I believe this is one of the big reasons I chose to go towards trading instead of working in SV. The prop trading companies (and even big finance firms like Goldman) have far more egalitarian profit-sharing structures than places like e.g. Google or Facebook, and you can really see that employees of those trading firms are a lot more motivated in their work than a programmer at a typical SV firm (even at startups that I've seen).
I don't think so. Yes, you do get paid more, but you're expected to put in more hours and forced to work within a much more rigid environment with less transparency. Also, throughout finance firms (even among the more tech-saavy ones), the programmers are ostensibly considered second-class to the portfolio managers, and this is reflected in the pay.
So yes, they get paid more, and as a result they may be more a bit more motivated, but there's nothing egalitarian about programmer pay on Wall Street.
I'm much more quant than programmer, but even programmers at trading companies get paid at least as well as they do at Google/Facebook (and obviously much better than they'd be paid at a startup) to start with. Not to mention that programmers at SV companies are second class to product managers, so the relative status situation isn't that different.
I don't know where you get the more hours/more rigid attitude from. 9hrs is very typical, weekends are very rare, and the only time you ever exceed that is when you are releasing very new strategies -- strategies which you get a direct cut of the PnL, so you have a very direct incentive to want to get that out there and trading as soon as you can.
Is everyone equal in finance? No. But compared to working in the valley? It's worlds apart. Let's look at a simple example, for Google and Goldman, take a look at average revenue per employee (~1.2m for both) vs. average compensation per employee (600k for GS, ~150-200k for Google). In what way are Google employees not getting screwed over? Prop trading firms have even flatter structures than Goldman.
"600k for GS, ~150-200k for Google" is a meaningless comparison. First of all, the 600k is mean, not median, and it's heavily skewed by the relatively few but very high MD/partner salaries. Second, that's across the entire firm, and the GS tech guys are pretty far down the totem pole when it comes to pay. I doubt there's much difference in median programmer pay in GS vs Google, especially recently given the rise in SV salaries.
And if you're a quant, then it's totally not fair to compare yourself against a programmer, because even if you're doing programming, it's a completely different job altogether. Quant jobs (the ones immediately touching the models) are much more statistics focused, and the coding is more a means more than an end.
There are some trading houses with really terrible cultures, but there are plenty where people work 9-to-5. Possibly 9-to-7, if a new strategy is being deployed that week. The 12-hour-per-day shops exist, but they're not the norm and they don't get the best people. At least, they don't get good people on the entry level. Top traders will work at them, for a price, but trading companies promote from within a lot more than tech, so that actually hurts them.
within a much more rigid environment with less transparency.
That's regulatory. It's true that it'd be hard for a trading firm to pull off a Valve-like structure, but most tech companies have the same barriers and permissions systems (but for arbitrary and stupid reasons). If you work for a closed-allocation tech company, there's no good reason not to trade up to a financial job with 50-100+ percent more pay and no fundamental change in work quality.
Financial firms also value loyalty more and promote from within. Tech companies almost never promote from within, because they have that emasculated social-climbing mentality of always feeling the need for "better" people. Traders, culturally, have more of humility. "We're regular guys making money doing something hard." (There are some prima donna star traders who are exceptions, but they tend to fall hard and when they do, they're viciously attacked-- as they should be.)
Also, throughout finance firms (even among the more tech-saavy ones), the programmers are ostensibly considered second-class to the portfolio managers, and this is reflected in the pay.
If you're savvy at all, you'll establish yourself as a quant-who-codes, not a pure programmer.
I don't think the Valley is different, in this regard. Non-managing programmers are, if anything, third-class citizens compared to venture capitalists, executives, and the people who are well-connected enough to be made founders.
Trust me. Outside of the few open-allocation tech companies (e.g. Valve, Github) the financial world's deal is across-the-board superior. It's harder to get into, though.
It's one of the things I like about legal practice. No outside shareholders, no non-lawyers in the management chain, and every shareholder labors for a living billing hours. I understand the importance of passive investment to the economy, obviously. As an employee, I just prefer not to work in that framework.
You have a better shot at partnership at even a mega-firm than getting significant equity with a significant vote in a corporation without coming in as an early employee.
