WhatsApp With the Minimum Wage?

By Lloyd Graff

Jan Koum: Founder of WhatsApp, app sold to Facebook for $19 billion

Connecting the dots …

Jan Koum, an immigrant from Kiev, Ukraine, sells his five-year-old company, WhatsApp, for $19 billion to Facebook. Ukrainian people overthrow Viktor Yanukovych, a corrupt dictator allied with Russia and Vladimir Putin. Democrats make income inequality and minimum wage law reset into campaign issues. Republicans put immigration change off the table for internal political reasons going into 2014 elections. Luxury buses traveling from San Francisco to Silicon Valley become a political issue. Vivek Ranadivé becomes lead buyer of the Sacramento Kings NBA franchise.

Jan Koum came to the U.S. in 1992 as a 16-year-old with his mother and grandmother with no money. They settled in Mountain View, California, in a tiny apartment paid for by a Jewish philanthropic group in the Bay Area, set up to help Jews leaving anti-Semitic Russia and Ukraine. A few years earlier, Sergey Brin, co-founder of Google, had come to America for similar reasons. His father had been kicked out of his university teaching job because he became a Jewish Refusenik in Moscow.

Koum’s mother eventually fell ill with cancer and the family had to survive on food stamps. Koum developed a passionate interest in computer programming and attended San Jose State University. He then got a job at Yahoo!. He left Yahoo! in 2007 with his friend, Brian Acton, and went traveling for a year, playing a lot of Ultimate Frisbee and thinking about a new company to start. He had friends and family spread across the world in Ukraine, Israel and South America. He saw an opportunity to create WhatsApp, a cheap messaging app that would be difficult to trace and insure privacy for people in places like Russia and Ukraine.

Facebook announced it was purchasing WhatsApp for $19 billion on February 19. The app was reportedly used by many people in Kiev during the rebellion that culminated in Yanukovych leaving office last Friday.

When Jan Koum was looking for venture capital, he connected with Jim Goetz of Sequoia Capital, which put up the money for early development. They often met at Red Rock Coffee in Mountain View, around the corner from the government office that helped sustain Koum’s family with food stamps. The baristas that served him were making $10 an hour, but if they were working for primarily tips, the minimum wage was $2.31 per hour. The controversy over raising the minimum wage and the bigger argument over the gulf between the rich and poor and the rich and middle class in America is sowing the seeds of a national sense of resentment. The minimum wage is all over the map. For a disabled person working in a sheltered workshop it is $2.50 per hour. It is $4.76 per hour for tuna canners in American Samoa. The minimum wage in 1968 is worth $9.40 today, and the $5 per day that Henry Ford instituted in 1913 is the equivalent of $14.71 per hour today.

Personally, I think the country would be better served with a $10 minimum wage, though we would see fewer fruit pickers and maybe higher priced fries at McDonalds. Perhaps there would be fewer workers, too. I doubt it would do much one way or the other for employees at Starbucks and Red Rock Coffee.

We hear the Republicans cannot get their act together to pass immigration reform because it might hurt Mitch McConnell in his re-election bid in Kentucky. A guy like Mark Zuckerberg will give big money to Chris Christie and Corey Booker, a Republican and a Democrat, because immigration and education reform brings in people like Koum from Ukraine, the family of Zuckerberg’s wife, the Chans, from Vietnam, and the vast talent needed to fuel Silicon Valley firms like Facebook. The Republicans lost the Presidential election in 2012 because Mitt Romney stupidly alienated immigrants and received 29 percent of the Latino vote. When will they ever learn?

Meanwhile, the Googles and Apples and Intels are running luxury busses from San Francisco to Silicon Valley to bring in the folks who no longer can afford to live in Koum’s Mountain View, but not to bring busboys and floor sweepers making low wages. It is symptomatic of the economic divide that includes the war veterans of Iraq and Afghanistan, who often come back with few marketable skills. Jan Koum’s firm, WhatsApp, has 55 employees. He doesn’t need busses, yet.

The Ukraine and India seem like exotic, faraway places. But if you go to Silicon Valley, you see a place filled with a lot of people who have struggled to come there, whether they are the Jews who lucked out of Ukraine and Russia, Mexicans doing the tough jobs others put up their noses at, or the intellectual elite of India who seek a place where their smarts will be rewarded, such as Vivek Ranadivé. Ranadivé came to the U.S. with $100, talked himself into MIT, and today is the majority owner of the Sacramento Kings NBA franchise.

