Businesses-as-Dictatorships

Our changing climate, the gaping wealth gap, discrimination, and exploitation are but a few of the inescapable side-effects of the system we live in. A system that “divides, demonizes, and causes us to suspend our instincts toward better.”^∇ But it has also brought us abundance and we do not want to throw the baby out with the bathwater.

What is clear is that we need a generative way of relating to one another, a different paradigm, a different model. And businesses are the place to start, transformed into companies-as-incubators for what comes next.

Nature follows a simple path to create big beautiful things out of small, unpretentious ones. From a tiny seed to a mighty oak tree. We don’t think that a long list of color scales or a 17-page constitution are necessary, or even helpful, to make a fundamental change. Eventually, these can become dogma, a form of force, and sabotage our progress. With that in mind, we came up with what we think is the simplest, most basic foundation to support our coming together to share work and wealth.

Company Foundation

In Radical speak, a company is what we call a group of people who come together to build something bigger than themselves. The word “company” comes from the Latin co-, meaning ‘together’, and pan-, meaning ‘bread.’ In other words, people who break bread together. We distinguish companies from businesses. Businesses 1) are dictatorships, and 2) their only reason for being is to make money for the owners.

Every company is different because the people who embody it are different, and this means that every company must find its own way. What fundamentally makes a Radical company different from a Fiat business is that it has a explicit Foundation,

Other practices can be layered on top of these, but for a Radical company this foundation is essential, otherwise it is just a Fiat business with “ain’t-we-nice” sprinkled on top.

Fiat Hierarchies

Hierarchies don’t just go away. Hierarchies are always present, but, unlike in a Fiat business, a hierarchy is not imposed in a co-managed company. Hierarchies that do emerge are dynamic, fluid, and shaped by the people involved, and what’s needed at a particular time. “An organism constantly changes. The cells develop, die and are replaced. It adapts to the current environment or goes away. … The org chart is insufficient.”^∇

Explicit and Transparent Alignment

In order to create a Radical company, you first need to be explicit about the company’s Impact (i.e., what for), its Purpose (i.e. why), and Mission (i.e., what, how, and when). You might call them something different or you might lump them in different ways, but, no matter, they have to be explicit and completely open and accessible to everyone.

The three-finger Scout Salute^∇ is a good mnemonic for it,

• Impact is our beacon, a clear point of light just over the horizon that guides us. This is what many call Vision but we wanted to put more emphasis on the impact that vision will have on the world.

• Dave Logan, lead author of Tribal Leadership, used to call it Noble Cause, but these days he prefers to call it Noble Passion. As he puts it, “… a noble cause gets you out of bed. A noble passion gets you out of bed early and keeps you up late into the night.”^∇

• Purpose is the reason why we, as a company, are focused on this particular Impact. It doesn’t have to be world shaking and it doesn’t have to strum your heart’s strings. An effective Purpose must clearly express why it is important for others to join us in this adventure.

• The Mission defines what we are going to do to move towards the Impact, how we are going to do it, and by when. This is a live, dynamic conversation where everybody who wants to can participate. It is not "suggestions" sent by email to somebody else who is going to select by popularity or any such. And, yes, it scales: there are many ways to do it with 50, 1,00, or 10,000 people.

This is but one way to express alignment. The important thing is to make it explicit, simple, and meaningful to every present and future co-owners in the team.

Recognizing Contributions

The distribution mechanism we describe below recognizes contributions, makes ownership decentralized and dynamic, supports egalitarian and equitable wealth sharing, and it scales to organizations of any size.^∇

The Rosedale Distribution

Rosedale Distribution^∇ is our name for a practice that we first heard from entrepreneur Philip Rosedale,

• As the company grows, cash and shares are put out for distribution every month.

• Every member gets an equal portion of the wealth the company generated. But they don’t get to keep these goodies for themselves: they have to distribute them to other members.

• They give it to anybody they feel has contributed the most during the month. Each person knows best who has meaningfully contributed.

• Each person decides how much to give to whom based on whatever criteria “feels right” to them.

The Radical Distribution

Instead of cash or stocks, Radical Distribution uses a dimensionless unit we call a RAD,

• Whereas money has a fixed value, RADs factor value through them.
• Whereas stocks represent a fixed percentage of the company forever, RADs represent a dynamic percentage of ownership at each cycle.
• RADs represent any kind of contribution, not just financial. In fact, RADs account for the unaccountable.

Co-owners then get to distribute RADs according to their individual judgment. Co-owners do this by recognizing the contributions of other co-owners. The end result is that a number of RADs are given to other co-owners. The value of the whole emerges from the judgment of the many.

