Fixing The Healthcare System For Indies x Web3 - John Paller

[02:39] Paul: Welcome to The Pathless Path. I'm Paul Millerd, and in this podcast, we examine the invisible scripts that run our our lives and dare to imagine new stories for work and life. Today I'm talking with John Paller, a Denver-based entrepreneur and the founder of Opalus, a digital employment cooperative for independent workers. Also the founder of ETHDenver, the world's largest Web3 and Ethereum festival. Excited to talk to you today, John. Welcome to the podcast.

[03:10] John Paller: Thanks for having me. Appreciate it, Paul.

[03:12] Paul: Awesome. We're going to talk about a lot today. Opalus is doing some interesting stuff with of bringing healthcare to these wandering independents like myself who have to deal with the, as I was saying before we hit live, the dumpster fire of the US healthcare system for people like me. But first, just want to start like what's happening in Denver? It seems like Denver, I've mostly been living in Austin the last year. It seems like Denver's one of the more interesting places in America right now.

[03:42] John Paller: Yeah, I think so. I mean, I'm slightly biased probably. So from inside my own echo chamber, that is the Colorado tech scene. We've been working pretty hard over the past several years to establish Colorado as a, as a place for blockchain technology and Web3 development, for like actually like really creating the space in place to help it thrive. The incentives, right? You've got Silicon Valley, which is really Web2.

You've got the New York banking district, which is very just centralized financial services, stock markets, things like that. So the power brokers that exist currently, if you look at the game design, don't really want Web3. They might talk about it or even entertain it a little bit or tease it. But if you really are honest, Web3 is going to fundamentally change their power and the way that they extract value, make money, and maintain their control. So like, they don't really want it. So Colorado has struggled for many years to be an epicenter for technology or an epicenter for entrepreneurism.

And we have the biggest startup week in the country. But, you know, it's, it's not really what I think the culture wants here. Most people aren't from Colorado, and they've come here because Colorado offers this sort of idea of like a progressive meets innovation and progress, human progress meets business-friendly, self-sovereignty, autonomy. So if you really kind of take a step back, those concepts really fit Web3 very well. So self-sovereignty, if it's not your keys, it's not your crypto, that kind of thing, plus being sort of progressive socially, And it's just a weird sort of paradigm. So politically, socially, Colorado is in a really good spot to kind of take the lead on that nationally.

And that's kind of what's happened. So in partnership with our Governor Jared Polis, we announced Colorado to be the first digital state, or the intentions to be. The definition of that is evolving, right? It's evolving and what, what that actually is going to look like. But The goal is to create new fluidity for communities, individuals, projects, to, to build this new digital future, whether it's the metaverse or it's Web3 or whatever it might be. We're trying to be at the forefront of that.

So, uh, I, I would say a large part of this is due to the fact that we've got, um, call it executive support at the state level. Like we're not just doing this like on our own. But it's sort of a bottom-up movement that's being well received by, by our leadership. So yeah, it's been very interesting to be a part of it.

[06:42] Paul: Yeah. So you wrote in an article growing up, you asked too many questions as a kid. Talk to me about that and how that kind of like dictated how you got to where you are today. Is that still with you, asking too many questions, but finally found the people that also want to ask them?

[07:04] John Paller: Yeah, I've, I've pretty much annoyed most of the people I knew growing up because I was— and actually, interestingly, it's my, my youngest daughter's that way too. So like, I haven't— as much as it annoys me that she does it, like, I have an appreciation for it now because it's like the apples don't fall far that far from the trees, really. Um, but yeah, I, you know, you gotta find your tribe. So to speak, you know, you gotta, you know, I think in a lot of ways, at some point in, in my career, I just stopped caring what other people thought. And that actually probably did more to, like, help me find the kind of group of people that, that really understand kind of this future that, that, well, we all share the same viewpoint, variations of it, but like, you know, we all share the general kind of belief system on where things are going.

[07:59] Paul: Awesome.

[08:00] John Paller: Um, yeah, yeah.

[08:02] Paul: So you, you started your career in talent staffing, recruiting. Um, it looks like you built a pretty successful business and some teams around that. How did you, um, did you get to a point where you started to kind of yearn for like a new path, or did this, uh, Ethereum crypto scene kind of just happen organically, or did you just happen to make some investments that made you recalculate What?

[08:31] John Paller: No, it had nothing to do with investments. I'm not that, um, well, I used to be much more opportunistic in my earlier days as an entrepreneur. You could say I had a moral crisis, actually.

[08:42] Paul: Interesting.

[08:43] John Paller: So where it came from is I started studying game design and economics, monetary policy, commercial relational dynamics, like all sorts of things that, that relate to sort of incentives, input outputs, economic growth, like how do you build a a better engine. And some of that came from, you know, I started looking around the staffing space. So keep in mind, we had about— we had hundreds of people working on our payroll per week. And, you know, in some cases, we were making more per hour as the house than the actual worker was making doing the job. And, you know, classic consulting company stuff. This happens all the time.

