[SenoraRaton]

One thing that I never understood was, if an employees wages are tied to the success of the company, would that not incentivize better work ethic as a whole? That is how it works in the start-up world. You get equity, you have literally invested in the company, and you know that your work should (in theory) directly benefit you financially.

Instead we end up in a system where the employee/employer relationship is inherently antagonistic. If you work at McDonalds, in is 100% in your interest to do the absolute bare minimum possible to not be fired, and in your employers interest to pay you as little as legally possible. This costs more overhead and resources from managers, and dealing with angry customers, and food loss/waste, which could largely be avoided if the employees were invested in the success of the workplace.

[wpietri]

You might enjoy the This American Life episode called NUMMI: https://www.thisamericanlife.org/561/nummi-2015

It looks at how Toyota took GM's worst plant and made it one of the best using the same workers. And how GM's management refused to learn lessons from that.

I think the current antagonism is something that started with management many decades ago. But now it has a lot of momentum, such that people on both sides are used to it and will carry it forward. I remember reading a great zine piece from a video game tester who'd had a variety of shitty jobs. He finally found one that was really good: good pay, good working conditions, nice bosses. But he felt compelled to steal office supplies in bulk because that's what he'd done at his shitty jobs. He was sort of mystified by it, but he couldn't stop.

However, there are alternatives. I live near an Arizmendi bakery [1], which is a worker-owned co-op. It's great. The food is really good, it's sanely run, and the people behind the counter seem serene and present. It's inspired by the founder of the Mondragon co-op [2].

Or you could look at companies that shift to employee ownership later. Bob's Red Mill was actually started by a guy named Bob who sold the company to his employees in 2010. [3]

I don't think those are going to be utopias. But I do think they lack some of the structural disincentives against sanity and compassion that you find in the typical corporate structure, where every dollar in a worker's pocket is a dollar less in economic rents for the owners.

[1] http://arizmendi-valencia.squarespace.com/

[2] https://en.wikipedia.org/wiki/Mondragon_Corporation

[3] https://en.wikipedia.org/wiki/Bob%27s_Red_Mill

[tiffanyg]

Good points and info, IMO. One suggestion, though:

I think the current antagonism is something that started with management many decades ago.

I think the pattern goes back, well, as far as you want to go back. There have always been individuals who think that they* should be in charge. There's a continual 'tug-of-war'.

For centuries, only a very few people were able to participate directly - when the world largely consisted of monarchies, empires, "hoards", and all of that**. Ancient Athens, and more recent "Enlightenment" ideas about "natural rights" and "mandate of the masses" etc. have generally been unusual in practice until quite recently.***

The data strongly support much more shared power past a certain level of technological and economic development, but, even if aware of the myriad examples, people with power-lust aren't going to stop. It's directly contradictory to that worldview, ambition, etc. - in multiple ways. And, any given person is likely to tack more towards or away from such notions over time, depending on multiple factors.

Right now, it seems there's much more interest, in multiple realms, on consolidating power, again.

Caveat populus.

* Not consciously intentional play on "the royal we"

** Before that, there's a lot more variation, AFAIK, but also a lot less confidence and evidence - though, ancient Egypt and China (three kingdoms etc.) come to mind as particularly early examples with solid enough information regarding ruling over large numbers of people by individuals (and various attempts &/ smaller "kingdoms" etc.)

*** "Radical", some might say "insolent"

[corinroyal]

Oh, I miss Arizmendi so much since I moved away.

I heard about an Arizmendi customer who went to Paris and was really excited to try real French bread. When she got there, all she could find was horrible like you could find in any supermarket. She told her French friend about her disappointment and asked where she could get some real French bread. The friend's reply was, "Berkeley."

There are a lot of great worker co-ops in the Bay Area. Here's a map from Network of Bay Area Co-operatives: https://nobawc.org/map-of-nobawc-coops/

[datavirtue]

Why don't unions progressively buy stock in companies with dues? Hard to argue with the owners.

[seanmcdirmid]

> If you work at McDonalds, in is 100% in your interest to do the absolute bare minimum possible to not be fired, and in your employers interest to pay you as little as legally possible.

Having worked that gig before, that isn’t how it works. You don’t want to work hardish, you simply don’t get hours. If management doesn’t want to give you more than minimum raises, you leave for something else, and turn over is high. There is still leverage to do good things (both on worker and management side).

A lot of people working there (mainly managers, but some crew) wanted to be owners, McDonald’s had a franchise system in place to do that but you had a better chance of getting one if you actually learned the ropes at another store for awhile.

