"We treat this entire idea purely as a bonus in the unlikely even of a future sale/IPO."
At far too many companies, equity is seen by the employer and employee as a form of cash-equivalent compensation, even though it isn't unless that equity has an income stream attached to it (as would be the case in, say, a grant of restricted stock in a company that pays dividends). So it's somewhat refreshing to see a high-profile tech company eschewing this.
The problem here is that 37signals' "plan" lacks all substance. The company doesn't intend to go public or seek acquisition, and its "bonus pool" is potentially limited to just 5% of any acquisition price.
As such, this "plan" doesn't promote retention the way equity does, and for all intents and purposes, it doesn't promote much of anything as the savvy employee will never expect it to bear any fruit.
Put differently, this "plan" feels sort of like an equity version of a poorly-made Louis V. knock-off. While, to its credit, 37signals' isn't pitching this as a justification for a less-than-market salary, there's a strong argument to be made that offering an equity substitute like this is worse than not offering equity at all.
The better approach for a company like 37signals? Make sure salaries are highly-competitive, offer an attractive benefits package and, if you want employees to feel like they have a direct "stake" in the company's success, implement a profit sharing plan. The benefit of this approach is that you attract the type of employee who wants to work at a company like yours without creating any confusion on trying to pretend that you're offering something that you're not willing to offer.
Funny. Buffett certainly didn't mind a little coddling in 2008. He was arguably one of the largest individual beneficiaries of bailouts which shifted ungodly amounts of toxic debt from failed private institutions to taxpayers. See http://blogs.reuters.com/rolfe-winkler/2009/08/04/buffetts-b....
The whole financial system and everybody that depends on it was a beneficiary of the bailouts. If everything collapsed, everybody would have suffered. Buffett just happens to own a bigger slice of the market than almost anyone, so of course he benefited significantly. But singling him out, especially since he's stayed away from wall street's games and made extraordinary efforts to keep things above board for decades, is totally unfair.
"The whole financial system and everybody that depends on it was a beneficiary of the bailouts. If everything collapsed, everybody would have suffered."
A narrative convenient for powerful banks that was created by powerful banks and allied politicians. People have suffered and continue to suffer because of the crimes these institutions have committed. Propping up their corpses only helps the criminals who created the situation. Clearing out bad businesses so that new ones can take their place is a central pillar of capitalism. If you really believe a bunch of billionaires who claim the world's going to end if they lose their billions, well, you're gullible at best. Far from forestalling suffering, the continued operation of these entities and their influence on legislation perpetuates it. Their collapse is the best thing we could hope for, even if it causes short term turbulence.
That all sounds very good, but I'm sorry to say that without a banking system, everything in our society stops working, and the small guy would get hurt a lot more than billionaires.
Without a banking system? The idea is to have a banking system that works and follows the law and doesn't require trillions in handouts to stay solvent, not no banking system.
The entire US financial system is based on credit and liquidity. Clearly something had to be done. Do I agree that the bailout was the best way to do that? No. But a timely bad plan was better than an untimely good one.
By the way, the argument that nothing needed to be done is opposed to practically every economics departments' opinion in the country. Maybe you know more about economics than we all guessed, but I think it's time you show a PhD instead of arm-chairing here.
The something that clearly needed to be done was to make the perpetrators pay for the damages of their crimes, not the victims. If the US financial system collapsed, there would be a deflationary shock and the short term high unemployment associated with an economic realignment, but the country would be much healthier financially in the long term. Instead the crisis is simply being dragged out, with the inevitable day of reckoning certain to be much worse because of it.
The amount of money the US has pumped into its corrupt financial system is enough to put its entire population on welfare for years. A sane approach would have been to let the banks fail, let the markets tank, and ease the transition as needed with bottom-up debt relief and aid.
You should do your research before making statements like "especially since he's stayed away from wall street's games and made extraordinary efforts to keep things above board for decades."
Buffett didn't sit idly by while his holdings were threatened. He lobbied for, and supported, bailouts.
Not content with bailouts of companies he owned large stakes in, he made sweetheart deals to invest in Goldman Sachs and GE knowing what was going to happen. Have you ever explored those?
If his GS and GE investments aren't convincing enough, here are a few choice examples of the Oracle of Omaha's hypocrisy:
2. Buffett once famously warned that derivatives were deadly, but when it came time to put his money where his mouth was, he lobbied against proposed derivatives regulations that would have cost Berkshire billions (see http://www.independent.co.uk/news/business/news/buffett-lobb...).
