Dan Price, co-founder and CEO of Gravity Payments, participated in the Albers Executive Speaker Series on January 21st. Price has been in the news quite a bit for establishing a salary floor of $70,000 at Gravity and lowering his own salary to that level. He's made many national appearances on that topic, so we are fortunate to have him in our own back yard and available to speak. Of course, when we confirmed his visit back in February of 2015, we did not know he would have so much notoriety!
Despite the rain and resulting traffic, there was a strong turnout of nearly 350, which shows there is high interest in Dan Price and Gravity Payments. The turnout was a pleasant surprise, and I wonder if it is connected to widening concern about income and wealth inequality in our society. If so, Price may find himself getting pulled into the 2016 elections in ways he is not anticipating.
Price was born in Michigan and grew up in Idaho. He founded Gravity Payments in 2004 while he was a student at Seattle Pacific University, in response to seeing many small business owners being overcharged by credit card processors. Today, a decade later, Gravity processes over $13 billion in credit card payments for over 13,000 businesses as it continues to disrupt the industry.
Along the way, Dan has received many awards for being a successful young entrepreneur --Entrepreneur Magazine Entrepreneur of 2014, Seattle Business Magazine 2014 CEO of the Year,GeekWire 2013 Young Entrepreneur of the Year, and Small Business Administration 2010 Young Entrepreneur of the Year.
Recent publicity for Price has not all been favorable. He is being sued by his brother and co-founder for mismanagement of Gravity. There are insinuations of domestic violence against his ex-wife. We received feedback beforehand that Price should not be in the speaker series and a group of students handed out fliers saying the event should be boycotted because of allegations of domestic abuse. As most people know, law suits are easy to file and accusations are easy to make. Unless there is at least some evidence in the public domain to substantiate the claims, we can't be cancelling events on the basis of hearsay. Rest assured if we had come to the same conclusions as these critics, we would not have hosted the event.
Price titled his presentation, "More than a Business Plan: My Mission to Help the Little Guy or Gal Achieve Their American Dream," a reference to helping small businesses lower credit card expenses and his $70k initiative. He started his remarks by talking about growing up in rural Idaho as the fourth child in a family of six. He spoke about his "nerdy" transition from being home schooled to the public schools in seventh grade. He explained how he formed a successful rock band and in the process met many small business owners who worked hard but did not necessarily have much to show for it, and that one of the challenges for them was the high fees they paid on credit card transactions.
That was the catalyst to create Gravity Payments, of course, and the path of Gravity has by no means been linear. The company was hitting its stride when the Great Recession hit in 2008. Price wanted to stay true to his core values and not respond by cutting salaries or eliminating jobs, and rallied his employees to find a way through the recession by increasing productivity.
By 2011 Gravity had bounced back and Price cited 30% profit margins, but he was taken back when an employee complained that he was being taken advantage of even though he was being paid "at market," and claimed that Price was proud to be making so much money and getting away with paying everyone else so little in market wages. So for two years in a row Gravity made large across the board wage increases and in both cases profitability rose, suggesting the wage hikes led to higher productivity.
Despite the raises, Price was seeing evidence that some workers could not keep up with the cost of living in Seattle. He was concerned that employees were making him rich and at the same time could not afford to pay the rent. On a hike with a friend one day, he decided to go with the now infamous $70,000 minimum salary policy.
In closing, Price said he wanted to be part of a movement where the purpose of business is not about squeezing out the last dollar of profitability, but that business serves a more noble purpose in terms of solving society's problems and needs. He urged students to think about what their purpose would be and how they are going to serve society.
In the Q&A, the first question asked was about how the new $70k wage policy seemed to be working. Price said the short answer is that it is too early to tell, but anecdotally he thinks there is evidence it is reducing employee stress and increasing productivity.
In a subsequent question on its impact on recruiting and retention, he said it had been a mixed bag. Prior to $70k, they would get 50-250 applications for a position and be able to identify a few exceptional applicants. Since the change they are getting thousands of applications and it is hard to pick out the gems. He also mentioned they had been able to attract a "rainmaker" who had been a VP at Yahoo and joined Gravity because she was inspired by the $70k policy. On the other hand, he admits a few people left the firm because of the policy and he regrets that. He went on to say this was not a "100% all good" kind of decision. He had to weigh it in the balance and make a call. "HR is complicated," he reminded.
When asked to identify mistakes he made as a young entrepreneur, he noted that he used to see things as black and white and could be rigid in his thinking. He said he has learned there are two sides to every story and the perspectives of others can be valuable. He gave an example of an employment law suit that he knew he was right about and knew he would prevail in, but it also caused a lot of stress, distracted him from the Gravity business, and was expensive in terms of litigation fees. Discretion may have been the better part of valor in that episode, he insinuated.
He was asked if he has a routine to keep himself operating effectively, such as methods recommended by author Tim Ferrris in The 4-Hour Workweek . He admitted he was not a big fan of Ferriss, but reading the book had prompted him develop a few successful strategies to deal with unwanted phone calls and email - not strategies that Ferriss recommended, but some that he developed for himself, such as programming his phone to send a gushing request to be taken off the email list by typing the letters S-P-A-M in a reply message.
Price gave expansive answers to the questions, something that seems consistent with his personality. As a result, time ran out and no doubt our panelists and audience had more questions for him. But that is ok, since we had students who needed to get back to their evening class!
It was a great opportunity for our students to hear from a young entrepreneur who has been in the news a lot these days, and that may not be changing any time soon!