Remaking the Union model.

[VivaRevolution]

i am not following you.

OK so a company is built and successful and the founders have cashed out. That means they sold the equity in the company to a third party. And that party is now the owner. How do you see the employees getting control??

There is one method but it is rarely done as its typically too burdensome. That would be to pay out the Founders by borrowing debt against the company (basically like a home mortgage) and then having the company over years thru its profit pay it all off and thus all the equity is now owned by the company's employees.

But i still go back to my question.

Lets say a few years post this the company needs capital to survive. Where do they get it? It is unlikely the employees will kick it back in from what they have received over the last few years. Few have that appetite. So you bring in new investors, and they take control again.

A company needs a risk base (investors) and a non risk base (daily employees) both as they both provide very different things for very different remuneration. But what tends to happen is that if a company becomes successful the people who wanted nothing to do with the risk start saying they deserve some of the reward.

And a good company will share that with them thru incentive that benefits both, not just because they work there.

Do share holders not all want their money too?

They do, which is why no one let's share holders liquidate a company. they hire a board, which hires executives.

These are the people who make the decisions, the difference is that the board would be answerable to the worker/share holder.

 

[JonesBones]

Revenue is not a great metric. The point is to share in the upside, imagine if every employee was incentivized to increase sales regardless of profit. That’s already a huge problem. GAAP is all we got, have to live with it. Also if these are negotiated not handed down by govt, you can move the gaap plus, ie restrict the games that can be played.

What about non GAAP standards? I know this girl who is an accountant and also kinds of weird beliefs. Like astrology and shit. But when I bring up non gaap metrics she throws a fit and acts like I'm a nut. The shit is totally bunk and she doesn't want to hear about non GAAP metrics.

And intangible values and belief play a role too. GAAP can't account for everything. There is more things in companies than is dreamt of in your accounting manuals, Horatio.

<Lmaoo>

 

[JonesBones]

i generally agree.

I think an employee who wants to sell their labour is entitled to a fair full compensatory wage and nothing more during the growth phase of the company especially where there is no profit beig derived and its being funded by someone else risk capital and they are losing money until the company turns to profits.

When you see Revenue shares such as in the NFL that really only is a profit share by another name. They have long term stable predictable profits which they can forecast with almost no risk going forward and so to make the players union happy they decouple the 'risk' of profit share and put it on the front end with revenue. BUt it is the same thing to the owners in the end.

Now if the NFL suddenly started to lose lots of money they would force the scrapping of that model almost immediately as it would be untenable. It would untenable to ask the owners to keep plowing in more and more new money to try and get it back to profitability while the players were scooping out some of that money as a revenue share.

That said, we've seen situations in some markets where companies are not valued on typical metrics. Tesla is the perfect example. Unlike Amazon that was actually making money (margin) on their business and losses were only because of re-investment in growth, I don't think Tesla made any money until last year. And yet investor returns (equity) was high. So I could see tying some employee remuneration to that revenue growth and market share growth, if that is what the investors are being rewarded for. Sure at some point that has to turn to a profit driven metric but at the start, I would not fuss.

That NFL example is perfect and shows who is really taking the risk and keeping things going here.

And Tesla has those intangible qualities I was talking about. I was watching a debate on a business channel once and it was a finance guy who judged everything by data and financials, and the other guy was saying there is more to it than that. A brand an be a network of feelings. It is hard to judge cult stocks as Jim Cramer says. The power of belief and inspiration is strong.

An example that is different is Uber and Lyft. Their losses are being subsidized by shareholders. They use shareholder money to subsidize operations in an unprofitable business model. They are fucking their drivers with pay too but this could actually be a case of shareholders subsidizing the workers by keeping the company in business. And unlike Tesla, secondary holders are losing money for sure.

 

[MaxMMA]

The fact that companies pay people by the hour and not by productivity is beyond incomprehensible to me.

When people get paid by the hour what incentive do they have to even give a fuck about the company they work for?

Only when someone has a measurable stake in something do they actually care about it.

 

[Gandhi]

What about non GAAP standards? I know this girl who is an accountant and also kinds of weird beliefs. Like astrology and shit. But when I bring up non gaap metrics she throws a fit and acts like I'm a nut. The shit is totally bunk and she doesn't want to hear about non GAAP metrics.

And intangible values and belief play a role too. GAAP can't account for everything. There is more things in companies than is dreamt of in your accounting manuals, Horatio.

<Lmaoo>

She sounds kinda weird lol.

Imagine flipping out about using an accounting practice that is not “generally accepted” for a unique situation.

And the SEC rapes you over those metrics, makes you disclose things that you would rather not.

Having gone through the S1 process those guys are way smarter than your run of the mill CPA in terms of understanding a business. Fly by night BS metrics and add backs don’t just fly by easily.