4 ms·
>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
by AndrewKemendo 3y ago
>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-million-following-claims-they-were-massively-overpaid-105506056.html https://www.engadget.com/tesla-directors-agree-to-return-735...
- chrisdbanks 3y agoWorkers 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.
- PartiallyTyped 3y agoWhy 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 3y agoSimon 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 3y agoYou'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.
- slt2021 3y agoAny 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 3y agoUSA 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/projects/1998-99/game-theory/nonzero.html https://cs.stanford.edu/people/eroberts/courses/soco/project...
- slt2021 3y agothank you for your comment, your points are valid
- snovv_crash 3y agoHow does this model account for varying growth based on employee alignment with company goals?
- 3y ago
- AndrewKemendo 3y agoGuess 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.
- capitalsigma 3y agoMost big tech firms give engineers RSUs for this reason
- slt2021 3y agoalso 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 3y agoIndeed, which are sub class of stock with no power. So it’s the same story and is effectively a lottery ticket.
- edmundsauto 3y agoRSUs that you can sell are effectively cash, not a lotto ticket.
- AndrewKemendo 3y agoThey 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 3y agoI 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.