Right?

[09:25] Paul: Yeah. I mean, when, when I started in consulting, I was getting billed at like $400 an hour and making like $25 an hour.

[09:33] John Paller: Right, right. And then, you know, how many people actually make partner and how many people actually start getting paid like real money? Like, and it's like, okay, on the one hand, I understand that there's like a path and an opportunity and like you can earn your way into it. You got to earn your stripes and stuff. I'm not anti-capitalism at all. But then there, there is an area where you get into exploitation.

And it's a fine line. I think a lot of people who live in the gray or even on the other side of exploitation sort of rationalize and justify the things that they're doing. But like when you've got hundreds of people out working for you that can't afford healthcare insurance and you're not providing it and they don't even have access to it back in the day day, right? Like, you know, it, it's like, I mean, if you want to get me in a really sort of mood around being sort of really truthful about it, it kind of reminds me of modern-day wage slavery. It's very exploitative. And I say that having been on the inside of the belly of the beast.

I'm not saying that just from my academic chair, sort of pot-shotting at people who are doing things that I'm not doing. I'm not taking a moral stand just for sport. I'm taking the stand because I'm saying, I saw how it directly affected people's lives. And I saw how a person who's normally making $35 an hour is willing to take $20 an hour just to pay their rent.

[10:56] Paul: Yeah, right.

[10:57] John Paller: And they don't have healthcare, they don't have anything. And when the house is still making double or more, you know, and it's like, wait, like, timeout, guys. Like, yes, we can do it. Yes, it's legal. Yes, it's compliant. But like, should we do it?

You know, so now there's not that many people in my space that were, you know, kind of screaming moral limitations on, but then it's like, well, you know, how do you limit it? You know, like, what is it that, you know, how do you build a better box or a better mousetrap around something that's, you know, just legally baked the way that it is? Employment is a very cut and dry sport. So like, yes, the company's taking on risk to employ that person. Yes, they should get compensated to take on that risk. But like, how do you— what's the balance, right?

It's very subjective. So I had some experiences amongst my moral conundrums where we actually started— well, we started— we were the first staffing company in the country that I'm aware of to start offering ACA-compliant benefits to our workers in 2013.

[12:07] Paul: And these are contract employees.

[12:10] John Paller: Contract temp workers.

[12:11] Paul: So the people you were staffing or the people that were working for you?

[12:15] John Paller: The people that we were staffing, the temps. Okay, this was unheard of. Everybody else that I know of was looking for ways to basically avoid paying the tax, right? Which is basically the employers having a responsibility to offer healthcare insurance based on a certain you know, employeeship, right? So if you've got over 50 workers, you've gotta do it. Staffing companies were not exempt from that.

And it's like, you know, all we heard in the buzz chat, the channels, the chitter chatter was like, oh, well here's this loophole and here's that loophole and here's this exemption. It's kind of like what Uber did around AB5 in California, right? Where they, they got the exemption for the platform requirement that there's a legal relationship of employee between their drivers and, and themselves. They paid $200 million for that exemption, right? But, you know, some little staffing company— I mean, we're a $25 million staffing company in the grand scheme of things, we're tiny. And, you know, we had no power to do any of that, and neither did any of these other people.

But they were doing it, you know, shell companies, 49 people in each one. Like, there's some of the games that I saw were just insane. And it's like, wow, you guys really don't want to pay for this. Well, we can't make up the margins with our clients because they won't pay. Yeah. So my assumption was that, that they would pay it.

I was like, well, look, if you're offering a better value, they'll pay it. And guess what? I was wrong.

[13:45] Paul: Yeah.

[13:46] John Paller: They won't pay it.

[13:47] Paul: Yeah. It's—

[13:48] John Paller: so the problem with, with forcing that on the game design, the incentives are just really bad. The, the Affordable Care Act was well-intended, but like AB5, it's the right problem, but the wrong solution. So fast forward a couple of journeys and a couple of chapters and a couple of experiences, and basically I found myself being introduced to blockchain technology, not really understanding what it is, and the concept of Web3 and not really understanding what it was. And through some good fortune and some happenstance and probably some karma, I was introduced to Dmitry Buterin, who's the Vitalik's father, you know, the father of Vitalik. And we randomly became friends at a conference before crypto was a thing. So this wasn't like, oh, you're Dima Buterin, oh, you're Vitalik.

No, we were just two guys at some random technology conference that happened to vibe together and, you know, talking about various topics of things, including a little bit about Bitcoin. But like we didn't really talk about Ethereum. And then I started following— we started following each other on social media, and, and he was posting about Ethereum and like all this stuff. And like, I was witnessing very, very early ICOs back in like 2015, you know. And I was just like, wow, how are they raising all this money? Like, what are they doing?

