Why I’m Against Unions at Businesses I Create
blog.joericketts.com
blog.joericketts.com
>But, I’m neither a historian nor an economist. I’m an entrepreneur, so I’m not going to wax on about the historical imperative of unions and why they do or don’t serve a role in our modern economy. I will, however, tell you what I know, and I know about starting and growing businesses.
I don't think we need much explanation on why an entrepreneur would prefer to dictate terms rather than negotiate with an organized workforce.
>I believe unions promote a corrosive us-against-them dynamic that destroys the esprit de corps businesses need to succeed.
Might you be mistaking the thrill of total obesiance for esprit de corps? You wouldn't be the first to...
>That’s why the type of company that interests me is one where ownership and the employees are truly in it together, without interference from a third-party union that has its own agenda and priorities.
Um, that nefarious third party agenda is the organized voice of your employees. Heck, we all appreciate being able to dictate terms, but not all of us are intellectually dishonest enough to come up with spin like that.
>It is my observation that unions exert efforts that tend to destroy the Free Enterprise system.
You haven't mentioned a single observation, just breathless, self-serving opinion. Were the shoe on the other foot, I'd expect to see you writing for Pravda.
*edit: I'm beside myself with that Pravda comment. JR posted this literally today: "Attacks on President Trump Show the Political Class Has Learned Nothing" http://blog.joericketts.com/?p=581
Judging by the predominantly negative comments in this thread, I think that's the case here.
https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble...
The Union is just another hierarchy. That's partly what makes it effective in negotiating with management and capital. It gains its power initially by persuading workers that it represents their interests, but it is easily corrupted over time by people who benefit from institutional positions within the union -- just like every other hierarchy.
> Everyone at a company – owners and employees alike – need to be sitting on the same end of the seesaw
Never mind that the founders or CEO will have 1000X more equity than you, employee (if you have equity at all). You're in it together!
I think this is being paid in stock options. Many people choose to mix stock, options, and cash in compensation.
Why is it that engineering types don't pay the least attention to history...? Why is it that engineering types think that sprinkling crypto on it solves a single meaningful social ill? Hiding the scrip behind "crypto" does nothing. Who's going to take your FacebookForCatsCoin when they could have actual money instead? A random speculator? Meanwhile, who's gonna take dollars?
Jeez.
ICOs are valueless trash in ninety-nine-point-nine-nine percent of all cases. This will only change, maybe-if-you're-lucky, if they are securitized and regulated, at which point it's the new "oh but stock!", and it's still not going to be a sane deal for a worker because the worker has no real way to deal with either counterparty risk of exchanges (meanwhile, dollars involve no such risk) short of paying a vig--you know, like how companies pay poor employees on debit cards with fees, how's that reality sound for everybody?--or safety of exchange rate, because LOL your company has a bad quarter and now you can't pay your rent because FacebookForCatsCoin no longer makes the speculators, the only people who are paying attention to it, sufficiently money-horny.
Sprinkling crypto on company scrip doesn't make it anything other than company scrip. And it's a bad idea for companies, too, because a mere, what, ninety-nine percent of companies have no public stock and would very much like to keep it that way?
Well, it's usually the norm for employees to be paid enough to get food, clothing and shelter. In your norm, this normal might not hold. Perhaps employees would be so upset in this case they'd form a union - or maybe just quit in en mass.
Imagine 100 employees having 100 coins each, and then the company tanks. No thanks..
Okay, I'll bite: why shouldn't the founders and investors have a lot more equity than the employees? If the business goes belly-up, they lose everything they've put into it, while an employee just goes out and finds another job.
Risk and reward need to be related somehow, surely?
At the end of the day people have jobs because they need to eat, the point was not that founders shouldn't have more equity it was that their incentives are not aligned. Lower wages is good for the employer and bad for the employee, it is adversarial and sugar coating it as if it's not is bullshit.
(Not that I think companies can't have good relations with their employees, just at the very least wages are adversarial)
Not if the wages become so low that qualified employees refuse to work there, it isn't. There's nothing more deadly to a business than crappy, unmotivated employees.
Losing “everything they’ve put into it” suggests that the founders will actually lose money if the business fails, where in most cases the business goes bankrupt and the founders only lose whatever seed capital they put into the venture before incorporating as a limited liability venture (specifically to limit their personal liability).
The employees also lose eveything they put into it, which is however many months or years of their life they contributed to the venture.
Do you really not understand the concept of equity?
"suggests that the founders will actually lose money if the business fails, where in most cases the business goes bankrupt and the founders only lose whatever seed capital"
Oh, they only lose their "seed capital" (plus all the --usually unpaid -- work they've put into starting and growing the business).
That makes it okay, then!
"The employees also lose eveything they put into it"
The employees got paid every week, dude.
It's a tempting gamble - hoping for a 100x or 1000x payoff on that bet, especially since most people who take that bet believe they can "make the difference" - but if they're unhappy with the prospect of "losing it all", they perhaps should "just find another job".
Yes, they did. And they chose to forgo a regular paycheck.
Why don't the employees take advantage of this "tempting gamble", then? According to you, there's really no downside at all, right?
(Also in consequence ruining lives of others.)
The gamble is not free at all.
I have twice, neither time particularly successfully - in fact one time quite spectacularly unsuccessfully if measured purely by how much money I put in my bank account for that 18 months of full time work. And I'm seriously considering an offer to ride that ride again right now...
