Gravity is Serious….

Remember Gravity? The company that established a “minimum wage” of 70,000 a year, to the hoots and derision of more “serious” business experts?

According to Market Watch,

Gravity Payments, that Seattle credit-card-payments processing company that said all its employees would earn at least $70,000 in three years, is defying the doomsayers.

Revenue is growing at twice the rate it was before Chief Executive Dan Price made his announcement this spring, according to a report on Inc.com. Profits have doubled. Customer retention is up, despite some who left because they disagreed with the decision or feared service would suffer. (Price said he’d make up the extra cost by cutting his own $1.1 million pay.)

The company is doing so well that it has hired an extra ten people to handle the additional business. The only person who isn’t doing so well, evidently, is Price himself–at least, not in the short term.

Price, meanwhile, has invested another $3 million in the company after selling all his stocks, emptying his retirement accounts and taking out mortgages on two homes, according to Inc. (He told the New York Times three months ago that he was “renting out my house right now to try to make ends meet.)

How this will all play out over the long term is anyone’s guess, of course. Which approach will prove to be better business practice over the long haul–Price’s insistence on paying all employees a wage that allows them to live well, or the Walmart /McDonald’s belief that paying below-subsistence wages (and letting taxpayers make up the difference via food stamps and other social welfare programs) will continue to be best for the bottom line?

I think we already know which approach is more likely to sustain consumer demand and generate economic growth.

 

41 thoughts on “Gravity is Serious….

  1. Another angle is “how loyal will employees be when their pay keeps them in poverty or close to it?”

    Henry Ford figured that out a century ago and today’s corporations’ CEOs are so full of power now that employees know that if they are fired, they may never find another job. Just ask anyone over 40 yrs old how loyal they are.

    Wasn’t there a report this past week about 50+ yr old suicides being the highest ever? It’s all related.

  2. I hope he becomes very wealthy from this plan. When everyone enjoys a decent standard of living we will be kinder to one another.

  3. Sheila, this is shoddy work.

    You’re arguing that $70K should be the going wage rate, saying that McDonald’s needs to follow Gravity’s lead.

    If you haven’t determined the price point for a McDonald’s hamburger with $35/hr. employees, you have no idea if McDonald’s would exist with inflated prices.

    How many people would spend $13.99 for a Big Mac?

  4. Have you ever left the states Gooper? In Europe where they pay a living wage to restaurant employees (of all stripes), it is about 10 bucks for a Big Mac. Not that I would ever eat one because I haven’t been to McDonald’s since 1980. Ick.

  5. i don’t think Sheila is arguing for a particular wage for Walmart or McDonalds employees. She was making the point that the paradigm of keeping employee’s wages low can and should be challenged. This may illustrate the actual impact of higher wages on the business model, which has been assumed by management consultants as simply a business expenses without considering larger social impacts of low wages – food stamps, health care, fewer opportunities for education, especially beyond secondary education – all which fall to the people with no interest in the business to pay.

  6. Bologna! If a company cannot afford to pay a living wage to its workers, then, taking a page from the Social Darwinist handbook of greed companies themselves follow, its business plan is hopelessly flawed and it SHOULD go out of business. It’s all a part of the “creative destruction” theory that Romney so loves (as a vulture capitalist who feeds off the bones of troubled corporations that often even a trip through Chapter 11 bankruptcy cannot cure). Wage inequality is destroying demand in the American market place and along with other travesties visited upon America by our corporate culture (notably big bank survivors via “socialistic” bailouts and handouts) is moving us along to Third World status with their myopic greed and propaganda. To those who disagree with this thumbnail analysis, read Piketty (who had a PHD and was lecturing at an Ivy League school at age 22) or Nobel-Prize winning Joseph E. Stiglitz, both brilliant economists. As it works out, we ordinary Americans are trying to save capitalism as a system – from the capitalists! Let’s put down the ideological handbook and adopt a pragmatic approach in seeking answers to our economic problems (including but not limited to wage inequality), answers that are data-driven and divorced from propaganda rituals of the greedy and their campaign contributions to congressional toadies. No? O.K., then welcome to the new banana republic, the USA, home of the barrios and Slumvilles from sea to shining sea. Have fun.