Bottom line: whatever one may have once thought about Warren Buffett, his actions over the past several years make it clear he is no investor, he is a corporatist. And quite a successful one at that.
I've done my research about Buffet. I've read 2 biographies, a compilation of his annual letters, some of his early partnership letters, and most of his op-eds and TV interviews. The people who criticize Buffett usually don't know much about him and it shows in how they paint him in the stereotypical tycoon brush.
I sincerely believe that he was in favor of the bailouts because he thought that it was the least bad option at the time. Without more liquidity in the system, things could have turned out much worse than they did.
Sweetheart deals in GS and GE? Buffett had lots of cash and they needed it, so he made deals that were very profitable to BErkshire and they took it because they didn't have a choice. I'm sure he expected the government to step in because it was obvious to him that they didn't have a choice, but I don't think he had inside information.
Buffett has explained his derivative investments in recent annual letters, and his explanation made perfect sense. I'm sure you can find it, it was probably in the 2009 one ±1 year.
Both Buffett and Munger have been very critical of rating agencies and accountants, but I'm sure they've also defended both against criticism that they think is unfair. It's not because you're wrong that you're wrong in all ways, always in bad faith, and about everything.
I only had time to skim the first article (getting late here), but I agree with Buffett's reasoning on the TARP issue. If the banks DID pay back their debt, then why should they be the ones taxed? He's not saying that industries shouldn't be taxed to cover losses, he's saying that the government should go after specific industries (like the auto industry) that aren't performing as well as they should be. Chase, if I remember correctly, was very good about repaying their loans on time. Now why should they be punished for that?
Oh, and Warren Buffett plans on donating the vast majority of his wealth away upon his death, so I usually give him the benefit of the doubt and believe that his suggestions are intended to improve the economy as a whole rather than build up wealth. What's it matter to him if he makes or loses another billion when he's giving it away in the end? Nah, I think he's a good guy.
Yet he is the only one who amongst the super rich in America who is talking about raising taxes. He is doing this specifically because of the positive impact it would have on finances for the country, despite the fact that this would have a disproportionate/fair share effect on his tax payments.
None of the positions you linked are inherently contradictory. Especially in the derivatives trading I have the feeling you have no idea what you're talking about. Going back and requiring existing derivatives contracts could cost a huge amount of money and time that wasn't taken into account when they were first bought. Applying the regulation to future contracts is a perfectly reasonable suggestion (especially since the vast majority of derivatives contracts are short term).
btw, When Berkshire acquired Gen Re (a massive reissurer), they closed down its derivatives book. It cost Berkshire hundreds of millions and took years, but they closed that book because they couldn't understand these derivatives.
The ones that Buffet has invested in are way more straightforward, don't pose any systemic risk, and have very different collateral requirements than the toxic stuff.
Prehaps they all benefited, but it seems as if the bailouts benefited the most irresponsible people far more than the rest of society.
The banks should have been allowed to fail. The only reason capitalism works is by providing a huge incentive to do things right. Bailouts like these will convince companies they can get away with the same thing in the future.
People talk as if shareholders in companies like AIG and Citi escape scot free. Citi is down 93% and AIG is down 98%.
The point was that you didn't have a domino effect that took down the whole world economy (no industry that is bigger than a corner store can function without a banking system). Throwing out the baby with the bathwater just so you can punish some people is counterproductive.
Given how much of everything moves based on short-term credit, it is unlikely anybody would have been able to step in before the economy imploded. The credit crunch was not about being able to get funds to build a new building, it was about being able to get funds to ensure the shipment of raw parts was sent (taken recursively through the entire supply chain all the way to your local retail outlet).
If that had seized, it would have been far worse than the bailouts.
Unfortunately, there should have been at least civil penalties (and probably criminal pentalies) associated with building and hiding enough toxic assets to tank the banking system. The real travesty was not the bailout, it was that there were no negative consequences (relatively speaking) to the people who caused it (which is a tough question to answer, but not enough effort was made, IMO).
I don't think you understand how everything is plugged into the credit markets and banking systems. I suggest you read Sorkin's book a as starting point.
Our deficit is $14.6 trillion. TARP, which cost ~$80 billion (with still more to be paid back), is a rounding error in that deficit. Changing tax rates would have a much bigger impact on the deficit.
