
In defense of the Google chef - lisper
http://rondam.blogspot.com/2011/11/in-defense-of-google-chef.html
======
mmaunder
My sister's a french trained chef and I've been writing software most of my
life. She works probably 3X harder than any geek I know including me. It's
brutal. She arrives 8am to prep and leaves 11pm after service, 6 days a week
when she was working for someone else. 7 now that she's opening her own place.
She's on her feet all day. The job is both time critical and requires constant
teamwork. If you or anyone else drops the ball the angry customer is right
there, including the angry wait staff and angry team mates. It's very high
pressure.

She's now busy opening her own restaurant and it's a far cry from writing
software once and kicking back while each incremental copy sold costs you zero
effort or money. Every incremental product a chef sells is hand-made and has
to have its raw ingredients bought without any certainty it'll actually get
sold. What's worse is many ingredients have a shelf life of mere days.

Every product is hand made to a customer's specifications and delivered in
real-time with immediate feedback. If a product is rejected, it's expected to
be replaced immediately without interrupting the flow of products heading out
to new customers. And of course the tools of the trade are not a keyboard, but
sharp knives and open flames.

So yeah, the "google chef scenario" comment bugged me too.

~~~
VBprogrammer
What annoyed me is not the suggestion that the chef is in someway less
entitled to the money than other employees, or that he didn't work as hard.

It is that it is just factually wrong. How many great people joined Google
when it was an up and coming start up who loved the emerging culture and the
idea of having a great chef.

~~~
scottschulthess
In general, in startups, aren't people compensated based on the value their
skills provide?

I'm not taking anything away from chefs, but Google is an engineering,
product, and advertising company, so chef isn't a core skillset and should
probably be compensated thusly.

~~~
brown9-2
You are making the same mistake as the original Zynga article does, and the
one that this article is attempting to correct:

You assume that because a person's job is not in the company's "core skillset"
that their contribution must inherently be less than that of an employee whose
job is in that "core skillset".

This is the incorrect perception that the author here is attempting to fix.
From the sound of his experience at early day's in Google, your assumption is
flat-out wrong.

~~~
scottschulthess
All I'm saying is that you have to evaluate each employees contributions and a
chef is less likely to be as valuable as an engineer in an engineering
company, for a variety of reasons, and then should be compensated accordingly.

~~~
brown9-2
_a chef is less likely to be as valuable as an engineer in an engineering
company_

based on what?

You are assuming something about an individual's contribution to a group of
people based on nothing but the job title.

Based on actual evidence from an early Google employee, this guy's
contribution was huge. Will all chefs at company's have similarly large
contributions? Not likely. But it doesn't change what this guy contributed and
to assume something like this seems really unfair and useless.

~~~
scottschulthess
_a chef is less likely to be as valuable as an engineer in an engineering
company

based on what?_

Why do you think engineers get paid more than secretaries, on average? There's
your answer.

~~~
brown9-2
Because their skills are in higher demand and the supply of them is lower.

But that does not mean that an engineer's contribution is inherently greater
than that of a secretary based on nothing but their job title.

~~~
lancewiggs
Meanwhile I've seen and heard of plenty of personal assistants (nobody uses
the term secretary any more) share in the upside of the company through
substantial annual bonuses. Often these come directly from their boss's
personal funds. A great PA, and a great person in any position, will make
everyone's life better, and help the people on the front line perform to their
capability.

------
goodside
It's ludicrous that it's even necessary to paint the archetypical "Google
chef" as someone who daringly sacrifices for their scrappy company for them to
be worthy of windfall profits. If you compensate employees with options, they
deserve whatever they end up being worth. Period. That's the whole point of
options. If there were an asterisk attached that said, "...but only if people
agree in retrospect that you deserve the money," nobody would accept them as
payment.

~~~
retrogradeorbit
Yeah. I find it humourous that they say they are clawing them back so they
"could attract more top talent with the promise of stock." What? By
demonstrating how they'll screw them out of that stock when the time comes?

~~~
zem
there are always people willing to believe that _they_ won't be screwed out of
their options because they deserve them more than those lazy early employees.

~~~
lambda
I loved the local coffee shop that had a sign up by the register: "We cheat
the other guy, and pass the savings on to you!"

That's exactly the message that Zynga is sending out now.

------
kamaal
Its not about chef or a Janitor or whatever. Why are these people acting as
though only a few _have the right to be rich_?

Why can't a Janitor be rich? Why can't a chef be rich? What really is so wrong
with it? This attitude is so despicable! So anybody who doesn't go to a big
Ivy league, or some one who doesn't have an MBA next to his name or hasn't
worked at a investment bank can't be rich?

Which in case, what this really turns out to be is alternate form of slavery
where a selected few have to resign themselves to a lesser standard of life to
serve the remaining self chosen elite and act in every way such that the elite
are benefiting.

If you want some job to be done and you are ready to pay for it, money/stock
or whatever. And you promise and the contract so. You just need to pay up.
That's it, it ends there.

You don't get the work done, squeeze the juice out of the employees. Then one
fine day realize that what you promised is now worth a lot of money. So you
suddenly dump them, loot all the money yourself and say that they don't
deserve it.

You had promised that it was worth paying something for some one from some
work. So now when it is time to pay up. Just pay.

~~~
lancewiggs
Ivy League MBA here. I completely agree. And so far we are missing the two
other points - fairness and fun. It's simply the right thing to do to get
everyone onto the bus, to let everyone share in the upside of a start-up. Sure
the amounts of options can vary between employees, but it's just not fair to
be stuck on a salary while everyone else around you gets millions from an
exit.