  7. “If a company cannot afford to pay a living wage to its workers, then…its business plan is hopelessly flawed and it SHOULD go out of business.”

    At least you’ve honestly stated your perspective, Jerry.

    You’re saying either pay $70K for help, for which the real cost of employment is over $100K, factoring in government obligations, or do all the work yourself.

  8. Years ago when I was in management one of my responsibilities was hiring new employees and retaining the ones we wanted to keep. We were often told retention of good employees was far cheaper than hiring new ones as there was a learning curve and a cost for that. The primary means of rewarding people was wages, in conjunction with that was a pleasant place to work.

    The fast food industry and other retail outlets has found a way to keep their burgers, tacos, chicken, etc., cheap. Just pay your employees minimum wage, and offer no benefits. I think the servers still make $2.13 an hour. Yeah I know they get tips, but lets face it if the Servers were getting rich, they would offer a College Course on proper serving techniques. If they qualify for food stamps and/or Medicare these companies could care less they have spread their cost of doing business among society.

  9. A business plan begins with products and customers and labor and raw materials including energy and means of production. It also envisions both the present and the future.

    If the products (and/or services) cannot be envisioned to create adequate demand from customers to pay for their creation it remains a plan; it never becomes reality.

    If instead it portrays a “happy” market with sufficient customers and satisfied workers it then considers how to obtain the means of production. The nice thing about software is the means of production are modest. Other products like cars have very expensive means. Typically the means are financed by taking on debt which adds another cost to the equation.

    Once a business is launched its success is built on ever satisfied customers even though they have choices; competition from other companies in the market.

    Everybody wins. It’s a brautiful thing – but only if those directing the effort are liberal in outlook.

    That’s what keeps everybody happy – future growth and prosperity for everyone. Investment in growth for everyone.

    But if those directing the effort are conservative everyone suffers. Customers aren’t rewarded with ever better products. Workers aren’t rewarded with prosperity. Suppliers can’t expect continued growth in their businesses.

    It’s a failure attributable to the fundamental difference between liberals and conservatives. They both want the same thing, liberals for everyone.

    In the real world those conservative directed businesses should never have been launched. They are too marginal to be sustainable. They are like poverty stricken people in that they have so many strikes against them their survival depends on welfare. They have to impoverish others to sustain themselves.

    The key to liberal success in business and government and religion is innovation. The persistent pursuit of better for everyone.

  10. Yesterday Gropper posited that all real good comes from conservatives although he apparently couldn’t think of any real example. I couldn’t either.

  11. I don’t expect other businesses to follow suit regarding such high salaries…especially at the cost of the owner’s possible personal losses. Not when the Supreme Court, the highest court in the land, upholds big business such as Walmart in a class action suit regarding their sexist promotion and salary practices. Evidence of discrimination on both counts was ignored by SCOTUS, the decision written by Scalia.

    There is also the class action suit filed against AT&T; a promotion had promised a free phone to those who signed up for their service but were then charged a $30.22 sales tax on that free phone. SCOTUS sided with AT&T on that case, too.

    Employees and customers of big business stand little, if any, chance in winning even with proof of violation of their rights as long as we have the current SCOTUS sitting in judgement.

    Is there a way competitors of Gravity can file suit against them for some form of violation of their rights (depriving them of their livelihood?) to continue discriminatory employee and wage practices? Would anyone be surprised if a case based on this issue appears; protected directly or indirectly by Citizens United (in their small print section) which allows big business to buy Congress and SCOTUS?