The people of Ukraine want a chance. Today they know WhatsApp in the world.

Question: Would a $10 minimum wage have a positive effect on your business?

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24 thoughts on “WhatsApp With the Minimum Wage?

  1. Josh

    I find it very hard to believe that with the total amount of money in the American economy that any job where one works 40 hours a week could be worth less that $10/hour. So much of the money that should be in the markets is tied up in the hands of a small minority of individuals. This is not the result of a free market, it’s the result of a tax system and economic system that has been funneling money to the top and bottom at the expense of the middle class for the past 30 years. Trickle down? Yeah, where is it? That mindset has proven categorically false and yet we still have a government catering to mythical job creators. People don’t create jobs, the market does and people exploit that for profit. That’s fine, but that doesn’t make you better than the person who flips your burgers, in many cases it just makes you luckier.

    1. Ron B

      Good stuff Josh… I like the writers ‘centrist’ view… nice Lloyd. What I do not appreciate is the mindset that anyone can do it because… here’s an example. Some people are gifted, some are privileged, some are eccentric and stay in their room throughout childhood, some are lucky… but that doesn’t make the others stupid and lazy. The capitalist want you to believe that anyone can do it because… they did it or this person did it. They will take an exception to the rule and claim it the standard.

      1. Emily Halgrimson Post author

        Yes! I completely agree. The idea that “I accomplished this with hard work so they should too” is oversimplified. To say that is to not understand why you think and act the way you do, or why others are doing what they learned from their experiences and upbringing too. Of course people can escape the pattern, but often that accomplishment is filled with lucky circumstances too.

  2. gordon erickson

    In a machine shop there really isn’t a lot of need for $10 an hour workers. Occasionally picking up a finger or a hand isn’t a favorite of mine, so I tend to hire a much higher caliber employee. Your McDonald’s comment sums it up though; The price of 2 hot dogs and a small shake at Portillos is over $10. Raising the minimum wage will cause the price of pretty much everything to go up. In the end, the increase in salary will be a wash to those working. However, now that it is at that magical $10, pretty much everyone who didn’t graduate high school is going to wind up on welfare. Of course, that will need to rise to afford those high priced hot dogs. I would expect that in the end, government meddling will once again create more problems than it solves.

  3. Robert

    Raising the minimum wage a few $ will have next to nill impact on lifting people out of poverty. This is considered a starting wage for teenagers entering the work force and is not meant as a living wage for older people with dependents. This will only add to a price spiral. Since Obama from day one has been more interested in giving people fish rather than teaching them to fish, it should be no surprise that he is attempting to pay off younger voters by giving out more fish. He is not interested in private sector employment, since they are not dependent on the Government. His model of employment is Cuba, where 80% of the country has a Government jiob.

    1. Josh

      So what is your solution to the income gap then? Surely you think working 40 hours a week ought to provide you with a livable salary don’t you? Isn’t this about the basic value of our labor force? How can we have a sustainable consumer economy if our consumers can’t afford to purchase goods?

  4. Jim Goerges

    NO! Basically, the poor need more money to pay for health care now, so this is a way for the government to start taking money from the poor, wanna bet? Also, many labor contracts are set based on minimum wage and adjustments are made for these increases, why is that?

    What this will do as explained by Robert, the hamburgers, hotdogs and such will go up. Many services will cost more, grocery’s, lawn care, ect. So, this is just another “fix” the dem’s will do and it will blow up like health care, Sudan, legalized marijuanna and the such. Can you sing along, We’re freaken at the freaker’s ball, tonight, at the freaker’s hall and you know, you’re invited……Join Hillary, Obama, Reid and Pelosi for a good ol’ time!!!

    1. Ron B

      Do you have any idea how much a McDonalds franchise makes… you really need to see those numbers before you claim that everything’s going up.

      1. Dan

        Shouldn’t the franchise owner that invested millions make money, why is that such a dirty thing? I am not sure why you employ people, but I do to make money, not to employ people or to make the world a better place. McDonalds has done an incredible job of taking skilled workers out of the picture to make money and keep prices low.