Like, and then I started unpacking and exploring it, and it just It didn't— I didn't get it, didn't get it, didn't get it, didn't get it. I thought I did, but I didn't. And then in 2016, I had my rabbit hole moment, my red pill moment, where I went— it just hit me like a ton of bricks, and I was just like, oh, so, oh. So then I pivoted out of everything by mid-2017, shut it all— I didn't shut it down, I just, I sold off companies and sold it to my employees.

[15:43] Paul: Yeah.

[15:43] John Paller: So it's now the fifth one.

[15:44] Paul: How long, how long were you doing the benefits for the people you were staffing? And like, were you— did that put you in a position to be out—

[15:52] John Paller: 3, 4 years.

[15:53] Paul: Were you outcompeted by competitors? Did you— what kind of upside did you—

[15:57] John Paller: In some cases, yeah. I mean, you go into large, you know, buyers and you say, hey, look, you know, we've got a better product. We take better care of our people. They're more engaged. And as a function of that, they're more productive. Yeah, you're going to pay a little bit more, but why just spend money for posterity's sake?

The problem is procurement people aren't incentivized based on quality, right?

[16:17] Paul: They're just trying to save money.

[16:18] John Paller: They're instant. They just— their whole incentives is to cut budget into, if, you know, be more efficient in spending money. So the incentives that large staffing companies create are low costs, right? Because they have big scale, and then they come in with their big contracts and their big talking points and all this, and they just eat your lunch. And it's like, I mean, you can't compete with that.

[16:44] Paul: And this is sort of like, it's like, well, we can game. Do you know, like, Game A versus Game B type framing? Yeah, it's like the Game A problem where, like, you can have a better way of treating people, but you're just going to be outcompeted by the system. And that's why, like, I feel like people develop a sort of cope in the business world, which is like, well, it's the rules. Like, you'd be stupid not to do these things. Which leads to a lot of frustrated people, I think, like you, who are trying to do these different things.

But it seems like Web3 for you—

[17:18] John Paller: you're trying to be the good guys, but the game is stacked against you, right? So I always boil it down to incentives. And when you have— so the game that I was trying to invent was really a new game and not pandering to existing incentives. Like, I was trying to, you know, redirect their attention to what should be their incentive, but it's not. Cutting cost isn't about productivity, right? It's about cutting cost.

So like, okay, but if the statistics are that, you know, 90% of temporary workers are in jobs that they don't like and don't really want to do, and then you unpack that to the most— the reason why that that's the case is they don't get any fringe benefits, they don't get healthcare, they don't get They get treated like second-class citizens. Well, if you could actually solve that, then you could solve a big problem in productivity and efficiency for the spend that you're putting out the door. You can be so much more efficient. They don't care. Like the procurement people are getting bonus based on how much money they cut.

[18:22] Paul: Right.

[18:23] John Paller: And it seems, you know, it's not about productivity. Not, not directly.

[18:27] Paul: And it seems like there's a sort of broader issue of a lack of imagination too. I mean, The study from Krueger and Katz showed that like all the employment growth from 2005 to 2015 was alternative workers. And then like politicians are basically taking the approach of like, let's turn them into full-time workers, right? Which is like not actually—

[18:51] John Paller: we're not—

[18:52] Paul: that's like not what they want. People like me actually want—

[18:54] John Paller: no, no, no, no, no, no. That's not what they want. That's why I say AB5 is the wrong solution to the right problem. It's like AB5 is going to force me now to subjugate myself to Uber. No, thank you.

[19:07] Paul: It's this sort of look at— and it's this, it's this look at workers as like they, they don't— they would get full-time jobs if they wanted. It's like they can't even see the benefits. Like the people making policies all have full-time jobs and have never taken a break in employment in their life. So they can't actually imagine that people would choose independence or self-employment or seasonal employment. Um, and when you survey these people, they're happier than full-time employees.

[19:41] John Paller: And if you dive down the social anthropology hole and why that is and what the values are, what's driving that, it's all about freedom and flexibility. And, and that comes from the fact that there's major distrust in the typical social contract of employment because it used to be backed up with loyalty and, okay, and real tangible things like retirement plans and pensions and all sorts of safety nets and, and golden parachutes, right? Yeah, there's none of that anymore, right? Like, even your retirement isn't safe anymore. Look at Enron, look at the— look at these things, right? Like, so the more these things happen and the more pandemics create mass shedding of jobs, the more financial crises, and the more I've got all my eggs in one basket.

I'm not de-risked at all in my employment, right? I've got all— I've got to put all my attention just to get permission to get healthcare.

[20:35] Paul: Yeah, exactly.