    The Nation magazine published a special issue, The Case Against the Roberts Court, dated October 12, 2015. An entire magazine filled with concise, well written articles regarding the violation of our civil rights by those who pay for their high court decisions. It isn’t only the decisions rendered on the cases that are accepted by SCOTUS that matter; it the decision on which cases to hear and those to refuse that must be considered to get the full picture of what is being done to the American public and the power behind the throne of a few old men.

    Dan Price has chosen to cut his own salary and put himself personally deep in debt to do what he believes is right and fair. Can he, will he, be “rewarded” for his humanitarian actions by being forced out of business and lose all if other credit card processing companies who are losing business find a way to file suit? My own experience with Synchrony Bank (formerly GE Capital Retail Bank) who held my Walmart and Pep Boys credit cards opened my eyes to the power of these businesses. When I was attacked and robbed, my three credit cards were immediately cancelled by my daughter-in-law and new accounts requested. PNC Bank Fraud Division acted immediately, notified me within 5-6 days about the charges incurred on my VISA by the thieves. Synchrony, on the other hand, transferred their 8 uses of my Walmart card to my new account. After receiving copies of court and police documents regarding the cancellation of my cards, they reissued my monthly Walmart statement with the full balance of the thieves charges but $0.00 payment due. They then reported my non-payment of this debt to three credit reporting bureaus. They wield a lot of power; as does Gravity, so they will be closely monitored and brought to ruin by big business if at all possible.

    No good deed goes unpunished!

  12. I am not saying pay 70 grand to everyone, as one writer has suggested. I am saying pay a living wage, which is less than that in most industries. I am tired of corporations’ taking the marginal productivity of their workforces and stuffing it into their bottom lines (which is great for the Dow but toxic to market demand). There needs to be fair sharing of both the economy’s income and wealth, like from WW II through 1974 (some say later) when the middle class soared and aggregate demand went through the roof, thus creating ancillary employment and innovation leading to new products and even further expansion of the economy. Don’t say fair pay can’t be done; it has been done in the past after WW II but abandoned circa the middle 1970s. The corporate culture is ultimately cutting its own economic throat with such poor-mouthing of its workforce the result of which is tepid demand for the goods and services the corporations themselves provide, as noted by Piketty, who also noted that unless such tactics are “attended to,” the system could itself implode. Our task is to save capitalism from the capitalists, whose short-term greed contains the seeds of their own destruction, and I fear what their replaced “system” could look like in the chaotic aftermath of such implosion. Truth be told, we have no choice – we just think we have due to propaganda from the greedy. Market economies can only stand so much political tinkering and corporate abuse before the whole shebang collapses. Then what? Ideology doesn’t buy goods and services in a market economy; wage and other forms of compensation do. When are we going to start thinking clearly through the maze of incessant propaganda fed to us in understanding this simple truism and fashion political policies and corporate business plans in consonance with economic reality? Ever? More is involved than who gets how much – the current system is undermining democracy, our most valuable asset bought by the blood of patriots. Is that up for sale, too?

  13. We as customers and workers can well be considered as nearly powerless – in the absence of democratic government. That’s the place small government oligarchy would take us. It’s certainly easy to see why. That would make us ripe for the pluckin’.

    Because capitalism is an everyone for themselves blood sport, those with inordinate power see it as the culmination of their entitlement. At least many of them do.

    Balance of power, checks and balances, the scales of justice, whatever one calls it, is the wellspring of progress. That’s what we the people have to maintain if we are to progress; despite all of the wailing from the whiney elite begging for more power. Giving it to them would do everybody in.

  14. It seems well apparent to me that criminals and businesses and our global threats have earned the size of our present government and law books and enforcement. It virtually all stems from reaction to those who have challenged us.

    We the people have to continue winning the arms race.

  15. Jerry;
    How about for a start the FCC or other agency imposes strict rules on advertising. They have to be accurate; they have to be truthful. Compliance can’t be achieved through a voice-over stating that the product is perfect, with the disclaimer in 4 font at the bottom of the screen for 15 seconds. We have cycled back to the snake oil salesmen of old. There seem to be an increasing number of purveyors who sell without conscience to gullible tv viewers without fear of prosecution. I agree that current practices are undermining the purchasing ability of the very people corporations need most.

