It's interesting to me how entitled the employees come across as. Minecraft was making millions, but they were only getting a regular salary. (Aside from luxury trips to Monaco with their families, and an extremely laid back and pleasant work environment.)
I remember that Notch was doing Minecraft development all alone for the longest time, even after it had become hugely popular, and users had been begging him to hire people to speed up development. So these employees join as regular employees, getting a regular salary, taking none of the risks of the founders, yet they are pissed off because they don't own shares of the company.
I suspect this is very common in successful startups, and in a way I understand it: They see the founders, guys their age, rolling in the dough, on the back of their work. I've felt the same way as an employee, when stuff I come up with and implement ends up making the company a lot of money and the most I get, if I'm lucky, is a pat on the back.
But, as a founder? Where the fuck do you get off expecting to take a piece of my company, that I have literally sacrificed blood, sweat and tears for, taken time away from my life and my family, risked huge amounts of money, relationships and years of my life, without any guarantee that I would ever succeed. And you take an interview, walk in the door from nine to five and do your job, which you get fairly compensated for, and would not be paid anymore for anywhere else, you can, and probably will, leave whenever you feel like it with no stress or loss. Yet because the company succeeds, somehow you are entitled to own parts of it for simply being there and doing your job?
You forget that the employees are also taking a risk. A Fortune 500 is stable, and steady work can be found in many city hubs.
Startups are sometimes spread quite afar, Mojang was in Stockholm, and are not always likely to survive. While Notch was "rolling in the dough" there was no guarantee that it would continue indefinitely.
That risk is why employees, especially early employees, feel like they should get some equity. It's a trade-off: they are accepting a percentage chance that they are joining a company that could fail, but there's also a chance it could be wildly successful. The difference between equity and wage represents an assessment of risk and riskiness. And, of course, offering lower wages and higher equity shares creates positive incentives for employees to go above-and-beyond and ensure that the company is not just a mild success, but a multi-billion-dollar-buyout success. This is opposed to the perverse incentive that wage-only compensation creates, where a buyout potentially means losing your job. After all, if you weren't valuable enough to deserve equity, you may not be the talent the new company was seeking to acqui-hire.
In this case, it is almost certainly the case that any Mojang employee would have better off foregoing all wages in exchange for a small amount of ownership.
With hindsight biases, I suspect every Mojang employee would say they'd be willing to give up some wages for some equity. But before the acquisition, it was nowhere near clear that the company was worth $2.5 billion, so I wonder how many employees might still be willing to take that offer.
So, like I said, trade-offs. I think the tone at the end of your post represents how a lot of founders might look at it, and I realize it's hypothetical. But stepping back from the situation, there are complicated incentives involved in wage and equity compensation, and balancing those as a founder or an employee can be difficult.
Employees are always taking risk; no company lasts forever, and even seemingly stable companies frequently get rid of people for reasons unrelated to performance.
If early employees feel like they should get equity, then they should ask for it on hire. That Mojang apparently found plenty of employees on a cash-only basis suggests that equity was unnecessary here.
There is a separate feeling, which is that in retrospect they feel like they deserve a share of the big money because there was big success. That's a reasonable feeling. But I think it's very different than having worked for a successful company, getting paid regularly, getting bought by a major tech company, and then saying, "Gosh, that was too risky!"
>> You forget that the employees are also taking a risk.
I don't know how it is in most countries, but in the United States, an employee gets unemployment when they get laid off. A founder gets nothing when the company goes under.
Also, I know of a lot of companies that consider self-employment the same thing as unemployment. I've made more money as a freelancer in the last 3 years than I ever made working for anyone, and I've produced more code in that time to boot, so I think it's been a pretty good measure of my productivity. But as far as your run-of-the-mill cunsoltoware company is concerned (and let's face it, the long-tail of such companies is the majority of places where your average software developer can expect to get hired), I might as well have been on a 3 year vacation.
So IDK, seems like there are a lot more implicit risks to being a founder other than just "everything could go belly up and I have no retirement".
> I don't know how it is in most countries, but in the United States, an employee gets unemployment when they get laid off. A founder gets nothing when the company goes under.
The $350 I got a week when I was unemployed three years ago doesn't affect much of anything compared to a developer's salary. I am fortunate in that I received 2 weeks severance and was able to get a new job within about a month; but not everyone is going to find a job within a time frame that having a drastically reduced income is trivial.
