Employees buy Gravity Payments CEO Dan Price A Tesla; Gravity Payments Team Surprises CEO Dan Price, with a Tesla; These employees thanked their Boss with a Tesla….Very recently, news of Gravity Payments gifting a Tesla to their Boss, CEO Dan Price, had become headline news. Supposedly, the employees saved for months to surprise him. They wanted to thank him.
Born in 1984, Dan Price, grew up in Southwest Idaho, near Nampa. Like his other siblings, he too was home schooled till the age of 12. Early in his life, he learned to play the bass guitar and formed a Christian rock trio called Straightforword. He was both a bassist and a business manager in the band, exploring his musical passion and business acumen. According to Price, the rock band sold 2000 CDs and even made live performances for as many as 4000 people. When he was 16, the band broke up and he sought out for change. Business was always his area of interest, being inspired by his father, who is the president and CEO of Price Associates, a business consulting company in Nampa. But business for him was not all about money. He wanted to help friends, like Heather, who ran the Moxie Java coffee shop in Caldwell, Idaho. He wanted to help all those who were being gouged by big financial firms everytime they swiped a patron’s credit card. He wanted to help them negotiate cheaper rates and better services. His intentions, ideas and negotiating skills together with technological expertise, soon won him 200 clients amounting to $12,000 in a month. By the age of 20, when he enrolled into the Christian Seattle Pacific University in 2004, he had already developed a more sophisticated business model, processing credit card transactions, that led to the foundation of Gravity Payments.
A credit-card processing company, Gravity Payments, was setup by Dan in 2004, in collaboration with his older brother, Lucas Price, who was then already a graduate and had prior experience working in credit card processing in California. Processing companies were intermediaries between the credit card company and the merchant. Everytime, a credit or debit card is swiped, they relay the transaction from the merchant to the credit card company, which then transfers the required funds to the merchant account. As middlemen, these processing companies, charge the merchant a fee and pay the credit card company a fee in turn. Gravity offered better services at lower prices by first outsourcing and then building its own arsenal. The goal of the Price brothers was to rectify, what they perceived as problems in the payment processing industry.
“I saw a lot of things that were missing in our industry”- Price was quoted to say by Lynsi Burton in Credit him with business savvy.
By June 2008, the company had emerged as the largest credit card processor in Washington, serving more than 15,000 clients globally. Today, the company is headquartered in Ballard of Seattle, Washington and employs over 100 employees.
An entrepreneur since his teens, Dan Price with his shoulder-length hair and Brad Pitt like looks, prided himself on being a good employer. However, his bubble was burst by a 32-year old entry level employee, Jason Haley, who earned less than $35,000 a year. One day, in late 2011, Price noticed Haley outside on a smoking break. He appeared to be disturbed. Concerned, Price approached him but was surprised by his outburst. “You are ripping me off”- was Haley’s response to Price’s concern. He had always known Haley to be shy and was surprised by both his accusation and outburst. He justified that the pay of his employees were based on market rates and that he had no intentions of exploiting him or any other employee for that matter. But this did not satisfy Haley. He was angry at Price’s so called ‘financially disciplined policies’ which was not allowing him to earn enough for a decent living. Shocked and hurt, Price felt like a victim. He felt the accusation was unjustified since he was controlling costs only for the benefit of the company. But soon it dawned on him that in the name of financial discipline he might actually be hurting his own employees. Humility!
Since its foundation, Gravity Payments had grown steadily in the first four years. However, the unfortunate global recession in 2008, nearly wiped it out. Traumatized, Dan became conservative in his spending and maintained a check on the employee paychecks, even after the economy recovered. He now recollects that he was so scarred by the recession, that he did not realize that his financial discipline, something that he bragged about, was actually hurting his own employees. The realization was a turning point in his life. Haley had transformed him from just an entrepreneur to a crusader against salary disparity. For three years, since the incident, Price gave his employees 20% annual increments as profits regained.
Another incident that also contributed to Dan’s change of heart and vision was his walk in March with a good friend, who earned less than $50,000 annually, working 50-60 hours a week. She was struggling to make ends meet with student loans in her small salary. She was worried about a $200 increase in room rent. Smart and equally capable, Dan could not justify the disparity in their salaries. And this was the same across the country. The mere 1.8% (adjusted to inflation) increase in median wages, was in sharp contrast to the 22% increase in the country’s productivity. Salaries of CEOs were disproportionately higher (about 300 times) than that of a typical worker wage, his own, being about 23-fold higher than the average wage at Gravity, with new hires making just $35,000 a year. The pay disparity bothered him. The welfare and well-being of his colleagues concerned him. He was worried that his disturbed employees might not be able to provide the best services to his clients. He recalled a study by Princeton behavioural economist, Daniel Kahneman, that while people did not feel happier on a daily basis as their income rose above $75,000, they were decidedly unhappier the less they earned below $75,000.