Other important observations about RADs,

• RADs are not a currency.
• Each co-owner gets one RAD per day, even before there is revenue because contributions happen regardless of revenue.
• The giving criteria is completely up to each person, although we can agree to some explicit guiding criteria to start with. Every so often new criteria are fleshed out and harvested to use as guidelines.
• RADs represent dynamic ownership. One month you may get a lot of RADs, but the next month you may not give me any.
• There is a RADs Mobile App that calculates this,

• RADs accumulate from one cycle to the next. For example, if I had 100 RADs last cycle and I get 50 this cycle, my total number of RADs goes to 150.
• Your percentage of the total may go up, down, or stay the same. For example, if I get 100 RADs from a total of 1,000 RADs, then I have 10% of the total. If in the next cycle the total goes up to 1,200 RADs and I get 50, I have 150 RADs and my percent ownership goes up to 12.5%. If, on the other hand, I get 20 new RADs, my percentage stays at 10%.
• Money or whatever else is disbursed as a function of the number of RADs each co-owner has. For example, if you have accumulated 200 RADs and I have 100, then you’ll get twice as much as me.

To summarize, allocations work like this,

• Co-owners get one RAD per day.
• Co-owners get to recognize contributions by pressing a button in the RADs! mobile app. They can press this “recognition” button as many times as they feel like.
• At the end of the cycle, the number of RADs are calculated from recognized contributions.
• For transparency sake, all these transactions are posted to a public Dashboard.

Radical Distributions Are Scalable

People are the best judges of what a contribution is and who is making it and it doesn't take that many people to cover the whole team. If somebody doesn't get any RADs at all, it's probably because he is totally disconnected or none of his work looks like contributions to however many people make up the company.

As people share and grant each other RADs, they learn the value of what they’re building together at a visceral level. People will, by necessity, be encouraged to learn to communicate more and better. To quote author James Ownen, “It ain’t bragging if you’ve done it.” They will learn from their peers to value their own accomplishments. They will also learn to talk about their failures, what they’ve learned from them, and how this learning can be valuable to others.

Distributions Include Banners

Recognition is really important to both the giver and the receiver. Whether as individuals or as a team, having our accomplishments recognized by others is very important and precious to people. But what about team accomplishments, causes, communities, or new projects? Even though they are not people, they are supported by Banners,

Distributions Include Retrospectives

At a Radical Retrospective, members discuss the criteria they used to allocate RADs. Participation in these Retrospectives is voluntary and members can share as much or as little of their criteria as they like. These do not prevent people from making their own decisions, but it serves as a guide.

Distributions Include Feedback

Anybody who wants to can call for a feedback session after a Distribution. In particular, people who didn’t get anything or significantly less than they expected would want to do this. It might be difficult to hear the feedback, but it’s the way to grow. It can help resolve latent tensions, correct wrong impressions, and get better results in the future.

Distributions Are Transparent

We don’t think that Radical Distributions will work without complete transparency. The temptation will be there to block the identity of the allocator or the recipient, or to block the number of RADs allocated. Don’t yield to it, it is fear speaking. We don’t think that anything less than full disclosure will work.

Of course, you’ll have to figure out what works for you, but hiding any of this information is likely to turn out to be a failure.

RADs Account for the Unaccountable

RADs represent many things other than simple financial value. They are not beans, but they can be counted.

The RADs you have represent how other people feel about you and how they value your contributions. If you are making us miserable, you’ll probably get fewer RADs from us; if you are helping us thrive, you’ll likely get more. If you do something that goes against our Impact, “but, hey, it makes money,” you’ll get less RADs; if instead you introduce a way to make money and strengthen our alignment, you’ll get more RADs.

Maybe I gave you RADs because you noticed that I was down and you talked to me and helped me get over a personal crisis. Or they may reflect the fact that you always make yourself available to help others in the team. Or it may indicate that you are a very effective coach, gentle and inspirational at the same time.

In short, RADs account for the uncountable. They measure what had previously been immeasurable.

Co-Ownership

You can calculate the amount each co-owners have earned by factoring the total revenue through the allocated RADs. For example,

• Six of us generate $16,000 in dividends.

• There is a total of 1,000 RADs allocated which means that each RAD is worth $16 this cycle.

• You have twice as many RADs as me.

• You Earned twice as many Dividends as me.

Predictable Takehome Pay

That earned amount is split between Dividends and a Predictable Recurring Income (PRI) component.

When you really think about it, “salary” is a Fiat tool. Employees get a more or less predictable wage in exchange for doing as the boss says. Salaries, such as they are today, do not quite fit in the Radical context, but people have bills to pay.

The PRI amount is what every co-owner takes home every period (e.g., biweekly, monthly),

• Each member determines their PRI. This is what they feel they need to take home every month.

• Along with expenses, loan repayment, and other fixed expenses, the sum of everybody’s PRI determines what for simplicity we’ll call the company’s breakeven point.