Trading houses accept that people are mercenary, which means it's socially acceptable to be that way. The result is that it's much harder for these companies (especially prop shops) to take advantage of their workers.
VC-funded tech, on the other hand, values effeteness and neoteny. You have to pretend to be a "true believer", and that creates enough actual true believers who'll take jobs with terrible terms, and that kills the market. Consequently, you have people working 80-hour weeks for "equity" that is 0.05% of a 60-person company. It's ridiculous.
Agreed, the culture is much more open in trading and people are very clear about how much money they are bringing to the table (arguably it is also easier to quantify value added, as well).
Companies marked with an asterisk are 100% employee-owned.
The biggest 100% employee-owned company is Lifetouch Photography in MN with 25,000 employees.
But Co-ops and employee owned companies are not the same thing.
I have worked for several small co-ops that used consensus decision making. While it is true that everyone has an equal voice the tendency is to listen more to people with more experience or expertise in the particular area being discussed. Also, there is a lot of delegation that happens where subgroups are formed so not everyone is deciding what type of toilet paper to buy or how exactly we should implement some minor detail. That being said sometimes random people come up with the best ideas, so it was helpful to have them involved.
I found consensus decision making to be a lengthy process but a rewarding one.
Consensus decision making is like QA: they can help make sure you're solving the right problem.
The upfront effort often feels inefficient -- especially if the team is lost in the weeds -- but can save a lot of heartache.
I've used various group decisions making processes to great effect. Joint application development (JAD) sessions for project kickoffs (scope setting). Approval voting for triage (issues with most votes get solved first). Roman evaluation (thumbs up/down) for acceptance testing. Story telling for post mortems. Etc, etc.
I've also seen much wasteful decision making. I'm not smart, or yet experienced, enough to identify the qwan that makes certain teams rock and others fail.
I think the article does a poor job of explaining why factories are generally not coop. When you have 1 employee = 1 vote, you can't sell (a significant amount of) capital to external entities. This leaves you with borrowing money, for which you can't use a significant amount of capital as a collateral.
That leaves the coops mostly to sectors that are not capital intensive (mostly service and retail).
There is a bit of a trend currently in France around employee-owned companies. One of the most visible is a restaurant in Paris ("le Temps des Cerises", we know we're in dangerous communist territory just by the name).
I know a coop where the employees/owners take personal credits to buy the headquarters.
Yes, that's a big problem. The owners of capital want to have a say about what the company does, because their money are at stake.
Perhaps this is just a cultural thing though. Take money lending - although a bank gives capital to someone else in exchange for profit, it doesn't require strict controls over the actual use of the money; it relies on contract law to get the money back.
Similarly, the executives of the publicly traded companies have responsibility to shareholders. Perhaps a similar agreement could be institutionalized with the coops too (yet preserve their democratic nature).
For the lending, there will often be a collateral, for a company it will often be shares. That limits the leverage to 50% since a default will make the bank an investor and external investors can't have control.
The collateral will not always be shares, sometimes it could be the acquired physical good, then it's accessible to coops (too bad if you want to borrow for service or immaterial goods). Using real estate or company planes as a collateral suggests that you already got a credit to acquire them in the first place.
Well you can how poptel did it was sell some equity in the company.
coop structures can be complex Normally the coop owns the company that employs the members - as long as the members have 50%+1 of the votes they control the company.
Try working with ICANT without capital ;-) effectively the coop did a deal and sold 40%. It in the end didn't work out the first dot com crash an the lack of forward thinking by the coop movement did for us.
You right poptel was an ISP and I think was a small ADMD. I think originally it was in the business of doing software for foundry's
Still at on point all of the members where worth over 1 Mil on paper :-)
It sounds like an attractive concept... but I'm not sure about its long term viability.
The larger a business grows, the more people become involved in the cooperative, and the harder it becomes to gain consensus or propose more risky but sometimes critical actions for the business.
Layoffs are most probably off the table, while things like employee benefits will probably become disproportionately popular and hard to cut. Furthermore the whole "own your company" appeal seems to become less of a big deal as more and more join the coop, and you get less of a say over how the company should be run. But conversely it is usually on a large scale that the financial benefits of minority shares ownership can yield decent returns. Seems a bit conflicting.
