TIME Companies

Reddit Users May Get Free Shares of the Company

But the plan could "totally fail"

Reddit CEO Yishan Wong told the Reddit community this week he wants to give them 10% of the company’s shares. Such a move has never been carried out by a company that depends on user engagement, like Facebook or Twitter.

Wong cautioned that the plan is still in its early stages and added a caveat to his post on Reddit: “KEEP IN MIND THAT THIS PLAN COULD TOTALLY FAIL.”

Wong also said that the idea of “distributing ownership of [Reddit] back to the community” has been a long-held dream by Wong and many of the company’s other employees.

TIME Money

PayPal Co-Founder Takes Aim at Credit Card Industry With New Startup

Yelp Chairman Max Levchin Creates New Mobile Payments Startup Affirm
Max Levchin speaks during a Bloomberg West television interview in San Francisco on Thursday, March 28, 2013. David Paul Morris—Bloomberg / Getty Images

“You have to have a credit card. You have to use it. You are going to get screwed and you know it."

The most miserable year of Max Levchin’s life began in 2002, shortly after he sold off his ownership stake in PayPal to eBay for an estimated $34 million. “At the time, I had a fascination with the color yellow,” Levchin told TIME. He would arrive to work in a yellow car, wearing a yellow jumpsuit and hole up in his executive suite, blending in with the all-yellow office paraphernalia. His former direct reports, who numbered in the hundreds, shuffled past the door, “staring at me every morning,” he recalls, “as I would sort of mope around going, ‘My baby’s now been sold to a giant company’ while wearing a yellow clown suit.”

He was 27 years old, flush with cash and adrift in an ocean of downtime. If that sounds like your idea of heaven, then you’re no Levchin. “I literally — I think I started hearing voices,” he says. His girlfriend left him. He wrote 10,000 lines of code, a “minuscule amount,” he insists. His friend persuaded him to take a scenic drive along the Oregon coast. “We saw a lot of very beautiful places,” he says, “and I don’t remember any of it other than the fact that Oregon is a really messed up state, economically.”

Nothing could lift his spirits, short of launching another company, which he did in 2004. It was called Slide, and it was a fun ride down the chute toward another sale in 2010 to Google for $182 million, Levchin says.

Today, he knows better than to slip back into the interminable boredom of easy living. He’s in the thick of a third venture, Affirm, and to sop up the last waning moments of his spare time, he also oversees an investment fund called HVF, short for “Hard, Valuable and Fun.” “Fun” has a very peculiar definition in this case — referring to any massive, globe-spanning problem that Levchin might get to noodle over in his scrappy new office in downtown San Francisco.

Affirm’s 32 employees have set up shop on a quiet street lined by venerable brick buildings, some of which withstood the great fire and earthquake of 1906 and have the commemorative plaques to prove it. Here, Levchin is thriving in his element. His girlfriend came back. They got married and had two kids. He still favors the style of clothing that might diplomatically be called “start-up chic,” a puffy sleeveless winter vest, unzipped and revealing a weathered t-shirt that practically whispers, “I’ve got bigger things to worry about than shopping.”

In fact, though, he does worry about shopping. Obsessively. Levchin has been visiting retailers across the country, asking about the state of consumer lending. He sums it up grimly: “You have to have a credit card. You have to use it. You are going to get screwed and you know it.”

Millennials are ditching the plastic in droves. More than 6 in 10 of them say they have never signed up for a credit card, a group that has doubled in size since the financial collapse of 2007. Evidently they’d rather scrimp on their purchases than get snagged on finely printed fees or mired in debt. “Which is wrong,” Levchin says. “If you are living hand to mouth every month you’re not going to improve your standard of living and you’re not going to scale up.”

Enter Affirm, a startup that that offers consumers the option to split payments over time, which a growing number of online retailers have added to their checkout pages. Users can get instantly approved for a loan by tapping their personal phone numbers into Affirm’s welcome page. From that phone number Affirm launches into the murky world of online data. “It anchors you to a whole host of information that is entirely public, or pretty close to public,” says Levchin. It can scan for social information across social media or dip into proprietary marketing databases or combine that with credit histories. In total, the Affirm team has identified more than 70,000 personal qualities that it thinks could predict a user’s likelihood of paying back a loan. If old fashioned credit scores provide a fixed, black and white portrait of the borrower, Affirm claims to capture that borrower in full, moving technicolor.

