Elon Musk’s SpaceX success shows how he’s sharing the wealth, not playing Monopoly
With the IPO of SpaceX (formally Space Exploration Technologies Corp; $SPCX) June 12, there has been endless commentary on Elon Musk’s status as the world’s first U.S.-dollar trillionaire. But in my eyes, his greatest accomplishment in wealth creation is not what he has done for his own wealth, but what he has done for others.
It’s been reported that in going public, SpaceX has created wealth not just for Musk, but for many employees. In fact, it is estimated that going public has made millionaires (at least on paper) of more than 4,000 SpaceX employees, which includes not just high-level executives, but employees in roles from cafeteria workers to contract workers.
Wealth is inextricably tied to ownership of assets, ideally assets that have the opportunity to appreciate in value. By allowing employees to participate in ownership of the company for which they work, they have an incentive to do their part in making the company successful, knowing that they will derive some of that benefit.
Whether that is structured as equity grants, options and/or stock purchase programs, it’s not just one person getting wealthy, it’s a whole team of people.
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That’s exactly what SpaceX has done for its team.
In a time when corporations are deemed "greedy" by the mainstream media and progressive politicians, where ownership of tangible items is being replaced by subscriptions, and where government deficits and Fed money printing have degraded purchasing power, it is refreshing to see loyal, hardworking Americans across job functions be able to participate in authentic wealth creation for themselves and their families.
About a decade ago, Juan Hernandez took a contract welder job at a company with which he was not familiar — SpaceX. He was offered a stock grant as part of his SpaceX pay package, and now his holdings are valued in the seven figures. As if that wasn’t amazing enough, he shared in an interview that this positive experience has led him to teach investing to his three children.
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SpaceX may be the highest-profile company to share wealth creation with its employees, but it’s hardly the only one.
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Private Equity company KKR, spearheaded by Partner Pete Stavros, has made it a mission to share wealth creation with a wide variety of employees of the companies in which it invests. One of several examples is when KKR sold CHI Overhead Doors to steel producer Nucor Corp. a few years ago. It was reported that the company’s hourly employees, including factory employees, received between $20,000 and $800,000 before taxes, with $360 million total going to employees, the majority of whom were non-C-suite employees.
Creating win-win situations is great for everyone involved. Employees help build businesses and are often frontline ambassadors. Having them have "skin in the game" in a low-risk way through equity options or similar structures creates great outcomes for businesses, their employees and their customers.
Elon and his team are not just building rockets, they are building wealth. Other companies should not just study SpaceX’s outcomes, but the incentives of the team that helped get them there.
Hopefully, we will see many more companies, whether startups, mature companies or those that go through a change of ownership, let their employees participate in ownership and wealth creation.