In the book Atlas Shrugged, three grown children of a wealthy business owner inherit a business called the 20th Century Motor Company. The three new owners were socialists, and decided to run the company like a socialist state. They decreed that all the employees would be paid not on effort, results or seniority, but on need. For example, employees with bigger families got paid more than the employees who were single and had no kids, even if the single employees worked double as hard, made more money for the company, and/or had worked there much longer.

Employees were supposed to work as hard as their ability allowed them to. So smarter, more talented employees were expected to work harder (and remember, not get paid based on this work but instead on their “need”) and dumber and/or less talented employees were allowed to slack off.

When the company started to lose money, the socialist owners, loving democracy, had the employees vote on ‘who was at fault?’. The men found to be at fault were forced to work overtime for six months without pay, because again, the company didn’t pay based on work hours, but only on “need.”

The company quickly went out of business due to all of the jealousy and infighting. Because socialist concepts do not work in companies (much less in real life).

As has happened many times, Atlas Shrugged has predicted real-life future. A few months ago, left wing CEO Dan Price, head of a merchant processing company, declared that EVERY employee in the company was to make a minimum of $70,000 per year, regardless of what that employee did, how well he did it, or how long he worked at the company.

In a 70-employee company, about 30 of them instantly doubled their salaries. As one might expect, left wing websites all over the place praised this utopian moron, um, I mean, compassionate savior of the working man, for his fairness and forthrightness.

What do you think happened?

Would you like to guess?

Tons of customers cancelled their accounts fearing (correctly!) that he’d probably have to raise his prices because of the insane amount that he was paying his employees. Then he lost two of his best employees, stating it was unfair to double the pay of some new hires while the longest-serving staff members got small or no raises. Seeing all this lost money, he got sued by some of the other companies’ owners.

He’s now on his way to bankrupting the company. Big shock.

Hey, I’d love to start a business and automatically pay everyone $70,000 a year regardless of anything else. Honestly, I think that would be nice. Yet I would never do this, because that’s not how human beings work in the real world. Concepts like communism and real socialism are one of those things that look really, really good on paper but do not work at all in the real world of human beings.

Isn’t it astounding that in 2015 most human beings still haven’t figured this out?

14 thoughts on “The CEO Who Paid All His Employees $70,000 A Year

  1. I’m pretty left wing, but there’s some stuff like this that I find crazy. For example, a $15 minimum wage is way too high. A full time worker on minimum wage shouldn’t live a comfortable lifestyle, they should live a, well, minimum lifestyle. Making $30k a year is not a minimum lifestyle.

    It’s also why I don’t like the idea of a basic income. There’s people like me who’d rather live a very frugal lifestyle and not work than to live a comfortable lifestyle while working, so I’d just take the basic income and not work. I will live that lifestyle eventually, but because I worked hard and saved, not because I’m living off the government tit.

  2. “What do you think happened?

    Would you like to guess?

    Tons of customers cancelled their accounts fearing (correctly!) that he’d probably have to raise his prices because of the insane amount that he was paying his employees.”

    The second video seems to be a Nike commercial, there is no information there to back up your claim, which I quoted. What he says is that he got 3 letters from clients who told him his decision had just made their jobs harder.

    “He’s now on his way to bankrupting the company. Big shock.”

    The third link is just an entrepreneur.com contributor sharing his opinion abut the CEO’s decision. Here is the summary: “Gravity is going to have a tough time remaining solvent with such high payroll expenses.”

    I appreciate your predictions since they are informed, but acting like what you predict has already happened makes you seem biased, rather than knowledgeable.

  3. Ah, nitpickers.

    – Not sure how long you’ve been clicking links on the internet, but sometimes when you click a link, you have to actually scroll down to read the content. If you had actually done that, you would have read this:

    “More troubling, a few customers, dismayed by what they viewed as a political statement, withdrew their business. Others, anticipating a fee increase — despite repeated assurances to the contrary — also left.”

    – I never made any predictions. This is the first time I’m talking about this. I’m reporting what’s already occurred. Which is, he increased the minimum salary to $70,000 for all employees, he lost employees, he lost customers, and now he’s being sued by his cofounders. All factual, as I stated.