The company is so confident in its claims that it puts its own money on the line, extending loans to people who are normally considered a risky gamble. Active duty soldiers, for instance, return home with scant credit histories. A raft of regulations require lenders to extend credit to the soldiers, even if the decision goes against their better judgement. As a result, lenders have historically eyed returning soldiers with suspicion.

“I couldn’t care less about the narrative of why that might be true,” Levchin says, “except that I know it’s actually not. From all the loans that we’ve issued I think we’ve had literally 100% repayment rate from active duty servicemen.” Of course, military service is just one of at least 70,000 variables that can tip Affirm in the user’s favor. The formula is complex by design, so that no user can game the system by, say, posting “brain surgeon” as a new job on LinkedIn and then requesting a fat line of credit.

Whether Affirm will truly upend the rules of lending or foolishly rushed in where lenders fear to tread will depend on its ability to collect interest on loans without resorting to hidden fees. After all, credit card companies do that for a reason: It’s lucrative. Affirm, on the other hand, actually alerts users to approaching payment deadlines and clearly states fee rates before they arrive.

In short, Affirm has to lend at the right rates to the right people. Fortunately for the company, it has $45 million of venture capital to test run its unified theory of lending. It also has no shortage of potential competitors circling in on the hotly contested field of smartphone payments, from Apple Pay, to Google, to Levchin’s old “baby,” PayPal, all competing for the same “under-serviced” customers, as he put it.

But perhaps Affirm’s greatest asset is Levchin himself, who was practically bred for this kind of work. His mother was a radiologist at a Soviet-era research institute, where she was tasked with extracting reliable measurements from Geiger counters. The old Soviet era instruments spewed out a tremendous amount of error data. Her manager dropped a computer on her desk and asked her to program her way to a more reliable reading. Stumped, she turned to her 11-year-old son and asked, ”Do you know anything about this stuff?” The question kicked off Levchin’s life-long love affair with programming, and it made him acutely aware of what data a machine can capture, and what essential points might elude its sensors. He points out that a heartbeat counter may measure 64 beats per minute, but it almost certainly misses a number of half-beats along the way. Affirm, in a sense, listens for those missed beats.

“The fact that we can look at data, pull it, and underwrite a loan for you in real-time is very valuable, because we can literally decide, ‘Hey, in the last 48 hours you got a new job, that changes things a little bit. Now you’re able to afford more,'” Levchin says.

Maybe that’s a hasty gamble, or maybe it’s sound financing. In either case, it’s Levchin’s idea of fun.

TIME States

These Governors Return Their Salary To The State

Every state appropriates its governor a salary, but not every governor accepts it. Some return a percentage to the state, while others forgo any compensation whatsoever.

Not all governors take full pay for the job.

Some take a small salary cut for symbolic reasons. New York Gov. Andrew Cuomo, for example, took a 5 percent salary reduction in 2011. “Change starts at the top and we will lead by example,” he said in a press conference announcing the cut. “Families and business owners in every corner of the state have learned to do more with less in order to live within their means and government must do the same.”

Others, like Michigan Gov. Rick Snyder with a net worth of about $200 million, simply don’t need the money.

Curious to see every other governor who forgoes all or part of their salary? See the list compiled by research engine FindTheBest with data from the National Governors Association below.

First on the list is Pennsylvania Gov. Tom Corbett, who takes a salary reduction for neither symbolic or wealth reasons, but has simply refused several cost-of-living adjustments during his time in office, keeping the $175,000 salary he had when he started in 2011. If Gov. Corbett took his full $187,256 salary, he’d be the highest-paid governor in the nation. Instead, he’s tied for second with New Jersey Gov. Chris Christie, and Virginia Gov. Terry McAuliffe.

Next up are Governors Steve Beshear and Peter Shumlin. Like Gov. Cuomo, they initially took salary reductions to represent solidarity with constituents during tough times. Gov. Beshear, for example, took his reduction in 2009 to share the burden of Kentucky state budget cuts, and Gov. Shumlin took his in light of a $150 million deficit in Vermont in 2010.

Then there’s Florida Gov. Rick Scott, who—like Gov. Snyder—refuses his salary because he’s amassed so much wealth elsewhere, reporting a net worth of $132 million last year. And while it’s unclear what kind of wealth Gov. Bill Haslam has, his brother Jimmy Haslam—CEO of Pilot Flying J and owner of the NFL’s Cleveland Browns—is worth about $1.45 billion.

In fact, the only governor to sacrifice his entire salary who does not fit the uber wealthy mold is Gov. Robert Bentley of Alabama. Bentley reported a high, but not extremely high, income of $372,687 in 2013, none of which came from his $119,950 governor’s salary. $119,950 would be a noticeable contribution to his bottom line, but Gov. Bentley refuses to collect a dime until Alabama reaches a full employment rate, meaning the unemployment rate drops to 5.2 percent.

