Put Your Money Where Your Mouth Is

Seattle CEO Dan Price caused waves a few months ago when he raised the minimum wage of everyone in his company to $70,000.  Why’d he do this?  He found a study which convinced him that people who earn $70,000 are happiest.  This would mean that many people in his company would get a substantial pay raise.

Unfortunately (but predictably), the move backfired.  Some of his top people have left.  The guy is having trouble making ends meet.  His labor costs have skyrocketed far beyond what he had anticipated.  Morale has been hurt.

Despite this, CEO Dan Price has my respect.  He risked his own money, his own neck, to test his theory.  Unlike so many armchair economists and politicians who advocate minimum wage but risk nothing, Mr. Price had the guts to attempt to change the world.  Yes, his plan failed, but that’s what happens in real life, that’s what happens in markets.  Most businesses do fail, and there are lessons on how not to do things.  This is how we get progress, by trial and error.

Another thing to keep in mind is the cost of the failure is born by Mr. Price.  Unlike nationally enacted policies, which spread the pain to everyone whether they took risk or not, the cost of Mr. Price’s $70,000 experiment is his and his alone.  Likewise, the reward would have been his.

I respect Mr. Price immensely more than any politician or armchair philosopher who preaches but risks nothing.  I wish him the best in future endeavors.

11 thoughts on “Put Your Money Where Your Mouth Is

  1. Would you be willing to elaborate more on your definition of an armchair economist?

    It sounds like you’re defining them as someone who sits around debating and blogging about economics, but are too scared or insecure to open a business and test their own theories. This sounds familiar.

    As a businessman I find this post to be quite flattering; I’m thrilled at the amount of respect you have for us. But I can see how some of your more loyal readers may find this a wee bit insulting. Could you please clarify?

    I would also inquire as to why you imply that politicians have less to risk than businessmen? Do they not hold their political careers and the legacy of an entire country in their hands? Does their success or failure not affect the lives of millions of people? Even though these are not specifically monetary risks, are they not indeed risks of greater importance than money?

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    • Albert:

      If Jon wants to alienate his base, let him.

      I gave him an opportunity to put his money where his mouth was and he declined. Now he’s saying he doesn’t have any respect for people who don’t. He insulted himself and his readers and he doesn’t even realise it.

      Most of his posts about other economists are designed to discredit them. He walks away, completely ignores and blatantly lies to people when he’s caught in a contradiction. He’d rather call names and slander than build up his own arguments. He lets his politics cloud the facts. Several of the posts that are about “good” are abstract ideas that he unscientifically links to markets.

      You notice that not even his most loyal readers ran to his defense when you asked him to clarify his definition of armchair economist. He obviously struck a nerve with his readers.

      I know you tried to save him from his arrogance, but you can’t. He’s a free market intellectual, let his consumers decide his fate and let him make his own mistakes.

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      • Then I will be the first to defend him.

        Jon’s got potential, He knows that. But what I hope he realises is that he’s still young and inexperienced and has still got a lot to learn.

        Jon certainly has his faults and a large ego is one of them. But what 20 something new graduate doesn’t have a big ego? Let it go, Varija!

        He’s got a bright future, but he’s got to earn that future. People can make promises, but they can be retracted just as easily. He’ll have to learn self awareness and how to respect people who disagree with him if he expects to go where he thinks he’s going, but I’m confident he can.

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    • It depends on how it’s set up: In the vast majority of corporations each share holder has (for example) one vote for each share he/she holds. However, some corporations, mostly smaller tightly knit corporations, defer all power to the board of directors and or CEO. Also if the CEO is the majority share holder he/she may have enough power to override the shareholders anyways.

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