A few months ago I wrote about Dan Price of Gravity Payments in Seattle. He made a splash for announcing that he was raising the salaries of all his employees to at least $70,000 per year by cutting his own million-dollar salary to pay for the raises. Even Rush Limbaugh got in on the act, saying that the move was “pure, unadulterated socialism.”
I thought then, and I still think, that Dan’s idea is a brilliant one.
Over the last few days, however, Dan has gotten more press because of the financial “woes” he’s facing. Fox News reports that he’s taken to renting out his apartment in order to make ends meet. The New York Times gives a fuller, somewhat more nuanced explanation of the situation, pointing out that the financial impact of his decision to give raises has been mixed; he lost a couple of his best employees and a few of his customers, but he’s also earned new customers and a great deal of publicity from the change.
And as much as I like El Rushbo (I grew up listening to him), he’s dead wrong. Tocqueville explained the difference between democracy and socialism expertly: “Democracy and socialism have nothing in common but one word: equality. But notice the difference: while democracy seeks equality in liberty, socialism seeks equality in restraint and servitude.” The equality of socialism is imposed by the central planners who substitute their own judgment for the judgment of each individual.
Dan’s decision, on the other hand, is a perfect example of the liberty Tocqueville describes. Dan looked at his business and at his own well-being and said, in effect, “I can do better for my employees without great cost to myself.” No government actor forced him to it. No bureaucrat requires any employee to accept Dan’s offer of employment. And no one demands that any other business owner follow his lead.
That’s the very essence of a free-market decision.
For his part, Dan has offered to “give up everything I have personally and everything I’ll have for years to come” as part of his effort to make this change work. That’s the power of a change like the one Dan Price has made. Undoubtedly Dan has made mistakes. No question his efforts will take refining over the coming months and years. The beauty of the free market is that he is free to make the decision.
Be that as it may, it’s a line at the very end of the New York Times piece that matters most to me here. One of Gravity Payments’ newest customers, Mario Zahariev, realized that after switching from another provider to Gravity Payments he’d be saving nearly $800 per month in card processing fees. Instead of pocketing the difference (which, I’d stress, he’d have every right to do), Mario decided to use the money he’d save to give raises to his 8 employees.
Dan’s made his decision and for now it looks like he’s sticking with it. I’m still impressed by his willingness to give up his own salary in order to make his employees’ lives better. Nick Hanauer, a Seattle venture capitalist, said of Dan “Who can tell what that last big thing is that catalyzes big change?”
Who can tell indeed.
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