Enforcing quality-standards for services rendered sounds nightmarish for either the end user or for the service provider. It's going to be interesting to see how this pans out for amazon.com.
Agreed, food / grocery delivery and transportation services would certainly be interesting, but defining the rates based on some sort of a base-cost-unit like mileage and speed of delivery would be extremely challenging to do smoothly for the end user. I think it would end up being non-satisfying for the customer and the sellers.
Besides, amazon.com has amazon fresh for the grocery delivery service needs. Why cut into their own business?
Sure, but restaurants have special needs relating to getting groceries. When they want "avocados" they don't just want any case of avocados. They may want a case of "locally sourced Haas 40's with 4-5 day ripening time with a USDA Grade of #2 Combination, or #2, but not #1". Not just avocados. Instead of wanting "bread" they might need an artisan bread with a gluten free recipe that's standardized to 16oz weight for their lunch sandwiches. So it's not as simple as it seems, which is why there's dozens of huge billion-dollar companies who do this such as Costco, Sysco, US Foods, Shamrocks, etc. You just shop around and stay on top of food costs. And if you're a medium-large chain you lock down trade agreements much farther up the supply chain (producer level) to very low fixed prices for 6 months at a time. So if amazon wants to try to tackle dozens of intricacies for thousands of types of perishable goods that will have variable quality in a market that is heavily regulated by the USDA, more power to them. Source: I own a restaurant on the side.
You're thinking about it incorrectly. Here's what the $200/hr developer does:
Identifies business challenges and offers a custom-tailored solution that will generate more money than it costs. Then that said developer will effectively pitch their prospective customer from that angle.
A business, if convinced you're correct and capable, will be happy to pay $500,000 to a developer who will develop software that will make them or save them $1,000,000 in the next year.
I'm not sure what you mean exactly. Rome was not built in one day, but with small steps. If you wish change then you take small actions that of course do not build a palace today, but might do in 10 years.
That basically translates to use bitcoins alongside dollars and slowly transition to bitcoins only.
Yeah, I've never understood the logic that using Bitcoins insulates someone to the normal financial system. If you want a loan, put money in a bank account, or hedger risk, or do anything with your money that isn't just moving it from address to address, it is still needed to have banks.
Or have cryptocurrency fans figured out a solution that I can't think of now.
It's similar to the idealist trope that tearing everything down to rebuild it will somehow not be subject to corruption and perversion the next time around. As though they've found some way to control human nature. It's unavoidable systemic entropy.
I agree, it was honestly difficult to read this article and to reconcile the thought that I do business banking with Chase.
I've been thinking of a few non-profit startup ideas to combat this widespread corruption problem, but its nothing I'd want to discuss publicly in case I actually pull the trigger on it and desired to remain anonymous. I think you're thinking down the right highway of thought though.
As someone else who uses Chase, I'm having trouble with the same reconciliation. As an individual consumer though, what can I do to stop feeding and perpetuating the system? My initial reaction is to "vote with my feet" but is there any bank that isn't similarly suspect? Alternately is it realistic to exit the banking system completely, or is that just wildly impractical? I see a lot of discussion on hackernews about "security vs convenience" (albeit in a completely different context); maybe the parallel here is "morality vs convenience."
Look into credit unions for which you might be eligible, as well as smaller regional banks that don't deal in exotic financial products and in which the management team still feels a personal responsibility to their depositors. patio11's recent blog post on Japan has a good section on what that's like:
There are still banks in the US that operate like that in principle, if not in degree - no exotic products, strict adherence to traditional corporate lending standards, extensive knowledge of their customers, and a culture ingrained first and foremost with personal responsibility to the soundness of the local economy.
Best example I know of is First Hawaiian Bank [1], having worked there a few years. It is actually the longest continually-running bank in the US, having been founded in 1858 and survived every major depression and financial crisis since. They're not on the bleeding edge of tech or quantitative finance, but that's one of the things that saved them from being a victim of the financial crisis (aka, the Battlestar Galactica of banking).
Other banks like that scattered around the country too. You can start some research with the various bank rating sites:
Wow I had a completely incorrect understanding of what credit unions are and what you'd use them for...this looks like exactly the kind of alternative I'd like to explore. Thanks!
I'm curious how this works with the legal landscape of US regulation.
I'm 99.9% sure the law would consider this equity compensation in exchange for labor performed, since this is being positioned as "getting a share" of the company. The only difference between standard "sweat equity in exchange for labor" agreements and this is that there are "coins" that represent a certain percentage of ownership instead of a standard contractual agreement bearing stock certificates.
That opens up a whole can of worms in terms of questions:
- Can the project owner further dilute the "coins" of the project, by increasing the total coin count? (Can prior work be diluted, thus lowering earning for prior work?)
- What kind of financial reporting requirements to companies have that work through assembly? Sarbanes oxley compliance? How do you know that they're reporting accurate earnings and not short-changing developers?
- Are these just "amorphous projects with a DBA" aka an informal partnership or are they all required to be corporations or LLC's?
- How about implicit liability?
If someone were to do an amount of work equal to 10-20% of a company's ownership equity, and the company did something illegal, wouldn't the developer have implicit ownership since he was profit sharing with the company? Would this open the developer to potential liability? (disclaimer: not an attorney, and it's been a while since I looked at related laws, but I remember reading some surprising case law that implied this a while back.)
- Possibly most importantly: How does this work with the SEC and IRS regulatory landscape?