    We used to manufacture things that were useful. Imported good were relatively rare. The things we manufactured had a purpose other than ridding us of pimples or belly fat. We knew a scam when we saw one – advertisers couldn’t sneak the disclaimer into the advertisement. The commercials aired on television took up a few minutes of programming; now the programming and advertising run times are approaching equal. Corporate interests have the finest government regulations that their money can buy.

    We have come so far only to wind up at caveat emptor again.

  16. Daleb, thank you for showing the spread of the snake oil salesman for all to see. The abuses you cite did not always air on TV or the printed page. There once was a time when those who controlled the media actually held the best interests of the public above the bottom line. As with so much else in our society greed has replaced honesty.

  17. daleb,

    Our big problems started back in the 70’s with the FCC. For a couple of years, I was General Counsel for the McLendon chain of radio stations around the U.S., Mexico, and off shore. One of my duties was at the end of the fiscal year to prepare a report to the FCC on our compliance with what was called: “The Fairness Doctrine.”

    Under “The Fairness Doctrine” in the early 70’s, you had to allow equal time over the air to the other side on any political commentary. As I remember, big fines were to be assessed for non-compliance.

    Eliminating the “Fairness Doctrine” wasn’t the first step, but a very important one, moving all of us toward the edge of the political cliff we’re now approaching.

  18. Marv; thank you for bringing that up, I was just thinking about it yesterday. Wondering whatever happened to the “equal time” on the airwaves for all politicians in this country. The 1st Amendment doesn’t require truth or anything close to it so we are shot down on that issue. Being deaf, I have had my own issues with the FCC, local news in Indianapolis has crappy closed captioning. So bad some days that it is impossible to know what they are reporting. News today is vitally important but is verging on being another part of the entertainment business…especially regarding sports reporting here.

    But; back to the Gravity issue, the companies who are the caretakers of our credit card payment processing must be well trained and probably bonded employees. Identity theft can and does ruin lives; if this process is not properly handled our credit rating, the stability of our lives, could be in jeopardy. Loss of home, vehicles, inability to purchase daily needs and medical care can now be paid for with our credit cards. Dan Price understands the value of trusted employees and is aware of paying his employees under the old standard of “a worker worthy of his hire.”

  19. Marv,

    what you witnessed on a small scale, from your personal point of view, must be protracted to include nearly every profession we know. Your local plumber was code enforced and regulated out of business. Your electrician and your bricklayer cannot compete with Dial One. Hooks Drugs was forced to sell when Walgreens came to town. Our ills are all pervasive and systematic. It is not possible to combat them on the one front of ‘minimum wage at Mickey Dees’. McDonald’s has to be reduced to single outlet franchises which compete with one another. When you see competition among the owners, you will see equality for the workers.

    When ‘Too Big to Fail’ was coined and public coffers were opened to big business, we were on notice that oligarchy had arrived.

  20. We tried the Fairness Doctrine from 1949 through 1987. We tried living without it from 1987 through now. A fair test I would say. Who thinks life without it is preferable? Media moguls? I sure don’t.

    Let’s demand it’s return.

  21. Earl, I believe that the only relevance of who owns the means of media production is the relative ability to influence government. Our government was designed to have that influence be one person one vote in the hiring and firing of those who manage the making and enforcement of the law.

    Recently the Supreme Court added corporations and money to dilute the influence of each of us.

    Just another case of our need to undo what’s been taken away from us.

  22. One other thing. “Too big to fail” is not a policy but the recognition of the consequences of limited competition in some essential markets. In that situation business failure hurts us all so much that corporate welfare is cheaper.

  23. Earl.

    “It won’t return until the local stations are independent.”

    Gordon McLendon’s chain was less than 10 radio stations. That was about as big as got back in the 60’s and 70’s. McLendon, known as the “old Scotsman” from his broadcasting days with his Liberty Broadcasting System which re-created Major League Baseball games was extremely independent as well as extremely conservative to say the least.