The second reason is fun. Isn't it a whole lot more fun to come to work where
everyone has a stake in the company? Wouldn't it be wild fun if your company
did an exit or IPO and everyone came to work with a huge smile on their face?

For the sake of giving up a little bit of founder equity we can create an
environment that is not only a lot more fun to be in, but is potentially life-
changing for everyone and their families. Thinking anything else can lead to
the situation that Wall Street is in now.

------
wisty
"Charlie didn't make $20M for cooking, he made $20M for taking the risk that
the company he was joining would fail"

Maybe. Or how about this:

Charlie didn't make $20M for cooking. He effectively made a normal chef's
salary, some of which he effectively invested into Google shares.

What's the issue? That a chef (unlike a banker or programmer) helps fund a
company, and gets shares for it?

~~~
gmazzotti
Exactly, thats the best way to see it and makes the "Give back our stock" more
ridiculous: employees get les money in cash because they decided to invest
some part of their salaries in the company shares, so, if the company go to
IPO and they get rich they are not geting rich because of how much value they
provide to the company, they get rich because they could recognize a great
company in the early days and invest on it.

Is like saying to an angel you didn´t help me so much in your mentoring so
give me your shares back.

~~~
wisty
I kind of understand why they want to stop giving them shares, as they no
longer need funding from little people.

But it seems a lot like tearing up a term sheet 5 minutes from signing the
final contract, just because you managed to shop for a better deal. It might
be legal, but it's just not done.

------
pg
It's not about cooks vs hackers. This is the critical point:

    
    
      Charlie didn't make $20M for cooking, he made 
      $20M for taking the risk
    

The money that founders and early employees make from startups they make as
investors. They're getting compensated for risk, not simply for the work they
do. Startups are volatile, which is why investors like them. Like other
startup investors, early employees sometimes get really lucky. But that is not
the same thing as being overpaid.

I can't say much for sure about this particular case because I don't know the
details, but I don't like the sound of it. It seems so shortsighted. The
amounts of stock involved must be small, and the damage done not just to Zynga
but the whole startup world could be big.

~~~
codyrobbins
Disclaimer: Only having read the WSJ article and knowing nothing more, I think
it’s more or less a form of blackmail—the employees are unfairly being put in
a no-win situation.

That being said, my takeaway was that they had thrown around equity so
liberally that they’ve exhausted their employee options pool and it’s going to
interfere with their ability to recruit going forward. Is that the wrong
interpretation?

If it’s not, and given such a situation, do you think it’s fair to say that a
startup should generally be trying to allocate its options carefully such that
a chef doesn’t end up with $20M worth of equity?

~~~
blacksmythe

      >> That being said, my takeaway was that they had thrown around equity so liberally that they’ve exhausted their employee options pool and it’s going to interfere with their ability to recruit going forward. 
    

They can issue more stock to incentivize new employees, which is fair in that
it dilutes everyone equally (preferred and common together).

What is unfair is to assume that the preferred stock allocation must be a
constant, and that you have to claw back existing stock options in order to
pass on stock in the existing options pool to new employees.

------
kls
I'm not usually a get out the E-Pitchfork type guy, but this subject has
really gotten under my skin. I got stiffed on an exit so you can take my view
as biased if you would like. It most likely is given my irritation at the
subject, I generally don't get worked up over stuff so it has certainly hit a
nerve.

But the part that really gets me is it has absolutely nothing to do with the
role these people played and every bit to do with the longer hours, reduced
compensation risk and how long a person takes that risk for. If they came in
on the ground floor then have been riding the roller-coaster and getting paid
dirt for longer then they deserve those early and current options, I just
cannot understand the attitude that is being displayed where the CEO feels
that later employees that are "now" more strategic to the company (read
executives) are more deserving of that equity given their worth to the current
goals of the company. That is such a warped perspective, it has nothing to do
with the future and everything to do with how much risk and how long those
early employes took that risk for.

~~~
earbitscom
We are talking about unvested shares to be earned in the future. There is not
much risk in working at Zynga from here moving forward - no more than any
large company. They're not taking back shares people earned during the risky
period. They're saying, now that the company exploded we'd prefer to pay you
differently from here on out. You have the choice to stay or go. Nothing that
already happened is being rescinded except that 2 years ago we put together a
plan to keep you highly motivated for 4 years, and now that we know what the
stock is worth, it's not equitable to trade the latter half for 2 more years
of your work. We could fire you to preserve this capital, but we're offering
you a regular compensation package instead.

~~~
DaveMebs
No, we are not really talking about unvested shares to be earned in the
future. We're talking about unvested shares. These are shares that employees
have already been paid. This payment is contingent upon the employee
continuing to work at the company. Zynga is in effect blackmailing these
employees. They are telling them "Give us this money we promised you, or we'll
fire you."

The idea behind putting together a plan to keep early employees highly
motivated is that you all work hard to grow the company, and in return for the
risk and hard work you stand to make a lot of money. That's the whole idea
behind tech startups. To grow the company and then tell these employees they
don't get the rewards promised them the entire time they have worked there is
ridiculous. It violates the entire idea behind vesting shares, which if it is
unclear, is that you have already earned those shares. It's merely a matter of
when you gain access to them.

~~~
ericd
I've always thought Zynga was a huge waste of space/energy/life/etc, and I
hope no engineer with any other job opp ever joins again, but it goes against
the whole definition and point of vesting to say that unvested shares are
already yours. If you quit or are fired, you rightfully only get the ones that
have vested, that's the whole reason they gradually vest - so that neither
party is completely bilked if you leave after a year and a half. They're not
handing over that percentage of the company on the day you join. That would be
silly.

It's disturbing that Zynga is doing this, and it's a shitty thing to reneg on
salary promises, but that's basically what vesting options are - uncertain
salary promises. What they're doing is saying "We promised you a salary based
on company worth, but we're now growing so fast in value that there's no way
you're worth this much to us, so take a pay cut from now on, or we're firing
you". If those people have been there for three years, they should already
have 3/4 of their stock vested, assuming they're following the typical valley
vesting schedule.

I think the main reason people are so vocal about this is because there's
generally an implicit understanding that options are different from salary,
more set in stone. Comparatively few people join companies based on promises
to be paid 2*x salary the following year. This is upsetting a big part of the
natural order of things.

Hopefully this won't impact more upstanding companies.

