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Wouldn't this be a more complex version of an existing structure, the worker-owned cooperative? https://www.usworker.coop/clinic/startups/ https://www.usworker

Wouldn't this be a more complex version of an existing structure, the worker-owned cooperative? https://www.usworker.coop/clinic/startups/ https://www.usworker.coop/clinic/startups/ I think the difficulty for both those and your proposed structure is the difficulty of fundraising, when outside investors can't just invest capital without labor. There are lots of rich people and institutions with more money than time. And conversely, not every employee/potential co-owner would necessarily want equity in lieu of a stable salary. It also gets into managerial complexity when co-ownership might also imply some degree of democratic decision-making because everyone is not only a worker but also an owner. It doesn't necessarily mean that everyone owns an equal share, but hiring and firing become more complex, and traditional company hirerachies may not be as common. There are a few tech coops: https://github.com/hng/tech-coops https://github.com/hng/tech-coops

coderatlarge 3y ago
Thanks for the links and your valid points. I'm not at all suggesting that everyone participating in a group like this would have equal say or equal ownership in this structure. Clearly, founders in startups as they stand today can add a lot of value by concentrating power and responsibility. The goal here would be to maintain the ability to exercise substantial top-down control, but on better terms than today's labor situation. To your point about investors and funding, there could certainly still be a holding company structure to invest in - it would just not have any employees. It would sit at the center of a web of entities that it would have majority ownership of (liquidation preferences, senior rights, etc). It would also control the bulk of the IP, by how it had set things up. For example, in the co-founding contracts I mention, the individual engineer might not be an equal shareholder at all. The entity that they contract with would be the majority shareholder and the agreement could apportion expectations. Perhaps a super-star engineer would get more equity in that entity and more leeway. The initial funding of the JV from the holding co, could be on the order of the typical sign-on bonus plus a few months of salary, to be re-upped down the road as IP and services flow the other way. To your point about a class of employees not wanting this: I agree this would definitely not be for everyone. That's comparable to choosing a seed-stage company vs the federal government.
- solardev 3y ago
  If I'm understanding you right, wouldn't this concentrate profits in the hands of a few while increasing risk for everyone else? They'd have no labor protections while also not having any real equity. It's high-risk, low-reward. It just sounds like a setup for exploitation. What's the upside? Why would anyone want to join such an organization, seemingly set up to skirt the very protections meant to prevent them in the first place...? Maybe I'm misunderstanding something here, but after the most recent round of layoffs and a gradual industry push towards worker unionization, going the opposite direction of "hey, just work under this confusing structure so we don't have to deal with labor laws... don't worry bout it k?" sounds pretty concerning... Traditional cooperatives at least have have the promise of equity (and sometimes democracy) in exchange for the risk and lower pay. What does this structure give the other workers-owners?
  - coderatlarge 3y ago
    It's useful to hear your (not positive!) reaction to this idea and I appreciate the exchange. The benefit to individuals participating in an organization like this would be that the org would be more likely to succeed because it faced lower overheads, less red tape and greater predictability. The individuals would have to evaluate for themselves how much compensation they're receiving and whether that's a better deal than open-market "managed employment" options. The structure allows for compensating much better and much worse than existing systems and it allows for more dimensions of negotiation because the contracts are private. If the founders of this business offer only exploitative terms, then presumably no one would sign up. Or perhaps only people who they might not want would sign up. If, on the other hand, they offered similar comp levels but with a greater chance of success, then perhaps it could be a lot more attractive than current options. The problem I perceive with the protections existing laws intend to deliver is their unintended consequences. For example, they can make employers slow or cautious in times when they need to be bold and decisive. Or they can sap exec bandwidth when it should be focused on the survival of the business. Because of its complexity, the system as it stands today requires lawyers and accountants and experts to interpret / research / analyze / opine, when a business generally needs clear and quick decisions. As an individual worker, I've certainly benefited from employment protections, but I've also been constrained by them in many ways. On balance, I'd like to have the option to work within a "managed" employment system OR to try my luck in more open-ended system where I can (potentially) do better by thinking harder and taking more personal risk. Unionization strikes me as an extreme of "managed" options, in which the individual elects to pay dues for some level of representation and then has to accept/reject whatever options are presented to them in an up/down vote with their cohort. In the system I'm envisioning, an individual can participate as an owner-capitalist, but without necessarily taking on the full risk of the enterprise on their shoulders as a traditional founder or co-founder.