FindTheBest is a research website that’s collected all the data on governors and Congress members, and put it all in one place so you don’t have to go searching for it. Join FindTheBest to get all the information on governors, Congress members, and thousands of other topics.

TIME Money

Tip Till It Hurts—Just Don’t Feel Smug About It

Guests ride an escalator in the background of a Marriott log
Daniel Acker—Bloomberg/Getty Images

Barbara Ehrenreich is the founder of the Economic Hardship Reporting Project, and the author of the seminal Nickel and Dimed: On (Not) Getting By in America.

The tipping initiative by Maria Shriver sidesteps Marriott's responsibility to pay its housekeepers a living wage

Anything that brings attention to hotel housekeepers is probably a good thing. Not only are they notoriously underpaid and overworked, but they can do very little to bring attention to themselves. The 2011 case in which a Manhattan Sofitel housekeeper accused a guest of sexual assault in his $3,000-per-night suite was the rarest of exceptions, and attracted the media only because the alleged assailant happened to be a former director of the International Monetary Fund. The housekeeper’s job is to clean, change sheets, restock amenities and exit the room without leaving any personal traces behind. They are paid to be invisible and usually are.

Maria Shriver, however, is sharp-eyed enough to have noticed them. Last year, she spear-headed the effort that led to January’s The Shriver Report: A Woman’s Nation Pushes Back from the Brink, which highlighted the struggles of low-income, working class women. I contributed to it, and was impressed by her energy and dedication. So I wasn’t surprised that Shriver struck up conversations with hotel housekeepers, and reported that “Their stories of hard work and perseverance inspired and informed me.” Unlike the 32 percent of hotel guests, who never even bother to leave tips for their housekeepers, she decided to do something.

But she chose to take a strangely sideways, almost timid, approach. Instead of getting the hotel’s CEO on the phone and inquiring politely why housekeepers aren’t paid a living wage – which is something that I imagine a centi-millionaire world-class celebrity could easily do – she launched a campaign to get hotels to encourage their guests to leave tips in their rooms. All the hotel has to do is place an appropriately labeled “gratitude envelope” on the bedside table. The initiative, called “The Envelope Please,” drew immediate support from the Marriott hotel chain, which employs about 20,000 housekeepers in North America.

The response from hotel guests was less enthusiastic. Already faced with proliferating surcharges for hotel services that used to be free – the in-room safe, a fold-out bed, baggage checking fees – consumers gagged on the assumption that they should now contribute to the housekeepers’ pay. September 2014 was probably not a tactful moment to introduce The Envelope Please: In August, hotels had just achieved a $2.25 billion high-water mark in their income from surcharges, double the amount they got in 2003.

Less churlishly, critics of the initiative wanted to know why the hotels don’t just pay higher wages. As one wrote to the Boston Globe, “All Marriott guests should then write ‘PAY YOUR EMPLOYEES A LIVING WAGE’ on the empty envelope and hand it to hotel management.” The median pay for a hotel housekeeper is $9.51 an hour – far less than a living wage in most cities – and an unseemly amount of this often goes for over-the-counter pain medications. Hotel housekeepers, who often work under extreme time pressure, are 40 percent more likely to incur injuries than other service workers—back injuries from lifting mattresses, knee and elbow injuries from scrubbing. Next time you stay in a hotel, take a look at a housekeeper pushing her cart through the corridor: You’ll see a tired woman, very often an immigrant, ill-shod and probably in need of dental work.

Let’s put this in perspective. Marriott International reported $192 million in profits for the second quarter of this year, up 7.3 percent from a year ago, and the company can be generous to employees when it wants to. Arne Sorenson, the CEO of Marriott International, got a raise in total compensation in 2013, bringing in $9.2 million, up from $8.6 million in 2012. That would be about $3,800 an hour.

Unless they wait tables in high-end restaurants, most people prefer to get their compensation in wages rather than tips. Wages are steady; tips are erratic and at the customer’s whim. And, although I’ve happily pocketed many tips myself, there’s something a little icky about the process. Everyone knows that “real” professionals—doctors, lawyers, electricians—don’t get tips, and to offer one would be a grave insult. Reporting from Barcelona in the 1930s, George Orwell noted that since the revolutionary government had outlawed tipping, waiters “looked you in the face and treated you as an equal.”