In Sweden (which is where the employees in question were), most workers are entitled to unemployment benefits of 80% of their full salary for 200 days, after which it's reduced to 70% for the next 100 days [1].
So a Swedish programmer will definitely be making much more than $350/week for almost a year while unemployed. Like someone else said, Mojang's employees did not take any real risks.
It's up to 80% of the full salary. While your typical Swedish programmer would get more than $350/week, they're not going to get 80% of their salary since they cap out well before that.
Oh, you're right. I missed the part about the 680 SEK / day cap.
Is that per calendar day or workday? I guess calendar day. That means the average programmer would get about 50% of salary on unemployment. (Just taking a wild guess that a programmer in Sweden makes 40k SEK / month.)
I lived in PA at the time, so maybe it's different in your state, but I got a lot more than $350 a week when I was on unemployment 4 years ago. It was about 1/2 of my previous wage. Considering I wasn't driving into an office every day, eating out all the time, etc., the money went pretty far. The rest of the shortfall was covered by just... not putting money into my retirement account.
And regardless, $350/wk is a lot more than the $0/wk a founder would get.
"I don't know how it is in most countries, but in the United States, an employee gets unemployment when they get laid off."
Thats assuming they were officially laid off, not let go for performance reasons even though it was actually company downsizing, and are eligible to collect unemployment. Since companies usually have to cover some of the unemployment payments they will fight unemployment claims or even fire a employee for a BS reason. So unemployment is far from guaranteed. IIRC IBM recently used those tactics in their latest mass layoff.
Competent developers near economic hubs like Stockholm should find jobs pretty easily (unless I'm mistaken). I fail to see the risk for employees, especially in a nordic wellfare state like sweden.
1. My understanding is that by the time Minecraft _utterly_ blew up they had a full fledged company going. Some people were probably there from the "a million or two" to "hundreds of millions" of dollars transition.
2. Notch didn't really have a lot of risk going. He wrote a game and it blew up and he hired people off the preorders.
3. Notch got lucky. It's not clear that he's an especially savvy business person, or manager, or etc. He owned most of the IP, but… he had an idea that was waiting to happen, and then it went supernova and infected the minds of most children in the western hemisphere.
If you sacrificed nights and weekends to get the thing to ship, and massaged it into production, and wrote most of the code, and strung most of the deals together, and basically made it work beyond a crashy demo… and it was all just dumb luck anyways, I think it's perfectly natural, human reaction to be resentful that your boss made an insane killing when he rage quit and didn't share much of it.
Lucky that he made a product that millions of people were willing to pay hard cash for? Luck is a funny word, and it can be used to dismiss people's sacrifices and hard work too easily.
If I plunk down 1 dollar to buy a lottery ticket and I win the jackpot, that's very lucky. Sure, I sacrificed a dollar, but that has very little impact on me. The risk is low. If, however, I plunk down a couple million dollars to buy lottery tickets and I win, it's less lucky because my chances of winning are greater and of course my risk is much higher.
In spending his time working on Minecraft when he could have been doing any other number of things he was putting the equivalent of the amount of money he could make working for someone else down on the table as stakes. Sure, there's an element of luck, but it doesn't mean he doesn't deserve to reap the benefits of his risk having paid off.
There are lots of people that work hard and nothing comes from it. Working hard is not the only variable in the formula. Luck does have a great deal to do with it. I would say not considering luck as a factor implies a dismissal of the hard work of someone who didn't have a successful outcome. History is full of people who worked hard and someone else got the glory for numerous reasons.
It can be. You can be lucky to meet the right co-founders. You can be lucky to have the right idea at the right time. You can be lucky in the sense that working on your current mediocre startup allowed you to luckily come upon a problem or idea that is even bigger. There is and always will be an element of luck to success. What it comes down to though is nurturing an environment where that luck is more likely to happen than not.
What if two people pick the same project independently of each other, work equally hard, and only one comes out successful. Did the one that did not come out ahead not work hard?
It was a hobby. Something he did for fun, as a leisure activity. Life is not about working, and for most people leisure time is not fungible with more work.
A hobby is just work you like doing. Countless companies have been started as "hobbies". So in that respect, life is about working, so you might as well try to find work you like to do.
This is a pretty inaccurate description of life in a game studio.