The downside is the consequences of failure usually include losing money - either real invested money, or in opportunity cost of the gap between market-rate-salary and what you're able to pay yourself for the time you spend working on your own business. This is often not a problem for early twenties tech dudes, it's not a realistic gamble for someone with a family or other responsibilities for which foregoing a reliable regular income isn't really a sensible/ethical option.
- The founders had the original idea / area to work in (usually not very well-defined yet).
- The founders raised capital. Yes, this takes some number of unpaid weeks or months, toiling deep in the mines of Palo Alto coffee shops.
And yes, they do a bit more than that, but that's the essence. Then you hire your first few people and off you go.
Founders believe that effort is worth 10-100X more than early employees' contribution, and at least 1000X more than the later ones. Employees, often unaware of how lopsided their equity is, go into it believing they're "in it together!" with the founders.
Maybe the "early employees" should become founders, then. There's nothing to it, right? Just hang around some coffee shops!
The right answer is for employees to start calling bullshit on the standard Silicon Valley equity agreement, where Emp#1 signs up for 1% (imagine having 1% of Google!!), Emp#2 takes .6%, Emp #10 goes with .05%, and so on... often unaware the founders hold 60%+ between the 2-3 of them.
It's appropriate for there to be a falloff in equity, but it's just too lopsided today. Emp#1 should ask how much the minority founder holds, and ask for (say) 80% of that. You spent 6 weeks without pay? Great, you get more reward. But not 50X more than #1. After all, the payoff is only if the company is successful, many years later... when those unpaid weeks are minor relative to the collective sacrifices of the company in whole.
Because it's an excellent argument.
"often unaware the founders hold 60%+ between the 2-3 of them."
Everyone who goes to work for a company knows that it's owned by someone else, dude. The vast majority of employees in this world get no equity at all. Ever.
the collective sacrifices of the company in whole.
As an employee, you are being offered a certain salary in exchange for performing a certain duty. You decide whether it's a good deal or not. There's no "sacrifice" involved.
It's a falsehood to think that every company is a profit machine, many employers are small business so 1000x more equity is not really much.
Haven't you heard? Founders are not free to just walk away! The horror.
</s>
Ok, but remember you take the good with the bad. Statistically more business fail than survive, so if you want to take that risk then why not. But even easier you could start your own business and share the utopian form of employment with your staff.
I have also seen union abuse, I was a member of the Culinary Union in Las Vegas as a busboy (everyone had to be) and they did not make it easy on the restaurateurs.
The bottom line seemed to be that without some oversight ability somewhere, the more powerful group (unions or management) seems to have a tendency to abuse the other group.
EDIT: I was reminded by an old friend that it was the Culinary union not the Catering union. Corrected.
But I can guarantee you, if the typical middle manager told his group of teamsters or UAW members that not only were they going to be fired, but if they wanted their severance, they'd train their own replacements - a bunch of 20 somethings from <low wage S. Asian country> on a work visa - the manager would probably end up missing.
It's interesting just how well the elites have trained us US tech workers to be good global, corporate soldiers.
Being anti-union doesn't mean favoring slave labor or breaking laws. Many rights of workers are protected by legislation (depending where in the world you live), and unionism doesn't mean higher wages.
That legislation exists because of unions
How do you think those rights found their way in to the legislation, and remain there?
Look I not blind to the history, and protectionisms which came about from unionism. But that is a common retort, but also a bit of a straw man argument.
I wasn't aware I was making an argument.
Ok that makes sense now.
"Many rights of workers are protected by legislation" - sure but employees are rarely able take the case to court without union backing.
In several countries where I have lived you don't need a court for industrial conflicts, there are arbitrators, mediators, and small courts which deal with such items.
For those of us whom are not American, there is a similar day strangely called Labour Day, which is celebrated world wide for similar reasons, Small world hey :)
But in context what the unions did was important, it doesn't mean that they are needed, relevant, or beneficial in current day. We celebrate Xmas, but that doesn't mean that we have a guy wearing a Santa (non-christian) uniform everyday.
But everyday we enjoy things like child labor laws, paid time off, safe working conditions, limits on shift-lengths, overtime pay, maternity/paternity leave, and myriad others.
> "I believe unions promote a corrosive us-against-them dynamic"
Unions are a blunt instrument people feel forced to use to correct a "corrosive us-against-them" culture. Unfortunately unions create as many problems as they solve, but at least they won't have to worry about putting food on the table, everything else is tolerable.
And watch as investors and the rest of the financial community trash your company for not putting profits first.
1 http://www.latimes.com/business/la-fi-american-airlines-rais...
2 https://www.cnbc.com/2017/10/18/chipotle-downgraded-employee...
There, I fixed that for you.
Yeah inequality is worse in 2017 than it was in 1917.
http://peakwatch.typepad.com/.a/6a00d83452403c69e20120a57377...
I guess a third way might be to find a bunch of employees who don't know any better, or enjoy being taken advantage of...
If you are interested in learning more about unions, I recommend reading Confessions of a Union Buster, by Marty Levy. Any other book recommendation about the topic?
Go to his bio:
> After graduating Creighton University with a B.A. in economics in 1968
He on at least some level an economist.
Because layoffs also promote a corrosive us-against-them dynamic that destroys the esprit de corps businesses need to succeed.