[20:36] John Paller: And get a retirement plan and to have, you know, long-term and short-term disability insurance. Like, I gotta, I gotta basically subjugate myself, sell out my time and attention to where it's like, why? Why am I doing this? So the younger generation's looking at the older generation going, no thanks, dude. Which is why the Gen Zers are already working over 50% independent because they value the freedom and flexibility over the perception of safety and security. They've just acknowledged it slightly different than what their older counterparts are still saying.

Well, you know, you need safety and security. You need a full-time job. There's no such thing anymore.

[21:17] Paul: Yeah. Right.

[21:18] John Paller: They're just living in, in cognitive dissonance world and denial because That they grew up 40 years ago when that kind of still existed. Now it doesn't.

[21:28] Paul: So where does Opalus come in? How, how are you thinking about solving some of these issues? I actually signed up for the service and I ended up canceling it because it wasn't the right fit for me. But, um, the, uh, it seems like you're set up in a similar model as like a professional employment agency or professional employment organization, but slightly different.

[21:52] John Paller: Yeah, similar to that. Um, but yeah, so I mean, we're, we're, we're a cooperative legal framework. So when you become a member, you become an owner. And all of our economic incentives are around growth. So we have, we've digitized our community, we've tokenized it, done some interesting things. But essentially what we've done is from a game design standpoint, we've aligned the the incentives to all stakeholders.

So now you don't have a staffing company who's trying to milk money out of the middle. You've got a community of folks building a public utility infrastructure for employment that replicates the things that we need to do for employment compliance in order to access things like group health care insurance and, you know, retirement plans and workman's comp and unemployment insurance and all these other things that you can't get floating around on your own. Yeah, right. So it's a, it's a collective that essentially aggregates people of like mind around, hey, it's more important to me to work independently, but it'd be nice to have these, these sort of infrastructural support mechanisms like I had at a big company.

So it's a big shared services and procurement cooperative for independent people to come together and take care of their employment needs without having to give up their independence.

[23:10] Paul: Yeah. And what's the I mean, what's the typical person that benefits? Like, what are the actual costs of this? Because for me, I sort of did the math and it was like a bit too costly for me, especially with like uncertain income. So I'm like wondering what, um, some of the costs and benefits are.

[23:29] John Paller: Yeah, it sounds, it sounds like we, we may need to just revisit your situation some other time. Because like, it's interesting, it's interesting that you say that because like, There is a big educational component here that there's a lot of, I wouldn't say misinformation, but there's a lot of misunderstanding about how you need to organize your finances as an independent, like what are best practices, and we're working on creating a bunch of content around this. So to help educate, because like, we don't benefit from people not understanding, right? Like we want people to know and be able to make good decisions.

[24:02] Paul: That's why I reach out.

[24:05] John Paller: Yeah, so one, uh, the cost is 1% of your income is what the community takes as a community sustainability fee. So that's, you know, at scale, if we got 100 million members, it's a lot of money. And it— the profits come back to the community in terms of patronage, right? So because it's a co-op, there's no third party making all the profits. The profits come back to the community, or it's retained by the community for further investment or whatever we want to do. Subsidizing healthcare, who knows, right?

Whatever it might be. So 1% is— there's no subscription fees, there's nothing. Now the other cost that people see that confuse it as cost is like, well, all these taxes that are getting taken out, like all this other stuff. It seems like, wait, what? Who's getting this money? All of that's the government.

Yeah. So So whether, whatever, whatever jurisdiction you're in, we're going to do the withholdings that are required by law in order to maintain a compliant employment relationship with yourself. And that's it. Other than that, it's just the benefits that you elect.

[25:12] Paul: So Employment Cooperative takes people that are like independent employees doing like 1099 work or other independent, uh, income streams, helps them sort of structure it as like a W-2 type arrangement. And then handles a lot of the taxes instead of doing like estimated taxes. You could just pay directly as part of like the payroll system.

[25:36] John Paller: And then you're a W-2, right?

[25:38] Paul: Correct. And then also you'd get access to better health care. So like one thing that did attract me to it, I think, I think my biggest challenge was like I didn't know where I'd be living and I didn't know if I was going to be doing taxes as a sole proprietor or corporation this upcoming year. But the healthcare plans you can access are way better than independent.

[26:03] John Paller: So, oh, like orders of magnitude. Not only are they better in quality because we designed them, like we're self-insured now. So we're not just taking some boilerplate crap that the insurance companies give us and say like, you know, here's your little flick of the French fry off the table small company. We're, we're a big purchaser now, right? So we can self-underwrite. We have, we've procured access to the Cigna doctor network.

So this is like top 3 in the country. And it's from an in-network status standpoint, it's national.

[26:37] Paul: Yeah.

[26:37] John Paller: So there is no limitations. Almost all of the state exchanges are limited to the state that you're in.