  5. allen

    I’m just fascinated that a guy who’s made his living, and fortune, accurately gauging the value of things feels free to question the validity of applying the same considered evaluation to the value of labor.

    Because labor obviously has differing values. The employee who can be trusted to get a complex job done is obviously more valuable then the employee who has to be closely supervised. Greater value should result in higher pay and in a free market setting it does.

    The obvious, and also proper, corollary is that lesser value should result in lesser pay.

    Where supply meets demand is where the actual value is determined and that point varies with economy. In a hot economy someone with valuable skills can demand more compensation but so can someone with relatively slight skills. It should be remembered that not that long ago those sneeringly dismissed “burger-flipper” jobs were paid comfortably above minimum wage. Market demand raised the value of even unskilled labor.

    The minimum wage puts a floor under pay but does nothing to increase the value of labor like market demand does. Therefor, the minimum wage creates a floor on employability. If the value of the labor you have to offer isn’t worth the minimum wage you simply don’t get a job.

    You’d think that ensuring some people are unemployable, and likely to remain that way, would be seen as a bad thing but that doesn’t take into account those who find artificially constraining the labor supply to be an agreeable state of affairs. That would be organized labor which has as its stock in trade a monopoly on labor. Monopolists reflexively abhor the free market since the free market inevitably destroys monopolies.

    So social justice not a raising of the minimum wage but a lowering and, preferably, repeal of the minimum wage law.

    1. Josh

      What do you do then in a system with more people than jobs? What do you do when salaries across the board are too low? Do you truly think that the wages people are paid these days reflects the accurate value of their labor? I don’t. I don’t believe in an America where working 40 hours a week doesn’t provide you with enough to make a decent living. You go on and on about market demand, what if there isn’t any demand? What will happen when we increasingly automate every field of business? We need to make decisions about these issues in the next 50 years or there will be a lot of people hurting. The global market is changing and the idea of hourly labor rates make less and less sense as this happens. People who are working 40 hours a week aren’t lazy in my eyes and deserve to make enough money to live. Right now we have an artificial welfare system exploited by corporations to subsidize their low wages at the expense of middle class tax dollars. It would be far more effective to have these corporations paying fair wages.

      1. yu

        problem is in your reply, what EXACTLY is “fair wages”, “working”, “decent living”?
        Combine that with the general standard of living in the USA. Compare “decent living” in a third world country or even China with USA. Others from around the world look at us and can only wish they could work at MCD’s and live like a king.

      2. Don

        “What do you do then in a system with more people than jobs? ”

        Well, to begin with you stop importing people with no skills to perform menial tasks, such as in the agricultural fields & timber industries, you enforce your nations laws and punish those who ignore them. You take away the economic “bait” for people to chose not to work and exist on the government teat because it’s more comfortable than learning a skill that would enable you to earn more. The minimum wage level job isn’t meant to be a career and it shouldn’t be the apex of an adult’s abilities. This once proud country didn’t become the greatest on Earth because of government handouts, it was through ambition and hard work. If you failed in a career you found something else you could earn a living at, not live off the sweat of others while you “found” yourself. The welfare systems we have, corporate and otherwise, are symbols of what happens when soft people come to power, when we elect leaders who have never actually earned anything, and they make laws based on that experience. The truth is, there IS a market demand, but we’ve decided that we’re too entitled to compete, that the burger flipper is as valuable as his manager, and they have as much right to be comfortable as the owner of the business. We have decided to try socialism as we’ve watched it fail everywhere else.
        When I was young I worked 2 jobs to earn more, until I developed my skill set to be worth a higher earning potential. Many today can’t comprehend that mentality. We have to compete globally, and there’s no way our government will be able to spend us into prosperity.

  6. Dan

    Raising minimum wage could hurt workers by increasing competition for low end jobs, lets face the facts, highly skilled valuable people are not holding these jobs. They are not being held down by society, many minimum wage workers are lucky to even be employed. The impact on my business would be minimal, but I may decide not to hire a low skilled employee if I have to pay $100.00 more a week.

    1. Josh

      Are you happy living in a country where we are “lucky” to be employed? What do we do for people in an economy with more people than jobs. That is unsustainable in a consumer goods economy and keeping wages artificially low is only going to damage us further.