~~~
brown9-2
I think it is mistaken to view options as equivalent of salary. When you are
granted those options, you have no clue what they will be worth on the day
they vest, and neither does the company. This is why the options have to be
valued at their worth on the day of the grant.

Options are used as an incentive for employees to stick around with the
company and to work harder in the hopes that their hard work will result in
2-4 years in a higher stock price (or high IPO), which benefits both the
employee and the company.

Attempting to take back options which were promised in the past because the
company currently thinks the employee doesn't deserve them is aptly named
"claw back", because that's exactly what it is.

Imagine a company asking someone in 2011 to give back a part of their 2009
salary, or be fired.

~~~
ericd
I agree that the connotations are different, but the way the vesting is
written into these contracts, it is essentially a periodic stock grant, which
ends as soon as employment does, and with no guarantee that it will continue.
In that way it's very much like a salary, despite how it's typically viewed.
Perhaps the expectation part of things is strong enough that this could be
considered bad faith, but my understanding has always been that if someone
doesn't work out as an employee for any reason, they have no claim to the
unvested stock.

------
andywood
Begrudging the 'Google chef' is taking the effects of market forces that
influence the relative pay of chefs and software developers, and trying to
apply them by sheer assertion to the stock option lottery. The mechanics that
influence pay are completely separate from the mechanics that make early
employees rich. If a CEO honestly believed that certain workers should not
have any chance of getting rich, the consistent thing would be not to offer
them options in the first place.

This issue also reeks of the Just-World Fallacy. Individual early employees of
wildly successful companies don't get rich because it's fair, even if it sort
of works out that way on average. They get rich because someone gave them
options, and then the stock skyrocketed. Efforts to explain it in terms of
justice are mostly post-hoc rationalization.

~~~
dylangs1030
Right, and the problem is that everyone wants to be a captain of industry, but
no one wants to clean the toilets. So they promise wealth to someone who
cleans _their_ particularly promising toilets, but they don't really believe
in the worth of that job, otherwise, they'd probably be doing it themselves (I
think most programmers would sooner learn a new sector of information
technology than give themselves a position as a cook on the side). It becomes
"I don't want to do y, I'm much too busy with important x" ----> "Eureka, pay
someone for necessary evil y" -------> "Wow, look at all this money, hey wait,
my company is selling x, not y!" The fallacy is revealed when it's simplified.

------
tlrobinson
Also, if I were Mark Pincus or another Zynga executive I'd probably avoid the
Zynga cafeteria for awhile...

~~~
muppetman
I know it's frowned to post these sort of comments, but I spat my beer (Friday
night in New Zealand) on the table laughing your comment.

~~~
raganwald
I don't soeak for anyone else, but I've always thought that an ocassional
witty comment was fine, it's just _lazy joking_ that's reviled. So for
example, pun threads amd lowbrow memes are discouraged.

The guidelines for submissions speak to piquing intellectual curiousity. If
there was such a guideline for cracking a joke, it might be "anythng that uses
humour to sneak an insight into the conversation."

The post above made me laugh and certainly makes a point about the morale at
Zynga. Well done!

p.s. There is another kind of wit that is explicitly discouraged, the "witty
reply." That is a special case where a comment tries to make fun of another
comment. As a general rule, this lowers the tone of the discussion by
emphasizing rhetoric over ideas. This isn't the case here, making fun of
Pincus is not the same thing as making fun of a comment or making fun of the
OP.

~~~
muppetman
I actually meant my comment, which was essentially pointless :)

------
davesims
The real problem Zynga has created is summed up nicely is this comment from
the OP's blog:

"Pincus has violated the basic tenant of start up economics and, thus made
start ups vastly more risky for people to join. In short he's just ups the
cost of hiring at start ups by 10-15%."

I suspect long-term it will be much more than that. Whatever the reality
behind the scenes, Zynga has created a new startup narrative to replace the
"Google Chef" narrative that was _precisely_ the story that made it possible
to hire premium talent willing to risk a few years and hard work on the chance
of a big payout. Zynga has quickly and fairly decisively dealt a near death-
blow to that idea.

Between Zynga and the stories coming out of the Skype acquisition a few months
ago, I expect startups will find it increasingly difficult to trade stock
options in lieu of compensation early on.

Unless and until some legal device is created to re-establish that trust, I
expect we'll be looking back on this incident in years to come as the moment
when startups lost one of the essential strategies to hiring top talent early.
Everyone will be skittish over this for quite some time.

------
alexwolfe
Who determines who is actually worthy 20 million or a billion? In every case
there is a tremendous amount of good fortune, luck, and incredible timing.

Anyone who thinks they deserve that much more money than someone else because
they are just a better human being needs to get a reality check. Its really
about being fortunate. The Chef certainly has just as much right to his 20 mil
as all the other guys that cashed out. Again, its not about just talent or
brains, its about luck.

~~~
bad_user
Great people make their own luck.

The Chef took a risk that may have impacted his career negatively. That's not
necessarily luck, that's an investment that payed off. And if you don't want
the Chef to get rich, then don't offer him any stock - but then you do need to
pay a higher salary.

