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In this case, charity would distort incentives by softening the outcome of bad decision-making. Each of those employees signed up for a salary and equity. Tha

In this case, charity would distort incentives by softening the outcome of bad decision-making. Each of those employees signed up for a salary and equity. That equity turned out to be of very little value to them in the end, probably less than they were hoping for. If they all got paid out anyway, they would not have learned that small equity stakes can turn out meaningless, and that exits are way less profitable for employees then founders. Some of these employees might now go on to be founders because they learned the dangers of working hard on something in which there is no equity. In the end they might create something of massive value, which the world never would have had if they simply benefited from charity. I think the lesson of this exit is also more valuable for all HN readers than it would've been if he had just paid out the employees, for the same reasons.

Jochim 6y ago
A counterexample I'd offer is that upon being treated charitably those employees could then be incentivised to use that windfall to pursue their own ideas, seeing the success of their founder benefactor and being empowered with a financial cushion they would not have otherwise had. They might then go on to create something of massive value which the world never would have had if they simply did not have the financial means to do so. Remembering the "charity" they received in helping build the business that enabled them to succeed as founders they then pass that same "charity" on to their own employees upon a successful exit, kickstarting a cycle of innovation that spreads much farther. There's an argument that "that's not the way the world is" but the world is as compassionate or dispassionate as we make it. Personally I'd like to see it move towards a point where taking everything just because you can isn't viewed as acceptable.
- fairity 6y ago
  > Personally I'd like to see it move towards a point where taking everything just because you can isn't viewed as acceptable. It's not clear to me what you're actually suggesting. You think that when someone takes more than they need, they deserve to be shamed? How do you determine how much one can take? We all want the world to be more loving and compassionate, but rules and financial incentives drive productivity in our economy. If the financial incentive to start a company is reduced, there will necessarily be a cost to innovation. Imo, the goal should be creating a system where the rules are fair and clearly outlined. The rules and incentives for employment were very clearly outlined in the employment contract these people signed. And, the founder does not seem to be the type of person who over-promises. So, I see nothing wrong here.
  - Jochim 6y ago
    > You think that when someone takes more than they need, they deserve to be shamed? How do you determine how much one can take? Shame is a pretty good motivator for encouraging people to behave in a manner deemed appropriate by society. I don't think there's an easy or definite answer for how much is appropriate. I guess the question I'd ask in return is: in the case of the woman caught on security footage dumping a whole bucket of Halloween candy into her plastic bag. Why is it that we find it appropriate to shame her and not a founder/ceo who does effectively the same thing? Why can we not apply these same rules of decency to business? > If the financial incentive to start a company is reduced, there will necessarily be a cost to innovation. I don't think this is necessarily true. By spreading the fruits of successful innovation more broadly you put the people who enabled that innovation in a position to use that experience to innovate further. I'd argue that model where innovation centers around founders aiming to hit unicorn status and then retire with 'fuck you' money limits it in the sense that those once you've earned your 'fuck you' money you aren't really incentivised to innovate any further. > The rules and incentives for employment were very clearly outlined in the employment contract these people signed. I'm questioning whether they were fair, not in this specific case, but I'm asking more generally is our approach to employment as a society reasonable and fair.
    - fairity 6y ago
      > Why is it that we find it appropriate to shame her and not a founder/ceo who does effectively the same thing? In the case of Halloween candy, the owner of the candy is offering each person up to a few pieces of candy for free. If you take more than a few pieces, you are stealing from the candy owner. Stealing is bad because we believe in the right to private property. Stealing is, in fact, illegal. Of course, our legal system isn't set up to enforce punishment for small actions, so shame is a useful alternative form of punishment. > Why can we not apply these same rules of decency to business? In the case of employment, each employee is offering the business owner his/her time in exchange for a salary and equity. The expectations are crystal clear to both parties. When the business owner sells the company, taking his fair share of the purchase price (as determined by his equity stake) is NOT stealing. Nor, is it breaking any norms or expectations. > By spreading the fruits of successful innovation more broadly you put the people who enabled that innovation in a position to use that experience to innovate further I actually agree with this specific point for an isolated case. That is, in isolation, spreading the purchase price for a huge acquisition evenly across the employee base would probably lead to greater innovation. However, this only makes sense in isolation. If you make it common practice to share acquisition price more evenly among employees, you destroy the financial incentive that drives much of entrepreneurship. Startups are very risky, and without a huge payout for success at the end, the expected values just don't work out anymore. Smart engineers will be much better off applying for a traditional FANG job. In fact, this is already the case! What you're proposing would just make the math even worse. Remember, for every success case like this, there are 4 or more founders who failed. There better be a sweet reward at the end of the tunnel to keep them motivated to keep trying! Furthermore, for small acquisitions like this, even if you were to split his 3.7M payday across his 20 employees, each person gets $18.5K. Hardly an amount that would spur innovation.
t0astbread 6y ago
This comment should be seen as unrelated to the Baremetrics case (because I don't know the employees' POV). I think I understand your reasoning but I don't agree with it. It implies that workers don't already know they're in a much worse position compared to founders/business owners when it comes to acquisitions. Generally it suggests that workers "learn" through pain until they become founders. Which might apply to some people but certainly isn't the case for everyone, let alone a good reason to treat your workers badly. I much more agree with the sibling comment by Jochim.

