Since the article ends my mentioning Missouri, it is worth mentioning that his cofounder Jim McKelvey used his Square success to found Cultivation Capital, which is a VC focused on parts of the midwest often ignored by the coastal VCs (e.g. Missouri, Indiana, Southern Illinois, etc.)
Can anyone who's been though an IPO comment on what happened to the early employees with their 0.1% stake (of the original 10 million shares)? Everyone understands that they'll get diluted with new rounds, but when I read that Dorsey's giving away 40,000,000 shares I wonder what happened to the poor sap who started with 10,000. Do companies typically issue more options or RSUs to existing employees? How many?
Varies from company to company. But every startup I've been in, and a couple of larger companies, gave "refresher" grants to folks annually. That keeps employees from being fully vested and helps skew equity toward the employees who are contributing the most.
Updated title on original source:
"Jack Dorsey is giving up at least 50% of his stake in Square to help underserved communities"
Update: This post has been updated to correct that Dorsey will commit 10 percent of the entire company, not just his equity as previously stated. In addition, our calculations were off and I regret the error.
This is commendable. Actually intending to making the world a better place (in the non HBO-Silicon-Valley-Show-way).
Depending on how he does this and the basis of the equity, this move may be an amazing tax shield, worth WAY more than it seems.
{edit} - I actually think this is exactly the strategy being applied by him and his team of tax strategists - He's using this "donation" as a tax shield and keeping the money in a foundation, which he can use to help "the underprivileged" as he pleases, instead of just paying an amazing amount of tax like Zuck did.
Any tax benefit from putting money into a foundation is limited to the money put into the foundation. So if you put $1 into a non profit, the government forgoes collecting the tax on just that dollar.
The way this can be used to protect money from taxes is to establish a foundation that then employs you and your descendants. The money paid out is taxed, but the principle can sit there untouched.
It's not a tax shield if you don't get to keep the money.
Of course, if you were going to donate anyway, then sure, it's more tax efficient to give appreciated stocks. But calling it a tax shield makes it sound like you can stand to gain personally by doing this.
I must be hugely cynical because my first thought was "what has this guy done to commit so much to public benefit." There is an unnatural or questionable amount of money for people to give up isn't there?
Jack Dorsey's net worth is approximately 2.4 billion [1]. Back when Bill Gates stepped down as CEO of Microsoft, he did so not to retire, but to take on the responsibility of spending his money in the best possible way for society. [2]
It's pretty easy to imagine a situation in which increasing your net worth can't really earn you more to experience or nice things. I'd wager Dorsey's already at that point, but maybe still wants to create things.
Does anyone else feel like it's the government's responsibility to help all the needy sections of the society, and billionaires intervening only abets and condones all the deliberate/unintentional mistakes of the former, and lets them escape it?
Volunteering and donations are a much bigger thing in the US than in Sweden. Here we just tax everybody more, and that mostly takes the place of benevolent billionare philanthropists.
So you'd rather have a middleman coercively distribute funds or amass more debt, and take some of the funds in overhead, rather than be able to direct your money where it's deserved, especially in an age when you can use the internet to set up payments and research deserving institutions? If you abdicate responsibility -- the poor are some distant entity's problem -- you are not being virtuous. By the way, it's not ONLY billionaires that can help with the needy. Your time is also valuable--for example, you could visit some lonely elderly people in a nursing home. If you pay it forward, people will help you out when you're in need. Your friends and family become your "social safety net."
The government is too bird's-eye-view to understand the details of different communities. I do think, however, the government should have some kind connection with a group of people in each state to get a status on things. And each state should have groups in different communities representing it to report up to the state-level group.
I feel like USA is already kinda designed that way, but something is making it not work... at least, it's not working for the poor.
Surely both can and should do their bit.
Governments have the scale and power to run systemwide education, healthcare and crime reduction programmes; wealthy entrepreneurs have the freedom to try experimental schemes or artistic programmes that many people think sound like a waste of money.
No. The assumption that government should fix everything is selfish and lazy. It absolves us of personal responsibility, and gives us someone to blame when things go wrong. I'd feel sorry for the politicians, except they do more than anyone to perpetuate this.
My first reaction was that funding artists, musicians, and business is probably not the greatest charitable good that can be done with his money... but then I reconsidered -- It might not be the greatest good, but it is more good than leaving the money in the bank. So... OK, I'll give it a mild thumbs up.
Is there an honest belief that wealthy people keep their money sitting idle in bank accounts? That would explain a lot of the hyperbolic language around the politics of envy - it's a pretty easy (although nonsensical in reality) leap to assume the wealthy accumulate money just to keep it out of the hands of "the people."
If someone gives a fortune away for something that deems noble, I would give it a double thumbs up even if I don't completely agree with the recipient. Myself, I would have probably directed that money somewhere else, but I still plaud Jack's initiative.
In addition to that, I've always had mixed feelings about him: yes, successful entrepreneur and apparently smart person, but I saw him in person at an event and I made my (bad) opinion about his personality. This gesture somehow fights against that opinion. I might start to like him after all.
Funding artists, musicians and businesses, especially in underserved communities is absolutely the best way to reduce poverty.
The world doesn't have a jobs problem, it has a funding problem. It requires capital to accomplish most tasks of notable quality. Plus it circulates the money better.
It appeals to me personally. My personal income in NYC is much higher than the average for the area I live in, and it seems to me that many younger people around me have aspirations modeled on those they see in popular media/instagram/youtube. Photography, sound production, graphic design, illustration... these are real, if difficult careers.