• Every month, the company pays its bills and all PRIs and what’s left is distributed as Earned Dividends according to each person’s RAD allocations. This is the happy path.

• As a company, we can get a loan or an investment for the PRI Fund. When revenue doesn’t cover the breakeven point, money flows out of the PRI Fund to cover a member’s full PRI. This makes it possible for each co-owners to take home a predictable amount.

• Each co-owner is responsible for her PRI Fund and has to pay back what they got out of it. Most likely, this will be paid back out of Earned Dividends once revenue goes above breakeven, but this is something you’d have to experiment with.

• In the worst case, if the company goes belly up,

  • If PRI was funded with investment money, there’s no “debt” to be paid back.
  • If it was funded with a loan, then people with unpaid balances have to make good on it.

The PRI Fund functions a lot like a salary fund,

• If I earned more than my PRI, then I can take home my PRI amount and my Earned Dividends.

• If what I’ve earned matches my PRI, then I take that much home.

• If I earned less than my PRI, I still take home the amount of money I expected because the PRI Fund makes up the difference. However, I now owe this difference to the PRI Fund.

You’ll have to experiment with how these debts are settled. At its loosest, I could pay that debt “later” (e.g., out of my future Earned Dividends). At its most forceful, I’d have to pay the PRI Fund debt, plus interest, within, say, 60 days. Our suggestion, as always, is to go for a policy that matches peoples' needs and situation. If a problem crops up, then tweak the policy as appropriate. In any case, don’t yield to imagined fears.

In the example below, Salim, Daliah, Alicia, and Anita earned enough dividends to cover their full Predictable Recurring Income (PRI); Kim and Julio earned less than their PRI, so money flows out of the PRI Fund to make up the difference, but they now owe this much to the PRI Fund.

We had a lot of back and forth over the PRI Fund being a personal debt. Why not have it be a shared debt? Appealing, but it doesn’t scale well. In a large group, it would make all co-owners responsible for debt accumulated by people they may not know that well. They would want to know things like Why is Julio’s PRI so high? On the other hand, as a personal debt, everybody can figure out what works for them and decide accordingly. Maybe Julio doesn’t feel good about going into so much debt and eventually brings down his PRI after realizing that he had jacked it up out of unexamined fears. Or maybe he is helping pay for his sister’s school and is willing to bear the debt for a while longer.

If you are thinking that this process takes a lot of time, you’re right. But it is cheaper and healthier than leaving tension to fester. That anger and bottled up frustration translates to less engaged people and less trust within the team. This is very expensive and very unhealthy in the long-term (and even in the short-term).

Dividends Are Not a Gift, You Earned Them

Below there are three sample scenarios for how Earned Dividends are calculated,

• Below breakeven: When we as a company don’t generate enough Dividends to cover everybody’s PRIs the difference to make up the PRI amount comes out of the PRI Funds.

• At breakeven: When we as a company make enough to at least pay everybody their PRI amount.

• Above breakeven: When we as a company can pay everybody their PRI amount, what’s left is disbursed as Earned Dividends according the RADs each co-owner has.

This first scenario is what normally happens at the start of a company: it doesn’t generate enough revenue to cover everybody’s PRI. In this case, we would need a cash infusion to the PRI Fund so we can use it to meet the amount of PRI each person has set.

In the breakeven case we finally get to pay ourselves fully from the revenue that we’ve generated. Even in this case, some people may need to draw from the PRI Account, maybe because their PRI is high, or their RADs are low, or both.

At some point, after we’ve been steadily growing our revenue, no money is coming out of our Predictable Recurring Income (PRI). This is when we start disbursing Earned Dividends in addition to covering everybody’s PRI.

Notice that even though dividends are up, Julio continues to draw from the PRI Fund because his PRI is pretty high and his RADs count is pretty low. He may want to change his PRI or get feedback on why his RADs are so low.

Comparing the Radical Investment Model with that of Banks and VCs

Radical investments will, at worst, have the same financial yield as today’s VC system, but with 1) a lot more beneficiaries (i.e., all the co-owners), and 2) less risk because a lot more people will be committed to making it work.

ENDNOTES

• Seth Godin. Naysayers (and the grifters) May 4, 2020. https://radicals.world/hOC6jE
• Seth Godin. What kind of org? (alt., here). May 4, 2020.
• This is also a gesture popularized in The Hunger Games movies to express unity with people striving to survive. Since 2014 it has also become a symbol of pro-democracy in Thailand (alt., here). Very apropos.
• Dave Logan. How to Develop Your Noble Obsession (alt., here). Aug 5, 2013.
• Paul Zak. The Neuroscience of Trust (alt., here). January–February 2017.
• Philip Rosedale introduced the tool in 2005 when Linden Labs had about 50 employees.

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