[26:43] Paul: Yeah, that's us right now. We're out of the state right now and can't actually access healthcare, um, because we have to—

[26:50] John Paller: well, you can, but you're out of network. We can pay, and you're gonna pay a lot. Um, you're gonna pay a lot for it, but that's how they manage the cost, right? But what's ironic is we're also saving people typically 20 to 50% on their healthcare. Yeah. So it's better coverage and they're saving money.

I mean, it depends on the state that you're in. You know, if you're in Wyoming, it's probably closer to 20%, but if you're in California, we're seen people over 50% that were saying, yeah, the costs have gotten out of control.

[27:20] Paul: I mean, I think a thing people don't realize about the US is like, if you make very little income, healthcare is not so bad. You can get enormous subsidies and coverage.

[27:32] John Paller: Subsidies are insane. But yeah, if you're, if you're, if you're, if you're on the low end earners, well, for everybody else who's not, it's jacking your price through the roof. I mean, you're basically it is the welfare state. And think about the incentives, right? So I've actually talked to people and I won't name names, but we've talked to people who have said, what are the minimum requirements to get on this and what are your prices? And they're like, yeah, you know, I really want to mine the tokens and do all that, but like, I don't want to have to make more money than I'm making because then I'll lose my healthcare subsidy.

I'm like, what do you mean? They're like, well, I intentionally make less than this amount of money because I don't want to actually lose my healthcare subsidy. And it's like, well, how much are you paying? They're paying almost nothing. And it's like, really? I mean, you're, you're like on purpose— I mean, really smart person, and you're like on purpose not participating in the economy because you get a really sweet handout I mean, and that's just a handful of people that I've spoken to.

I can guarantee you that's epidemic. I mean, there's, there's no doubt about it. Oh yeah, there's people for sure that absolutely intentionally do that.

[28:51] Paul: Yeah. What is— so how would somebody think about joining like a cooperative like yours if they have like uncertain income? Because I, I don't have certain income. Like, I, I'd like to make more money, but like sometimes I don't.

[29:05] John Paller: This is, this is the game that you got to play. So first off, I think state of residence is strategic.

[29:12] Paul: Yeah.

[29:13] John Paller: So in the kind of global world of work, I would absolutely pick a state that is favorable to both whatever wages you need to elect as a minimum and state income tax.

[29:26] Paul: And what states are those?

[29:29] John Paller: Wyoming, Florida, Texas. These don't— all of these don't have any state income tax and The cost of living is reasonable depending on where you are. And I mean, Wyoming is pretty much easy anywhere. You can live in the middle of Cheyenne and it's easy. Um, but that's, you know, if you want to live—

[29:46] Paul: most people aren't optimizing on tax strategy anyway.

[29:50] John Paller: Like, to a point, no, they're not, but they, but they should, but they should.

[29:54] Paul: They might go to Texas, but they're not going to go to Wyoming.

[29:59] John Paller: I know a lot of people that have gone to Wyoming, but not for the reasons you might think. I mean, there's there's a bunch of reasons why you might do it. I wouldn't be surprised if Wyoming doubles in size in the next 10 years, um, for social political reasons. But Texas is also going to get really big, and so is Florida, for a bunch of reasons. But, um, yeah, you just, you got to find a state that fits you, okay? And I would say economically it's got to fit you.

The challenge with California and New York, for example, and even Illinois to an extent is these, these, the social programs and even the state exempt minimum wage have gotten so big.

[30:37] Paul: Yeah.

[30:38] John Paller: Like just to be an exempt employee, you got $68,000 in California. $68 grand, like just to be an exempt employee so I don't have to track my hours and do all this stuff. It's, it's kind of bananas.

[30:51] Paul: Yeah. What?

[30:52] John Paller: So, so, you know, Texas is like $32K. Yeah. You know, it's like half of that.

[30:58] Paul: What, uh, so Opulus as it stands now is like, what does the vision of this look like? Because I know your goals are much bigger. Like you use the phrase democratize employment. Like, what does this look like? Like, where are we headed?

[31:14] John Paller: So where the vision is going is Opulus becomes a multinational, um, employment DAO that has a legal wrapper of a cooperative. That has cooperative-owned entities all over the world that facilitate this employment in some form or fashion. And we help aggregate like-minded people around to essentially give them permissionless work and portable benefits to their commercial experience. So if, let's say I'm in, I mean, think about what the landscape of work is going to look like. So if I'm in Denver, it's not uncommon or unlikely that I might get big working for a project that's housed in Europe or maybe somewhere in Asia. And I'm working on 3 or 4 different projects at a time.

And so I'm fractionalizing, I'm de-risking my, my basket of commercial attention. Because if, you know, one project goes away or loses funding or whatever, I can just kind of shift into these other ones that I'm doing. I'm going to be doing travel to my conferences and meeting with my tribe, right? So it's not gonna be just geocentric where I just commute from the, the suburbs to my parking structure downtown. You know, like the, the fluidity of work and the high frequency of work is going global and it's enabling a whole new work dynamic. There's a reason why people are looking to work remotely, and that's because it better suits the freedom and flexibility narrative, right?

