It seemed too good to be true. On April 13, with reporters from the New York Times and NBC News hovering nearby, Dan Price, the young chief executive officer of Gravity Payments, a Seattle-based credit card processing company, told his staff he was raising their minimum salary to $70,000 a year. Some employees would see their wages double. There was more: He planned to cut his own $1.1 million compensation to help cover the cost. The idea came to him, he’d later tell the media, after talking to a friend who earned less than he did. He’d read about a study showing that extra income improves the happiness of people who earn less than about $75,000. “It’s not about making money; it’s about making a difference,” Price told the Today Show, one of two dozen TV interviews he did in the days following the announcement.
Price’s story rocketed around the world, a capitalist fairy tale to counter growing inequality. With his tousled long hair and dark brown eyes, Price combined Brad Pitt’s smolder and Boo Boo Bear’s aw-shucks demeanor to become an articulate and attractive messenger. Rush Limbaugh denounced him as a socialist. Jesse Ventura christened him Robin Hood.
In late summer, the New York Times ran a longer piece on Price, now 31, showing that raising wages wasn’t so simple. Job applicants had overwhelmed his company, and two employees quit, saying the increase wasn’t fair to higher earners. “Potentially the worst blow of all,” the Times wrote, was that about two weeks after the announcement, Price was sued by his older brother Lucas, who owns about 30 percent of Gravity, alleging Price paid himself too much in the first place. Price insinuated that his brother may have sued in reaction to the generous pay increase. “I know the decision to pay everyone a living wage is controversial,” he told the Seattle Times, which first reported the lawsuit. “I deeply regret the rift this has caused in my relationship with my brother.”
An expensive lawsuit, filed possibly in response to his kind act, made Price seem more of an underdog. When I met him at Gravity’s headquarters in mid-October, he wasn’t even supposed to be in Seattle. He’d been scheduled to join Planned Parenthood President Cecile Richards and General David Petraeus on a panel titled “Leading Under Pressure” at the Chicago Ideas Week festival. But Price had canceled at the last minute, saying he’d hit a wall of exhaustion. “I think I’m just standing in for a bunch of other people doing great stuff,” he said. “To me the responsibility is to be the best spokesperson I can.”
As we talked about his wild six months, I brought up the lawsuit, asking if Price thought Gravity’s spending on the raises triggered his brother’s suit, as he’d implied. “I have no idea,” he slowly shrugged, looking right at me. “The quote in the Seattle Times from his attorney was, ‘It wasn’t only because of that.’ ” He twisted his beard between two fingers, contemplating the statement by Lucas’s attorney, Greg Hollon. “That one singular quote in the paper is the only information I have about if they were connected or not.”
It’s a poignant story, one that I almost wrote. Until I realized Price knew more than he was letting on. The lawsuit couldn’t have been prompted by the pay raise—if anything, it may have been the other way around. And his salary before the big announcement was unusually high. As I read through the court record and media reports, I began to see how Price was writing his own origin myth one interview at a time. With what he says is a $500,000 book deal, he’s solidifying his place as the next do-gooder businessman, joining the CEOs of bigger companies, such as Zappos’s Tony Hsieh and Whole Foods Market’s John Mackey. In the process, he’s surely become the only credit card processing executive to be feted by Esquire, courted by literary agents, and swooned at by women on social media who declared him “yum.” But how it all happened is a little more complicated.
The day-to-day work at Gravity Payments is pretty unglamorous. Gravity is a middleman between merchants and payment networks, namely Visa and MasterCard, which in turn connect to banks that issue credit cards. If you use a credit card to pay for a Habanero Soft Chicken Burrito at a Taco Time in Seattle, it’s Gravity that helps move $6.29 from your bank to the restaurant’s, keeping a sliver for its service along the way.
As Price tells it, he started thinking about credit cards when his middle school band, Straightforword, was gigging around Idaho. He grew up in a religious family outside Boise, the fourth of six kids. The “teenage rock star,” as his speaking-circuit agent now bills him, frequently performed at a local coffee shop and got to know the owner. Price says she complained about how much she had to pay for credit card processing and inadvertently taught him about swipe fees. “She let us do a show and gave us 100 percent of the door, but when someone wanted to pay their entrance with a credit card, we had to pay the fee,” he says.
About that time, Price’s father began consulting for the credit card industry. Price learned the ropes from his dad and helped businesses negotiate with processing vendors. In 2003, Price started college in Seattle, and he and Lucas founded Gravity the next year. The brothers initially split the company evenly. In 2005, at 21, Price married Kristie Lewellyn, and the next year he became Gravity’s CEO.
Gravity works to keep merchants happy with low prices and good service. That’s expensive, but acquiring new clients can be even more so. Gravity says it historically has lost only about 9 percent of its customers a year. “Typically, there’s more than 30 percent attrition per year in our industry,” Price says. Not quite: A 2012 study for Discover Financial Services found the rate averages 16 percent, and other sources indicate attrition rates well below 30 percent.
When the financial crisis hit in 2008, consumers cut their spending, and about 20 percent of Gravity’s business disappeared within weeks, Price says. “It changed us from being mildly profitable to where we were losing money every month.” He called a company meeting, and “I said, ‘In seven months we will be out of business, so let’s hold expenses and get into the black,’ ” he recalls. It worked. In 2012, Price began raising staff pay in steps. Each raise, he says, brought a surge in profit.
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December 07 - 13, 2015