Hacker News Reader

People with money would like to control what they buy with that money? Interesting...

The issue could be organizational, though. You, Bob, Mary, and I form a company legally. Then we work to get capital for that company, however anybody does that. But we decide beforehand that we are equal part owners, and when we need to find more people to help with the work, we sign them up as part owners instead of as conventional wage employees.

I think that technically, stock options are a version of this, but the disparity in ownership between "founder" and "twentieth employee" might be so stark that the latter is better off taking a wage. Maybe the founders _could_ decide to give everybody a bigger piece of the pie, so to speak, with proportional increases in responsibility to those hired and difficulty in finding people. It would be a different kind of company.

>we sign them up as part owners instead of as conventional wage employees.

That's basically how startups work. They pay less, but they presumably make up for it in terms of equity. However, the common advice when it comes to startup options is to value them at $0, which makes sense given how much risk there is. I can't imagine many people taking up on the "you get equity instead of wage" offer. The "options are worthless" problem doesn't exist for large publicly traded companies, but then at that point shares in the company and cash is basically interchangeable. What real difference is there between $300k in meta stock vs $300k in cash? I'd guess most people would still rather take the cash than the equity so they can have some sort of worker co op.

>but the disparity in ownership between "founder" and "twentieth employee" might be so stark that the latter is better off taking a wage. Maybe the founders _could_ decide to give everybody a bigger piece of the pie, so to speak, with proportional increases in responsibility to those hired and difficulty in finding people. It would be a different kind of company.

The problem is that in terms percentage ownership of the company, giving out equity is a zero sum game. You can't give everyone a significant stake (eg. 5%), because that would wipe out the founders/investors.

> The problem is that in terms percentage ownership of the company, giving out equity is a zero sum game. You can't give everyone a significant stake (eg. 5%), because that would wipe out the founders/investors.

I agree that it's a problem, but only if the founders think that they are due a much bigger share than anybody else. It's only natural to think so. But, if you're doing the cooperative thing, you have to share. I don't really know anything about it, but that's why I described it as a different kind of company.

>but that's why I described it as a different kind of company.

You mean... like a partnership? It works well for professional services (eg. lawyers, accountants, consultants) because there isn't much capital required and are limits to scalability, so you giving your partners equal share isn't that much of an issue. However, I can't see it working for tech companies where there's a massive amounts of capital required, and the impact of a single contributor can be enormous. Why would investors invest the "different kind of company", the returns will only be shared among the workers? For the founder that has a $1 billion idea and has the skills to execute on it, why would he create an organization where he gets the same share as a junior developer who care barely make a CRUD app?

I agree with you.

> For the founder that has a $1 billion idea and has the skills to execute on it, why would he create an organization where he gets the same share as a junior developer who care barely make a CRUD app?

Presumably he wouldn't hire a developer who can barely make a CRUD app, and his decision to share more than he has to would be on ideological grounds.

> I can't imagine many people taking up on the "you get equity instead of wage" offer.

Autodesk did that. Everyone who took that deal became rich. This is unusual.

What I've "discovered" is that most people today have very elevated compensation goals that they can't really fathom being an 'equity player'...

It just seems like a huge risk. Basically it seems like if you lose, you lose, if you win, everyone shares in your winnings.

Stock options that allow the founder to keep control and to receive more significant profit for the extraordinary risk they take makes much more sense imo.

Exactly this. Startup employees are essentially compensated like this:

* Base salary that is very low risk because they have a “liquidity event” every pay period, and there are numerous legal protections that ensure that they get paid.

* Incentive Stock Options, which are very high risk because they backed by a company that might not succeed, might never experience a “liquidity event”, are not nearly as liquid, and have far fewer legal protections.

It seems that more than a few people have not considered that ISOs will be a part of their overall investment portfolio, and they should think about how much of their portfolio they want invested in high-risk assets.

Making it illegal to have the company block/veto the sale of shares would definitely improve the picture. IMO it's a break in property law to have a contract that says "You own the property and have all it's liabilities (like taxes) but you do not have the right to sell that property to a willing, SEC qualified, and able buyer" ...