    His offshore station was later found out to be a cover for the C.I.A.. McLendon was a Co-founder of the C.I.A. Alumni Society.

  24. Pete,

    it appears that way because people like Bernanke described it that way and we believed it. That’s how we roll. We buy whatever is for sale by those who ‘know better’.

    Let’s take a reality check when it comes to economics: This nation was founded and flourished on one economy; slavery. Slavery was the economy. It was America . This peculiar institution was destroyed in one day and the nation survived.

    We survived Astor, Rockefeller and Carnegie and if every Walmart should close tomorrow we would survive. Improved.

    We can make it without the 1%. Trust me.

  25. There were three Indiana billionaires listed in Forbes: The first in health care products which is heavily subsidized by federal, state and local governments. The second a purveyor of retail sites which deal mostly in selling things you don’t need. The third by in cashing in on our maniacal mania for mental diversion.

    The third is rapidly gaining on the other two which is strong indication that we are getting dumber. Do you know that the NFL, i.e. Irsay, is paid for every item with a NFL logo? Just like IU or Duke, everyone gets paid when you see a horseshoe or a blue star on anything. Nearly all of this junk and cheap jerseys are made in China. We will make sports associated enterprises the major force in Indianapolis. And it will not work for Indianapolis. You will remember that during the super bowl and the Pan Am games, many Broad Ripple retailers nearly went out of business.. There’s trickle down for ya.

    Maybe you can figure this out.

  26. Earl, the following is a little academic but interesting and relevant.

    “In time, I predict the invisible hand will come to be seen as a special case of Darwin’s more general theory of competition, which was fundamentally different. Darwin trained his sights on competition not among merchants but among individual members of plant and animal species. But the two domains, he realized, share deep similarities. His observations revealed a systemic flaw in the dynamics of competition: The interests of individual animals were often profoundly in conflict with the broader interests of their own species or larger subgroups within it. The failures he identified resulted not from too little competition but from the very logic of the competitive process itself. Many of the most cherished beliefs held by libertarians, while perfectly plausible within Smith’s framework, don’t survive in Darwin’s.”

    “Darwin’s central premise was that natural selection favored variants of traits and behaviors insofar as they enhanced the reproductive fitness of the individual animals that bore them. If a trait made the individual better able to survive and reproduce, it would proliferate. Otherwise, it would eventually vanish. In many cases, Darwin recognized, the same variant that served the individual’s interest would also serve the interests of larger groups within its species. But he also saw that many traits promoted individual interest to the detriment of larger groups.
    As an example in the former category, consider the speed of the gazelle. Mature members of this species can sustain speeds of thirty miles per hour for extended periods and can reach sixty in short bursts. How did they become so fast? It might seem that being faster would be unambiguously better from an evolutionary point of view, but that can’t be true or else all species would be fast. Tapeworms are slow. In their particular environmental niche, being fast never mattered. Gazelles are fast because they evolved in an environment in which being faster than others was often decisive for survival. The gazelle’s predators, which include the cheetah, are also very fast, and there are few places to take shelter on the terrain where both groups evolved. Slower genetic variants among the modern gazelle’s ancestors were more likely to be caught and eaten.”

    “Since the selection pressure that forged speed in gazelles was the threat of being caught by predators from other species, greater speed posed no conflict between the interests of individual gazelles and the interests of gazelles as a species. Up to some point, being faster conferred advantages for both individual and species. With respect to this particular trait, then, Darwin’s natural selection narrative closely parallels Smith’s invisible hand narrative about the proliferation of cost-saving innovations and attractive new product designs.”

    From. http://www.the-american-interest.com/2011/09/28/charles-darwin-economist/

    My interpretation? Devious competition may work in the short term for individuals but we always catch on and over the long term deny it. So there is an arms race going on. The evidence of our adaptation rather than extinction is our long term progress not our short term struggles.