I was thinking about the cumulative 10-year deficit. I swear I've heard the number $14.6 trillion somewhere, but maybe I'm thinking of the debt. At any rate, I wasn't that far off. From the link you gave:
By 2021, the budget deficit would be about double the baseline projection, and with cumulative deficits totaling nearly $12 trillion over the 2012–2021 period, debt held by the public would reach 97 percent of GDP, the highest level since 1946.
Adding in this year's deficit, it comes out to $13.5 trillion.
TARP is a rounding error all right--compared to the $16 trillion the Federal Reserve has provided to private banks behind the scenes. TARP was just political theater.
No. This thread is a font of misinformation. The Federal Reserve lent $16 trillion in total transactions at the primary credit interest rate to banks over years worth of time. This number is clearly cited to provoke populist rage but is completely ridiculous when analyzed intellectually.
Look, consider this analogous situation. You're having trouble meeting your short term debts but had a solid line of income so you come to me and say, "I need $10 for lunch today but I can pay you from my paycheck at the of the day." I know you have a job and confirm your paycheck so I say, "OK. I'll lend you the money." So Monday comes and goes and you pay me back. Now, times are tough so you have to do this for a full 2 weeks before you can get back on your feet. During this time I lent you $10 on Monday, got payed back on Monday, $10 on Tuesday, etc. At the end of the two weeks would it be accurate to say I lent out $100? No, because I only really lent out $10 at a time. In fact, I really just lent out the same $10 ten times.
This is exactly the same situation. The $16 trillion is in total amount of money lent but it doesn't actually reflect any amount of money lent at any given time.
What on earth are you talking about? Where did I or the article claim anything about amounts lent at any given time? A total of ~$16 trillion was secretly lent to failing financial institutions at extremely low rates over 3 years. That's just a fact and it's an enormous sum that dwarfs programs like TARP regardless of how the transactions were divided. If it provokes populist rage, maybe that's because it should.
If it provokes populist rage, maybe that's because it should.
I will no longer argue this with you as it is clear you are not interested in logic. I am not interested in clouding a debate with emotion so I'm done.
Sometimes emotion can be a logical response to events. If you feel disgust at the actions of a murderer or thief, there is nothing logically 'cloudy' about that--it's a justified reaction. You allege that simply stating a numerical figure that represents the sum of the Fed's loans over a 3 year period is 'designed to provoke populist rage'. My point is that if just printing this number leads to strong emotional responses, it's worth considering if those responses are justified. So you see, I'm not actually bringing my own emotions into the discussion, just countering your assertion that reporting the sum amount of the Fed's activities is somehow 'designed' to create anger. So it seems you're the one getting emotional here and taking your ball and going home. I'm just stating my thoughts. But anyway, c'est la vie... thanks for the discussion.
99%+ of his wealth is in Berkshire, though, so the better Berkshire does, the more billions will go to Gates and a few other foundations (mostly run by his kids).
"BART, which has its own police force, must be held to constitutional standards."
This sounds nice, but do you actually know what those Constitutional standards are?
First, as you seem to recognize, the area in which cell phone service was disrupted is what is considered a "nonpublic forum." The government has significant latitude to restrict speech in nonpublic forums, especially when the restriction is related to the function of that forum. Here, BART shut down cell phone service because it was informed that a group of "protesters", which had caused disruption to BART service in the past, was going to use cell phones to organize another disruption. According to reports, cell phones were to be used to communicate the locations of BART police officers to maximize the mob's ability to disrupt service.
Second, not all speech is due protection under the First Amendment. There is protected speech, and unprotected speech.Speech designed to incite violence or create a breach of the peace is not protected. There is substantial case law on this. Here, based on tweets like "We are going to show BART (@SFBART) how to prevent a riot #OpBART" and the past actions of this particular group of "protesters", it is clear that BART had a compelling reason to temporarily shut down cell phone service in its stations.
Finally, in this case, BART did not prevent this group of "protesters" from expressing ideas. It simply restricted, temporarily, a particular mode of delivery.
What about those who weren't planning to use their cell phones to incite a riot? Again, there is more latitude to restrict speech in nonpublic forums, and any restrictions here were content-neutral, narrowly drawn in terms of time, place and manner, and were for a compelling purpose (protecting public safety).