> company block/veto the sale of shares

Example of this happening IRL? I've seen right of first refusal and tag along rights that make it harder to find a buyer, but nothing that actually prevents sale of vested shares.

As I understood the few contracts I've had they barred me from selling to anyone unless the company approved. That in practice meant I had no liquidity unless IPO or got to sell to investors in the next fund raise round (very very rare).

And think about it a bit further, who's going to go through any due diligence if their research and offer is going to first hit the board/company and potentially completely vanish for them? I certainly wouldnt invest time/resources to see if I wanted to buy shares from an employee to potentially find out the company decided to buyback those shares instead. This property would massively lower the price I'd be willing to offer. (as a compensation for my risk taken)

> IMO it's a break in property law to have a contract that says "You own the property and have all it's liabilities (like taxes) but you do not have the right to sell that property to a willing, SEC qualified, and able buyer".

Once you enter into a an options contract with your employer you are bound to the terms of the contract. You can refuse to sign I suppose.

More important though is to understand that the limitations you mention lower the value (increase the risk) of the options.

> Basically it seems like if you lose, you lose, if you win, everyone shares in your winnings.

More or less why communism is unproductive, because it takes away the incentive for individual achievement.

What if people who come up with particularly effective solutions are awarded a bonus? That could put back some of the incentive.

Who decides the who/how/when of the bonus recipient(s)? You are back to square 1.

You lose when everyone’s contributions (including your own contribution) results in a net loss.

Sometimes, a lot of the time hopefully, your loss would be negated by the combined efforts of everyone else. It would be the situations where enough people lose to result in a net loss that would require everyone to steer away from.

Tech is most primed for it thanks to open source and other things that make it easier for workers to afford automation and distribution with sometimes up to near 100% margins / zero unit cost. So the most challenging cost becomes free time. Which wage labor does make challenging to find, but that's not as hard as also not being able to afford the means of production at all as in other fields/industries

I’d like to start writing playbooks from experience on how to optimize this approach vs big capital up front style. I’m bootstrapping off b2c+b2b app revenue and spinning up worker coop structures a lil to start scaling up as fast as I can give at least livable share of revenue in addition to equity share for help to grow the businesses. I bought indiedevstack.com to blog and productive this approach but haven’t set it up just yet

As I understand, you don't really need money to make a co-op, but what you need is cash flow. The most plausible route I've heard is freelancers forming a co-op where they pitch in some portion of what they make to a shared pot to even out the lean time in any particular freelancer's stream of gigs, as well as potentially sharing work if a client asks for more than an individual can do.

Of course, that requires the participants know and trust each other, but it seems a plausible way for individuals without a bunch of money to start a co-op.

>As I understand, you don't really need money to make a co-op, [...] The most plausible route I've heard is freelancers forming a co-op where they pitch in some portion of what they make to a shared pot [...] , but it seems a plausible way for individuals without a bunch of money to start a co-op.

Yes, your realistic scenario of a co-operative is something I already outlined in a previous comment of "consultants co-op office" : https://news.ycombinator.com/item?id=14647223

But that type of freelance co-op isn't really what most people are thinking about when the discussion follows the template of "Big company <X> did something bad so why don't workers form a co-op <Y> instead of being screwed over by <X>?!?"

In this thread, the topic is "IBM" laying people who are "too old". In response, some observers think "workers should form co-ops" to avoid being screwed over. In other words, the hypothetical co-op version of an "IBM" wouldn't lay off old workers. The "freelancers co-op" doesn't apply to this story of an IBM middle manager (MaryKathryn Doheny) being laid off.

The issue is that companies like IBM, or Google, or Tesla, etc are by their very nature -- capital intensive -- so there won't be co-op alternatives for those.

Still the same underlying economic factors: the car workers don't have the money to pool together and form a worker-owned car factory -- and the founders/investors who are motivated to start a new car company are not interested in sharing equity with a 100% worker-owned structure.