In 2013, he announced a 2% increase in the pay for all employees, earning less than $100,000, as a response to the lapse of the Middle Class Tax Relief and Job Creation Act of 2012, also known as the payroll tax cut. Last year in April, Price invited NBC News and The New York Times, to make a revolutionary announcement. Over the next three years, Gravity Payments was to phase in a minimum salary of $70,000 for its employees and the project was to be funded through deduction in his own pay package from $1.1 million to $70,000 as well. A modern Robin Hood!
“I just decided I’m gonna do $70,000. I don’t care if I have to stop paying myself or I have to work 20 hours a day. I’m going to do it”- Dan Price to Inc.
The minimum wage was raised to $50,000 immediately, with a $10,000/year increment planned to be phase out in the next two years. Others earning $50,000 to $70,000, would get increments of $5000. He planned to fund the idea through his own paycut. His 3 bedroom home with a pool was listed for $950 a night. The companies past profits of $2.2 million became his backup fund. He also sold all his stocks and exhausted his retirement accounts, mortgaged his properties. “Most people live paycheck to paycheck, so how come I need 10 years of living expenses set aside and you don’t?”- said Dan. He also added that a modest pay was a good thing and would help him to stay focussed.
“I started with nothing. I can always make enough to support myself.”-Dan Price (Paul Keegan, Inc)
The announcement created ripples across the globe. Well, why not? It is not everyday that a CXO of the corporate world, making millions, sacrifice even a small percentage of their salaries to make a difference in the lives of their employees. His benevolence created history in the social and news media, inspiring many to do the same. Walmart announced raises for its lowest paid workers. Interested employees flooded the offices of Gravity seeking an opportunity to be part of the company, because they thought they could make a difference here. Everyone, far and wide, applauded Dan Price, spurring debates across the American corporates. What should be the basic pay for a worker, especially at a time when the world was still recovering from the recession? How to control costs and boost profits without sacrificing the welfare of the employees? Well, the latter was never the real intention. Budgets were on tight leash only for the benefit and sustenance of the organizations.
However, appreciation was not all. Dan’s Robin Hood act, also drew many criticisms. Multimillionaire Limbaugh, was quoted by Paul Keeman for saying that he hoped that this would become a case study in MBA programs to demonstrate how socialism does not work. Some even accused him for orchestrating a publicity stunt. And as an icing to the cake, his brother and co-founder of Gravity, Lucas Price, sued him, accusing Dan for paying himself “excessive compensation” earlier. He requested the court to order Dan to buy Lucas’s then 30% share at a ‘fair value’.
Socialism vs Capitalism- what works?
However, despite the fallout with his brother, Dan vowed to protect the firm and never had a negative comment for his brother. “We’re in such a great place with the company and Lucas helped me get here. Anything he gets, I won’t begrudge. I’ll be glad he got it and think he deserved it” – said Dan Price after being sued (Paul Keegan, Inc). He also added that he would do anything to help his brother reach his financial goals, as long as his employees and clients did not have to bear the burden.
In a recent proceeding, Judge Theresa B. Doyle, from the King County Superior Court, ruled in favour of the Robin Hood stating that Lucas Price had failed to prove his claims. To celebrate his win, the employees at Gravity Payments, gifted their Boss with a brand new car, a Tesla, his dream car, to show their gratitude. Dan Lucas had won their hearts! Their love and affection made the tesla priceless.
Increasing costs has never been viewed as a conventional means for increasing profits, but Dan Price, did just that for the well-being and happiness of his employees. The high salaries of the top management seemed unjustified when others in the organization were struggling to make ends meet. It was morally wrong. From the business perspective as well, he knew that an unhappy employee could never provide the best services, which ultimately would take its toll on the business. Happy employees make a profitable business! To inspire and demonstrate to the business world that importance of moral ethics, he hoped that he would in time be able to turn around profits, bring his salary back to the market rate and regain his $3million loan. He wanted to encourage other business heads and assure them that these cuts were only temporary and in the long run would be profitable for their organizations. He wishes to advocate to the world, a business scorecard defined by purpose, impact and service rather than just money.