It's funny that Zynga tries to paint this negative picture of Google's IPO,
when clearly at Google everybody won tenfold, including founders and investors
and being good employers is partly the reason for that. Zynga will never be
Google and it starts with their attitude towards their employees.

~~~
alexwolfe
There are a million great people people out there that you don't know who
aren't lucky. Having money doesn't make you great, being great makes you
great.

I do think that the harder you work and the the more opportunity you give
yourself to get lucky the better your chances are to be successful. But
believe me, luck plays a huge part in everyones life no matter how smart or
great you think you are.

~~~
bad_user
Yes, but the odds of having 20 million drop from the sky in front of you are
zero. Even people winning the lottery have to buy a ticket first and even
then, the chances are greater for being hit by a car the next day.

So there's a huge difference between that and investing your time and skill in
something based on making educated guesses. Which is why I wouldn't call it
luck.

Also, wealth is relative. Some people simply don't care that much about money
if they earn enough to live comfortably, especially since pursuing money is in
general painful for everybody.

~~~
lutorm
_So there's a huge difference between that and investing your time and skill
in something based on making educated guesses. Which is why I wouldn't call it
luck._

That's an absurd definition of luck. What you have to do is look at the
distribution of outcomes in the population. If those outcomes are widely
distributed, it depends on luck. The characteristics of the underlying
population are irrelevant.

------
danbmil99
All I can say is Ayer's restaurant serves really amazing food at an affordable
price. So he's giving something back to the community. He's hiring people and
building a business. Is he less of a contributor to Google's success than the
worst programmer who made $20M on their IPO?

What I don't get is the zero-sum thinking here. They're worried that someone
in their organization might get rich, and maybe they didn't deserve to get so
rich. So what? They should worry about their company, not be squabbling over
percentages.

Reminds me of the end of "Treasure of the Sierra Madre." The prospect of real
money seems to drive some people insane.

~~~
earbitscom
They're not worried about whether someone gets rich who doesn't deserve it.
They no longer need to pay someone $10M to keep them working there because the
risky part of the journey is over. So, they're saying, you earned X already
for the risky portion, you can keep that, and you can keep your job, but we're
not going to keep paying you a startup equity share for you to work at a big
company with total stability, benefits, vacation, etc. We need to scale it
back, and we want you to stick around for what is probably a competitive comp
package if you look at it objectively.

~~~
zem
no, you're missing the point. here's how it works:

zynga: want to be an early employee in our risky little venture?

emp: um - the salary is kind of low and there's no job security

zynga: but we're tossing in 100,000 options. potentially worth $10M if our
stock hits $100 in the ipo

emp: okay, that sounds better. i'm in

zynga: of course, to prevent you from just exercising the options and leaving,
they'll vest over four years

emp: works for me.

so basically the entire chunk of options was the employee's payment for
joining the company when there was low salary and job security. the vested
part is payment for sticking around to help zynga succeed. and the implicit
contract is that the unvested part is an _already made_ promise that his
compensation for each year of work will be $x in salary + $y in incrementally
vested options. since employers tend to have disproportionate leverage in
these matters, there are of course a whole range of clauses stating that he
could be fired for any or no reason and lose his unvested stock just as if
he'd resigned, but that's harking back to the letter rather than the spirit of
the agreement. abusing that leverage is a scummy thing to do, regardless of
the technical legality of it all.

~~~
earbitscom
That is one of two ways to look at it. Most employers do not think of the
initial stock as a grant that you have earned for signing on and then four
years of dragging out payment. They look at the stock as four years of payment
that, along with your salary, is designed to keep you motivated the entire
time. So, the other is:

zynga: want to be an early employee in our risky little venture?

emp: um - the salary is kind of low and there's no job security

zynga: we'll toss in 25,000 options per year for the first four riskiest
years. potentially worth $2.5M per year if our stock hits $100 in the ipo

emp: okay, that sounds better. i'm in

2 years later

zynga: hey, looks like you did pretty good the last two years, but the
trajectory of the company has changed, there is no longer any risk in it for
you, and it doesn't make fiscal sense for us to pay you $2.5M a year in stock
anymore. We'd like you to stay on, though, and you'll still get a competitive
salary and benefits plan. If you don't think that it is competitive, we
understand.

emp: works for me. (OR) doesn't work for me.

~~~
LesZedCB
I think the keyword here is anymore. You can't change an agreement that was
made in the past based on hindsight.

~~~
earbitscom
What you're saying would be true except that if the employee saw that the
company was headed nowhere and they left after 2 years, nobody would say,
"Hey! But you agreed to a 4 year plan. We have paid you all of this stock that
you haven't vested yet."

------
dylangs1030
Just the fact that Ayers was stylized as a "Google chef" and not by his name
is demoralizing. It just gets worse when they speak of his success as
something a company should avoid if at all possible. It's manipulative to hire
someone, offer them stock options, then decide they're not worth it later on.
Just don't offer them in the first place!

~~~
sounds
Fortunately, Pincus' attempt to paint Ayers with this brush _is_ backfiring.
Ayers is getting tons of free publicity, while Pincus is utterly failing at
what he was trying to accomplish.

Zynga is bleeding valuation right now.

------
andrewfelix
"Charlie didn't make $20M for cooking, he made $20M for taking the risk that
the company he was joining would fail" This succinct sentence sums it up for
me perfectly. His ability and contribution aside, a gamble was made and it
paid off.

------
oacgnol
Zynga and Groupon just seem to have shot themselves in the foot right before
their IPOs for stupid reasons. It's a shame how greed and stupidity in
leadership have negatively impacted the payout for the people who toiled to
make the dream possible.

------
jfruh
The thing that most bugs me about this is that the Google chef somehow needs
to have his rights defended. He was made a promise when he was hired and
Google cheerfully fulfilled its obligation to follow through with that. Ditto
on whoever is being screwed at Zynga. "Unvested" does not mean "maybe you will
get this at a later date, who can say."