That's why the employees who don't like Tesla's ownership structure can't quit and go work at a worker-owned co-op electric vehicle manufacturer.

People start businesses because they want to make money. Co-ops and charities are usually set up for other purposes, and have other constraints.

People also start businesses because that is the simpler default that you will be pushed towards: by your clients, your accountant, your suppliers, your lawyers, your mother, your bank, and most everybody else.

> The roadblocks to worker-owned co-ops taking off are money and capital.

That cliché just doesn’t apply much to many professionals, because the biggest expense is salaries. Watch a new business form, and professionals can often afford to self-finance during the initial period. A few professions need to rent, but say lawyers and some doctors have cheap chambers and clinics to service the market for individuals starting out.

And lawyers and accountants do form a type of co-op: they call them partnerships.

There are a huge number of self-funded software startups because so long as founders can pay their bills, they can afford their salary. Most self-funding software startups could just as easily be formed as co-ops, yet they are not. The reason is not because they are forced to become a business because they need capital. Note I am talking about self-funded startups - funded startups are obviously different.

Finally, co-ops are fundamentally unfair to the founders. Starting a business costs a lot more than money, and businesses are how we try to fairly repay that.

And the #1 reason why co-ops don’t exist? Because people have seen them and they don’t want to join them.

>That cliché just doesn’t apply much to many professionals, because the biggest expense is salaries.

The context of my reply was this thread's article: IBM laying off a middle-manager employee like MaryKathryn Doheny.

There isn't a co-op of "middle managers" charging an hourly rate. I previously explained that a "freelancers consultants co-op" doesn't apply to her situation: https://news.ycombinator.com/item?id=35930165

>And lawyers and accountants do form a type of co-op: they call them partnerships.

No, the professional partnerships like law firms are not "100% workers' owned co-ops" that people are thinking of as I've explained before: https://news.ycombinator.com/item?id=31459215

>Most self-funding software startups could just as easily be formed as co-ops, yet they are not. The reason is not because they are forced to become a business because they need capital. [...] And the #1 reason why co-ops don’t exist? Because people have seen them and they don’t want to join them.

Your chain of reasons is overcomplicating things and doesn't answer the mystery for the workers who already know what a co-op is and want one. On the other hand, I'm explaining that the workers who already bought into the concept of co-ops -- are not the ones creating new companies as co-ops. Why can't those pro-coop workers "Be The Change They Want To See" , as the proverb advises and create those co-ops?!? Because they have no money.

> Because they have no money.

My point is that money is not the reason co-ops are not created - it is just the clichéd reason.

Pick an industry where money is not the issue, such as self-funded software startups, and co-ops don’t usually form. QED: needing money is not the reason. There must be other dominating reasons why co-ops are not formed - I have suggested what could be the reasons but I don’t know I have hit the central reasons.

Even with capital, you could structure a business to have co-op like features through share-classes or loans or structured contracts, i.e. even if you need money you could still form an equivalent of a co-op. That rarely happens. QED: needing money is not the reason.

> law firms are not "100% workers' owned co-ops

Obviously. My usage of “type of” was too subtle? But also co-ops are not ‘100% workers’ as per https://news.ycombinator.com/item?id=31460457 simply because co-ops can employ people that are not members, directly, or indirectly.

Finally, look at historical large co-ops and large societies: again and again we see members sell-out and the organisation become a business (at least that is my experience in New Zealand). They have enough capital, so the reason for deciding against a membership ownership structure isn’t because they lack capital. QED: needing money is not the reason.

It feels like déjà vu making such an obvious argument: why do you cling so tightly to your beliefs about capital?

Perhaps our governments cover most of the purpose for a co-op: many countries have 40% to 60% GDP devoted to government (including the USA) and large amounts of that are infrastructure, social welfare, and shared services for every member (citizen).

I want to add one last perhaps-irrelevant quote talking about the VC ecosystem (most severely capitalist):

  one very real truth: the most talented, value-additive people in any industry are virtually never in it just for the money

- https://siliconhillslawyer.com/2018/11/09/dont-be-an-asshole...