I've heard some groceries in US converted to co-op model though. Wonder how they are doing now.
I am from Spain and used to work with cooperatives like Mondragon group in the North and lots of small agricultural coops in the south.
It is not paradise, but somewhat it works. It is not for everyone, everybody is the same and you have consensus lock when taking decisions.
About unions relationship, well for me they have nothing to do. Everything changes when the workers own a part of the company, nothing to do with Big Unions on Big Companies or Government.
My favorite employee owned business is King Arthur flour. I think it's a wonderful thing when a company is owned by people who are part of the day-to-day meat and potatoes of the business.
Coops & employee stakes have worked a lot of places, and should be tried more often – but it's clearly not best for everywhere, all the time, or it'd already be a universal practice.
Chrysler was majority-owned by a UAW retirement trust for a period starting in 2009... until Fiat finished buying out that stake earlier this year. Was 2009-2014 an "everybody wins" period for Chrysler?
I'm sure these companies are more humanely managed and have happier employees but I doubt they're economically efficient. If they were they'd outcompete non employees
owned companies. We even have an entire sector of employee owned companies where they obviously do win consistently, professional services firms like accountancy (PWC, KPMG, Deloitte, Ernst & Young) or management consulting (McKinsey, Bain, BCG). All the MC firms reserve equity for partners after an up or out process which takes about seven years. Most people never get equity. Accounting firms don't have up or out but there are still partners and non-partners.
What's particularly damning about the efficiency/survival value of employee ownership is that all the (then) Big 5 accounting firms threw off IT project management/procurement firms, all of which were/are normal companies. Accenture os all that's left of Arthur Andersen. It doesn't have partners except the way Goldman Sachs has "partners".
If you want more humanely managed companies mandate it for everyone because employee owned companies lose, consistently.
You're presuming a perfect market where the most economically efficient organisation will win. There is no guarantee that our current economy is like that.
ADBOC. This is like the efficient market hypothesis, the strong version is wrong and the weak version is so weak as to be almost tautological. In a perfect market the most economically efficient organisation would win, end of story. What we've got isn't that but it's an approximation thereof. The closer it gets to fulfilling all the conditions the more likely it is that the outcome is economically efficient.
The only economy I'm aware of that had a lot of employee owned cooperatives was Yugoslavia. It worked better than Soviet bloc communism as far as resource allocation and living standards went but not as well as capitalism.
Co-ops don't expand as much as privately or publicly held firms because they maximise something approximating profit per worker whereas normal firms maximise straight profits. I think I picked up that argument from Paul Krugman. It's been a long time since I read the argument so I may be misremembering but he used Harvard and the UC systems as examples. Harvard doesn't expand its student body, this maximises faculty utility, the UC system does, this maximises student utility. The article even mentions that worker's co-ops have higher profitability than normal firms.
Co-ops don't expand as much as privately or publicly held firms because they maximise something approximating profit per worker whereas normal firms maximise straight profits. I think I picked up that argument from Paul Krugman.
r- and K-selection. Companies like Google and Microsoft, which grew large at the cost of culture, are r-selective. Valve and Github, which grow more slowly while maintaining open allocation and cultural health, are K-selective.
It seems impossible, in the long run, to be K-selective if you take venture capital. You're now controlled by people with the attention spans of five-year-olds.
Not the comment author and I wouldn't commit to the idea that co-ops are more efficient, but here's a stab:
1) Coops have different governance structures than traditional businesses. Diffused knowledge, institutional practices, and the legal system itself are oriented toward the dominant paradigm. Given a choice between a traditional business and a co-op that is otherwise equally well-situated, if I'm a profit maximizer I'm going to loan capital to the traditional business, since it's more of a known quantity. I've got no idea of the unknown unknowns that go along with getting involved with a co-op.
2) This goes along with the idea that co-ops are inefficient instead of trying to argue they aren't, but the incentives of a co-op are different than a traditional business. A traditional business will attempt to maximize total profit per unit capital (I think); a co-op will try to maximize something closer to total profit per unit labor. The former will succeed in a capital-poor world, while the latter is better for a labor-poor world.
