It is no longer news that the workforce has undergone significant structural change over the past few years. The number of freelancers versus full-time employees has gone up drastically. The ring-fenced model of organizations with a set number of hired employees is being extended or replaced by more open and flexible structures. ‘Gig’ and ‘Sharing Economies’ opened the doors for mega-platforms with limitless members to create value outside of the traditional company. And, thriving open source projects have come to life from non-salary contributions.
These new “open” models appear to be better on the surface because of their efficiency. But in fact, they do not always benefit the contributor. Studies have repeatedly shown that gig workers suffer downward pressure on wages and sharing economy participants take lower asset valuations than existing markets provide. In many cases, work marketplaces collide with−or escape−the legal and social systems designed to protect individuals from exploitation.
From a business standpoint, the ability to leverage networks of independent individuals to fund, build, deliver — and even consume — products and services has proven to be more effective than the traditional managerial model of a captive workforce coordinated by a hierarchical chain of command.
However, rising tensions between firms and networks, combined with much lower switching costs for self-employed individuals than for regular employees, are starting to challenge the sustainability of these models.
Workers need new types of support for new economic models. Regulation is one potential path. Nicolas Colin, a leading critical voice, argues that new regulations may provide the bridge to resolving the employer versus employee conflict that is heightened in the Entrepreneurial Age.
Business leaders also have an essential role to play in a reinvented version of Fordism, which advocated decent wages to workers so that they could be included in the emerging industrial economy of the time−not only as producers, but also as consumers. Therefore, another way to realign interests between firms and communities lies in their practical ability to share the long-term value that they create together.
“Ownership and community are fundamentally linked. As humans, we tend to feel a deeper link to people we share ownership with. And we’re increasingly skeptical of exclusive communities where the incentives of insiders are not purely aligned with outsiders.” —
At Tribute, we believe that equitable value sharing is not only good for society, it’s also good for business. Today’s firms are more open, but they become less attractive, because market transactions tend to replace long term relationships. It is already a challenge to rely on fully engaged employees. What can we expect from people who are dealt with like mercenaries? At best, a huge loss of potential. Open conflicts and active sabotaging at worst.
As Nick Tomaino pointed out, ownership is a key factor of cohesiveness of communities. The fast rise of decentralized networks was fueled by the shared ownership of their underlying tokens. In startups, stock options play this role. Fred Ehrsam compared the role of tokens to equity for startups: “So how do you get people to join a brand new network? You give people partial ownership of the network. Just like equity in a startup, it is more valuable to join the network early because you get more ownership”.
Indeed, equity has been so far the most common way to materialize the ownership of economic resources. But stock options have been designed for executives and employees, not for open networks nor contingent workforce. Airbnb recently asked the SEC for a rule change, so that they could offer equity to their hosts, and other companies followed suit. However, compliance is only one of the hindrances that make equity unsuitable for incentivizing communities:
- liquidity: vesting provisions and low probability of liquidity events make stock options unattractive to occasional high-value contributors
- granularity: rewards based on company-wide performance are poor incentives for contributions whose impact is measured at a project or business unit level
- flexibility: stock options grants work the same across the board; it is impossible to set them up in order to achieve particular goals, such as encouraging risk-takers, peer collaboration, etc.
- governance: equity bears voting rights, which make them inadequate as a simple value-sharing mechanism
- supply: since the issuance of a new pool of stock options requires shareholders’ approval, it is an exceptional event, disconnected from the operational needs of the company’s business
- centralization: because of their sensitive nature, grants of stock options cannot be delegated to operational levels
- cost: legal and administrative costs pertaining to the issuance and management of stock-option programs are high
We believe that new instruments are needed today, so that organizations can share more value that they capture for themselves, in an agile, cost-effective, and secure manner. Not only with their employees, but with any networked individual who contributes to the creation of value: freelancer, advisor, supplier of services, user, customer, referrer, influencer, etc.
This is why we are building Tribute.
The Tribute Platform
With Tribute, organizations can use new instruments for incentivizing people to the long term success of a project.
The platform includes 3 core components:
- contributive tokens are the units of account used to measure the value generated by contributions to a project. Their main function is to acknowledge and reward contributions, regardless of the current market value of their work, and of the financial resources of the project that benefits from them.
- a reserve fund, whose purpose is to provide liquidity to the contributive tokens: the value of each contributive token is the ratio between the current total number of tokens and the total value of the fund. In other words, a contributive token is a reserve fund share.
The issuance of new tokens involves dilution for existing token holders, and the contributive token value grows with the fund value for a given number of tokens;
- smart incentives, designed to encourage specific behaviors within the community of contributors of an organization, such as encouraging collaboration between contributors.
The combination of contributive tokens, reserve funds and smart incentives form a toolbox that offers endless possibilities for driving and coordinating the action of contributing agents in a network. Implemented as smart contracts on a public blockchain, it gains transparency, enforceability, and resistance to tampering.
The Tribute Network
We are building the Tribute platform in order to have a positive impact at the microeconomic level for organizations and the networked individuals they work with.
We intend to play a part at the macroeconomic level as well, by introducing a new way for funding the development of digital commons, such as the open protocols and the free software that made the Internet possible.
To this end, we are setting up the Tribute network as a community-driven, code-based decentralized organization, whose purpose is to inject a flow of value into the commons economy.
In our next posts, we will introduce the token model and the governance system of the Tribute network.
Thank you for reading! If you want to participate to our early tester program, please request an access here. If you’re interested to contribute to Tribute, or if you have any question, just email us at engage@tribute.coop.
Special thanks to Susan Basterfield, Francesca Pick, and Jonathan Siegel.