Bottom line: this is only a Constitutional issue if you have no understanding of the Constitution and First Amendment case law.
We're a young company that's so hot, we melt ice in our sleep. Some of our investors even believe we're responsible for global warming. Out hotness is to be expected: our 5 founders hail from top engineering schools, and one even won $5,000 in a single night playing online poker when he was 13 (for reals).
Our users? Cooler than a polar bear's toe nails. Think Tom from MySpace, but even cooler. They're young, they love technology and they all have fat bank accounts. Oh, they're all beautiful people too.
Our trajectory is clear: extreme penetration of a lucrative niche market in Year 1, and world domination in Year 2. We've already grown 500% in our first 2 weeks after launch. See http://yfrog.com/kfu2tcj
We're looking for an awesome Python developer with a big ego and low self-esteem. Someone who knows he's the sheeeeet but doesn't want to prove it at a big company that does lame stuff like QA. Someone who can down a can of Coke and a box of Mentos and then go on to devour a four-course meal of web-scale challenges the likes of which no other startup has ever faced. Seriously.
What do we offer? Put simply, The Life. As an early employee, you'll receive a salary that will enable you to rent a condo in Palo Alto with 3 other startup dude roommates, a huge equity stake that will be massively diluted as we raise new rounds of funding from some of the most respected angels and VCs in the Valley, and the ginormous confidence that comes with knowing you're changing the world one unique visitor at a time.
If you're ready to take your awesomeness to the next level and think you have what it takes to hang, send us an email at socially.awkward.hipster.startup@gmail.com and tell us why we shouldn't laugh at your Github account.
It is unfortunate that you posted this to such a transient medium as News.YC. This is art, of a bitter and brilliant variety that should be printed on crisp white paper with dark bold letters and hung in the MOMA. People would gather around it and claim to "get it".
But they wouldn't get it, of course, unless they'd lived through the same history as the artist.
>Someone who can down a can of Coke and a box of Mentos and then go on to devour a four-course meal of web-scale challenges the likes of which no other startup has ever faced.
what happened to the 6pack of beer and a pack of filterless Camel? Sounds like technology has profoundly changed.
I didn't realize at all it was stair until I read your comment.
I viewed it out of context, through the news:yc iPhone app, from "best comments" page, and there's no link to 'parent' post (at least not that I'm aware of).
I really thought it was a genuine job ad. I think this says a lot.
1. Were your developers granted actual stock, or were they granted options?
2. Your company is angel-backed. If and when it wants or needs to raise additional funds, is the company obligated to protect said developers from dilution?
Assuming that you're a typical angel-backed company, the answers to these questions are "stock options" and "no." Which would mean that:
1. Your developers don't own anything.
2. Your developers don't have an equity interest (or potential equity interest) that they can trust will actually represent a specific percentage interest in ownership if and when their options are exercised.
I don't mean to pick on you, but your comment highlights two things:
1. Just how loosely the word own[ership] is used when it shouldn't be.
2. How percentages are used to inaccurately describe potential equity stakes when those potential equity stakes cannot be reliably translated into percentage-based (potential) ownership interests.
While I agree that sacrificing salary for stock is a very risky strategy your comment is overboard and inconsistent.
1. If employees got granted stock they'd have to pay tax on the entire amount which they can't afford. It's not that expensive to buy though since early on, the options are usually granted at a fraction of the actual price though which means they're often 10x cheaper than the going rate. Nobody "owns" their stock until they exercise their options but if they feel it's not worth more than their original option price then the company's flatlining and it's pretty academic anyway.
2. Nobody in the company knows what their percentage will be at the time of exercise. That's regardless of whether they hold options or stock and is part of the territory. Everyone's stake gets diluted when new money comes in just as everyone's value is inflated as the valuation increases. If you propose anti-dilution clauses for employees then someone else will need to double down on dilution and I'm not sure who you propose that should be.
So
a) "ownership" comes down to whether someone exercises their options - their call but they have the legal right.
b) If you don't like % equity descriptions (which will almost always go down), translate into $ descriptions instead. "If we exit today you'll get this many $, if we exit at 5x you'll get this many $ and if we have to do a downround you could be diluted to this many $. Such change is not unreasonable it's just the nature of it.
I think you miss the entire point of my comment. I am not suggesting that companies describe equity stakes in percentage or "you would make $x" terms (they can do neither), or that they provide anti-dilution protection to rank-and-file employees (it isn't going to happen). And while your assumption that nobody can afford to pay the tax on restricted stock grants is simply wrong, that's a different discussion.