[baby-yoda]

Wages tied to success of the company, ie profit sharing; how much more profitable could a restaurant become if every employee gives it their absolute best labor output? A few percentage points here and there? Certainly not orders of magnitude. Maybe theres no improvement in some situations at all? I don't see it as much of an incentive, especially if the variable compensation is partly in lieu of fixed compensation.

The startup scenario you mention offers the potential for huge payouts (of course this plays out wildly across a spectrum). A far easier sell to employees, IMO.

[542458]

I think it would incentivize bailing out as soon as times get slightly rough, and last thing you want is all your best (and most mobile) employees quitting when you need them most.

For example, if my company has a bad quarter and makes $0 net, does everybody get paid $0? Most people wouldn’t stand for that and would start job hunting pretty quick. The “work for equity at a startup” crowd does it because they can afford to take the risk of $0. Most people can’t or won’t take that risk.

> If you work at McDonalds, in is 100% in your interest to do the absolute bare minimum possible to not be fired

That incentive won't change much under this new system. Joe Average at McDonalds has little to no power to significantly increase the company’s, or even their franchise’s profits. Sure, they could maybe move the needle slightly, but working (say) twice as hard to make 3% more is probably not a rational move.

[mikepurvis]

Usually it's not zero though, like it's base pay + the promise of a maybe-payout down the road if things go really well.

But part of it also hinges on the organization being small enough that individuals can actually make a difference. Otherwise it's back to just being a prisoner's dilemma / shared commons, where the incentive is to slack off and let everyone else carry you.

[benjaminwootton]

At the lowest levels, most employees don’t stand to share in any gains or upside attributed to their hard work. At best there will be a small bonus if the company does well which will be weakly correlated with their individual efforts.

In white collar jobs and as you move into management then the bonus programmes become more aligned with business unit and company performance so maybe you can move the needle and get paid for it. Companies also have the carrots of promotions and pay rises.

[deegles]

I (naively) think a restaurant would have an easier time detecting people who are doing the bare minimum. The issue becomes how to "punish" freeloaders who are also owners? Imagine the nightmare scenario of a restaurant where every employee is a part of the LLC that owns it. "Firing" someone becomes an onerous legal process.

[pc86]

You can handle it in advance by requiring "vesting" periods where you are working but not an owner. The existing owners then get the chance to offer you ownership, or not. This is how most private physician practices work, and AFAIK a lot of law firms as well.

So if you're a lazy employee for your initial 2-year contract, you don't get any offer when your contract expires. If you're not, you might get a contract extension or an offer to buy in as an owner.

[mordae]

I think coops just vote on it.

[SenoraRaton]

Does it? If the rest of the community doesn't want you there, seems pretty cut and dry. There are no "managers" at Valve, yet they fire people all the time. You would simply receive your pay, and whatever your portion of the dividends owed to you up until your date of firing.

[fallingknife]

And how does your remaining equity position work? If you lose it on firing then you aren't really an owner in any meaningful sense any more than a tech employee with unvested RSUs is.

[username332211]

Valve is still a corporation with a single majority shareholder.

And I can't imagine a restaurant could work the same way as Valve. In a restaurant, you have to feed people day in day out. You can't deliver a Michelin-quality meal when the inspiration hits you and nothing when it doesn't.

Valve also seems to have a strangely forgiving customer base. I don't think I've ever seen anyone complain about micro-transactions in their games, whereas other publishers seem to get a lot of hate for it. (Then again, ever since I stopped playing games, I've began to notice that each publisher had their own unique method of fleecing their customer base, so it may be that Valve got the players that tolerate micro-transactions, whereas others would have the ones who tolerate endless DLCs.)

[jabroni_salad]

If you hang out with the tf2 people you might not see much in the way of good vibes towards valve. The community in that game persists despite valve, not because of them.

[pc86]

There is a lot more legal overhead to buying out an LLC owner against their will compared to firing an at-will employee.

[username332211]

Should a worker-owned company be an LLC? An LLC[1] is a union of assets put together for a common purpose. It's not a union of people. A worker-owned company should have a different legal structure, usually something created specifically for such an organization, though one would imagine partnerships would be suitable if the law doesn't provide for a special structure.

[1]Granted, I'm thinking of European definitions here, because I get really confused when I try to educate myself about American ones. An GmbH is more or less an AG with stakes rather than shares, whereas an American LLCs seem to behave somewhat differently (taxation, for example is pass-trough).

[mminer237]

Entity laws are all state-by-state in the US, but in most (all?) states, LLCs and corporations are essentially the same ownership-wise. A person buys membership interest/stock in an LLC/corporation, and becomes a partial owner. The organization is a separate legal entity then owning the contributed assets and the members/shareholders own the LLC/corporation. The bylaws will lay out how to divest a member/shareholder of his interest, usually involving the other members/shareholders or a board of managers/directors voting to buy out his shares.