~~~
esrauch
That is exactly what unvested means, it means "maybe you will get this at a
later date, maybe you will be fired, who can say."

Zynga could just fire all of these people if they didn't want to give them the
stock, and that wouldn't be "taking back stock", that would just be "you never
had the stock". The only reason why it's evil is because they think the
employees are actually valuable enough that they want to keep them around but
not valuable enough to keep good on their stock units. They could easily fire
the employees and let them re-interview for their old jobs if they wanted and
it would be perfectly legal (companies do this on a regular basis to rehire
employees as contractors without benefits).

RSUs and stock options like this are pretty interesting to me because it
provides a huge incentive for employees to stay at the company, but it also
provides a huge incentive for employers to fire their employees after (N-1)
time periods where N is when their units vest.

~~~
damoncali
If the only reason you're firing someone is to keep their stock, you're a dick
and it's wrong. This, unlike options agreemetns, is not complicated. It may be
legal. And it may be financially rational. But it's wrong.

~~~
esrauch
You still slipped it "keep their stock", it isn't their stock. It's just like
any other compensation; if the company just had people hired at salary X and
decided that a particular employee isn't worth that salary anymore, they can
either just fire that person or they can lower their salary.

What you are saying is the same as "if the only reason you're firing someone
is to not have to pay them anymore, you're a dick and it's wrong".

~~~
damoncali
Nonsense.

Options are negotiated at the time of employment for a reason - their value is
derived from the risk and their upside. You cannot go back and take them away
"because they're worth too much". It defeats the purpose of having them in the
first place. If you want to cap the value, do it at the time of the agreement.
Otherwise you are misrepresenting the value of the compensation.

As long as the employee is doing what they are supposed to be doning (and if
they're not, they should be fired), those options should be paid out,
regardless of their worth.

Ask yourself this: What would Pincus be doing if those employees had worthless
options? Do you think he'd be writing checks to cover their non-gains?

I know the agreements are written to allow this behavior. It's still wrong,
and goes against the spirt of equity grants.

~~~
esrauch
I still don't understand how this is any different than "What would he be
doing if their salaries had been negotiated to be lower to begin with? If he
didn't have to pay them, would he still be firing them?"

I fail to see how this is any different than the spirit of a salary, you
expect your salary to be the same or go higher and anytime it is lowered would
be a surprise to most people.

It is explicitly in writing that this stock do not belong to them and that
they won't get it if the company decides to fire them for any reason. That is
exactly what the contract says, otherwise there wouldn't be any dispute here,
it would be a violation of the contract. Stocks don't belong to you until they
vest, just like salary doesn't belong to you until it actually gets deposited
into your bank account.

It doesn't matter if the compensation is salary or stock grants or health
insurance, and to act like stock is some magic form of compensation that is
somehow different than the others, that it's perfectly ok to fire someone if
their salary is too high but not ok to fire someone if their future stock
grant would be too high makes no sense at all to me.

~~~
damoncali
This is why: the value of the options at the time of the grant is very
different than at the time of the firing. You are accepting very risky options
in return for a small amount of cash with the hope that it will be worth
something much greater later, and the knowledge that it may be worth zero or
less, if you include the strike price and taxes.

To come in after the fact, and decide that the upside was too much is to
retroactively change the value of the options at the time of the grant, making
them worth less than the agreed upon amount.

Yes, there is a detail in the agreement that the employer can fire you
whenever he wants and retain unvested options, but the reason that is there is
so that people who fail at their jobs do not continue to collect equity beyond
their usefulness, not to greedily claw back money from employees who are
fulfilling their agreed upon duties. Hiding behind that clause to justify this
behavior is reprehensible.

There is a BIG difference between saying "Johhny, it's just not working out,
please take the options you've earned and move along. You're not needed
anymore."

and

"Johnny, we like you, but we didn't think you'd make this much money, so we
kinda wish we hadn't given you as many options. Please give them back or we
will forced to fire you as permitted by clause 3.2D in the agreement."

~~~
esrauch
> This is why: the value of the options at the time of the grant is very
> different than at the time of the firing.

The options are worth $0 until they vest, so at the time of hiring and firing
they are still worth $0. They are a promise of future compensation, just like
salary, and just like salary you don't receive it if you don't work there
anymore. If it was actually a decision of accepting the risk of the stock
being valueless, then the compensation would be _stock_ instead of options.

> Yes, there is a detail in the agreement that the employer can fire you
> whenever he wants and retain unvested options

No, that is the clause as written, not some sort of sneaky backdoor that they
snuck in, it is the very definition of these stock options. The clause doesn't
say "if you are fired for gross negligence or incompetence..." it says "If you
are not employed here on date X, then you get nothing".

> There is a BIG difference between saying "Johhny, it's just not working out,
> please take the options you've earned and move along. You're not needed
> anymore."

You have earned _nothing_ until they vest! That is the entire point of the
structure of these options. If they were actually anything like what you are
describing, they would just be monthly stock grants. If you work somewhere for
6 months you don't get half of the grant that you get after 1 year, you get
nothing. It is explicitly not proportional in the contract.

> "Johnny, we like you, but we didn't think you'd make this much money, so we
> kinda wish we hadn't given you as many options. Please give them back or we
> will forced to fire you as permitted by clause 3.2D in the agreement."

