It is a winner-all economy. More and more labor markets act as a lottery, where a pair of “superstar” workers have given very high returns relative to their peers – who can start at exactly the same starting line.
For Charlie Olson and Eric Lack, that dynamic did not make sense. “We own 100% of our future. And, you know, once you choose a career, you’re off to the risk-reward risk preference for that career, “Olson said. Hit the lottery, and your earnings skyrocket. For the majority of others, however, there is no safety net – no insurance policy – that protects you despite pushing your hardest in the race for superstardom.
The two founders were connected while at Stanford GSB and began to look around their peers, some of whom could be business superstars in the years ahead. He thought of some ideas, but kept returning to the idea of trying to create a sort of pooled insurance platform for careers.
His thinking eventually led to the creation of the San Francisco-based Pando in mid-2017, a platform to create a career insurance pool similar to that among a group of peers. Olson explained, “We’ve created a marketplace to allow groups of people to choose their pool, and each person in that group can contribute some defined part of their uncertain future to the shared group Agree to. “
So, for example, a person in business school and a bunch of their classmates seem similar on paper. Statistically, one of them could do well professionally in his career, but right now nobody knows who he will be. Pando hopes that those users will join together and buy into their shared future returns.
The payout rules are set by the users of that pool, but there are some emerging guidelines that are helping pandas to be produced. There is usually a financial barrier to overcome in terms of income, so that income below a threshold is not paid. For users who hit the threshold, the typical contribution ratio is either around 1-2% with a large number of pool users, or 7-10% of an individual’s income in some smaller pools. The dollars collected by the pool are distributed equally to all users.
One of the early customer profiles for Pando focuses on building a pool around professional baseball players. Unlike the record-breaking earnings that are announced in the papers, many baseball players rest in the relative obscurity of making at least a dollar, before still hitting the big leagues, while still expecting a shot in the big leagues. “You either leave the game with nothing, or huge amounts of money,” Olson said.
In this context, a Pando Pool can reduce some of the extreme deviations of pay seen in the game, while also helping to create more excitement. “The idea of a group of people coming together with financially aligned incentives to form partnerships is a real motivation to see each other succeed,” Olson said. He said that the specific pool size at Pando is 5.7 people. In baseball, in particular, the pool includes the player’s direct team income, but does not include ancillary income like endorsement deals.
So it makes a lot of sense, but one thing that was less clear to me is how pandos persuade ambitious and talented people to sacrifice some of their upside. After all, no one does it for the major leagues without thinking whether they are going to be the next A-Rod, or starting the next Facebook without thinking of themselves as the next Mark Zuckerberg.
Olson mentioned two things. The first is data, which shows the human need for the distribution of results in an area and the protection of income for a pool. And the second is that having a portfolio of updowns is better than using your solo career as your sole bet in the financial future.
“Warren Buffett believes in himself. And yet, he has a portfolio of companies in which he has invested. Venture firms have believed in their ability to pick winners. And yet, you will never find one that has a single investment according to their portfolio strategy. “Your agent is proud of you. And yet, he has a stable group of customers, and he will make the money from the most money-maker. Why are you the only one who owns 100% above your own? “He said that the logic and the cooperative feel of a pool helps to close deals.
The company officially launched in fall 2017, and raised $ 3.3 million in seed from Ulu Ventures, Peer VC, Avalon, Nimble Ventures and Stanford Startup Fund. The company revealed this morning that it raised a $ 8.5 million series at Core Innovation Capital in 2019 under the leadership of Kathleen Utech, with the VC and its seed investors joining Gol.
With the funding, the company is expanding outside of its professional athletics initial target market like business school students, entrepreneurs, and others who are walking high-risk, high-reward career paths.
While it is still early days and has a tough trend to replace the winner-take-all labor economy, Pando is offering a different kind of take on the problem and is a thoughtful and innovative platform.