It's not really a union of assets nor people though. The former would be a trust or arguably a non-profit, and the later would be a partnership. And LLCs can elect to be taxed as a C corporation, although I can't fathom why one would. (And most small businesses can elect pass-through taxation!)

[singleshot_]

No. Taxation of an LLC is not pass through. Taxation of a single member LLC that is a disregarded entity can be pass through. LLCs can also opt for sub K, sub S or sub C.

I also would not refer to an LLC as a collection of assets for a common purpose; instead I would say it is a popular entity form that limits member or manager liability. However you could take a different view.

[bluedino]

>> If you work at McDonalds, in is 100% in your interest to do the absolute bare minimum possible to not be fired

Or:

If it's flipping hamburgers at McDonald's, be the best hamburger flipper in the world

Ice Cube, or Abraham Lincoln, or Dave Ramsey said that. I forgot which one.

[pessimizer]

Horatio Alger stories were about humble, brave, smart and hardworking boys from troubled, deprived backgrounds who found terrible, unrewarding jobs or situations, worked hard, smart, or bravely at them, and were observed doing this by successful, wealthy, and wise men who recognized that raw merit, plucked those boys from their situations, moved them into their businesses and homes, and gave those boys real responsibility and a start on their road to inevitable success.

Horatio Alger was a pedophile who preyed on young homeless boys and orphans.

It is very easy for the best burger flipper at McDonald's to remain the best burger flipper at McDonald's forever. His job is safe. The harder he's willing to work without getting a raise, the longer he will be working without getting a raise. One day, he will probably become assistant manager, and his promotion will mean a pay cut because now he's on salary, and his responsibilities will become greater because he has to show up when others don't. They know he will, which is why they gave him the job. Meanwhile, he works under a series of managers transferred from other locations, or hired from other companies. Eventually he gets sick, and his awful health insurance runs out almost immediately. He's demoted, then fired because he can't keep up at the job anymore. Then he's homeless, then he's dead.

Goofus, however, did the least possible in order to keep from being fired, and went to community college at night. He eventually was able to wrangle a paid internship at a company where there was a career path, and quit McDonald's. Everybody was happy to see him go, because he was a person like them who managed to get a good job, and also because he was terrible to work with because he was always so tired from school and didn't put a ton of effort in. Goofus is now middle-class.

postscript: Goofus later also got sick, his insurance ran out, and he became homeless and died. US healthcare is terrible.

[SoftTalker]

Have you worked at a McDonald's as a manager? Because I have, and their insurance for full-time staff and managers was the same as you get at most employers. Anthem, or whatever major provider. Salaried managers also earn middle-class incomes. Perhaps your experience was different, or perhaps you are making it up.

[datavirtue]

MacDonald's managers are knocking down $200k?

[avgcorrection]

This is a concept that dumbfounds people today (at least many on this startup incubator forum) but that Adam Smith explained over two-hundred years ago. Yes, workers and owners end up forming two distinct groups with two distinct class interests.

[programmarchy]

Ever done a group project in school? Free riders ruin shared incentives.

[SenoraRaton]

But somehow having a freeloader at the top that siphons off profits is totally fine? I would much rather have someone that I quite literally worked with, and the rest of the staff interacted with freeloading, than some franchisee owner who literally does nothing for the business. Not only would it be much easier to identify, it would be easier to socially address, or remove this person. I couldn't fire my project mates in school, in this scenario you could.

[moate]

I never did a single group project at school that had a legally binding contractual agreement or a board of shareholders, so I imagine these are entirely different situations.

[thescriptkiddie]

Capitalism was not designed to create a mutually beneficial relationship between workers and owners, it was designed to make as much money as possible for the owners at the expense of the workers. Even if that means everything runs inefficiently and less money is made overall, the people in charge don't care so long as they get all of the profits.

[TuringNYC]

>> One thing that I never understood was, if an employees wages are tied to the success of the company, would that not incentivize better work ethic as a whole?

It would probably incentivize you to ensure everyone else's work was up to par. This doesn't seem that different from a small startup with heavy equity comp -- everyone is incentivized to work hard, but there are also plenty of times where people want everyone else to work hard but not themself.

In the extreme case, imagine two co-founders. It is common for each co-founder to try and take distracting side jobs / consulting or not quit their dayjob, while the other puts in the hard work to grow the value of the startup. Generally this is a hard-NO from an angel/vc investment standpoint, but outside an external party clamping down, there is an incentive to cheat.