      1. Dan

        I live in a country where work is not a right, do you hire drug addicts because you believe they have a right to work? Raising minimum wage is the opposite, making them artificially high causing inflation.

  7. MIke

    I own a small seasonal business that employs mostly high school and college kids. We have been in business for 13 years. When I opened my starting price for my product was $1.00 and I was paying $5.50 an hour when minimum wage was $5.15. Since the minimum wage has gone up, I now charge $1.50. If I am forced to pay a 16 year old person $10.00 per hour, guess what, I will raise my prices again. To me, anyone trying to earn a living on minimum wage does not either have the education or skills required to advance up the ladder. Have them show up for work early, put in a decent effort and have a good attitude and I will be if they ask for a promotion, they might get it. The argument that you cannot find quality workers for minimum wage is not true. I have some great young people working for me and I reward their efforts by paying more that required.

  8. Ken

    If anyone has little or no knowledge we still start them at $10.50 per hour.

    You can’t find “good” workers for less than that.

    No one who is frying a hamburger is worth $10.00 per hour.
    The fact is that minimum wage allows companies to train folks into a skill set if they have the potential to learn. While perhaps it may be time to nudge this up the fact is that most jobs demand that you start someone higher than minimum anyway.

    If you think that raising the minimum wage is the answer to everything as some do are you telling me that when you are 40 years old you will still be at minimum wage demanding that the rates be raised yet again? You cannot live on this and it was never intended for that.

    Just make all food service jobs a flat rate with tips. If you are good enough and do a good job let the customers tip you for it. That’s the way most food operations work now if the person waits on you.

    For facts we should turn to how the “prevailing wage” is tied to “minimum wage”. I think those in office and other places are not being honest about why they want the “minimum wage” to be raised. If it goes up the unions get a raise too because their wages are tied to “prevailing wage”. Try that on for size.

    You want to see what will happen to those jobs that are paying $8.50 an hour for high school kids? Just raise the minimum for 18 year old’s and you’ll find out.

    Think “Inflation”.

    It’s just a ploy by our elected leaders before this election to get votes. The Obamacare mess is going to bankrupt our health care industry and they know it and folks are migrating away from the Democratic party, they must do something and do it soon so they can say “look what we did for you peons”.

  9. Paul Hampton

    Obama needs to pay for Obama Care. Raising the minimum wage will give low income workers enough money so they can pay the Federal goverment tax penalties (or buy insurance). People in this country are to stupid to realize there is no free lunch.

  10. Jerry Levine

    This comment is about the WhatsApp story, not minimum wage: While the US has many problems, it is still the magnet for the best and brightest and hardest working people from all over the planet. Immigrants continually strengthen and revitalize our country. Our gain is often the immigrant’s country of origin’s loss.
    WhatsApp just sold for $19B. That’s more the $15B bribe Putin offered Ukraine to stay in the Russian “sphere of influence.” Ukraine’s ambivalence over joining a free West versus taking the Russian money has led to a revolution with over 100 dead, and potentially many more to come. What if 20 years ago, Russia/Ukraine had offered Jan Koum’s family no religious discrimination, true economic freedom, and a rule of law, and he stayed and developed WhatsApp in Ukraine? They could have had their cake and eaten it too–Western style capitalism and freedom and $19B too!

  11. Bob

    One more comment on minimum wage, if you please. Where is the ambition going to come from if we keep raising minimum wage? I, like most of us, started working in a car lot when in high school, I got a job in a machine shop when I turned 18, saw that the higher skilled jobs paid more money so learned the skills needed to get that pay, and found that I was very proud of my knowledge and skills, that in turn kept me wanting to learn more, to be more ambitous. Seems that is the problem with some of us Americans, some of us no longer have the ambition that people in other country’s have.
    One more thought, Don’s comment summed up my thoughts on our goverment. I wonder if any of them have ever worked in a machine shop, or started as a carpenter, or pipe fitter, have they ever driven a truck for a living? How can they be expected to govern something they have no understanding of? Perhaps it is time to start electing business people to public office, instead of lawyers.

  12. Pete May

    Why all the fuss about petty things ? Everything will be fine, the politicians say so. Praying is easier than worrying. I sure hope and pray that Alexander Tytler was wrong.

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