How is this viewed by the SEC? The SEC requires that any exchange of securities be subjected to extreme regulations (you must take your company public to sell shares to public investors). When I raised money for my angel round, I had to seek SEC Rule 506(d) exemption just to provide shares to my initial investor base and to sweat equity to myself and my founder.
Most SEC exemption types carry additional reporting requirements for companies that have "non-qualifed" stockholders. This means monthly financial reporting that is SOX compliant by a CPA among other things IIRC. For the record, "qualified investors" have a net worth of $1mm+ or access to internal information that allows them to make knowledgeable investing (or in this case, investment of the developer's labor). These developers won't qualify simply by developing software for the company, as they need to have access to executive-level information.
In addition, SEC exemptions need to be filed by the actual companies in question. Those exemptions have a window of time during which they're valid. Different exemptions have different maximum non-qualified investor counts before the company must go public. That may mean that there's a maximum amount of different developers that can develop and receive sweat equity on a project before it reaches a ceiling, depending on interpretation of the law.
Finally, how does this affect the developer's taxable income? If he were to receive these equity shares (whether called "coins" or not), the IRS is going to deem these coins as having some sort of a value, just like stocks do. There's a lot of case law here, and typically it's going to work out to be (company valuation / ownership percentage = effective income amount). The IRS doesn't simply have you pay on dividends received from your equity, it has you pay the value of the equity as income as well, so how about with these coins? The IRS will see this as an asset received for labor, so how will this affect the taxable income of the developer? Do you require the companies on assembly to post a credible, running, monthly valuation by a 3rd party investment bank for taxation purposes? How do you handle the possibility of phantom taxation?
I apologize if this seems negative, I think the idea is (potentially) pretty sweet. I just hope you and your founding team talked with some good attorneys before building out this business. As a startup CEO myself, there's a lot of basic regulatory issues that I see with it which would have prevented it from passing the initial "idea vetting" process.
You’ve pointed out several of the biggest challenges Assembly has had to overcome to get where we are today. But yes, they are big challenges.
Here’s how it works:
(I think I’ve addressed all your points here, let me know if I missed anything)
Every product is structured as a partnership (similar to the way a law firm can be a partnership). Everyone who earns App Coins in that product is a partner – which entitles them to a portion of all profits in accordance with their ownership percentage, along with access to business information and direct involvement in decision-making. Those profits are paid out as royalties, not dividends. There are other differences from securities, for example, you can't transfer ownership of Assembly products on a secondary market.
This solution is the best balance we’ve found so far.
Products built on Assembly live on Assembly (so that we can protect the interests of anyone in the community who helped build them). So, revenue is collected by Assembly, the bills are paid, and profits are distributed to all partners (all of this is fully transparent). So, Assembly takes care of financial reporting and products don't need to worry about things like LLCs and DBAs.
Dilution occurs anytime that work is awarded, and a rogue Core Team might be able to game the system to their advantage, but we have reasonable protections in place to prevent this happening to an extreme.
I’d love to chat about this more if I haven’t covered all your questions. You clearly have a good grasp of what we’re trying to do, and you asked all the right questions. I’m at austin@assembly.com if you want to chat.
[edit: added the sentence about secondary markets]
Ah. I understand what you guys are doing now. This is an interesting and challenging concept to execute. I wish you guys success!
My only question remaining is how you guys handle shareholder liability since there's no corporate veil for partnerships. Is there some sort of general liability policy requirements, or is that kind of up to the people running the partnership?
Every product is structured as a partnership (similar to the way a law firm can be a partnership). Everyone who earns App Coins in that product is a partner – which entitles them to a portion of all profits in accordance with their ownership percentage, along with access to business information and direct involvement in decision-making.
I wanted to clarify the above:
1) Though some have conceptually referred to products on Assembly like partnerships they are NOT. They are neither structured as "Partnerships" and are not housed in their own separate legal entity
2) Each product has a group of contributors that, through the rules we all agree to abide by on Assembly (https://assembly.com/terms), collectively determine the strategy and product development as well as share in any profits.
3) App Coins determine a contributors share of any profits and are awarded by the product's Core Team made up from the community. App Coins aren’t transferable, and aren’t exchangeable for other currencies. You can learn more on how App Coins and profits work here (https://assembly.com/help/revenue)
We have spent a lot of time thinking about some of the structural issues raised here. They are the kinds of issues that we see many companies working through as they try to fit new business models into existing rules and regulatory schemes. We’ve done our best to create a structure that addresses regulatory concerns while also maintaining the core principles on which we’ve founded Assembly.
Any idea what's the legal status of getting paid royalties as someone on an H1-B or F1 visa? Dividends and investments are usually acceptable secondary sources of income. I'm not sure where royalties lie, I'm guessing it's not ok, but perhaps that should be stated more clearly.
Partnership?! Are you out of your mind?! Now 100 internet strangers come together to build something, one of them makes a bad decision and 99 people have unlimited liability for that person's mistake. Sounds like a great way to ruin lives.
I've got a few products on Assembly and have some thoughts to share. I think Assembly has a shot at a product that makes revenue by helping startups/products/teams navigate the pain points you described. You specified their business model. It is incredibly difficult, but that's why it's worth paying for. CPA and regulatory compliance as a service. I think it should function to VC's as project greenlight does to steam, a platform to get started and build traction on before getting called up to the big leagues. It needs a lot of work, a top to bottom rethinking to account for the legal quagmire you touched on, but if it can do that, and function as software for vestment, and allow these app coins to be purchased by the public, they become an instant idea to ipo company.