How is this different from "Johnny, we like you, but we don't think you are
worth the $200k salary that we foolishly offered you before. We aren't going
to continue paying you such a high salary, so you can either accept the lower
salary that we think you deserve or we will fire you"? Both are retracting an
offer for _future_ compensation for _future_ work. Or do you think that would
also be immoral?

~~~
BrandonM
As a former poker player, the problem here is very clear. Let's say there is
$100 in the pot, and it's going to cost $50 for me to call and be all-in. I'm
paying $50 to win a total of $150. That means that I need to have a 1/3 chance
of winning to make this a financially-breakeven call. I estimate that my hand
has 35% equity, so I go ahead and call.

I'm going to lose 65% of the time, I'm going to be ridiculed by poor players
without knowledge of equity and pot odds, and I'll question whether I actually
made the right decision. The other 35% of the time, I'll win that $150, feel
good that I made the right decision, and those same people will call me a
lucky moron.

The average result is that I gain $100 * 0.35 - $50 * 0.65 = $2.50[0] every
time I make this decision. My decision was good, even if the outcome is highly
volatile (nearly 2/3 of the time, I lose).

Now the player I was up against says that because I got lucky and won with a
worse hand, I don't deserve the full $150 that's in the pot. How about if I
give him 10% of that as consolation, since he "should have won"? Everyone else
at the table agrees that's reasonable (after all, I'm just an idiot who got
lucky), and now the equity of my decision works out to 85 * 0.35 - 50 * 0.65 =
-$2.75[1], and I'm actually losing money on my original decision.

Changing the terms _after I've made an informed decision_ is more than shady:
it makes my original decision (based on the overall expected value) incorrect
in retrospect. _That_ is what people have a problem with. If early employees
now have to account for some nonzero chance of getting fucked on their equity,
it's going to make it that much harder for an early startup to afford anyone.
Limiting the upside of an investment drastically lowers the risk an investor
(and an early employee is effectively an investor) can rationally bear.

[0] At the time of my decision, there was $100 in the pot for me to win. I win
it 35% of time, and the other 65% of the time I lose the $50 that I'm paying
now.

[1] 150 - 10% = 135 - 50 (the amount that I put into the pot to call) = 85.

~~~
esrauch
My entire point is that it was explicitly in the rules that they are allowed
to do this. If you did the calculation and excluded the possibility that you
would get $0 because the options are otherwise worth too much _then you did
you calculation wrong_. It's like you played the above scenario but didn't
take the externality that the other player was going to get a straight flush
into account in your calculations, your "informed decision" was actually an
uninformed decision because you incorrectly treated options as though they
were guaranteed.

------
suprgeek
What really stinks about "not creating a Google chef" scenario is the implicit
belief that the chef should not become rich and should not be able to
participate in the success of your company. Why the arrogance? If an employee
(Chef, Janitor, Developer or CEO) played a part in the success, exactly why is
it that they should not participate in the payoff

------
jackgavigan
If these people were underperforming, then why didn't Pincus address the issue
before now? Why do it now, when Zynga appears to be preparing to IPO?

This strikes me as pure greed. Pincus offered people shares as part of a
package to persuade them to come work at his risky startup. He made a deal and
now he wants to go back on it.

Say what you like about Bill Gates but he was perfectly comfortable with early
Microsoft employees like Andrea Lewis growing rich from their share options.

PS: Lots of people talk about the greed on Wall Street but it strikes me that
the prospect of riches is causing greed to rear its ugly head in the startup
scene too. What's more, people seem to turn a blind eye to it if the
perpetrator has been successful. It's disappointing and I think it bodes ill
for the entire sector.

~~~
michaelochurch
_PS: Lots of people talk about the greed on Wall Street but it strikes me that
the prospect of riches is causing greed to rear its ugly head in the startup
scene too. What's more, people seem to turn a blind eye to it if the
perpetrator has been successful. It's disappointing and I think it bodes ill
for the entire sector._

Very ill. We'll never know the real numbers, but it wouldn't surprise me if
Mark Pincus has done $1+ billion worth of damage to the startup ecosystem.
Fewer people will want to work for options/equity because of this story (which
has caught on outside of our echo chamber) and the reputation of Silicon
Valley's leadership has taken a hit.

On the flip side, this is a _great_ opportunity for Facebook and Google+ to
repair their reputations. Drop Zynga. Denounce Pincus. I don't know about
Facebook, but the vast majority of Google engineers who have to work with
Zynga detest that company, so this move would also be beneficial for internal
morale at many companies.

~~~
jackgavigan
Do you really think that Facebook, led by Mark "I'm going to fuck them in the
ear!" Zuckerberg is concerned about ethics?

------
ck2
I wouldn't have a problem with a startup janitor taking home $20M in a stock
payout.

A rising tide should lift all boats, not the boats they specifically select
with hindsight.

~~~
damoncali
Not only is it not a problem, it's a _good_ thing. We sell dreams. In order to
do that, some of them have to come true.

------
kaze
Beautiful.

There was a chef of similar capabilities at my first company. Ten years later,
me and my ex-colleagues still rave about his food and the inspiration it gave
us.

EVERY employee counts.

------
davesims
For all of you trying to parse this on a purely business level and justify
Zynga on some ethical or legal distinction between 'vested' and 'unvested',
etc., understand this: The take-away lesson, from the standpoint of an
experienced developer being offered stock options in lieu of compensation is,
from now on, a simple story, and it's the one you will have to overcome for
the foreseeable future, thanks to Pincus:

Once upon a time the "Google Chef" could become a millionare.

Now he can't.

The End

------
OoTheNigerian
This Zynga position is the reason why most Nigerian politicians have second
wives.

A poor young man finds a woman wo will marry him a starter in life, poor with
fair education.

20 years down the line after the woman has bore him kids, supported his
career, this man becomes a Governor. Then aha! He realizes his mid aged wife
is not really educated, not fit for the position of a first lady.

He does not want the situation of a high school educated first lady.