coderatlarge 3y ago

Thanks for the links and your valid points. I'm not at all suggesting that everyone participating in a group like this would have equal say or equal ownership in this structure. Clearly, founders in startups as they stand today can add a lot of value by concentrating power and responsibility. The goal here would be to maintain the ability to exercise substantial top-down control, but on better terms than today's labor situation. To your point about investors and funding, there could certainly still be a holding company structure to invest in - it would just not have any employees. It would sit at the center of a web of entities that it would have majority ownership of (liquidation preferences, senior rights, etc). It would also control the bulk of the IP, by how it had set things up. For example, in the co-founding contracts I mention, the individual engineer might not be an equal shareholder at all. The entity that they contract with would be the majority shareholder and the agreement could apportion expectations. Perhaps a super-star engineer would get more equity in that entity and more leeway. The initial funding of the JV from the holding co, could be on the order of the typical sign-on bonus plus a few months of salary, to be re-upped down the road as IP and services flow the other way. To your point about a class of employees not wanting this: I agree this would definitely not be for everyone. That's comparable to choosing a seed-stage company vs the federal government.

solardev 3y ago
If I'm understanding you right, wouldn't this concentrate profits in the hands of a few while increasing risk for everyone else? They'd have no labor protections while also not having any real equity. It's high-risk, low-reward. It just sounds like a setup for exploitation. What's the upside? Why would anyone want to join such an organization, seemingly set up to skirt the very protections meant to prevent them in the first place...? Maybe I'm misunderstanding something here, but after the most recent round of layoffs and a gradual industry push towards worker unionization, going the opposite direction of "hey, just work under this confusing structure so we don't have to deal with labor laws... don't worry bout it k?" sounds pretty concerning... Traditional cooperatives at least have have the promise of equity (and sometimes democracy) in exchange for the risk and lower pay. What does this structure give the other workers-owners?
- coderatlarge 3y ago
  It's useful to hear your (not positive!) reaction to this idea and I appreciate the exchange. The benefit to individuals participating in an organization like this would be that the org would be more likely to succeed because it faced lower overheads, less red tape and greater predictability. The individuals would have to evaluate for themselves how much compensation they're receiving and whether that's a better deal than open-market "managed employment" options. The structure allows for compensating much better and much worse than existing systems and it allows for more dimensions of negotiation because the contracts are private. If the founders of this business offer only exploitative terms, then presumably no one would sign up. Or perhaps only people who they might not want would sign up. If, on the other hand, they offered similar comp levels but with a greater chance of success, then perhaps it could be a lot more attractive than current options. The problem I perceive with the protections existing laws intend to deliver is their unintended consequences. For example, they can make employers slow or cautious in times when they need to be bold and decisive. Or they can sap exec bandwidth when it should be focused on the survival of the business. Because of its complexity, the system as it stands today requires lawyers and accountants and experts to interpret / research / analyze / opine, when a business generally needs clear and quick decisions. As an individual worker, I've certainly benefited from employment protections, but I've also been constrained by them in many ways. On balance, I'd like to have the option to work within a "managed" employment system OR to try my luck in more open-ended system where I can (potentially) do better by thinking harder and taking more personal risk. Unionization strikes me as an extreme of "managed" options, in which the individual elects to pay dues for some level of representation and then has to accept/reject whatever options are presented to them in an up/down vote with their cohort. In the system I'm envisioning, an individual can participate as an owner-capitalist, but without necessarily taking on the full risk of the enterprise on their shoulders as a traditional founder or co-founder.