My advice, as someone who has both stayed in hotel rooms and cleaned them, is this: Tip till it hurts. And for many of us that means a lot more than $1 to $5 a night recommended by “The Envelope Please.” You will be helping someone feed her children and pay the electric bill. You will be gaining karma points.

Just don’t feel too smug about it. By tipping, you are acceding to an economic arrangement based on severe inequality. In fact, you are inadvertently subsidizing a company that profits from and perpetuates this inequality. Tipping may generate a tiny flare of human warmth in an otherwise cold corporate world, but “gratitude” is not an answer to exploitation.

Barbara Ehrenreich is the founder of the Economic Hardship Reporting Project, and the author of the seminal Nickel and Dimed: On (Not) Getting By in America.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME Money

Occupy Wall Street Just Made $4 Million of Student Loan Debt Disappear

All the students whose debts were abolished went to the for-profit Everest College

An Occupy Wall Street campaign says it has abolished almost $4 million in student loan debts, in a Tuesday announcement marking the third anniversary of the Occupy protests that brought renewed attention to the issue of income inequality.

The Rolling Jubilee Fund, an initiative of the Occupy movement, has been accepting donations and buying up student loan debt for pennies on the dollar from debt collectors, and then forgiving the loans altogether. The group has spent about $107,000 to purchase $3.9 million in debt, organizers said.

The debts were held by students who attended Everest College, a for-profit institution part of the Corinthian Colleges network. The fund called Everest College a “predatory” institution that is helping fuel the $1.2 trillion in total student loan debt in the United States.

“We chose Everest because it is the most blatant con job on the higher ed landscape,” the organizers said. “It’s time for all student debtors to get relief from their crushing burden.”

The debt belonged to 2,761 people who had taken at loans at Everest College. The group is only able to purchase private student debt, not the majority of outstanding U.S. student debt that’s backed by the federal government. Corinthian Colleges told CNN it stands by the “high-quality” education it provides and denied charges of predatory lending.

TIME Economy

Watch How California’s Drought Will Affect Your Wallet

California’s drought means higher food prices for Americans.

The West Coast has been in a persistent drought for the past 15 years. California, which grows more than 200 different crops, is being hit the hardest. This year, about 500 million of acres of California’s land is expected to be taken out of production. The consequence: higher produce prices for all Americans.

Timothy Richards, a professor of agribusiness at Arizona State University, conducted research that predicted that 10 to 20 percent of California’s crops could be lost. On top of that, the threat of a megadrought, which can span over two decades, could result in a major economic crisis.

 

 

 

TIME Scotland

Scotch Whisky Makers Aren’t Warming to the Prospect of Scottish Independence

Distillers fear secession could dampen sales of their beloved spirits

Scotch whisky makers are worried about the vote for Scottish independence on September 18.

The Scotch Whisky Association explained how a vote for independence is concerning because it is currently unclear which currency Scotland will use and what an independent Scotland might mean for access to foreign markets. Currency confusion could lower sales, putting the important industry in a tailspin, along with the rest of the economy.

As the country’s second-largest export, Scotch comprises one fourth of all of Scotland’s food and drink exports. Some 40 bottles are shipped out of the country every second, according to CNN Money. The Scotch Whisky Association also stated that 35,000 people make their living off of Scotch production.

TIME Mental Health/Psychology

6 Things You Must Know About Money and Happiness

Money stack
Getty Images

If you were offered a well-deserved raise at work or a no-strings-attached wad of money, would you take it? You’ve surely heard that money can’t buy happiness, but it can certainly get you closer to an enjoyable life, right?

Yes and no, says Elizabeth Dunn, Ph.D., associate professor of psychology at the University of British Columbia and author of Happy Money: The Science of Smarter Spending. “It turns out, what you do with your money seems to matter just as much to your happiness as how much you make,” she says—good news for those of us without a sudden windfall or promotion in our near futures.

Health.com: 15 Myths and Facts About Depression

Here are six facts that may surprise you—and tips on how to live the good life, no matter how much you’ve got.

Don’t sweat the six-figure job

“There is definitely a correlation between income and happiness,” says Dunn. “But actually, money buys less happiness than people assume.” And in some ways, it buys happiness only up to a certain point: A 2010 Princeton University study found that emotional well-being—defined by the frequency of emotions like joy, anger, affection, and sadness—tended to rise with salary, but only up to about $75,000. Beyond that, people continued to rate their lives as more satisfying, but they didn’t seem to experience any more happiness on a day-to-day basis.