Here's the bottom line: at a venture backed company, you will almost never know what your equity represents - in percentage or dollar amounts - until there's a liquidity event. As such, the value of the equity component of a compensation package should not be overestimated if you're a rank and file employee at a venture backed company. It should be treated like a lottery ticket because that's what it is.
The problem with equity is that at most venture backed companies, rank and file employees don't know what percentage of the company their equity package represents, or could represent in the future. Naive employees (most of them younger) chasing startup riches often like to think in terms of "If I own 1% of the company and it sells for $500 million I'll be rich!" but if you ask them what ownership interest their 75,000 stock options might represent, they won't be able to tell you.
Employees who think "it's all about equity" would be wise to consider the following:
1. It should go without saying that if you're granted stock options, which is typical unless you're a founder, you don't actually own any portion of the company. A stock option is, obviously, simply an option to purchase stock at a fixed price at a future date.
2. Assuming your employment is at-will, you do not have control over the vesting of your stock options. You could be terminated at any time, including before a large portion (or even all) of your options vest.
3. Dilution is a fact of life at venture backed companies. If you join a company early, your expectation should be that you will be diluted, and significantly. This dilution can also be rapid (i.e. a dilutive new round of funding closes a month after you join the company).
4. There are plenty of ways the value of any equity you own (or may one day own) could be diminished. If your company is acquired, for instance, but the acquisition results in the exercise of a liquidation preference, it's conceivable that your equity will be be worthless, or of such minimal value as to be effectively worthless.
Bottom line: if you're not making six-figures and aren't already independently wealthy, which covers most of the young folks who think equity is an apples-to-apples substitute for salary, accepting a significant pay cut for "equity" is sort of like planning your financial future around the assumption that you'll one day win the lottery.
As they say, "one in the hand is worth two in the bush."
AirBnB's fundamental flaw is that the potential costs (in the form of monetary losses) of renting out a home to a stranger far exceed the economic benefits that can ever be realized, particularly for hosts who are violating local laws and/or are violating the terms of a lease by subletting properties they don't own. These "features" do nothing to address this.
Voice Connect? Professional scammers are usually very persuasive if not downright charming. The ability to speak to a prospective guest will not deter experienced criminals.
Video Connect? These are for hosts only, but even if they were for prospective guests too, a professional con would have little problem putting together a convincing video.
References? These, obviously, are subject to gaming, but notwithstanding that, I doubt very much that a significant number of hosts are going to turn down an otherwise solid-looking guest who is "new" to AirBnB and doesn't have any references.
24/7 Hotline? If your AirBnB experience turns into a nightmare, you're probably better off making sure your first call is to your attorney.
How do you think the new "AirBnB Guarantee" affects this calculus (which really seems to be an insurance policy)?
Starting August 15th, when hosts book reservations through Airbnb their personal property will be covered for loss or damage due to vandalism or theft caused by an Airbnb guest up to $50,000 with our Airbnb Guarantee. Terms will apply to the program and may vary (e.g. by country). This program will also apply retroactively to any hosts who may have reported such property damage prior to August 1, 2011.
AirBnB's guarantee doesn't affect this at all. Here's an example:
You rent an apartment and have a standard lease that forbids subletting. You travel a lot on business and decide to rent out your apartment for $150/night five days a month anyway. That's $750/month, or $9,000/year, in your pocket pre-tax. Not bad, but....
One day, you rent to an individual who happens to be a heavy drug user with a criminal record. You don't know this because you didn't perform any due diligence.
When your guest is confronted by one of your neighbors about a noise issue, he brutally assaults your neighbor. During the assault, your neighbor suffers major head trauma and is rushed to the hospital, where he undergoes emergency surgery in an attempt to save his life. Following the surgery, he is comatose and if he recovers at all, will require months if not years of rehabilitation. In the best case scenario, the doctors believe he will likely have some permanent brain damage that may prevent him from living a full, productive life.
When it comes to light that you were violating the terms of your lease and renting your apartment to complete strangers in exchange for money without doing any real due diligence on your guests, it's very likely you'll be sued by the victim's family. Needless to say, given the amount of damages you may owe if you're not successful in defending yourself, you're going to need a great lawyer. They don't come cheap. AirBnB's $50,000 guarantee? That only applies to damage due to vandalism or theft, but even if it applied to everything, won't even cover the cost of the victim's initial surgery.
