Thoughts on (Amazonian) leadership

The "leaders are owners" bit is a great idea from the shareholders' perspective, but a bit of a raw deal for the employees. That is, every owner wants the employees to act as if he has as much skin in the game as an owner does. But the employees simply do not. They might have some equity, but at Amazon it would only be the tiniest sliver. If you can convince such employees to act as if they are owners, then good for you I guess. But savvy employees would only act as owners to the extent that they are given upside potential to match.

I don't understand how slivers of stock is supposed to incentivize anyone to do anything.

Amazon has 1.5 million employees. Say that it's a completely fair co-op and I have a 1-in-1.5-millionth share of the whole company. Their market cap is about 2.5T, so this is about 1.6 million USD in stock that I own. (By amazing coincidence, their market cap in USD is about the square of the employee headcount)

But if I'm a rank-and-file employee with nobody under me, then doubling my production could only be equivalent to adding one more 1-in-1.5-millionth to the company's value, right? Equivalent to hiring one more employee at my level.

For that impossible extraordinary 80-hours-per-week double effort, my stock would go up... a dollar, right? Roughly 1-in-1.5-millionth of my 1.6 million dollars of stock.

I think it's a joke. I think "stock incentivizes people to work harder" is a little joke that people tell each other so that labor will be pacified with company stock and leftists will bicker about co-ops instead of saying the quiet part which is that people just want more money

I just don't see any math in which stock isn't basically a tragedy of the commons for boots-on-the-ground workers. If I was paid for exactly the labor I do, doubling my effort doubles my paycheck. If I have stock, some of that revenue is spread to everyone else who has stock. Giving everyone stock doesn't incentivize anyone any more, right? What am I overlooking?

I’m not going to strongly defend it but this “doubling my production could only be equivalent to adding one more 1-in-1.5-millionth to the company's value, right?” isn’t true; if your work scales or you are managing people, you could move the needle more - say you launch a new service from scratch.

You need to multiple it by the probability of that new service actually succeeding, which is low.

And even then, do you expect it to move stock price by more than 10%? Otherwise it's not going to meaningfully impact your RSU compensation

The real purpose of equity grants is to fudge the OpEx accounting costs on non-GAAP reports.

Yeah I think it only really makes sense for people who are very high up (and are given a lot of stock) and for the purpose of creating an environment where "we all work really hard" (and slackers are looked down on). I think Amazon's leadership principle is going for the latter: create social costs for not working hard.

You are overlooking the part where you affect more than just your own behavior, but that of your colleagues. You also assume a linear function of productivity and stock price.

You are correct with regards to amazon. In earlier stage companies, your rsu can 3x overnight once you ship

In early stage companies - ie private companies - your RSUs are Monopoly money that will statistically be worthless. In a public company, my RSUs are immediately available to liquidate (which I did).

Isn't there also a difference in tax treatment?

Ownership without corresponding property rights.

>For that impossible extraordinary 80-hours-per-week double effort, my stock would go up... a dollar, right? Roughly 1-in-1.5-millionth of my 1.6 million dollars of stock.

That might be the case if workers were bricklayers and output was measured in walls. But supposedly this incentive might cause you to have a brilliant idea that makes billions for the company, and then you're gaining more than a few bucks.

You could just work smarter instead of more and have a much larger effect on stock price.

I don't need to do that. I contest the claim "doubling my production could only be equivalent" by giving a possible example where it isn't equivalent. That doesn't depend on how likely the example is, only that one (and many) of them could exist.

I mostly agree with you but not for big tech. You see, in startups this is a very fair criticism - you get super low salary and barely any stock in comparison with the founders, so working as "owners" often might not make sense. In big tech though, you get paid well, so it's normal to expect ownership from everyone.