The Good Capitalist: Part II – A Modern Update
[This blog continues the story begun in the previous post. I know, the “Part II” kinda makes that obvious, but, you know, thought I’d mention just in case. If you haven’t already, please read Part I otherwise this Part II won’t make nearly as much sense regarding the right moral conviction leading to the right business decision.]
Dan Price is the CEO of Gravity Payments, a financial services company located in Seattle, Washington, that he co-founded at the age of 20 with a brother. Dan has long been a hip entrepreneur with shoulder-length hair and Brad Pitt features who looks every bit the west coast tech success story that he is. Rooted in his strong Christian upbringing, Dan knew it was his responsibility to treat his employees well and had prided himself in doing so, or so he thought.
Late in 2011, six years into growing Gravity, Dan was 27 and pulling in a steady annual salary of a little over a million dollars. One afternoon Dan spotted Jason Haley on a smoking break outside the office. Jason was a Gravity employee, a 32-year-old phone tech earning about $35,000/year. Dan saw Jason was in a foul mood and as Dan approached he asked Jason, “Seems like somethings bothering you, what’s on your mind?” That’s when the truth spewed out. Jason bared his soul, if not a national sin.
“You’re ripping me off,” he responded. Dan was taken aback. Jason is shy and not prone to outbursts. “Your pay is based on market rates,” Dan said. “If you have different data, please let me know. I have no intention of ripping you off.” “The data doesn’t matter,” Jason responded: “I know your intentions are bad. You brag about how financially disciplined you are, but that just translates into me not making enough money to lead a decent life.”
What was Dan’s response to being slapped with this truth? As Paul Keegan, who tells this story in an article for Inc. Magazine wrote: Dan walked away shocked and hurt. For three days, he groused about the encounter to family and friends. “I felt horrible,” Dan said. “Like a victim.” . . . Yet the more people tried to cheer him up about his wage policy, the worse Dan felt. Finally, he recognized why: Jason was right—not only about being underpaid, but also about Dan’s intentions. Dan’s vision and version of fiscal responsibility, particularly after Gravity was nearly wiped out by the Great Recession, meant keeping a lid on wages, even after the economy recovered. Dan reasoned that low wages would help the company survive in the event of another downturn. He’s quoted as confessing, “I was so scarred by the recession that I was proactively, and proudly, hurting my staff.”
Dan did a lot of soul searching after his encounter with Jason. He also did a fair amount of justifying, dithering, and vacillating, before turning to number crunching and more soul searching. He eventually moved on to gathering courage and pulling the trigger.
In April of 2015 Dan launched a media frenzy and exploded onto the national stage when he announced a $70,000 minimum annual wage for all 120 employees of Gravity. Moreover, in order to fund the wage increase without layoffs of employees or price increases to customers, Dan slashed his own annual salary of $1.1M to $70,000.
Photo Credit: Inc. Magazine on Gravity Payments
As of today, almost 10 years and a world-wide crippling pandemic after Jason opened Dan’s eyes, Gravity has opened a second location in Dan’s native Idaho, a third location in Hawaii, and is successful by every typical business metric. Those metrics include year-over-year revenue growth and profits, customer satisfaction and retention, and employee satisfaction and retention. Gravity is also successful as measured by non-traditional but significantly meaningful employee-centric metrics. Those include employee happiness, engagement, increased home ownership, decreased commute time, increased 401(k) contributions, increased family formation and stability, and the fact that the employees got together and bought Dan a new Tesla car as a thank you gift.
Dan’s lesson and application of generosity has come with costs. A handful of executive-level employees quit almost immediately because they felt the rank and file shouldn’t be paid as much as them, and his co-founder brother sued him. The critics, of course, attacked immediately and are expected to continue. But overwhelming the critics are the fans and supporters, who see that capitalism done right isn’t a slur and God actually cares about how we do business.
Aaron Hedges and I tell the story of Dan Price in our recently published book Better Capitalism, to contrast the difference between what we call plantation system economics and partnership economics. “Plantation” in our usage refers to a winner-take-all economics that exploits others for self-advantage. “Partnership” concerns an economic practice of mutuality that contributes to the common good while attending to one’s own interest.
Plantation system economics was what Dan was practicing, like so many American businesspeople have been taught to do. After his confrontation with Jason and the truth of what Dan was doing, he started his transformation toward Partnership Economics. A lesson I learned from the Part 1 parable is that jealousy is an element of plantation system economics and generosity is an element of Partnership Economics. I trust it’s a lesson each of you join me in learning today.
Dan Price is an example of a business leader practicing Partnership Economics. You don’t have to be the business owner or boss to practice Partnership Economics; we can all participate in countless little, and big, ways. As of today, Dan leads a successful organization of engaged employees, his annual salary is over seven figures when he wants, and his example of imitating God’s generosity shines a light for all of us working our way toward being better businesspeople and good capitalists. God cares about how we do business.
Indeed, the most difficult part of Dan’s journey appears to have been finding the courage to make the change he knew was necessary. Here at PartnershipEconomics.com our hope is that every businessperson, indeed, every human, finds their courage to fully imitate God’s compassion and generosity, including, and especially, in their business dealings.
What about you? Share your story, question, comment, idea, disagreement -- yes, we welcome disagreement for the sake of mutual benefit! -- with us at blog@PartnershipEconomics.com. We will give a thoughtful response, with prioritized attention to emails from our subscribers. Subscribe here >>
Our Amazon #1 New Release: unleash more with Better Capitalism: Jesus, Adam Smith, Ayn Rand, & MLK Jr. on Moving from Plantation to Partnership Economics.