Games are incredibly unpredictable. Even after Minecraft blew up in popularity, there were tons of risks. Plenty of games have blown up, only to fall off in popularity quickly. Minecraft has been far stickier than most games, which is an easy thing to acknowledge in hindsight, but a pretty challenging thing to predict.
You're right. The 9-to-5 employees only sacrifice blood and sweat. The tears are worth so much more.
Quite a lot of that previous argument rests upon the axiomatic assumptions about "fair compensation". I would argue that quite a lot of employees are not compensated fairly, and not just in software companies. The remainder rests upon axiomatic assumptions about the origins of company value. It's almost like you subscribe to the labor theory of value insofar as it benefits founders and owners, then shift back to price theory the instant it becomes a liability to them. Those are not mix-and-match.
If you argue that your vast personal sacrifices entitle you to a vast ownership share in the work-product, you cannot then reasonably argue that lesser sacrifices, made after yours, should not result in lesser ownership shares. Likewise, if you argue that your ownership share is based on the fact that your contributions increased the overall wealth of the company by that amount, you cannot then reasonably argue that the folks who methodically replaced your hasty prototype with something scalable and maintainable should not also receive partial ownership.
You may note from the article that great pains were taken to keep the Mojang line employees from quitting en masse. If they were not responsible for a significant fraction of the current value of the company, that measure would not be necessary.
When you say "where the fuck do you get off...?" I feel it necessary to ask that you reexamine your premises. What you said treads very close to, "Fuck you; I got mine." And I also recognized several common misperceptions of management, such as the idea that regular employees bear no risk of loss when they take a job, and suffer less stress than owners and managers.
In short, where the fuck do you get off discounting so deeply the value of non-owner employees? Does the fact that it happened to someone in their past justify that person doing it to someone else later?
When you start something like Minecraft, you initially do the work without being paid. That may mean you don't draw a salary for months or years depending.
When you take a job, you get paid to do the work. If you're Markus, you kept working despite the lack of a paycheck. If you're an employee, and the business stops paying you, you're almost always going to quit.
Beyond the straight-forward legal basis, it is precisely that initial risk that gives morally credibility to the ownership held by the founder.
What I've personally been building for the last six months, I draw no income from. Are you going to attempt to claim that a typical employee would take that risk? That they'd forgo a paycheck for six months to keep building the product to get it to launch? No, exceptionally few employees would be willing to do that. They'd all quit when the paychecks stopped. I'm willing to suffer and absorb risk in ways a standard employee never will, to get what I'm building to completion, and I morally deserve the ownership accordingly.
What you seem to have a problem with are the concepts of ownership in general.
I can in fact reasonably argue that employee contributions after the founding do not and should not automatically entitle someone to shares based on proportional effort. That is all decided by the employee, and what terms they're willing to accept to part with their labor/time. Don't take a job where you don't get equity, if you want equity. That's a matter of taking personal responsibility for your own life and well-being.
I find ownership of property to be a critical foundation stone of modern civilization.
But I also believe the labor theory of value to be complete bunk. You are again apparently endorsing it, but only for your own labor.
All that pain and all that sacrifice are worth exactly zero. You have ownership of the company because your name is on the incorporation papers, and your investors haven't diluted you too much yet. There is no moral justification there. You deserve the money because you have some combination of luck, money, and business acumen that got you to the right place fastest. You don't deserve it because you have a sad-sack sob-story about how hard it was for you to get it. Just be happy it's yours and not your closest competitor's, and try not to pat yourself on the back too hard. You're not a better person, you just got there first.
I am not disputing that you are legally entitled to all the fruits of your business. I am disputing that there is any moral justification whatsoever for you to be an asshole to the other people that helped it grow. You can rationalize it to yourself all you like. The money is yours because your name is on the paperwork, period. That's the way it has to be, because otherwise all the 7 billion idiots, each with different ideas about how ownership and valuation should work, would add too much friction to business.
Your justifying arguments sound to me like Divine Right of Kings or Manifest Destiny. It's the crap you feed to the proles to keep them from getting mad at you. You're not the boss because you work harder or you are more skilled. You're the boss because your name is on all the documents. You don't actually need to work harder or better or longer to justify your ownership. Your name is still on the paper. You do all that to justify your market share.
