Yesterday, around the same time that global elites landed in Davos for the World Economic Forum, a report was released by Oxfam showing that 82% of the wealth created last year went to the top 1% of people. How much wealth went to the bottom 50%? None.
Wealth inequality is out of control. Most middle-class people make their money by working. Most wealthy people make the vast majority of their money by owning. For example, Jeff Bezos’ net worth doubled from $50 billion to $100 billion in 2017, but it’s not because Amazon paid him $50 billion — it’s not like Jeff Bezos has a $100 billion cash account somewhere — it’s because his ownership in Amazon grew almost $50 billion last year.
Today, eight men own half the world’s wealth — and it’s largely due to the growth in what they own.
Yet at the same time that companies like Uber and Amazon have seen eye-popping valuations that are driving the Dow Jones to all-time highs, the average Uber driver or Amazon warehouse floor janitor aren’t seeing their wealth grow, because they don’t own a stake in what we create. In order to turn wealth inequality around, we need to think creatively not just about how people can get paid better (which is important!), but how our society can create more owners.
Fortunately, there’s a roadmap. One of my favorite entrepreneurs, Kim Jordan, founded New Belgium Brewing Co. and created a different template for how to create wealth for her employees, by building a 100% employee-owned company. Crack open one of their Fat Tire beers, and you’ll be contributing to the wealth, retirement, and kids’ college funds of janitors and receptionists in Colorado and North Carolina.
Kim graduated from Colorado State University in the ’80s and launched a career as a social worker. She remained in Fort Collins and started working primarily with single mothers who were trying to get their lives on track. Kim remembers, “I learned that the most important way to be happy is to codify who you want to be: What do you care about? And how can all aspects of your life — work, family, home — reflect that?”
In 1988, Kim and her then-boyfriend, Jeff, took a trip to Belgium, where they toured breweries on bikes, and decided on that trip to start their own brewery back home. Its name: New Belgium. Their first act was to apply the principles Kim learned in social work: “We took a hike to a beautiful place and talked about what we wanted to be as a company. Then we codified the values and behaviors we wanted to have.”
New Belgium’s core values remain unchanged from their founding, and include “balancing the myriad needs of the company, our co-workers, and their families.” (Twenty years later, as CEO, Kim still would refer to every person at the company as “my co-workers.”)
When Kim and Jeff, who would get married, started New Belgium, they didn’t raise outside investment. They took out a second mortgage on their home and applied for every new credit card they could. One day, a co-worker, Brian Callahan, announced that he wanted to leave and start his own brewery. Kim and Jeff knew they couldn’t afford to lose him, so they made a handshake deal with Brian for 10 percent of the company if he agreed to stay. It was the first in a trend: over time, Kim and Jeff started distributing more shares to co-workers.
In 2008, Kim and Jeff divorced, and Jeff wanted to figure out how to sell his ownership without impairing the mission of the company. They thought, “Why not sell to our co-workers?” The company with its free cash flow bought Jeff’s shares, then set up an employee stock ownership plan so that any co-worker at New Belgium could earn a stake in the company.
Kim noticed that the co-workers who owned the company contributed more value, and she set a goal for New Belgium to become 100 percent employee-owned. In 2012, Kim and the other owners in New Belgium realized that dream: instead of selling their company to a major multinational company like AB-InBev or SAB Miller Coors (and the ultra-wealthy investors that own them), they decided to sell to their coworkers.
As New Belgium continues to grow, every manager and janitor, every brewer and receptionist at the company have the chance to become owners. And the company’s success can create security for their families and a healthy retirement. In a world where the average CEO makes over seventy times the median employee salary, this kind of financial security for all employees is rare.
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Why don’t more people do this? I talked with a friend at a large investment bank and he told me that the Davos-attending owners of businesses — and the Davos-attending bankers who advise them — have little incentive to distribute ownership. You can make more money in the short term with one transaction to a big institution than with a complicated employee ownership plan. But as Kim saw, over the long term, companies with more owners do better.
Why did Kim do something different? “A crazy benefit of being an entrepreneur,” Kim says, “Is you don’t know what you don’t know. I did what I did because it seemed like the right thing to do — and I didn’t know, because I was a social worker, that other people didn’t do them that way. When we started to get the virtuous cycle feedback loop — we gave up ownership to our co-workers and we were more successful — we got freed up to do even more of this. It may be that other people think what we have done is weird, or hippie, but in reality it’s the right way to run a business.”
If we had more companies like New Belgium, and more owners, we’d turn around wealth inequality. Fortunately, we have a roadmap.
Disclaimer: The New Belgium Family Foundation, created by Kim Jordan and family with wealth created from the sale of New Belgium to her coworkers, is a partner of Village Capital. If you’re an entrepreneur interested in our investment programs, visit our website. If you’re interested in partnering with us, reach out to ross@vilcap.com.