  4. “Not sure how long you’ve been clicking links on the internet, but sometimes when you click a link, you have to actually scroll down to read the content. If you had actually done that, you would have read this:”

    Sorry, for some reason I didn’t get any text in that second link when I reviewed it earlier, just the video. It was a long page with the video at the top and blank space downwards, except for the pictures. It makes a lot more sense now 🙂 You are right, he’s a dumbass.

    If he was that well payed to lead the company and he made such a ridiculous blunder, I wonder whether he didn’t have ulterior motives. Like trading the success of that company for his own popularity, to launch into something else. The second video seems to promote Nike too much for it to be a coincidence.

  5. “Then potentially the worst blow of all: Less than two weeks after the announcement, Mr. Price’s older brother and Gravity co-founder, Lucas Price, citing longstanding differences”

    longstanding differences = differences not caused by the pay increase…

    “Then he lost slew of his best employees” is how you translate “Two of Mr. Price’s most valued employees quit” 2!

    “More troubling, a few customers, dismayed by what they viewed as a political statement, withdrew their business. Others, anticipating a fee increase — despite repeated assurances to the contrary — also left. While dozens of new clients, inspired by Mr. Price’s announcement, were signing up, those accounts will not start paying off for at least another year.” – so they lost clients because they didn’t agree politically with the salaries increase, not because the increase actually changed prices or quality of service.

  6. longstanding differences = differences not caused by the pay increase…

    Oh yeah, I’m sure it had absolutely nothing to do with it and it was a complete and total coincidence it happened at the same time.

    “Then he lost slew of his best employees” is how you translate “Two of Mr. Price’s most valued employees quit” 2!

    I got that wrong. I thought I read in other articles that there were more than two, but I can’t locate them. Corrected.

    so they lost clients because they didn’t agree politically with the salaries increase, not because the increase actually changed prices or quality of service.

    Irrelevant. He lost the business when making the change. The market spoke. “Sorry, I have to lay you off, but it’s not because we have a bad service. It’s because some of our clients don’t believe in my politics. Doesn’t that make you feel better?”

    Here’s a comment from one of the sites, and why clients and employees left:

    Do the math guys. 120 employees at $70k/year is $8.4 million. The company needs to make a minimum of that much just to cover salaries, on top of rent, insurance, etc. An I bet you some of those employees make more than $70k/year. This company must generate $10 plus million just to break even. Good luck with that. He may ave a good heart, but it’s a bad decision. You just sunk the company overnight.

    Nitpick all you like; this was a very poor business decision.

  7. “Irrelevant. He lost the business when making the change. The market spoke. “Sorry, I have to lay you off, but it’s not because we have a bad service. It’s because some of our clients don’t believe in my politics. Doesn’t that make you feel better?””

    Well, it might be relevant, my point is that that there were 2 decisions:
    1. Increase the minimum wage in the company
    2. Make decision 1 public

    I think decision 2 is the costlier one. The market spoke in relation to decision 2.

  8. I don’t think so.

    1. How would you be able to keep something that significant a complete secret from all of your customers? (And vendors, etc.?) Not gonna happen.

    2. You seriously think that if he had done it but no one knew, everything in his company would be fine right now? I seriously doubt it. Again, it was an extremely poor business decision any way you look at it.

  9. The article isn’t very clear, but from what I can tell his company is now making money primarily because of all the free positive (left-wing) publicity and buzz he’s getting, not because he’s paying his employees more money. (Though I could be wrong.) The guy has pretty much become a celebrity now.

  10. “Irrelevant. He lost the business when making the change. The market spoke. “Sorry, I have to lay you off, but it’s not because we have a bad service. It’s because some of our clients don’t believe in my politics. Doesn’t that make you feel better?””

    “The article isn’t very clear, but from what I can tell his company is now making money primarily because of all the free positive (left-wing) publicity and buzz he’s getting, not because he’s paying his employees more money. (Though I could be wrong.) The guy has pretty much become a celebrity now.”

    Funny BD…

  11. ” socialism is working” – Well, it’s not socialism. The guy took a marketing decision in a capitalist economy.

  12. Hmmm, yeah I guess you’re right. Although I would’ve expected his competitors to swoop in and take advantage of the fact that he’s opened himself up like this. Then again, apparently his company makes 150 million a year (with 2 million profit), so paying all of his employees 70k a year is probably just a drop in the bucket for him. Especially if he’s taking it out of his personal salary.

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