more players and more opportunity for people to get to the top of these companies – but they’d be paid less because their companies wouldn’t have such a dominat position.
    The situation I describe is certainly the case in law where access is severely restricted (My uncle is a high court judge and he’s quite frank about how shockingly uncompetitive the legal profession is from the customers’ persepctive and how artificially high prices are for often very questionable degrees of competence). In accountancy, there are only 4 audit firms for large companies inthis country – how price competitive is that likely to be? And let’s not forget that New Labour tax and regulatory complications have fed the accountancy profession in recent years.

    Reply
  6. Bishop Hill Avatar
    Bishop Hill

    Having trained at Coopers & Lybrand, I can report that there were plenty of casualties of the greasy pole – people who slaved away for years in the hope of making partner and then not quite making it.

    Reply
  7. Mark Wadsworth Avatar
    Mark Wadsworth

    What HJHJ says.
    I work for a firm of Chartered Accountants and you do wonder sometimes.
    Tim, are you not confusing ‘internal risks’ (i.e. all the unpaid overtime and backstabbing and so on, that does not benefit the customer or worker) and proper risks, i.e. I will pack in my job and remortgage the house and gamble all my money on a new business venture or product. Which might benefit me, my workers and my customers. And might cost me everything.
    Like James Dyson, who deserves every penny (and damn’ fine cleaners they are too).

    Reply
  8. Mark Wadsworth Avatar
    Mark Wadsworth

    That said, as a general rule, Richard Murphy is a complete f***wit.

    Reply

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