    Progress prevails but painfully slowly. Like evolution and natural selection.

  27. Pete;

    I fear we deal in factors beyond our abilities to comprehend. How can we relate the great speed of the gazelle for survival with the excessive lethality of the dart frog? Why is it that most species seem to develop defenses against one another rather than a predator? How does great speed protect against the river crocodile? I have seen powerful felines totally frustrated by the shell of a tortoise or the spines of a porcupine. You see how complicated this thing called Darwinism can be? Like the weather, we can witness it as it develops. But no one can tell you how Christmas will be. We just think we can.

  28. Don’t get me wrong. I don’t dispute Darwin. I only know it is like unto the butterfly effect: far too complicated for our puny minds to encompass. The Invisible hand? Hogwash! Rockefeller was that hand when he cornered the market on barrels, not oil, lit every kitchen in America and set us up for Walmart.

  29. My only argument Earl is progress. I personally would not trade my time on earth for any other era. That strikes as a trend likely to continue over the long term. What happens over the short term will always be problematic. That’s human nature. We’re a whiney bunch.

  30. daleb,

    WAKY was not a station when I was there. But it sounds like one of his. McLendon was great at using catchy call letters like KNUS, an all news station in Chicago, or KABL in Oakland where he could beam into the San Francisco market. He crossed the border into Mexico with XTRA.

    Gordon McLendon has always been a prime suspect in JFK’s assassination. According to the Warren Report, when Jack Ruby was first arrested, the first person he asked to speak to was Gordon McLendon. According to at least one witness, Ruby had been with McLendon a day or so before he assassinated Lee Harvey Oswald.

    Knowing Gordon like I did, I believe he could have been covering his tracks as he must have been involved in either the full page “Wanted Poster”on JFK in the Dallas Morning News the day of the assassination or the very similar “Wanted Poster” on Adlai Stevenson our Ambassador to the U.N. when he visited Dallas a few months before Kennedy’s fatal trip. If Oswald was alive to testify, I’m sure his defense attorney would have raised the importance of the “Wanted Posters” to Oswald’s state of mind.

    Jack Ruby wanted to be a hero. It would have been very advantageous for Gordon McLendon to have made him one. No one was better at persuasion than McLendon. He was an intelligence officer during W.W. II, mostly in the Pacific Theater.

  31. Earl, @ 4:33 I think you have something… It seems that all of Indiana’s billionaires have received financial assistance from all the different levels of government.

  32. Marv,

    I was very interested in JFK’s murder. There is another angle: look into the genesis of the Remington .221 round and the XP 100 Fireball pistol. Draw your own conclusions.

  33. Ron;

    history shows that there is no other path to riches. The first barons, you will remember, were the railroad tycoons. The US govt awarded land on each side of the tracks for some 6 to 40 miles..

    Right through Salt Lake, Ogden, Sacramento, Omaha, Winnemucca?

    Now when you are awarded a swath of land like that for the breath of a nation, how can you claim some extraordinary ability when it comes to getting rich?

  34. Everyone here should investigate the history of Cyrus McCormick and the invention of the reaper which revolutionized farming and enabled pioneering into the plain states, what is now the breadbasket of America. Associated with all of this is a slave named Jo Anderson.

    Look into it and learn.

  35. What happened to the issue of Dan Price going into debt to raise salaries of his employees at Gravity?

    “Remember Gravity? The company that established a “minimum wage” of 70,000 a year, to the hoots and derision of more “serious” business experts?”

    This was our starting point this morning and we have somehow reached the invention of the reaper which revolutionized farming and a slave name Jo Anderson, going by way of the assassination of JFK and the railroad land give-away. Y’all lost me way back there somewhere. I’m still worried about Dan Price and his gamble to increase his employee’s wages…and the number of his employees to keep up with the increased workload. Hope we hear more about him and his efforts to raise wages for his employees and the consciousness of other business owners.

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