Part of helping underserved communities would be to move some of the business outside the Valley and major metro areas. Find the mid to small cities and spread the wealth.
...well, the line between spreading the wealth and gentrification is a bit fuzzy.
I'm not convinced what's happening in SF, and starting to happen in Oakland, is actually desirable by the residence that were there before tech people showed up.
I think it's much better that Jack donates to help public schools, libraries, arts & crafts, other recreational activities in underserved communities.... without sending the gentrification catalyst into them.
This is quite true, the way companies hyper-concentrate is not really given much thought it seems. There are obviously benefits to concentration when it comes to fostering innovation but like everything I imagine there is a point of diminishing returns beyond which the benefits turn to negative.
A similar phenomenon can be seen in the DC area, all the companies are hyper-concentrated in NoVa creating a miserable commuting situation for hundreds of thousands of area residents, meanwhile a city like Baltimore a mere 40 miles away is completely ignored when it comes to locating offices.
he should use that to save Twitter but good on him for getting his priority straight and putting human lives over some glorified text publishing app that gives the world an insight into our most mundane daily mental noise that we otherwise would've never spewed if it wasn't for such social media platforms.
I'd prefer these announcements wait until the stake has been distributed.
I think it's been over a year since reddit said the community would receive a 10% stake in the company (or maybe it was just a direct payout of 10% of the amount raised in a previous round). I haven't heard anything about it since.
[+] [-] cowsandmilk|10 years ago|reply
[+] [-] 100k|10 years ago|reply
[+] [-] ChuckMcM|10 years ago|reply
[+] [-] transitorykris|10 years ago|reply
[+] [-] stpe|10 years ago|reply
Update: This post has been updated to correct that Dorsey will commit 10 percent of the entire company, not just his equity as previously stated. In addition, our calculations were off and I regret the error.
This is commendable. Actually intending to making the world a better place (in the non HBO-Silicon-Valley-Show-way).
[+] [-] rco8786|10 years ago|reply
[+] [-] _lex|10 years ago|reply
{edit} - I actually think this is exactly the strategy being applied by him and his team of tax strategists - He's using this "donation" as a tax shield and keeping the money in a foundation, which he can use to help "the underprivileged" as he pleases, instead of just paying an amazing amount of tax like Zuck did.
[+] [-] maxerickson|10 years ago|reply
The way this can be used to protect money from taxes is to establish a foundation that then employs you and your descendants. The money paid out is taxed, but the principle can sit there untouched.
[+] [-] murbard2|10 years ago|reply
Of course, if you were going to donate anyway, then sure, it's more tax efficient to give appreciated stocks. But calling it a tax shield makes it sound like you can stand to gain personally by doing this.
[+] [-] dclowd9901|10 years ago|reply
[+] [-] eric-hu|10 years ago|reply
It's pretty easy to imagine a situation in which increasing your net worth can't really earn you more to experience or nice things. I'd wager Dorsey's already at that point, but maybe still wants to create things.
[1] https://en.wikipedia.org/wiki/Jack_Dorsey
[2] http://money.cnn.com/2006/06/15/technology/microsoft_news/
[+] [-] humility|10 years ago|reply
[+] [-] msvan|10 years ago|reply
[+] [-] ahallock|10 years ago|reply
[+] [-] smtddr|10 years ago|reply
The government is too bird's-eye-view to understand the details of different communities. I do think, however, the government should have some kind connection with a group of people in each state to get a status on things. And each state should have groups in different communities representing it to report up to the state-level group.
I feel like USA is already kinda designed that way, but something is making it not work... at least, it's not working for the poor.
[+] [-] arbitrage314|10 years ago|reply
[+] [-] notahacker|10 years ago|reply
[+] [-] treerock|10 years ago|reply
[+] [-] codingdave|10 years ago|reply
[+] [-] oldmanjay|10 years ago|reply
[+] [-] simonebrunozzi|10 years ago|reply
In addition to that, I've always had mixed feelings about him: yes, successful entrepreneur and apparently smart person, but I saw him in person at an event and I made my (bad) opinion about his personality. This gesture somehow fights against that opinion. I might start to like him after all.
[+] [-] rezistik|10 years ago|reply
The world doesn't have a jobs problem, it has a funding problem. It requires capital to accomplish most tasks of notable quality. Plus it circulates the money better.
[+] [-] lips|10 years ago|reply
[+] [-] ScottBev|10 years ago|reply
[+] [-] smtddr|10 years ago|reply
I'm not convinced what's happening in SF, and starting to happen in Oakland, is actually desirable by the residence that were there before tech people showed up.
I think it's much better that Jack donates to help public schools, libraries, arts & crafts, other recreational activities in underserved communities.... without sending the gentrification catalyst into them.
[+] [-] Edmond|10 years ago|reply
A similar phenomenon can be seen in the DC area, all the companies are hyper-concentrated in NoVa creating a miserable commuting situation for hundreds of thousands of area residents, meanwhile a city like Baltimore a mere 40 miles away is completely ignored when it comes to locating offices.
[+] [-] curiousjorge|10 years ago|reply
[+] [-] arbitrage314|10 years ago|reply
[+] [-] arbitrage314|10 years ago|reply
[+] [-] jsprogrammer|10 years ago|reply
I think it's been over a year since reddit said the community would receive a 10% stake in the company (or maybe it was just a direct payout of 10% of the amount raised in a previous round). I haven't heard anything about it since.
[+] [-] LunaSea|10 years ago|reply
[+] [-] butwhy|10 years ago|reply