Dan Price: a new Robin Hood or a well-intentioned fool?
Back in April last year, Dan Price was "living the dream", says Forbes. The announcement that he planned to pay 120 employees at his credit-card company, Gravity Payments, a minimum wage of $70,000 partly financed by cutting his own $1m salary to $70,000 saw him hailed as a new Robin Hood, the "Best Boss in America" and a latter-day saint (see below).
"It's difficult to ignore the fact that Dan Price looks a lot like Jesus," joked actor Russell Brand in a YouTube video, celebrating the long-haired Seattle entrepreneur. Hollywood agents, reality-show producers and book publishers began queuing at his door. The new messiah of American business observed that "it's not about making money; it's about making a difference".
Nine months on, however, Price's "rocket-ship marketing move" has crashed to earth. Within a fortnight, it emerged that his older brother, Lucas, a co-founder of Gravity, was suing him for paying himself $1m a year without the board's consent. By summer, notes The Sunday Times, the 31-year-old and his dog, Mikey, were living in a friend's spare room "after he was forced to rent out his house to help make ends meet".
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
The final nail in the coffin of Price's saintly reputation came in October when his ex-wife, Kristie Colon, gave a talk on the power of writing to overcome trauma, says Bloomberg Businessweek. In it, she alleged she had been physically abused by Price. Gravity has since denied what it calls "reckless allegations". But mud sticks, and Price's once-golden reputation remains tarnished.
"I love Monday mornings," the "relentlessly upbeat" Price told Inc last year, as he toured Gravity's offices wearing "the full hipster regalia of ripped jeans, untucked shirt and sneakers". The office space is unremarkable, but Price makes a point of reorganising it every six months so people "don't get too comfortable". His own childhood was anything but.
Growing up in rural Idaho, Price and his five siblings took turns waking at 5am to make breakfast before Bible readings and prayers led by their evangelical Christian parents. He was home-schooled until the age of 12, then "rebelled a bit", dying his hair like a punk rocker and eventually forming a Christian rock trio called Straightforward.
A past master at writing his own "origin myth", the way Price tells it, he started thinking about credit cards as "a teenage rock star", says Bloomberg. Noticing his takings were lower when punters paid for tickets by credit card because of the swipe fees, he took some advice from his father a credit-card consultant and began negotiating with processing companies on behalf of local firms.
He formally founded Gravity in 2004. Despite his recent travails, the company is still operating normally, says Bloomberg, and one aspect of the saga is certain. Whether it's down to "altruism" or some other motive, "70 employees at Gravity now earn far more than they did before".
Why $70,000 specifically?
The catalyst was a hiking trip he took with an ex-girlfriend who was struggling to make ends meet on $40,000. When Price totted up the cost of living in Seattle, the number that popped out was a "surprisingly high" $70,000. It "rang a bell with him. A number of economists including the Nobel laureate Daniel Kahneman have deemed $70,000 to be the point at which the average American has enough disposable income to start to be happy." So that figure became the target.
A backlash was inevitable, says Paul Keegan on Inc.com. Price was "pilloried" on Fox News and "trashed" by multi-millionaire conservative pundit Rush Limbaugh. "I hope this company is a case study in MBA programmes on how socialism doesn't work, because it's gonna fail." Harvard Business School duly obliged by asking to study Price's "radical experiment".
Some have accused Price of "a clever publicity stunt" but if so, it's certainly been costly. Some disgruntled customers have walked and Price has poured around $3m of his own cash into Gravity to fund the experiment. "As majority owner, he is not exactly penniless. But if Gravity fails, so does Price." He may go down in history as nothing more than a "well-intentioned fool".
We'll know more about his motives and the views of others in the company in May when his brother Lucas's lawsuit is aired in the courts, says Karen Weise in Bloomberg Businessweek. Meanwhile, Price has some navel-gazing to do, says AJ Agrawal in Forbes. "Using the brand of a founder or CEO to shortcut your way to success has been a proven strategy time and again." But it only works if you "clear out all the cobwebs".
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
MoneyWeek is written by a team of experienced and award-winning journalists, plus expert columnists. As well as daily digital news and features, MoneyWeek also publishes a weekly magazine, covering investing and personal finance. From share tips, pensions, gold to practical investment tips - we provide a round-up to help you make money and keep it.
Accelerating state pension age hikes could cost Brits in early 50s almost £18,000
How to invest according to your age - the one rule everyone can follow
