A Return to Ancient Times: How Skin in the Game Can Revolutionize American Business
Employers, employees — unite!
Blood and sand
An ancient Greek wrestling school required participants entering to ‘strip or retire’ because spectators weren’t welcome. You were in the ring or out the door. The person who risked nothing and owned no downside was perceived as shameless, dangerous and dishonorable. The absence of consequences stripped someone’s credibility to the point where they were generally laughing stocks whose opinions were ignored — I mean, come on — who’s going to take the guy full of hot air seriously? Certainly no one in ancient Greece or Rome.
Fast forward to modern society, where, as Nassim Taleb points out, these folks are actually given platforms to predict stocks, make policies and influence people’s lives. In Antifragile, he states: “At no point in history have so many non-risk-takers, that is, those with no personal exposure, exerted so much control.” Where’s the lie? If we looked at corporations, cable news channels and internet pundits through the lense of ancient times, many wouldn’t be allowed through the door of the wrestling school because they won’t put skin in the game.
A bigger pie feeds everyone
It’s not a coincidence that companies who incentivize employees through skin in the game flourish. One deli managed to catapult itself to $40M in revenue thanks in part to employee equity programs. A small digital marketing agency had its best year ever in 2016 after giving staff ownership stakes. Funny how that works, eh?
These companies aren’t mavericks, nor are they accessing secret information. In fact, several openly admit to taking their cues from “The Great Game of Business” which was published back in the 80s. OfficeMax co-founder, Michael Feuer, subscribed to an equity formula from day one, because he knew that employees with skin in the game were the ultimate leverage for monster success. He famously said that he was “much better off having a relatively smaller piece of a huge pie than a huge piece of a very small pie. So you award people equity and you get diluted, but you have more at the end because it’s a bigger pie. It’s pretty basic. Unfortunately not many people understand that.” He’s right, but this attitude is shockingly rare in corporate America.
What today’s race to the bottom workplace culture forgets is that aligning employer/employee motivations works. Deli workers are motivated to scrape the last bit of mayo from the container the same way that the marketing employees kept more work in-house: it’s their money too. When you’ve got ownership in a company, it’s much easier to really give a shit.
Workplace trust, engagement and productivity skyrockets
Boomers love to wax poetic about the good old 1950s, but conveniently forget what made that era so prosperous: employers and employees both had skin in the game. Employers eagerly invested in their employees for decades by taking care of them with training, retirement plans, bonuses and strong wages. In return, companies received loyal, dedicated staff who expected to devote their entire career to their employer. It was a win-win and America prospered.
This post-war workplace reciprocity benefited both parties, until T. Boone Pickens obliterated this social contract when he convinced American companies they owed their loyalty to shareholders instead of their employees. This shift marked the beginning of the end. Today this misguided notion has manifested itself in companies earnestly bragging about treating their employees ‘well’ by providing nerf guns and organic juice — all while refusing to commit to hiring permanent staff and providing medical benefits. It’s not terribly surprising to now see low wage workers walking off the job in droves.
The larger ripple effect benefits society
Back when employers followed the rules of ancient times and invested skin in the game, they honourably owned the upside and the downside. Now, thanks to Picken’s misguided advice, they just own the upside. Since then, corporate America has raced to unload their share of SITG by heaping it upon their employees. Companies of the past and ancient civilizations would be shocked at how dishonorably employers act towards their employees who are expected to uphold a one-sided relationship or face starvation.
The proven path forward requires returning to the past. We know it works because people prospered and the economy boomed. Which of those parts is bad? Oh wait, that’s right. The wealthy can’t leverage the threat of poverty to require folks to work for slave wages and perpetuate this broken system. What SITG offers is fair for both employers and employees because there’s a clear (and fair) link between correlation and contribution across the board.
War of the damned
Ancient societies believed a person owning their risk was honorable, and it was a big deal to them. But talk was cheap, and reputation had to be consistently proven and tested. Citizens demanded proven traction from their leaders, politicians and heroes because honor wasn’t bestowed unless it was earned. Today we make zero demands of the wealthy and don’t require them to uphold their end of the social contract by paying their share of taxes, paying employees a respectable wage and acting with integrity. They own all the upside and we’re crushed by the downside.
Restoring balance to this skewed equation is childishly simple: align employee and employer motivation through skin in the game. Those who want to be perched on top should be required to consistently prove themselves and fulfill their societal obligations. This shift would take care of the windbag pundits who have no right to influence anyone, while improving the trajectory of all of corporate America for the next century. We did it once, we can do it again.