And that's not gonna change. So, I could be working for one project in Europe and two projects in Asia. I can have my little LLC, elected S-corp in the States. I can manage what I'm paying myself based on my receipts. So to answer your previous question, people should absolutely not be paying themselves the top receipts that they get paid by their projects. You should be taking a certain percentage and you gotta determine what makes sense for you.

But we see some people taking 30 to 40% of their gross revenue receipts and just keeping that in the business. So then when—

[33:25] Paul: so that's like corporation versus LLC, like there's a dollar amount when it kind of flips. Do you know that dollar amount?

[33:33] John Paller: Well, it depends on the state that you're in, but like, um, so the, the, this is called the FLSA standard. So everybody who's a member of Opulus has to be elected S-corp at the federal level if they're an LLC. They can also use—

[33:48] Paul: you have to do this. This is why I didn't end up signing up because I'm not S corp yet.

[33:54] John Paller: So you can elect that if you're an LLC. There's a form that you fill out with the IRS that— oh, so S corp is not a registration designation, it's an election. Yeah. So you're choosing to be taxed as an S corp. Now there's benefits to this too because that money that you hold back.

[34:10] Paul: Yeah.

[34:11] John Paller: So let's say you're making $200,000 in receipts, but it's really choppy, right? Like some months are just crushing it and some months are dog shit. And it's like, well, wait, I could run into a situation where I don't have the money to pay my salary. Don't pay yourself $200K.

[34:26] Paul: Yeah.

[34:27] John Paller: Pay yourself $80K. And with an S corp, you can take a K-1 distribution, take a bonus or whatever you need to do throughout the year, and you can create a normalized situation. So when you have that break, you've still got capital inside the business to continue paying yourself. And that way you don't have these breaks, right? So there is absolutely a little bit more. Fiscal structure that you need to think about, right?

And like, you know, treasury management planning. But it's, you know, we've got some pretty, you know, average people that are part of the commons. And, you know, once you get it going, it's like, oh, this is pretty simple. You know, it's kind of set it and forget it. And then at the end of the year, they get with their accountants and they're like, okay, you know, I've got $40 grand left in the business. What should I do with it?

You know, should we pass it through on a K-1? Do we take the— take it out of the business or do we just pay the tax? Like, you know, what do we want to do? Right. And you can make decisions based on your particular situation. We even have accountants as part of our network, right?

So we don't provide this, this guidance as Opulus, but we have a community that can. And yeah, we help people basically create a situation that feels good to them so they can take advantage of the discounts and the better healthcare, and they can kind of professionalize and sort of upgrade their mechanisms of operation in their freelance world, right? Because we're not here to get in the way of anybody's, like, your business operations. The way we do it makes it so that we don't have to. There are other employment mechanisms that I've seen that basically are kind of just a new version of subjugation. Where they kind of want to get involved in your stuff if they're going to agree to take on this risk.

And it's like, no, this needs to be a neutral utility, right? So this is why it needs to be member-owned. This is why it needs to be decentralized in a lot of senses. This is why it needs to be the way that—

[36:28] Paul: what is the member-owned in the token? Like, what does that look like 5 years from now?

[36:34] John Paller: So It legally speaking is a cooperative. So think about it like REI for employment. So REI is an outdoor equipment store, if you've ever been a member. Have you? So basically, you pay like an annual subscription, you know, membership fee of like $40 or something, and then you get to go into their stores and buy all this really high quality outdoor equipment for value, right? This is like really high end stuff, and you can get it for cheaper than what you would see at other places.

They even make their own branded stuff, kind of like Costco and Sam's Club do, right? But you go in and buy some skis and some camping equipment, and at the end of the year, they'll cut you what's called a patronage check. Now, what that is, is it's actually profit sharing for your consumption. For buying all that gear, you're getting a share of profits based on the pro rata amount that you consumed or that you bought. So the same is true for Opulus. So based on the amount of payroll that you run and based on the amount of payroll that your friends who you refer run, you're receiving these patronage tokens called work.

And the work token is the unit of account that we use to determine who gets what when it comes to profit distributions. Now the trick is you have to be a member, an active member, in order to be eligible to get your allocation. If you go buy these tokens on some decentralized exchange somewhere or whatever, it doesn't matter if you're not a member of the commons. You have to be a member of the commons in order to participate in the profits. You can be a referring member without being an employee member. We call this a coalition member.

So there's two kinds of memberships: employee member, like what you were signing up to do but then didn't do. And then there's like these non-consuming members, which are called coalition members that you can also earn for referring people to the company.

[38:33] Paul: So you pay about 1% of payroll as a contribution. And then at the end of the year, you get some percentage of that back?