In the UK, employee or customer owned businesses are a mixed bag. We have some very good ones (John Lewis, Nationwide) and some bad ones (the Co-op group).
I think whether or not a business is employee owned is less important for success than it having a good and capable management team.
The coop got into trouble because they where lent on by the government to solve some of the structural problems in the banking industry and at the same time had a botched transfer of undertaking from a building society.
Not that combined group didn't have some structural issues and some less than stellar board members - needed some stroppy buggers like me on there.
Care to elaborate?
Unions function differently in different EU states: In the UK they were pretty much killed, in France they act as antagonists to the business side, in Germany they act more collaboratively with the business side.
In the latter case in Germany every large enough commpany has to have a democratically elected workers council, that gets a seat on the board.
While not the same as co-ownership, this democratic co-determination is arguably one of the more important reasons why labor relations in Germany are much better than in other European countries.
Germany didn't need a minimum wage because of the strong unions. Now that they lost much power minimum wage is needed.
This is also why there's no big push for minimum wage for instance in Denmark or Sweden, because the unions still work there.
Part of a larger Eco-system which also includes many middle sized (family) firms and a banking culture focused on supporting such firms trough thick and thin.
But yes, enforcing the voice of the worker in the Board is likely to be a major win all round for Anglo-Saxon English companies. One I would happily support.
Note that "union" can mean very different things in different cultures.
I don't think the model that works in Germany (unions having a significant representation on the board) would work with UK/US-style adversarial unions. Volkswagen tried - and their US employees weren't interested (http://www.usatoday.com/story/money/cars/2014/02/14/vw-worke...)
But about 47 percent of American workers participate in profit-sharing arrangements of some sort. Employee stock ownership plans (ESOPs), for instance, involve around 10 million workers
Most of those programs are junk, it's worth noting. That's true, even in the Valley, where 0.05% (vesting over 4 years, with nothing gained if the company decides to cliff you) of a 100-person company is typical for a "mere" engineer.
The term I like is "checkbox equity". It's just offered so the company can say, "we offer stock options" on its website. It means absolute jack shit. Far from making you a partner in the company, it has the opposite effect. It's an excuse not to offer raises and to demand unreasonable sacrifice. It's a mediocre equity program that exists just to check off the box. To that I say: fuck you, pay me.
I would rather not have the equity (which is almost always insultingly low) and just get a fair wage. Let's just be honest here. I'm going to be a mercenary unless you give me a legitimate reason not to be, and 0.03% of a 200-person company is 0.06 of a person's labor, which is just not enough to make me give a shit about anything other than my own career. So I won't, and that should be socially acceptable.
The purpose of these Valley startups' equity programs is to encourage a tyranny of the masses, and make the honest mercenary attitude socially unacceptable (allowing the employees to be plundered by the dishonest mercenaries at the top).
And thanks to them for that. Because the moment someone uses a political label like that the whole discussion usually goes haywire. I wish people would stop labeling everything by random political ideologies.
It makes exactly as much sense as saying: "classes are bad because they are Javish, and we all know how Java is bad because it asks you to provide megabytes of XML just to print 'Hello World'". This is what I hear when someone says "hey, this is marxist/communist/liberal/whatever speech".
Seriously, labeling like that is a cognitive equivalent of drunk driving - probably fun, but sheer idiocy.
It isn't Marxism. One of the most well-known advocates of employee-owned companies, Noam Chomsky, is anarchist, not Marxist. Marxism is primarily about controlling political power to achieve economic goals. What the article talks about works without (much) political power.
What's your argument/evidence for that claim? Chomsky has self explicitly said numerous times that he's not a Marxist and prominent Marxists don't consider him to be one of them...
Wrong. Check Wikipedia or any of his writings. He is clearly not Marxist. Anarchism is fundamentally incompatible with Marxism, because it lies on the other side of the vertical axis in the political compass (politicalcompass.org). 'He later described his discovery of anarchism as a "lucky accident", allowing him to become critical of other radical left-wing ideologies, namely Marxism-Leninism.'
Marxism is just a way of viewing the world but public ownership of the means of production is exactly what socialism is. Workers owning everything was the very founding idea. There are other marxism-inspired ideologies, like syndicalism, which are even closer to what coops try to establish within the market economy.