It's nice that you can afford to go six months with no paycheck. But you're not, really. You're not wasting your time; you're investing it in something you own in the hope that you will earn a return on it. The typical employee won't work for free, because they have no actual equity in the business, and they still have living expenses to pay. You're not stupid, and neither are they.
There is no moral principle in play here. No matter how much or how little an employee feels justified in wanting a percentage instead of a constant, the owner decides who gets what, because their name is on the paper, and the compromises we have made as a society in building up trade law have determined that is the important factor.
So if you sold out, you too could take the cash and walk out without saying goodbye. It would be completely legal. Your employees (and much of the rest of the world) would still be free to think you are a morally bankrupt prick. Scratch that. A rich, morally bankrupt prick, who might yet start a new business and hire them again. So they won't burn any bridges with you. But you won't make any friends that way either.
Compare Steve Jobs and Steve Wozniak. Jobs got stinking rich, and everybody thought he was an insufferable pantload. Wozniak got less in cash, and far more in respect. Jobs was better at the names-on-papers game. Woz is better at the human empathy game.
In the end, your moral calculus will always have your own personal perspectives as a factor. Just forget about that. You're not a better person, you just have your name on more papers. And above all, stop trying to bullshit us into believing that the people who own morally deserve to get all that they take. You get what you get because our system would break in unpredictable and probably horrible ways if you didn't.
It isn't because you're awesome. It's because you put your own name on your own papers, and the business world hasn't yet decided that they're worthless.
The analysis itself is pretty old. I got sick of people painting over ugly reality with pretty rationalizations a long time ago.
My in-laws had somewhat of a dispute over a matter of a few thousand dollars some years ago, when their mother died. One of the sisters wound up in control of a certain bank account, and after the burial she simply kept all the money left in the account. My spouse was angry, until I explained that we were never entitled to a dime of it, because my mother-in-law is the one who failed to manage her estate properly. We could either accept it or go to the graveyard, argue with a tombstone for a few hours, and then accept it anyway.
The fact remained that the sister-in-law did what was legal instead of what was right. She kept the money, and lost the trust and respect. We haven't forgotten. That's why if my spouse and I die unexpectedly, the guardianship of our minor children is now separated from the trusteeship for their inheritance. If they choose to live with any of my spouse's siblings, whoever that is may have to submit their expense receipts to my sister and parents in order to get a check. We were simply fortunate to have learned something about the moral fiber in the family before it impacted anything actually important.
The worst part of the whole affair for me was listening to the person whinge on and on about how much she deserved that money. She didn't. She just had her name on the paper. And that's why I was okay with her keeping it. It wasn't mine. It wasn't my spouse's. It never was. Not getting money that was never mine is a very, very, very small price to pay to learn whether someone is trustworthy. And it is now a perfect illustrative example, separating the two realities of legal contract terms and implied or traditional moral obligations.
If you want something to be fair, write the contracts to make it fair, because even a seemingly trustworthy person can bullshit himself into thinking he's doing the right thing, even while screwing everyone else over.
Yeah, I agree. It makes me think of advice my very wise fiance gives people: "Don't do more for a company than they would do for you."
In a lot of cases, sacrificing anything for a company just isn't worth it. The rest of your life is more important than your job, IMO. To be fair though, I'd have felt the pangs of greed that the Mojang employees felt, seeing all that money. In the end I would calm down and remind myself that I signed on for a fixed salary though, and be happy there was a retainer bonus in it for me.
To quote Don Draper, "That's what the money is for".
I think this is situation dependent. If you have people walking in and getting a normal salary, a reasonably good sense of security, and a good work/life balance then it's reasonable to expect that they would get less elsewhere. I'm not sure I agree with less being 0.
Of course the opposite is also true. If you take a risk you deserve to get a share of the reward. Unfortunately a lot of people seem to view founders as magic beings who should be worshipped and get all credit for a company.
I am always amused when the founder glorifiers accuse employees of feeling entitled, and proceed to rattle off the list of sacrifices which they don't realize everyone in the company must make in order to have success. Companies are a team effort. Good luck getting to 100-million-anything with only the founders' sacrificies.
Sure. But they still stand the have the most to lose. If a company goes under, an employee loses a job. The founder loses... well... who knows. Everything they've put into it. The equity, the time, the money. All gone.
That's the whole thing. As an employee, you agreed to the terms of your hiring.
