[AndrewKemendo]

>They are there to crack the whip and collect the spoils

This is historically correct

Here's a recent unambiguous proof from Tesla's own words:

"Tesla argued that stock options were used to ensure Director's incentives were aligned with investor goals." [1]

Said another way, "we massively over-paid directors in order to give them an incentive to prioritize investor goals over all other goals"

In the parlance of finance this is the only goal and the ultimate decision that cannot be questioned.

I have seen this made explicit in multiple organizations as a Director or Senior Manager. As a manager, if you are explicit in supporting employee benefits over increase in stock price or C-Suite direction (when given the choice) then you should expect no further growth or promotions (unless you can manipulate the org or have some damaging information on the company).

>Maybe another approach would be for the workers to share more equally in the spoils so that they would be naturally inclined to integrate business improvements and goals

The strong form of this is a worker-owned-cooperative but second to that are labor unions. So if you want to change it, then start/join a union and stop creating corporations with separate ownership rules for investors.

[1]https://www.engadget.com/tesla-directors-agree-to-return-735...

[chrisdbanks]

Workers vs investors shouldn't be seen as a zero sum game. If it is then that's short-term thinking. Simon Sinek explains this all very well in The Infinite Game.

[AndrewKemendo]

Guess which one thinking short term can hurt the other?

I’d agree if there was any semblance of a power balance or history of successful outcomes for the vast majority over the long term.

All people point to are the infinitely rare (over represented here by multiples) first few employees of a huge start up - and even that is getting rarer for anything but the first 100 employees at most.

When was the last big employee millionaire event like Microsoft or Google or Amazon - over 20 years ago for all but Google (19)? That’s an entire career.

I don’t recall a wave of new millionaires from Snap, AirBnB or Uber IPO in the same way. Maybe I’m totally wrong here and just missing these groups - seems all the spoils went to the VCs.

[slt2021]

Any non-zero sum game can be re-formulated in zero-sum game terms, this is a rule.

Give me example of any non-zero sum game, and I can prove that under the hood it is actually a zero-sum game.

The trivial proof is that profit/revenue pool available for Corporation is limited, and the main question is how that profit pool is to be divided among Labor (employees) and Capital (investors/shareholders).

The fundamental laws of mass/energy preservation equally apply to money - you can't create money out of thin air, it has to be taken from someone else (customer) and then redistributed (among suppliers/labor/investors/shareholders/tax man)

[adave]

USA literally creates money out of thin air, there is no upper cap as they keep extending the ceiling.

This is how we have a CEO making $100b from a single company stock which would be impossible if it were a zero sum game.

Hype which is even more rarefied air, can create so much money without taking anything from the customers. Silicon Valley VC's create valuations for companies out of thin air and then triple it even without anyone ever seeing that money.

Attention which is unlimited in a way is a new form currency, which is why you see platforms being built up to get more eyeballs.

The rule you mentioned comes into play when taking into account players in the game i.e any game where you can add more players is guaranteed to become zero sum.

In real world situations where cooperation is needed, we mostly have a non zero sum game.For ex - https://cs.stanford.edu/people/eroberts/courses/soco/project...

[slt2021]

thank you for your comment, your points are valid

[aschearer]

Giving and receiving love is not zero-sum. Cultivating mutual trust is not zero-sum.

[slt2021]

it is not zero-sum between two parties (as in if one party shows more love, there is a chance it will create more mutual love from the other party).

But, the problem can be reformulated as zero-sum in terms of time: Time is the ultimate scarce and zero-sum resource, you cannot create time, only redistribute.

The more time we spend with the loved ones, less time we have for other things like hobbies and work. Company wants people to spend maximum time on work and worker efficiency (so called "career growth"), and less time on personal life etc. For corporation - worker's attention is absolutely zero-sum game and they want maximum of worker's attention, on top of 9-5.

That's why they create more employee love by throwing benefits, free food and snacks, corporate parties so that they spend less time on personal matters and work more toward the company's goals.

[Chrisoaks]

Free time isn’t zero sum. An accountant and a plumber can create free time by trading services. If it would take a plumber five hours to file his taxes, he could instead fix the tax accountant’s sink in one hour in exchange for the tax accountant filing his taxes. Assuming the tax accountant can do so in one hour and would have taken five hours to fix his own sink, both profit by reclaiming four hours of time.

