Worker- and founder-ownership
Pragmatics of owning the economy
2015-02-16 — 2025-06-17
Wherein the division of stakes is treated as a calculable accounting task, and methods such as dynamic equity splits and slicing pie are described, including application to joint loans with staggered payments.
How to trade off ownership, salary, sweat-equity, and cash investment optimally (or fairly) in new ventures.
1 Dynamic equity split models
I naively imagined that when founding a firm, a common model might be that a founder’s share of the total equity would be proportional to the value of their contribution. It took me some googling to discover that this concept is called “dynamic equity split” and is considered a radical new idea. The radical innovation, AFAICT, is evaluating how much money and time each party actually invested when dividing things up. I’m utterly baffled that this should be considered in any way innovative, but here we are.
1.1 As “slicing pie”
Some consultants have made bank promoting an approximation to the idea under the banner of “slicing pie” (Moyer and Wasserman 2016). The basic trick is to assess everyone’s relative contribution against the market valuation of that contribution at the time it was made, add everything up, and use those relative values to determine each person’s share of the final valuation. So people are credited for both equity and sweat equity at market rates, in terms of the stake they acquire in the risky asset.
I haven’t paid subscription fees for that service, so I don’t know the models’ details, but the worked examples I found online seem weak on time discounting and risk premiums, which seem to me to be real factors. Given that, and the fact that fairness is hard in several ways, I think the claim that Slicing Pie is “perfectly” fair is likely oversold. Call me back when we all know our Shapley valuation.
“Better than the screaming nightmare void absent common sense that came before” might be fair, however.
- Slicing Pie “The World’s Only Fair [sic] Startup Equity Calculator”
- Dynamic Equity Split or How Everyone is a Co-Founder | by Alex Zhebryakov
- How to Use a Dynamic Equity Split Program So Everyone Gets What They Deserve
- Learn the Slicing Pie Model
1.2 For simple debt, this is easy
We don’t need a name-brand consultancy to work this out in simple cases.
Say several parties take out a loan together and want to pay down the loan at whatever rate is convenient for them. Their payments have different rates at different stages in the life of the loan. How do we calculate the equity share of each participant?
Relevant to cohousing.
- Dynamic Ownership - Generation Home — a real estate lender that offers integrated dynamic equity split as a service.
2 Background
- Chris Dillow on worker-owned firms
- David Ellerman’s worker-owned firms linkdump
- Exit to Community Calculators: A tool designed to help companies transition to community ownership. It provides resources for founders and workers who are interested in selling their business to their community.
- The Mystery of the Kibbutz. Abramitzky (2018) is summarized in Grok in Fullness, based on an econtalk. Interesting ideas about what works and doesn’t work in private socialist communes like kibbutzim. (FWIW it sounds like the kibbutzim are remarkably effective given how dated their mechanism design is.)
- Also GrokInFullness: Why Worker Ownership of the Firm Is (Usually) a Bad Idea, which makes some good arguments about (certain kinds of) worker ownership being bad.
- CommunityWealth.org has a particular agenda (pro-worker-autonomy). Various fun reading lists there, for example, on co-operatives. They run a layperson’s blog about such things.
- Interesting illustration of the way things differ depending on who owns whom; the wobblies write about worker exploitation at consumer-owned cooperatives.
- Bob’s Red Mill is employee-owned
4 Incoming
- We should own the economy — by Elle Griffin — The Elysian
- PCO: A New Model of Ownership — RadicalxChange
- The Grocery Store Where Produce Meets Politics
- What Co-ops and DAOs Can Learn From Each Other
- Decentralized autonomous organization
- Using Time Value Of Money For Real Estate Valuation
- How S Group became Finland’s most dominant retailer: The Cooperative That Could