[38:42] John Paller: If we're profitable, which we're not yet. So right now the game is most people are stacking as many work tokens as they can get. They want to, like, because it represents in the future when we hit that precipice of profitability, once we hit that, it scales like crazy. What does that mean?

[39:03] Paul: How is somebody stacking work tokens?

[39:06] John Paller: Well, for example, we've got several people on the platform payrolling themselves millions of dollars.

[39:12] Paul: Nice.

[39:13] John Paller: Because they're incentivized to do it because the more they consume, the more profits they get back.

[39:19] Paul: Got it. And they're sort of invested in the success of capitalist more generally. Correct.

[39:25] John Paller: So their incentives are to see the payroll growth, which means not just their own consumption, but they're also referring their friends. So when, let's say I referred you to the commons and then you came in as a member, I, in addition to you getting your credit for your own consumption, I'm also getting referral credit for your consumption in perpetuity. So long as you stay a member of the commons as an employee member. I'm getting credit for your payroll consumption.

[39:52] Paul: And how—

[39:54] John Paller: so we're all aligned on wanting the same.

[39:56] Paul: How does this model change over the next 5 years? Like, what is the roadmap for Opulus look like?

[40:03] John Paller: I think it just scales really, really nicely, actually. I don't think the model changes. I think what happens is at some level of scale, the, the, the ridiculous incentives to join now dilute a little bit because early adopter rewards are absolutely a thing. So those that get early are going to get a larger incentive to come and help build versus the Johnny-come-latelys who come after it's built. They'll still get profits at scale. It just won't be outsized.

Yeah, right. So people that are getting in now are getting, you know, to some people, what's disproportionate? It's like, well, no, they're taking a big risk and they're coming here. Early and that is being rewarded, right? So our, as they call it, token economics are weighted towards incentivizing early adoption, which in a way accelerates growth, right? Because it creates a little bit of a market FOMO, right?

When people are looking around going, wait, you're using Opulus? Wait, you're using Opulus? Well, shit, man, I need to be doing that. You have— how many tokens do you have? Like what? Like, yeah, we're talking about being profitable by the end of the year and there's like $2 million coming out to the community.

What? Like, what do you mean? If you're getting paid to run your payroll globally, and you're an owner in this, and you can have a voice in governance and decision-making around features and benefits, where are you going to go? Right? So the way that it evolves is it just kind of, it matures. And the, you know, the maturity will happen around governance, it'll happen around economics, it'll happen around around optimizing token distributions, even possibly, like, but I don't think the fundamental model is going to change.

I don't, we took 2.5 years to design it.

[41:53] Paul: So what are the biggest risks you see? I mean, of course, there's regulatory risk. The rules could, some rules could get worse.

[42:05] John Paller: What if the rules change, then it could be a problem. If the rules stay as they are. We're perfectly compliant. So we take great care in ensuring that we're perfectly compliant because, you know, if you think about what we really do for the government, we're ensuring that independent contractors are paying their taxes. That's the key thing that they beef about.

[42:26] Paul: Yeah, they don't mind.

[42:27] John Paller: The government likes what we're doing. No, they love it. They absolutely love it. The Department of Revenue in Colorado here is like, really? That's cool. Yeah, we like that.

Now we were just sort of sniff testing what they— what we— what we We were curious to know what they might think. And so in partnership with some of our state advocates, we got in touch with a few people that made a few comments and we're just like, yeah, good alignment. So it's a really interesting thing because not much of what's happening in sort of this Web3 space is understandable to the existing power structures.

[43:07] Paul: Yeah.

[43:08] John Paller: But Opulus is very understandable and they get it and they like it.

[43:11] Paul: Yeah. Do you, do you need the token? I mean, couldn't you just give people shares or is that just something that's not actually—

[43:20] John Paller: Well, cooperative frameworks are— no, I mean, you could do it in theory, but it's not, it's not fluid. It's, it's terribly difficult to manage in a traditional sense, in like a cap table sense. Patronage isn't technically like a share in a co-op. Patronage is a different thing, and so is consumption of payroll. So we're like, you know, patronage is, you know, payroll consumption and referrals is better classified as patronage than it is like shares and ownership, like ESOP stuff or RSUs. And like there's— that has a lot of regulatory issues around it.

Co-ops are really cool because they have a securities exemption in the state of Colorado for, for raising capital from your membership. We haven't done that yet, but in addition, we didn't sell the token and the token really is more— it's a unit of account, you know, it's a, it's a, it's a chit, right? So I'm getting this chit that represents like, okay, I consume this product or Maybe I paid somebody else for their token so I could buy access to their former consumption, but I'm getting access to this value and I can do different things with it. I can even stake it and earn a return. You can't do any of this with stock. So Web3 is really just a toolset.