~~~
rooshdi
They also share another commonality: breaking their vows _after_ hitting it.

------
dasil003
It's laughable to think Pincus is worried about a "Google Chef" scenario.
There will be no Google-anything scenario at Zynga.

------
fauldsh
Are there no laws in the US protecting employees from this kind of scenario?
Something like Unfair Dismissal in the UK.

As others have said, the first employees took the risk of working for a
startup, any-one who joined later can't possibly deserve more because they
"contributed more" because the company wouldn't exist without the original
employees.

------
OoTheNigerian
How about just keeping agreements?

Does it matter if the money allotted to the barber down the road becomes worth
$100m?

If he kept his part of the deal, you should.

------
kschua
Anyone who joins a startup be it a chef or masseuse (Bonnie Brown) who take a
risk by joining a startup deserves to be compensated accordingly if the
startup succeeds. Just because they are not developers doesn't mean they
didn't contribute to Google's success.

Glad that I am not alone in thinking that the "Google Chef" deserves what he
gets.

------
paul
This is a good example of why Google became a great company: they understood
the big picture. Zynga apparently does not.

------
HarrietTubgirl
I interned at Google back in the day, and when I came back to school, I can
only remember raving about one thing -- the food. It was absolutely fucking
amazing. I gained 10 pounds that summer (starting at 145, this probably wasn't
a bad thing).

There was a lot I could have raved about. The fact that around my area in ads
there was probably a 20% chance that an individual had his own Wikipedia page.
The debugging tools I got to work with and the MapReduces I got to write. All
of the geeky stuff that makes Google a cool place to work at.

But when I got back to school, the food is really what stuck out about the
experience. I would argue that those cafeterias are one of Google's most
marketable benefits.

A bad programmer who is overcompensated just blends in, a great chef gets
singled out.

No matter what, equity distributions are going to look insane in retrospect.
Probably the most glaring ones are not even going to be the under-performers
who plodded along or folks in less-important roles that were hired early, but
the crappy execs that were hired well after the risk was decreased, but got a
huge stock grant anyway. Start with those guys.

Let's be honest here -- how hard someone works isn't directly relevant to the
discussion, it's how much value they end up adding. But to that point, I'm
pretty sure Charlie added a lot more value to the company than many software
engineers there had.

------
MaysonL
At this point the only question worth asking about this situation is whether
anybody on Zynga's board has the balls and integrity to tell Pincus to go fuck
himself.

~~~
potatolicious
They can't. Pincus _isn't_ an obstacle in the way of the company. Pincus _is_
the reason Zynga is successful.

Without the aversion of innovation, the complete disregard for ripping others
off, and partnerships with incredibly shady companies, Zynga would not be
anywhere close to where they are today.

A business in the theme of Zynga _needs_ the unscrupulous head honcho who
can't care less about what's right, only what's profitable. Get rid of Pincus
and Zynga sinks like a rock.

Let's be honest, if you take Zynga's games, strip out the blatantly
psychologically manipulative bits, inject some real fun into there, and
actually spend some money on innovation... none of it would be profitable.

~~~
nasmorn
Lets not forget, the basis of their business is that they found a way to
replicate the economics of a slot machine without falling under gambling
regulation and without ever having to pay out real dollars. It is still the
same business though. As a former game developer I am shocked by the fact that
people buy their image as a gaming company. They have about as much to do with
computer games as roulette has to do with Settlers of Catan.

~~~
michaelochurch
Thank you. Zynga is an insult to game developers. I can't for the life of me
see the appeal of their garbage games.

------
Tichy
Also the food comes up pretty high on the list of incentives for working at
Google. Who knows how many talented people now work at Google because of their
chefs.

Also consider opportunity cost. The chef could have opened a restaurant
instead and perhaps also earn a lot of money that way.

~~~
jiggy2011
I thought most restaurants basically hemorrhaged money? A job at a tech
startup + stock options might have been quite low risk by comparison.

~~~
neilk
According to BusinessWeek, new restaurants are not quite as risky as people
perceive. Only 60% of new restaurants fail or are sold in three years[1],
which is a bit higher but similar rate to any new business.[2]

I can't find any good numbers on tech startups with some Googling other than
the oft-quoted 90%. This is hard to compare, because you might earn some sort
of salary while the startup is in operation, but it closes down because it
fails to meet growth targets.

But on balance it seems to me the startup is still riskier.

[1]
[http://www.businessweek.com/smallbiz/content/apr2007/sb20070...](http://www.businessweek.com/smallbiz/content/apr2007/sb20070416_296932.htm)

[2] <http://www.newventurelab.com/resources/blog.php?id=261>

------
DodgyEggplant
Conduit famously gave options to the cleaning ladies

------
JulianMiller520
Couldn't agree more. I'd expect a comment/attitude like this from people on
wall street but not in the world of tech. It's sad that they could even
pervert the phrase "Google Chef" into something negative or something that
should be avoided.

------
doki_pen
To argue that he deserved it is to cede the point. It was what he signed up
for and google was right to respect that agreement.

------
rhizome
Ooh, I think thinking twice about the Google chef is to accept Zynga's "pray I
don't alter your option plan any further," take on things, i.e. the argument's
already lost.

------
webwright
I'm not sure I agree with earbitscom (commented a few times here), but I
upvoted him because I think he's boiled it down to the important point. But
for the people downvoting his "options are future compensation" argument,
here's an interesting thought exercise:

Say you joined a young/really hot startup that was heading straight up. You
negotiate a good options package, but it's lean-- they aren't super eager to
part with these (obviously valuable) shares.

Then, the world explodes. The company gets sued, the market crashes, the users
revolt. But the company manages to emerge from the carnage beaten-but-alive.
It's no longer a sure thing. In fact, it looks risky as hell. But you believe
in the vision and the management, so you want to stick it out.

You're 1.5 years in. New hires are getting packages that reflect the
(newfound) risk in the stock. Your stock package looks small in comparison.
Given the new information, would it be wrong to negotiate for more stock?