Obviously, this is an extreme example, but it's well within the realm of possibility. There are plenty of other scenarios, less extreme, under which an individual could conceivably be personally liable for damages far in excess of what they will ever make using AirBnB, and far in excess of what AirBnB says it will cover.
By the way, AirBnB's guarantee is almost certainly not an insurance policy, even though the company (intentionally or unintentionally) is going to confuse people who don't understand the difference between a guarantee and an insurance policy.
As far as I know, AirBnB is not registered as an insurance company in any state, and I doubt very much that a legitimate insurance company would sell a policy for most AirBnB rentals without, at the very minimum, proof that the host has the authority to sublet and that he or she is not violating any local ordinances that apply to rentals and hotels.
This scenario seems pretty far-fetched. Are the even any examples of people being sued where they knowingly allowed a violent person to reside at their apartment, and that person then assaulted a neighbour? The fact that the violent person is a paying customer does not appear to change the duty of care owed to neighbours.
Under premises liability law, a tenant is generally responsible for personal injuries to guests, invitees and others (who are legally on the premises) if the tenant had control of the premises or was responsible for creating the dangerous condition that led to the injuries. IANAL but a quick Google search will provide you with the relevant statutes and case law.
If you sublet your apartment to a third party in violation of your lease and you fail to take reasonable security measures (verifying identities, conducting credit and background checks, signing agreements, etc.), you should expect to be sued for negligence if and when something goes wrong. Might you successfully argue that the injury in question was unforeseeable even under these circumstances? Sure, but you'll still lose because making that argument will be costly.
Finally, even if you somehow believe that there's no risk in subletting your apartment to strangers, you should consider alternative liability scenarios, like your guest suffering an injury while staying in your apartment. This too makes AirBnB a juicy target for cons, as it would be relatively easy to stage an accident with the intention of suing the host.
The net-net:
1. Being sued is an expensive hobby and anyone renting out his apartment to strangers to pocket a few extra bucks is always one guest away from discovering this.
2. There are good reasons most landlords forbid subletting.
"Offer me a decent salary" should be on the top of this list.
If you have a solid, established relationship with somebody technical, and he or she is interested in a startup endeavor, raising the possibility of going into business together is one thing. But if you have to "recruit" a technical co-founder because your social circle is void of competent technical people, the number of potential co-founders who will be eager to jump on board your boat without monetary compensation is probably fairly small.
Let's face it: the kind of person who would make for a good technical co-founder probably doesn't have any shortage of opportunities in today's market. So what's the appeal of a jumping in bed with a complete stranger if all that's on the table is equity and "salary upon funding"? There typically is none, which is why so many of the people trying to find a technical co-founder experience so much angst.
There is no surplus of good opportunities for technical folks to co-found something they can believe in. There are plenty of other opportunities of course.
I think the article is solid in that you have to sell the potential technical co-founder that you have a great idea and will add value to the relationship. "decent salary" will get you a contractor for hire, not a co-founder.
You don't have a lot of choice than to network and try your pitch.
Also, for the technical guy, if you're going to be building a prototype by yourself for no present financial consideration - you can do that already on the weekend, and possibly are.
"I have an idea, build it for me" almost never works. The value proposition is too asymmetric. There has to be something more to it than that if you want to attract people.
After pointing out that "The central bankers throughout the world have lost touch with reality" and discussing the messes that have been created in large part by inept bureaucrats, The Smartest Man in Europe dismisses all of the problems brewing in China with a naive "the authorities will figure out solutions to solve them."
Anyone who truly believes that the "authorities" in China are any more capable than the "authorities" outside of China isn't very smart at all.
Agreed. These are the same Chinese authorities that refuse to publish key economic statistics, or blatantly make them up. They also have trouble keeping track of government debt -- just this week there were reports about regional government loans that have been kept hidden. And then there's the housing bubble developing in the major cities because it's been so easy to get private loans the last two years.
Chinese officials can do many things, but they aren't magicians, and won't be fixing anything overnight.
Sure, 'twas obvious sarcasm, my bad. But there are good reasons for China's economy to grow sustainably for some time yet (emerging middle class, manufacturing going more high-tech, etc). They have major structural problems too, but it's not all doom-and-gloom like Japan is/was.