Jochim 6y ago

A counterexample I'd offer is that upon being treated charitably those employees could then be incentivised to use that windfall to pursue their own ideas, seeing the success of their founder benefactor and being empowered with a financial cushion they would not have otherwise had. They might then go on to create something of massive value which the world never would have had if they simply did not have the financial means to do so. Remembering the "charity" they received in helping build the business that enabled them to succeed as founders they then pass that same "charity" on to their own employees upon a successful exit, kickstarting a cycle of innovation that spreads much farther. There's an argument that "that's not the way the world is" but the world is as compassionate or dispassionate as we make it. Personally I'd like to see it move towards a point where taking everything just because you can isn't viewed as acceptable.

fairity 6y ago
> Personally I'd like to see it move towards a point where taking everything just because you can isn't viewed as acceptable. It's not clear to me what you're actually suggesting. You think that when someone takes more than they need, they deserve to be shamed? How do you determine how much one can take? We all want the world to be more loving and compassionate, but rules and financial incentives drive productivity in our economy. If the financial incentive to start a company is reduced, there will necessarily be a cost to innovation. Imo, the goal should be creating a system where the rules are fair and clearly outlined. The rules and incentives for employment were very clearly outlined in the employment contract these people signed. And, the founder does not seem to be the type of person who over-promises. So, I see nothing wrong here.
- Jochim 6y ago
  > You think that when someone takes more than they need, they deserve to be shamed? How do you determine how much one can take? Shame is a pretty good motivator for encouraging people to behave in a manner deemed appropriate by society. I don't think there's an easy or definite answer for how much is appropriate. I guess the question I'd ask in return is: in the case of the woman caught on security footage dumping a whole bucket of Halloween candy into her plastic bag. Why is it that we find it appropriate to shame her and not a founder/ceo who does effectively the same thing? Why can we not apply these same rules of decency to business? > If the financial incentive to start a company is reduced, there will necessarily be a cost to innovation. I don't think this is necessarily true. By spreading the fruits of successful innovation more broadly you put the people who enabled that innovation in a position to use that experience to innovate further. I'd argue that model where innovation centers around founders aiming to hit unicorn status and then retire with 'fuck you' money limits it in the sense that those once you've earned your 'fuck you' money you aren't really incentivised to innovate any further. > The rules and incentives for employment were very clearly outlined in the employment contract these people signed. I'm questioning whether they were fair, not in this specific case, but I'm asking more generally is our approach to employment as a society reasonable and fair.
  - fairity 6y ago
    > Why is it that we find it appropriate to shame her and not a founder/ceo who does effectively the same thing? In the case of Halloween candy, the owner of the candy is offering each person up to a few pieces of candy for free. If you take more than a few pieces, you are stealing from the candy owner. Stealing is bad because we believe in the right to private property. Stealing is, in fact, illegal. Of course, our legal system isn't set up to enforce punishment for small actions, so shame is a useful alternative form of punishment. > Why can we not apply these same rules of decency to business? In the case of employment, each employee is offering the business owner his/her time in exchange for a salary and equity. The expectations are crystal clear to both parties. When the business owner sells the company, taking his fair share of the purchase price (as determined by his equity stake) is NOT stealing. Nor, is it breaking any norms or expectations. > By spreading the fruits of successful innovation more broadly you put the people who enabled that innovation in a position to use that experience to innovate further I actually agree with this specific point for an isolated case. That is, in isolation, spreading the purchase price for a huge acquisition evenly across the employee base would probably lead to greater innovation. However, this only makes sense in isolation. If you make it common practice to share acquisition price more evenly among employees, you destroy the financial incentive that drives much of entrepreneurship. Startups are very risky, and without a huge payout for success at the end, the expected values just don't work out anymore. Smart engineers will be much better off applying for a traditional FANG job. In fact, this is already the case! What you're proposing would just make the math even worse. Remember, for every success case like this, there are 4 or more founders who failed. There better be a sweet reward at the end of the tunnel to keep them motivated to keep trying! Furthermore, for small acquisitions like this, even if you were to split his 3.7M payday across his 20 employees, each person gets $18.5K. Hardly an amount that would spur innovation.

t0astbread 6y ago

This comment should be seen as unrelated to the Baremetrics case (because I don't know the employees' POV). I think I understand your reasoning but I don't agree with it. It implies that workers don't already know they're in a much worse position compared to founders/business owners when it comes to acquisitions. Generally it suggests that workers "learn" through pain until they become founders. Which might apply to some people but certainly isn't the case for everyone, let alone a good reason to treat your workers badly. I much more agree with the sibling comment by Jochim.