[slt2021]

^ I don't think professional plumbers and accountants exchange services in kind for a living, last time I checked people use this thing called currency.

and this makes the zero sum, since the money plumber pays accountant, is the money he cannot spend on other things like groceries and vise versa.

[aschearer]

If "anything can be broken down to a zero sum game" just means "time is finite, react accordingly" that's all well and good. Kind of banal, though. I was hoping for something more theoretical...

[slt2021]

I should have added: anything material (that is subject to laws of preservation of energy and mass).

On the flip-size, only immaterial things can be freely modeled as non zero-sum without conflicts

[snovv_crash]

How does this model account for varying growth based on employee alignment with company goals?

[slt2021]

Think of annual profit generated by company as a fixed pie. or total market as a giant pie.

Question is how to slice a pie between Labor and Capital?

Now we know that IT is a growing market, and next year pie will be bigger, much bigger. That's why Capital needs Labor to cooperate along and work as efficiently as possible to capture maximum slice of pie for the Corporation next year and the year after.

That's why they give variable compensation and give sense of ownership. Just by giving out 0.1% of shares, Capital is able to extract max value form Labor and make their pie grow at 30-40% per year.

Absolutely killer deal for Capital.

That's how zuckerberg et al become billionaires, while employees who created the money making machine are mere (multi)millionaires.

you join stage B startup and get 0.01% of company as ISO options, but you do the 100% of the work required to make product and grow company from $10M valuation to $10B valuation. Three orders of magnitude growth for Capital, while Labor get 1/1000 of that growth

[admax88qqq]

> Now we know that IT is a growing market,

That's literally a non zero sum game. You can phrase it as cynically as you like, but that's still the definition of a non zero sum game.

[slt2021]

it is zero sum when it comes to Labor vs Capital relationship.

Counter example to your claim: if giving out RSUs is not zero-sum, then why don't Companies give me as many RSUs as possible, since they are not losing anything and it is not zero-sum game, by your definition?

[PartiallyTyped]

Why should they care about long term health of the company when their stake can change [almost] on a whim?

The whole system seems to exist for short term profits.

[AndrewKemendo]

Simon is wrong.

It is absolutely zero sum for any measure that matters over periods that are impactful to individual and familial human flourishing

This capitalist rationalization of greed-based markets, loves to pick whatever timeline for measurement which fits their criteria.

It is unambiguous that wealth and power accumulation will persistently concentrate into the smallest number of hands in absence of collective structural countermeasures.

So the default state of large scale capatalist systems follows power law in both wealth and power distribution. It’s a mathematical reality that is shown over and over and over to repeat itself

[Zetice]

You're pitching this as truth when in reality it's just one viewpoint. Simon is not "wrong" any more than you are "wrong". You're just arguing from different perspectives.

[capitalsigma]

Most big tech firms give engineers RSUs for this reason

[slt2021]

also SBC (share based comp) looks favorably on cash flow statement, because SBC does not decrease EBITDA, thus artificially inflating EBITDA numbers and price target of the company.

How this works: new SaaS startup shows up and shows $10M EBITDA to investors. This does not reflect $5M in SBC.

According to industry averages, bankers apply average (lets say 10x) EBITDA multiple and derive valuation of $100M and invest funds based on that calculation.

Had company paid cash salary instead of RSUs, firms' EBITDA would have been $5M and valuation of $50M - a half of original pitched value

Obviously this is just a naiive textbook example, and actual valuations are more complex and involve several ways of deriving value and multiples, but in general RSU is viewed favorably mainly because it improves Cash Flow from Operations and EBITDA numbers - in addition to creating incentives to employees

[AndrewKemendo]

Indeed, which are sub class of stock with no power.

So it’s the same story and is effectively a lottery ticket.

[edmundsauto]

RSUs that you can sell are effectively cash, not a lotto ticket.

[AndrewKemendo]

They depend on the stock which is totally unpredictable

For example, literally the day before I started at my last company, their stock went from $120 to $40

So yes it’s a lotto ticket

[edmundsauto]

I just… sell the stock when it vests? I guess I can see your pov is consistent as long as you consider every stock as a lotto ticket, but I don’t think that’s the typical opinion.

[slt2021]

Problem with this approach is RSU grant price is fixed at when you join the company.

You could sign job offer with $1M in RSUs at $100/sh for 10k shares, but you would have vested only $500k worth of shares if price decreases to $50/sh a year after, when you reach cliff vest

So selling at vest does not decrease your risk between RSU grant date and vest date