They aren't more capable, but at least they are able to take responsibility. Banks will be nationalized the minute they look shaky. Local governments will be recapitalized, and the leaders might get punished. But there won't be as bad a crisis, because someone will foot the bill.
OK, it will cause a moral hazard. There will be a big need to reform. But there already is a big need to reform. And I think there's already a commitment (from the top, and from the general public) for reforms.
Plus, it's easier to grow when you are under 1/5th the GDP per capita.
What are you talking about? Banks already are 'nationalized' for all intents and purposes (rather, they've always been under central leadership). And that's exactly the core problem with the debts owned by Chinese banks comes from.
Maybe not capable, but surely more focused? As far as I know there are no elections that change the top leadership every few years. This way they have a larger interest in planning beyond their political term and the private industry has less influence through campaign contributions.
But I might be wrong, I'm way out of my comfort zone here.
In China, "private industry" doesn't truly exist in many industries. To do business, you need to be politically connected to some degree. In other words, campaign contributions are unnecessary; the state and private industry are already married.
China's errors seem to be ones of engineering: Overbuilding.
America's errors seem to be ones of lacking fortitude: constantly increasing over spending.
If neither change, china is headed for continued growth and maybe some painful re-allocations of capital, while the US is headed off of a cliff.
> Anyone who truly believes that the "authorities" in China are any more capable than the "authorities" outside of China isn't very smart at all.
For the last 50-60 years, they have proven very capable of keeping 1.3 billion people under a communist regime that arguably lacks most of our understanding of constitutional legality, considering how they came into power through the "War of Liberation" and considering the lack of human rights.
The author has a point, and it's quite possible his idea wasn't worth pursuing further.
This said, a few points should be made:
1. A picture is worth a thousand words. It shouldn't be assumed that individuals you poll about ideas and abstract product features understand them the way you intend them to. You might simply be describing features in a way that doesn't make sense to them, for instance. This is why wireframes and simple prototypes are so valuable.
2. You need a quality sample to make intelligent guesses about the viability of a new product. You should not immediately assume that if you query 10 people about your idea and all 10 shoot it down you are not on to something. Most businesses that are very profitable aren't convincing nine out of 10 (or even five out of 10) potential customers to buy their products. Keep this in mind.
3. Just because your initial product concept (or implementation for that matter) isn't viable doesn't mean that the problem that led you to develop the idea doesn't exist. Instead of simply asking folks whether or not they like your product concept, you should also seek to validate that you're trying to solve a real problem. If you can confirm that there's a problem, you may only be a few iterations away from a product concept that has a shot at success.
Bottom line: you don't want to give up on an idea too late, but you shouldn't give up on an idea too soon either.
I really like your bottom line! At the end of the day, it all comes down to a really subjective subjective judgment on if you should proceed.
And frankly, I'm not sure that I have all the knowledge or experience to be making the right decision. May people in this thread raised some very good counter points and undoubtedly have more experience and knowledge than I.
However at this stage, I think I'll go away and test out the target market for a few other ideas I have and see what kind of response I get. I think I could do with a few more data points on what kind of response to expect from the "talk to your target market" approach.
At far too many companies, equity is seen by the employer and employee as a form of cash-equivalent compensation, even though it isn't unless that equity has an income stream attached to it (as would be the case in, say, a grant of restricted stock in a company that pays dividends). So it's somewhat refreshing to see a high-profile tech company eschewing this.
The problem here is that 37signals' "plan" lacks all substance. The company doesn't intend to go public or seek acquisition, and its "bonus pool" is potentially limited to just 5% of any acquisition price.
As such, this "plan" doesn't promote retention the way equity does, and for all intents and purposes, it doesn't promote much of anything as the savvy employee will never expect it to bear any fruit.
Put differently, this "plan" feels sort of like an equity version of a poorly-made Louis V. knock-off. While, to its credit, 37signals' isn't pitching this as a justification for a less-than-market salary, there's a strong argument to be made that offering an equity substitute like this is worse than not offering equity at all.
The better approach for a company like 37signals? Make sure salaries are highly-competitive, offer an attractive benefits package and, if you want employees to feel like they have a direct "stake" in the company's success, implement a profit sharing plan. The benefit of this approach is that you attract the type of employee who wants to work at a company like yours without creating any confusion on trying to pretend that you're offering something that you're not willing to offer.