~~~
SourPatch
If you didn't have some leverage over the company, it would not be wrong. If
you were, say, lead engineer, and knew that training a replacement would take
quite some time, then it would be wrong.

------
gwern
> Feeding a few hundred people in a professional setting is not just taking
> the process of preparing a home-cooked meal and multiplying. If a software
> engineer screws up, the site goes down. But if a chef screws up, people get
> sick. In extreme cases, they die.

Wow, hyperbole much? A chef only gets people sick or kills if he _epically_
screws up.

A thought experiment: figure how many restaurants and fast-food chains there
are in the US; multiply by how many people they serve a day; multiply by
365.25; divide by number of annual deaths. Ponder this upper bound on risk.
Ponder whether the base-rate risk is greater or lesser than the risk of
walking across the street or driving to work. Finally, ponder on whether this
base-rate ought to be adjusted upwards or downwards for a trained corporate
chef working in a controlled environment with good facilities (as opposed to a
newbie teen or immigrant working for minimum wage in a kitchen somewhere).

------
missy
I know in stocks you can sell futures. So you say, the shares are worth 1$
today as a fresh start up, in 2 years we will buy them back of you for 20 $,
if the share is worth over 20$.

If your are Zynga and you are confident that they could go above that its a
good buy and the worker feels a bit more secure but wont earn these too high
returns that Zynga may not like .

Sorry if my application of basic futures to Zynga are bit off, hope explains
more or less what I mean, my memory is flaky here.

------
petegrif
If the Zynga story is as reported it is beyond despicable.

------
martian
My startup has an in-house chef. It is the best investment we have made.
Employees are happy, morale is high, we eat healthy food, and stay late to
have a family-style dinner. When we make it big, I'm going to be stoked to
share profits with her. :-)

One of my colleagues takes pictures of our food and puts them up here:
<http://thumbtackfood.tumblr.com/>

------
code_duck
This is a pointless rebuttal, because it's not about who contributed what, or
how hard a chef worked, or whether their job was worth it. If you make a deal
with someone for x amount of stock, or whatever, they get it. You don't try to
strong arm them into giving it back later on - that's dishonest. It doesn't
matter if it's worth 20 million or 20 cents.

------
whacker
Why is this even being debated?

How is the chef, or any other employee, any different from an early stage
investor?

------
balsam
I don't know, man. I would rather give shares to someone who can keep my
teammates and I on the brink of starvation. Does nobody remember the motto
"stay hungry, stay foolish"?

------
linuxhansl
I do not understand this entire discussion. He joined Google, got early stock
options that ended up being worth a lot. Good for him. Where is the problem?
The system worked.

------
justinhj
being a chef is a hard job for sure but the real point here is that being on
board for a succesful ipo is like a lottery win for all early employees. let
them have it and enjoy it. don't make them feel like shit by telling them they
don't deserve it. i don't see any win for zynga here

------
smackfu
I wonder if the chef was hired at typical chef wages, or at "startup" chef
wages?

------
grandalf
This is essentially a Trolley problem that people are getting quite indignant
about: <http://en.wikipedia.org/wiki/Trolley_problem>

Here's an oversimplified example that mirrors the classic Trolley problem:

 _Suppose the company consists of three people: The founder, the engineer and
the chef. The founder can't raise more money from investors and she realizes
that if she fires the chef it'll free up 200K ISOs which can be used to
recruit a sysadmin. Without a sysadmin the startup will fail. If the founder
gives up her own shares, she loses control of the company to one of the
investors, who she knows will sell the company to cash out immediately. If she
stays in control, the founder aspires to grow the business to 20x its current
size. Should the founder fire the chef?_

What small detail would have to change in order to quell the ire of all of the
people claiming that Pincus is acting unethically?

~~~
OoTheNigerian
Like I said earlier, how about keeping your own side of the bargain?

Remember the 'useless' chef already got you to where you are presently. The
place where you need to raise _more_ money.

Why then did you hire the chef in the first place? If the chef has started
cooking poorly, you sack him/her. Just like your board would fire you for poor
performance.

That this is even up for debate is baffling.

PS: Grandalf, so I suppose the stock people receive in your project 'Dandelion
Labs' do not really have any worth because two years down the line the people
canget disposed if the founder needs to free some stock without getting
diluted

~~~
grandalf
I'm not making an argument here, just comparing the situation with a Trolley
problem and wondering what details are most troublesome for people.

I think it was probably a stupid decision by Pincus to do this, but not
necessarily an unethical one. ISOs with a vesting period are not money in the
bank, and anyone who thinks of them that way has been foolish.

~~~
scarmig
I have no idea why you're bringing some contorted-beyond-recognition Trolley
problem into this.

The situation is more like:

1) Founder hires an employee at a depressed salary using the possibility of
making it big via vested options to compensate for lost income.

2) Employee works first, second, and third years performing to satisfaction.

3) Before IPO, founder goes "I can make that employee give up their money
through a threat of firing them."

Actually, isn't that pretty much the situation?

If we really want to talk analogies, it's like if someone took a health
insurance policy, but when they get really sick and the "big payout," the
insurance company cuts them off because they haven't contributed enough to
merit the million dollar payout.

