CEO Dan Price not only delivered on his promise he made in 2015, but he went above and beyond. His original promise was that the minimum wage salary would be $70,000 today it’s at $103,000! Read on…
Four years ago, Dan Price became famous overnight for putting his money where his mouth was.
The then 31-year-old tech entrepreneur made headlines worldwide by announcing he was slashing his own $1.1 million pay package to help fund a minimum “living wage” of $70,000 for all his workers. His millionaire salary might be the going rate for CEOs, he told his staff, but “I make, uh, you know, a crazy, uh, my compensation is really really high.”
“There’s that line in the movie ′Social Network’ where the one character says to (Facebook chief) Mark Zuckerberg that ‘a million dollars isn’t cool anymore, a billion dollars is cool,’” Price explains from the office of his credit card processing company in Seattle. “And I think that’s one of the worst lines in the history of the movies. What’s really cool is trying to do your best.”
At first, the enthusiastic response to Price’s pay idea meant he could do no wrong. A video of Gravity Payments’ mainly young staff whooping at the news went viral. Chat show appearances and a book deal followed.
But then a lawsuit from his brother (and Gravity co-owner) Lucas surfaced, claiming the new poster boy for ethical capitalism had previously paid himself “excessive compensation.” Dan Price was forced to deny what he called “unequivocally false” allegations of domestic violence leveled by his ex-wife. Critics began asking whetherhis $70,000 minimum wage policy was all a publicity stunt, and it seemed the story had come full circle.
Or had it?
Today, Gravity says its average salary is $103,000 and everyone there earns more than Price’s living wage, just as he promised. Gravity claims it has 80 percent more clients now than when the experiment started.
Price, however, says he defines success not by financial results, but by the ways the pay raise changed people’s lives. “Babies being born at the company went from zero to two a year to, since then, about 20. So that was really exciting. Our home purchases ― it’s a very unapproachable market in Seattle ― really significantly increased. I think that’s been great.”
The ripples, meanwhile, are spreading; After hearing Price speak, the CEO of Boston-based Pharmalogics Recruiting raised starting salaries by 33 percent in 2016. Last month, Atlanta-based tech business rented.com credited Price as it unveiled a minimum salary of $50,000.
The living wage wasn’t universally popular at Gravity. Two staffers already earning around $70,000 quit, according to Price, because they felt that handing out rewards on a plate was demotivating or unfair. But he thinks the living wage helped others “stick around longer” instead of moving on to bigger firms. His brother’s lawsuit, meanwhile, failed.
And now Dan Price has a new mission: To stop tech’s oligarchs from gobbling up smaller independent businesses. His timing, amid growing hostility to the insecure gig economy created by digital platforms, is impeccable. But, like with his pay plan, some people are wondering if his move to curb tech titans is just a little too good to be true.
Dan Price was one of six children, homeschooled until he was 12 by evangelical Christian parents in rural Idaho. He conceived Gravity while gigging as a teenage musician in small venues, concluding they were being ripped off by big credit card companies’ payment processing charges and needed a cheaper option. His ideas about pay dovetail closely with that original mission of backing Davids against corporate Goliaths, and with a political belief that wealth is too concentrated at the top.
“If you look at the type of returns investors are expecting, the values we’re placing on companies, it’s really out of whack; 80 percent of all wealth created last year went to the top 1 percent primarily through corporate ownership and assets appreciating, and in the meantime the actual workers’ share of income gains is shrinking every year. If we keep taking away from the basic needs of the vast majority human beings on earth so that we can glorify a very tiny percentage with wealth and power and outsize political influence, it doesn’t take a lot of imagination to remember that really ends very poorly for everyone.”
Price thinks the pressure on CEOs to deliver bumper returns for shareholders, who then approve their excessive salaries, is unhealthy; he supports the idea of pay ratios, linking a CEO’s salary to that of average workers, instead. “If you could only make say 20 or 30 times what your average worker makes, it would reduce the incentive for the CEO to manipulate the game for the benefit of shareholders. They’d want to do the right thing.”
As he tells it, his own epiphanyover wage equalitycame while hiking with his friend Valerie, who was struggling financially after a rent increase. Angry on her behalf, he quickly realized “there were people like Valerie working in the organization that I was leading.”
Price says he took out loans against his home and retirement savings, reduced his salary by more than 90 percent, and sacrificed “luxuries” like a personal assistant to cover the $1.8 million cost of phasing in raises for around half his staff of 117. He’s still comfortably well-off by many people’s standards. And, now the living wage has been delivered, Gravity’s board is discussing when he might resume drawing a conventional CEO’s salary (he says it’s about balancing the need to ensure that “if something happens to me I could be replaced” with his ability to face himself in a mirror). Nonetheless, he has made sacrifices that most CEOs don’t, and that raises awkward questions for his peers.
Some in corporate America would doubtless love him to fail. Price claims the head of one regional bank won’t even deal with Gravity because of its perceived “political stance.”
But that hasn’t stopped him entering a fresh political row over a tax on local employers to fund affordable housing in Seattle, the aim of which is to offset the soaring property prices that followed the city’s tech boom. To Price’s evident exasperation, when the tax was being debated, Amazon initially paused the building of an extension to its Seattle headquarters in what was seen as a threat to take jobs elsewhere.
“I just think it’s a very aggressive display of unbridled capitalism, of basically saying, we don’t actually care about anything but money,” Price says. “If I need to make my voice heard with a company like Amazon, which is held up like a poster child of success and yet does not pay a living wage to the median employee― I mean, that seems crazy.”
But that’s not his only beef with Amazon. “The thing we’re spending the vast majority our time thinking about right now is how do we keep Amazon and other companies like that from hurting independent businesses, mom-and-pop businesses? So we’ve spent literally millions of dollars over the past few years identifying and partnering with the best cloud solutions or software solutions to help independent businesses keep up.” The idea is to expand beyond payment processing into other kinds of software, covering services that small businesses are currently offered by big platforms at a price ― like, say, software helping neighborhood restaurants arrange deliveries without being swallowed up by delivery platforms like UberEats.
Perhaps some of that’s PR-speak. But the fascinating question is whether small businesses would much care what drives Price, so long as his products help them.
Does he feel vindicated, three years on from the pay experiment and the ensuing backlash? Price pauses briefly before answering: “I think those critics have been proven wrong so far. I had somebody I worked with who said to me ‘Dan, I don’t question your motivation, but to be honest with you … I don’t really care about sitting here speculating on what your motivation for it is’.
“I thought that was a good point, because it seems to me a difficult thing to read somebody else’s mind. But in the long term, I’ll either prove my supporters right or my cynics correct, so we’ll just have to wait and see.”
SINCE YOU’RE HERE…
… we have a small favour to ask.
Hurn Publications is a home for bold ideas and big thinkers. We welcome your comments and banter, provided it stays respectful for all parties.
Hurn Publications is editorially independent, meaning we set our own agenda. Our journalism is free from commercial bias and not influenced by billionaire owners, politicians or shareholders. No one edits our editor. No one steers our opinion. This is important because it enables us to give a voice to the voiceless, challenge the powerful and hold them to account. It’s what makes us different to so many others in the media, at a time when factual, honest reporting is critical.
We’re also an Indie Publishing Company, partnered with, The Write Point. We aim to help educate, inspire and coach new and published writers to achieve their goals without getting taken advantage of in the publishing world. Follow our link for Submission and Query Guidelines and join The Write Point Community of aspiring and established authors.
If everyone who reads our reporting and writing, who likes it, helps to support it, our future would be much more secure. We ask that you follow us and subscribe to our publication.