>Pick an industry where money is not the issue, such as self-funded software startups, and co-ops don’t form.

Because the owner/founder of the self-funded software company doesn't want to dilute their ownership with workers. Owning 100% of a self-funded startup and just hire employees with 0% ownership is seen as a bigger financial reward from the owner's perspective. The employees get a salary and the owners get the excess profits. This thinking of how to split the pie is rooted in money.

There may be some minor employee-ownership benefits such as ESOP (employee stock option plan) for retirement plans or ISO (incentive stock options) but the core reasons for co-ops not being popular is still based on money. Co-ops are not just arbitrary administrative slicing of a corporation; it is about dividing the economic pie a different way that benefits some at the expense of others. The founders of new companies must be willing to give up significant and meaningful ownership percentage to potential employees who have no leverage to fulfill the vision of a workers-owned co-op. Most founders won't do it because of money.

A bunch of lawyers and farmers forming "professional co-ops" are not relevant to this discussion that got triggered by an IBM middle-manager getting laid off because she wasn't a part-owner of a co-op.

I am arguing that the need for capital is not the primary reason co-ops don’t form.

You are talking about something else (I am not actually sure what you are trying to say - you appear to be agreeing with me).

I also gave you two other independent reasons (see QEDs) to fortify my primary argument: I did not give you a three legged chair where you could knock one leg out.

> Finally, co-ops are fundamentally unfair to the founders. Starting a business costs a lot more than money, and businesses are how we try to fairly repay that.

Here’s a fantastic article about this point: https://www.startups.com/library/expert-advice/emotional-cos...

Also a quote from https://michaelafreemanmd.com/Research_files/Are%20Entrepren... about startup founders:

  Who in their right mind would choose to be an entrepreneur? The barriers to success are virtually unlimited and most startups fail as a result. Entrepreneurs have lower initial earnings, lower earnings growth, lower long-term earnings [32], greater work stress, and more psychosomatic health problems than employees [33]. Why would anyone voluntarily accept the longer work hours, fewer weekends and holidays, more responsibility, chronic uncertainty, greater personal risk and struggle, and greater investment of emotional and physical resources required to be an entrepreneur instead of the security and long-term rewards of having a career[34]?

Although some of it is selection bias versus cause: the paper seems to suggest many founders are literally mad before they start a business.

Why cant the workers pool their available capital, and if they're sufficiently productive why cant they do some to generate more?

Tech workers are considered to be highly paid, so if anyone could accumulate capital it's them.

>Why cant the workers pool their available capital, [...] Tech workers are considered to be highly paid,

The highly-paid workers can pool capital... if we're speaking in hypotheticals. The hypothetical tech workers can hypothetically pool their capital together to form a 100% worker-owned co-operative.

On the other hand, my comments are explaining what real people have been doing in the real world. E.g. ex-Google employee Kevin Systrom didn't form Instagram as a workers co-op. And ex-Yahoo employees Jan Kuom and Brian Acton also didn't form WhatsApp as a workers co-op. They could have -- hypothetically -- but they didn't. (Those startups did have Incentive Stock Options but that's not the workers ownership people are thinking about when speaking of "workers co-op".)

We can see that most ex-employees with access to money do not form co-ops. Why? The ex-employees-now-the-founders see no financial incentive to do so.

The workers who actually _want_ co-ops are not the ones out there creating new companies.

Harry Hardworker is also not going to want to share his compensation equally with Dan Deadwood.

The coops i've seen, in practice, are mostly low capital required things. So your point does make sense.

I've mostly seen coffee shops, bike/repair shops, breweries, some restaurants.

These are both not capital intensive, and are pretty well commodified too unfortunately.

You are missing a massive blockers. Coops are often ostracized by private corporations. To the point that coops have to build coop networks to resist.

Interesting. In what way ostracized? Can you give some examples?

It's well known that private corps are reluctant to engage and sign contracts with coops.

Unions have the money.