It's a toolkit that enables a much more fluid sort of economy that you're building versus just a company. So tokens create economies, stock creates companies. Does it make sense?

[45:04] Paul: Yeah, no, definitely. I mean, I'm pretty deep in this. I'm sort of asking for the people listening as well, the listener who might not be as in deep in this. So what's next for Opulus and like where should people go for more information?

[45:24] John Paller: Well, I'll just keep beating the drum on the early return, the early rewards, the early adopter rewards. It's, you know, we're about halfway to the, to the next milestone. We're just shy of halfway to 500, or excuse me, to 1,000 members. And, you know, there's going to be an inflection point when it just grows really, really fast, and there's going to be a dilution of token rewards that comes for each growth epoch based on the way that this all works. I just don't want people to be like upset that they didn't hear it enough, right? Like, you know, this is something you already got to do.

You've already got to be compliant with your, you know, you want to get affordable, high-quality healthcare, independent workers. It's built by independent workers for independent workers. So this isn't some private equity company coming in and trying to extract money from you and, you know, just the next generation of exploitation of workers. This is structurally benevolent, legally and structurally benevolent, and it's economically sustainable. So come and join the workforce. This is, you know, dollar sign workforce.

It's our meme, right? But, uh, or become a workaholic, right? These are all memes that we've created to kind of promote what we're doing. But like, it's, it's a movement. It's not a service. So, you know, on the surface, when you start hearing about payroll and benefits and boring necessary evil garbage, most people just gloss over and they're just like, okay, dude, whatever.

You know, I've got Gusto. I'm fine.

[46:58] Paul: Yeah. No, it's—

[47:00] John Paller: but like, look, we'll probably charge you less than Gusto if you're a solopreneur and you're going to get all these other upside benefits. Not to mention we can— we'll save you money on your healthcare in addition and at minimum get you better coverage. And it's kind of a no-brainer. We don't sell much. Most of what we're doing is educating, right? Because once you actually get into it, you're like, oh, well, this is obvious.

I mean, nobody says to us, I don't really like this. I mean, there might be life circumstances or situations like yours that might be just contextually like, maybe not like the right time.

[47:36] Paul: Yeah, yeah.

[47:37] John Paller: But as features and benefits goes, we don't get pushback.

[47:40] Paul: Yeah, I think basically, if I shift to like slightly higher income and need coverage for more people, it probably makes sense, though they keep inching up those subsidies. It's kind of, uh, it's kind of hard. Like last year, dude, like, it's so high.

[47:59] John Paller: I know. Well, if you're on subsidies, dude, it's hard. Yeah, like, we're not trying to compete with that.

[48:05] Paul: We can't compete with that. Printing unlimited money.

[48:08] John Paller: There's nobody that can compete with that.

[48:11] Paul: The U.S. government will just—

[48:12] John Paller: so, like, printing money Well, they will, and their monetary policy missteps are going to catch up with them. It's already happening with inflation.

[48:22] Paul: For sure. I sense there'll be a lot of restructuring of this stuff in the next few years due to the different—

[48:30] John Paller: There has to be. It's entirely unsustainable. And I say that from a pure economics viewpoint. It's not about politics and opinions of— it's not opinions. It's numbers, basic market economics. In numbers.

It's how shit works. Excuse my French, but that's just the way it goes, dude.

[48:50] Paul: Cool.

[48:51] John Paller: I don't make the rules.

[48:52] Paul: Well, appreciate you sharing today. Opolis.co. I'll link it up. Also, I'll link up an article you wrote, which is pretty good. Anything else you want to lead people to? Follow you on Twitter or anything else?

[49:10] John Paller: Yeah, follow us on Twitter. @Opulus is the handle for the Opulus main page, and then my personal Twitter is @pallerjohn. Okay, um, shameless plug for ETH Denver. If you're a Web3 nerd, you know, February 2023, we'll be doing our 6th installation, which is the longest-running Web3 event in the world. It's also the world's largest Web3 crypto festival. It's an innovation festival, so the main event is a hackathon.

This year we had $1.5 million in prizes that went out the door. So it's unlike any other event in Web3 blockchain that you might experience because it's completely organic and built by the community. It's also a DAO. SporkDAO is the main master DAO for ETHDenver, and we have a whole team that's behind it with something like 350 volunteers. We had 12,000 people from 100 countries in Denver this year for it. So it's— if you're interested in any of these concepts like crypto economics, next generation legal frameworks, smart contracts, blockchain tech, tokens, any of this stuff, this is where you come and learn.

It's free to come, no cost at the door unless you want to upgrade to a Spork Whale, which is our version of VIP. But the base entry is just, you know, come with an eager enthusiasm to contribute and to learn. It's a lot of fun.

[50:34] Paul: Awesome. Thanks a lot, John. It was great talking with you today.

[50:38] John Paller: Yeah, likewise, Paul. Appreciate you, man.