Spend on experiences, not things

Material goods may last longer, but a 2014 San Francisco State University study shows that life experiences—like trips, fancy dinners, and spa treatments—provide more satisfaction in the long run. Researchers interviewed volunteers before and after they made purchases of both types, and found that afterward, most people viewed the intangibles as a better use of money. However, they add, an experience has to fit a person’s personality in order to have benefit; someone who doesn’t like show tunes, for example, probably won’t see the value in a Broadway play.

Health.com: 20 Ways to Get Healthier for Free

Donate to charity

Giving to people or organizations in need “has a direct correlational effect on happiness that is basically equivalent to a doubling of household income,” says Dunn, citing research from a Gallup World Poll. How you give matters, too, she says: You’ll get more of an emotional reward by supporting groups you feel closely connected to, or when a close friend asks for your help. (In other words, accept that Ice Bucket Challenge already—the giving money part, at least!)

Pay it off early

“The pleasure of consumption can be dragged down by the pain of having to pay for it,” says Dunn. One way to get around that? Put money down for things as early as you can, even if you won’t actually experience them for a while—book trips months in advance, pre-order books and albums you’re excited about, or purchase credit for a service you can redeem at a later date. “Research shows that what lies in the future is much more emotionally evocative than what lies in the past,” she adds. “If we paid for something last year, it’s almost like our brain forgets we ever spent money on it.”

Health.com: Money Trouble? 14 Depression-Fighting Tips

Give thoughtful gifts

When money gets tight, it may seem wasteful to splurge on presents and tokens of affection—but Dunn’s research shows that spending money on others, especially a loved one, is one of the happiest things you can do with your money. (In one study, people who had been asked to spend $5 on someone else felt better at the end of the day than those who’d been asked to spend it on themselves.) It’s the thought that counts, too: Both givers and receivers are happier when a gift is a good fit for the recipient’s personality.

Use a debit, not credit card

Being in debt is negatively associated with happiness, and is linked to health problems such as depression and anxiety. It may be hard to avoid all forms of debt, but one way to keep from falling deeper into it is to make everyday purchases with debit accounts, rather than charging them. “Debit cards are way happier plastic,” says Dunn. “They provide a lot of the same conveniences as credit cards, but don’t have the same long-term problems associated with them.”

Health.com: 14 Reasons You’re Always Tired

This article originally appeared on Health.com.

TIME Economy

The Worst Stock Tip in History

Stock Market Crash
Messengers from brokerage houses crowd around a newspaper in New York City on October 24, 1929. New York Daily News Archive / Getty Images

Sept. 3, 1929: The market reaches its highest point before the Great Depression

At this time 85 years ago, Yale economist Irving Fisher was jubilant. “Stock prices have reached what looks like a permanently high plateau,” he rejoiced in the pages of the New York Times. That dry pronunciation would go on to be one of his most frequently quoted predictions — but only because history would record his declaration as one of the wrongest market readings of all time.

At the time he said it, in early October, he had good reason to believe he was right. On Sept. 3, 1929, the Dow Jones Industrial Average swelled to a record high of 381.17, reaching the end of an eight-year growth period during which its value ballooned by a factor of six. That was before the bubble began to burst in a series of “black days”: Black Thursday, October 24, when the market dropped by 11 percent, followed four days later by Black Monday, when it fell another 13 percent; and the next day, Black Tuesday, when it lost 12 percent more.

Fisher, consistently bullish, pronounced the slide only temporary.

In his defense, he was not the only optimist on Wall Street. After witnessing nearly a decade of growth, most economists, investors, and captains of industry believed that the market’s natural direction was up. The beginning of the crash struck them not as a sign of financial doom, but as an opportunity for bargains. Following the first of the black days, the New York Times was full of positive predictions: “I have no fear of another comparable decline,” said the president of the Equitable Trust Company.

Many of those optimists, including Fisher, went broke by mid-November, when the Dow had lost nearly half its pre-crash value. Fisher’s reputation likewise plummeted.

He went on to develop a new theory about what had triggered the crash: overly liberal credit policies that encouraged Americans to take on too much debt, as he himself had done in order to invest more heavily in stocks. By then, however, no one was listening. His theory didn’t gain traction until the 1950s, when, years after his death, Harvard economist Milton Friedman pronounced him “the greatest economist the United States has ever produced.” Fisher’s debt-deflation theory found its way into the spotlight again when overgenerous credit lines and huge debts prompted another U.S. market crash — this time in 2008.

Read Niall Ferguson’s comparison between 1929 and 2008 here in TIME’s archives: The End of Prosperity?

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