I'm no baker, but I know a few people who are pretty damn good at producing cakes and confectionaries of quality.
So if you bake a cake for yourself. Usually you go away and buy the ingredients for the cake. You then take those ingredients and put in the work to make the cake - the time and effort. At the end of that period, you have a cake.
The payoff of this is - well shit, you have a cake. That's awesome. That's YOUR cake.
Okay so. Lets say someone goes out and gets you the ingredients for the cake, on the understanding that tthey are going to receive a portion of the cake for this assistance in helping you make it. How do you fairly decide how much cake to give them? Like put aside any notion that they might be your friend or neighbour or whatever. Assume this is basically a stranger, though at least one other person that you know has baked a cake with them before.
I suppose a fair way to divide up the cake is to compare how much effort goes into each part of its creation. If the ingredients are very rare and expensive and require a four-hour round trip, then that perhaps indicates being worth a lot more of a share of the cake than someone who had the ingredients in their cupboard anyhow and just popped them over on the way to the shop.
But you're the one making the cake, right? So ultimately it is your choice. I mean if you want to be ethical about it, you make the offer beforehand so the individual can assess it is fair - but then we are assuming that these people are indeed fair. We're baking cakes for each other after all.
So imagine this scenario.
Someone comes to you and offers to bring you ingredients. They ask you to bake them a cake with them. And they tell YOU how much of the cake you get to keep. And you don't get to keep very much at all.
No problem, you might think. They are bringing all the ingredients after all. I mean they are putting in that effort.
Then you find out that they have approached fifty other bakers with exactly the same offer, and then you pause for thought - because - it is almost as easy to get hold of a LARGE amount of cake ingredients as it is to get hold of a SMALL amount, in terms of effort. And that effort is being put in once - after which the person making the offer benefits from the effort of fifty-one bakers.
And to each of those bakers, this person has said: I am making this much effort, so I will let you keep this much cake.
So you get angry, and you say to this person: I put in more effort than you did. I MADE this cake. This cake was made by me, took up more of my time than you spent getting the ingredients. How do you get to dictate how little of my cake I get to keep? How dare you value the small amount of effort you expended so much more than the large amount of effort I have expended?
I don't think that's an unreasonable thing to ask.
So we get to the end of the day, and each baker, including you, has half a cake. And the purchaser of the ingredients has 25.5 cakes. Every single one of you has expended a similar amount of effort.
Sounds ridiculous, doesn't it?
Now imagine you aren't baking cakes for yourself. You are baking cakes that get sold, and you get paid for baking cakes.
Let us assume you bake ten cakes in a day. If you were baking for yourself, then you would have to go out and get your own ingredients, so - the amount of money you have after the fact is however much you sell the cakes for, minus the cost of the ingredients.
But you're just baking those ten cakes, on instruction from someone else. They buy the ingredients for two hundred people to bake ten cakes. Those people all bake ten cakes, you included. Then this one person who bought the ingredients is going to sell the cakes, and pay you out of that money.
Now, if we assume that the effort put in to acquire the ingredients (MINUS the cost) is the same as baking the ten cakes - that those doing this actually put in the same effort in a day's work - then a fair division of the income made from the cakes is as follows...
You take the income from the cakes sold. You remove from that the amount of money it took to buy the ingredients - that gives you your gross profit - and perhaps how much you've had to pay for the building, the power, the water et cetera. You then divide it up based on effort, and given that every single one of these people - you, 199 other bakers and one buyer-seller - has put in the same effort, then you divide that sum of money by 201, and everyone gets to take that home today. Well done.
Let's say, though, that there's multiple people buying the ingredients and selling the cakes. Then there's someone whose job is to make sure that the people who bake the cakes are baking the cakes right. Then let's say that there is one big bod, whose idea this whole thing was, who got the loan from the bank or the money from wherever to buy the FIRST big batch of ingredients and put the penny in the power meter to fire up the ovens.
There's still 200 people baking cakes. There's 5 people buying, 5 people selling, 1 person peeping over shoulders, and 1 person doing all the maths. That's 212 people, who put in - when it comes down to it - approximately the same amount of effort. Now we are spreading the funds a little thinner, because while the same amount of cakes are being baked, there's more people to spread the sales income between - which means that ideally, those extra people are either increasing the productivity of the cake bakers (ensuring they can bake eleven a day maybe) or the efficiency of buying ingredients and selling cakes.
So again, a fair division is money gained from selling all cakes, minus cost of ingredients, minus cost of plant and necessary goods, divided by 212. Because everyone put in approximately the same effort.
I keep stressing that point.
So here you are. A baker, having baked for several different people over the years. You think you are pretty good at baking cakes. You can produce 12 cakes of decent quality in a day, and you've proven you've got a good work ethic. You approach a person who owns one such theoretical cake-baking building, has done for many years, because you need to bake cakes to get money to, well, stay alive. Everyone needs food and shelter - even bakers.
You sit down in a nice room. The person sat in front of you isn't the person who owns the building - they work for them. It's their job to make sure the bakers bake, and to bring in new, good bakers.
After assessing your baking credentials - twelve cakes a day, indeed, how impressive - it comes down to brass tacks. You are told how much you will be getting to bake cakes.
It's not very much.
At least, it's perhaps half of what the person in front of you gets, and perhaps one tenth of what the person who owns the building gets. But then, that's fine, right? Because your effort is what you are rewarded for. You put in a full day's effort, you get paid the equivalent of two cakes. While the person who is hiring you clearly puts in two day's worth of effort every day, and thus receives four cakes - and the person in the big office puts in five times THAT much effort, and thus, gets twenty cakes.
But hey. You get TWO CAKES. There's some bakers that don't even get ONE cake until after their first year. That's great!
You take the job.
You never see the person in the big office, so you have no idea how they put in ten days worth of work effort into one temporal day. But that's fine. You're sure they've earned it. Right? ...right?
And all those other people - those people who don't actually come into the building that you bake in, that sit at home and once put in enough flour to make several batches of cakes - it's right that THEY all get a bunch of cakes too, right? Cakes that you've made. I mean you already agreed to only get the equivalent of the first two cakes you make every day. Who cares what the rest of those cakes go toward? Who cares if the person that gets those cakes REALLY deserves them? You get TWO CAKES.
So you wonder why, at night - when you go home, and you sit down in your small flat, and you eat your reasonably-priced meal - you feel a little bit cheated.
You're right to.
If you are curious about anything I have just alluded to, do yourself a favour and google what Surplus Value is.
If you're okay with getting two cakes, then you haven't been paying attention.