When the company I worked for was bought out, employees with 401K's were given a sizable (but hardly enormous) contribution to that as part of the owner's sale. We weren't owed that, but I did appreciate it. But it was never promised to me and I was paid for the work I did.
In my experience, early employees at startups don't usually just work from nine to five. They usually _do_ make large time sacrifices. I would say that early employees generally _are_ entitled to a fraction of the profits.
A: Fair market rate hasn't been fair for a while, due to non-poaching agreements.
B: Nevertheless, "fair market rate" typically includes gaining equity over time at a company. More equity the younger the company is and the more it is growing while you're working there. If you work for "fair market rate" at Microsoft, Google, Amazon, Facebook, etc. you get stock grants, stock options, the whole nine yards. If you work for "fair market rate" at an up and coming startup you'd expect to receive stock as well, and in comparatively larger chunks.
In Minecraft's unusual case, it was already seriously de-risked when the first few employees were hired. The additions however, did keep the momentum going, and deserve a cut for that. Jeb immediately comes to mind.
I'd agree it would have been nice to have given at least some stock options to employees. The $300k bonus for staying 6 months, though, is a lot more than what one should expect to get when joining a startup. (Zero would be the usual amount because most startups fail)
They signed a contract. They made a deal to work without having that kind of cut.
We can enter in the sympathy realm after this, but no one was entitled to anything. If they didn't like the job, or felt underpayed, they should've done what everyone else does: Try to find a comfortable solution with their company, and if that doesn't work, leave and find a better job.
I see you are part of the "written word only" style of ethics. This is where you declare only those things prohibited by written law or contract to be unethical, and then grant inventive persons the status of geniuses when they find new ways by which to exploit you.
I am not, and despise exploitative use of law. I believe human behavior is so complex, that defining what is acceptable or not in paper for all the possible cases is borderline impossible. Written, clear laws have their place, as does human judgement.
That being said, it really seems clear in this case.
Compensation for work is one of the things defined at the beginning of a work relationship, comfortable for both parties. Minecraft was already big when anyone was hired, I assume that if any extra compensation besides salary was expected, it would be asked for when the work started. Disgruntlement seems a bit out of place, and seems to be used in the piece to adorn a non-story.
Plus, note that my course of action would be talking to your employer to try and find a solution that works, not just "suck it up".
Everyone wants more money. That is the nature of capitalism. They should be applauded for rationally looking out for their self interests. Just as Markus and crew should be applauded for their ability to retain staff without having to share equity. As long as people are safe, aren't being abused, aren't starving and have a home to go to in the night I say let the game go on.
I've received equity at most of the software development jobs I've ever had. For everyone, any offer must be compared against the other opportunities they have.
> you can, and probably will, leave whenever you feel like it with no stress or loss
And you can, and potentially will, fire your employees or make them relocate whenever you feel like it with no stress or loss.
Everyone should get fired from a job they love, and get to quit a job they hate. It gives you a totally different appreciation for the nature of business.
I have to admit that I don't really understand the spirit of some of the commenters here that feel that the rank and file employees were wronged.
Every year my company has to decide how much bonus and equity to give me, if any, and I have to decide if I want to continue to work for them. If the work is interesting, my skills are growing, and the compensation is adequate, then I'll probably continue to stick around. If other companies offer me a sufficiently better gig then I'll leave.
I remember that Notch was doing Minecraft development all alone for the longest time, even after it had become hugely popular, and users had been begging him to hire people to speed up development. So these employees join as regular employees, getting a regular salary, taking none of the risks of the founders, yet they are pissed off because they don't own shares of the company.
I suspect this is very common in successful startups, and in a way I understand it: They see the founders, guys their age, rolling in the dough, on the back of their work. I've felt the same way as an employee, when stuff I come up with and implement ends up making the company a lot of money and the most I get, if I'm lucky, is a pat on the back.
But, as a founder? Where the fuck do you get off expecting to take a piece of my company, that I have literally sacrificed blood, sweat and tears for, taken time away from my life and my family, risked huge amounts of money, relationships and years of my life, without any guarantee that I would ever succeed. And you take an interview, walk in the door from nine to five and do your job, which you get fairly compensated for, and would not be paid anymore for anywhere else, you can, and probably will, leave whenever you feel like it with no stress or loss. Yet because the company succeeds, somehow you are entitled to own parts of it for simply being there and doing your job?