It’s because owners hoard the equity so workers have minimal stake in outcomes (usually the chance of the company tanking resulting in job loss is not a primary motivator or perceived risk either).

Small companies that aren’t worker-owned and without promotion ladders aren’t immune to this. They get workers who strive toward promotion via job switching.

You can debate the fairness of equity hoarding by those who invest money into the business but it doesn’t change the worker dynamics

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sokoloff 3 days ago | parent [-]

Employees are often not in a position (financially or sometimes legally) to take a reduction in cash in order to take an increased proportion of their value in equity.

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wahnfrieden 3 days ago | parent [-]

Who decides that tradeoff? You are only reinforcing why workers have no stake in outcomes. Worker-owned organizations afford both

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sokoloff 3 days ago | parent | next [-]

I believe that employees and employers both make choices that they think are in their best interests.

Employees might want to receive the most cash they can right now (and therefore prefer 100 units of cash over 90 units of cash and 10 of equity compensation). We shouldn't force them to accept a different mix of compensation, particularly one which forces them to invest in their employer via such a tradeoff. They might choose to work at business X instead of worker-owned cooperative Y for any number of reasons.

Employers think about the value proposition they offer to attract and retain employees and if there are 100 units of compensation available to be paid and they have reason to think that employees prefer cash over equity, they are likely to offer all 100 units of comp in cash rather than 90 units of cash and 10 units of equity. There's no sense tying up 10 units of equity that an employee only values as being equivalent to 5 units of cash.

In the case of workers working for public companies, they have a straightforward way to invest in their company if they want: take some of the cash and buy shares in the company. That's barred in most cases for private companies by practicality and accredited investor rules.

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wahnfrieden 3 days ago | parent | next [-]

Worker-owned co-ops are also free to offer cash vs equity options. The difference is that they don't have a hierarchy of ownership hoarding whatever the market will bear.

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sokoloff 3 days ago | parent [-]

Great/agreed that they could offer choice. I wish them and the employees who choose to work at them well.

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wahnfrieden 3 days ago | parent [-]

There's no choice to be had, it doesn't substantially exist in tech. It takes organizing and coordinating various resources to make a new reality, not passively evaluating current options at hand. So it's not productive to evaluate their viability based on what currently exists as if it's already a choice unorganized workers have evaluated and made. But it is an idea that is appealing even to some founders (there are upsides to working alongside people with a stake in outcomes) and some are working toward making this possible for workers to choose.

https://www.federalreserve.gov/releases/z1/dataviz/dfa/distr...

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FreakLegion 2 days ago | parent | next [-]

Most startups are open to trading cash for equity if you ask. Many even offer it explicitly. Investors also encourage it, e.g. see Index's Rewarding Talent guide: https://www.indexventures.com/rewarding-talent/balancing-cas....

When I make someone an offer, I give them a spreadsheet where they can plug in different salaries and equity stakes to see outcomes based on future funding events, valuations, and exit scenarios. Without exception the people who've leaned into equity have turned out to be the best performers and ended up with higher salaries anyway, but a majority favor cash up front.

	▲	wahnfrieden 2 days ago \| parent [-]
		I addressed this elsewhere in this thread

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sokoloff 3 days ago | parent | prev [-]

Be the change you want to see in the world?

As you find reasons to object to that, many of those reasons are likely the same shared by others and make this a vastly less common arrangement, because someone has to take on the massive initial risk to start and fund the business through the unavoidable period of initial losses and probably wants to see a way to having a compensating upside in the event of success.

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wahnfrieden 3 days ago | parent [-]

Well now you're talking about what investors want (including if the founder is also the investor sure). That's a reflection of the funding climate

	▲	sokoloff 3 days ago \| parent [-]
		I'm talking about the financial realities of starting a company from scratch, which impacts how many companies get started in what form and might be a significant part of the explanation why you aren't seeing as many worker-owned companies as you express a preference for. Brainstorming and figuring a way to address that might be a way to help you mold/nudge the world towards your preference.

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fijiaarone 2 days ago | parent | prev [-]

100 units isn’t 100% of available cash and equity. It’s the minimum number of units that founder (investors) think they can get employees to work for. Most of the time in well funded startups they can afford to pay 200 units of cash and 500 units of equity. But the founders (investors) would rather take 50000 units of cash and 50 million units of equity for themselves and only pay employees 90 units of cash and offload their risk onto the employees so that they have greater reward and lesser risk.

	▲	wahnfrieden 20 hours ago \| parent [-]
		Their argument is that no one will start a business (by investing their time or their money) without minimizing the units of cash and equity given to employees per whatever the market will bear. How do you address that?

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alemanek 3 days ago | parent | prev [-]

That is an interesting point. Co-ops seem like they should out perform from a worker incentive point of view. But, why are co-ops basically non-existent in Big Tech. WinCo, groceries, and REI, expensive outdoor stuff, in the US are both big co-ops but are retailers.

Maybe VC money warps the economics so that every company needs to be winner takes all lotto tickets for the investors. Having it be worker owned gets rid of the extreme ROÍ VCs expect.

If you know any papers on the subject I would be interested though.