Idea: Payout "Stabilizers" smooth out volatile earnings into guaranteed, salary-like payout plans

Here are my ideas for optional payout “Stabilizers”, simple algorithms that somewhat limit the amount you get paid from SourceCred each week in order to reduce volatility - protecting you from the weeks when SC changes, vacations, or other temporary things would have you earning far less than comfortable.

Tension: Salary mindset, payout volatility

from S_ben’s thinkpiece, “Flying the SourceCred Plane”:

Medium-term, risks around SC tend to be tied to raising reward amounts. When rewards increase significantly, approaching what people might make via traditional salaries, I’ve observed that there tends to be a psychological ‘flip’ in contributors. With the stakes higher, some become more reliant on the income (potentially even quitting their Trad job), and expectations can shift. This can be mitigated to an extend by clear communication and expectation setting. But humans are gonna human. Especially if deeply invested in established systems or trying to overthrow them. People can (consciously or subconsciously) start comparing SC to a job. Which obviously provides greater perceived income stability and guarantees (legal protections, benefits, etc.) than a typical SC instance.

This can be helped by reminding everyone to treat it like a typical part-time job, regardless of how much they make from it. But what if we can actually make it a salary-like experience, or maybe even better than a salary?

From the same article:

Personally, having experienced the volatility of several tech startups, I prefer the volatility of SC to a job. A salary is flat, until it abruptly goes to zero. And the relationships you invest in turn into LinkedIn connections. In reality, the volatility of a flat salary is simply hidden. Usually by a centralized authority incentivized to withhold information from you and shift financial risk down the hierarchy. SC income is volatile, but payouts are determined by a distributed consensus on the value you create. It provides a different type of stability, which is not legible at first to people without experience in these systems.

Feature Idea

Here’s what comes to mind for me: offer members a choice between customizable payout “Stabilizers”. here are some of the possibilities!

Simple Smoother

This algorithm pays you every week with the average amount you’ve historically earned in a week. Like most stabilizers, this means you won’t immediately get most of the money you earned each week, but as you continue to earn more, or simply maintain earnings above the average, that average rises every week and you slowly earn a higher and higher “salary” as it approaches your consistent output.

Or, if your output is not consistent, you don’t have to worry so much about budgeting for low-income weeks an equal amount as you would for high-income weeks - the spikes pay for the dips! you can take a long vacation and get paid while you’re away. It would still slowly creep down, depending on the parameters you set.

You also get built-in “retirement” or “severance” pay. If you stop working altogether, the average will drop a bit every week, but you still get weekly payouts for a long time! Eventually it will fade to nothing, and by then you’re hopefully moved on to other sources of income.

Rolling Average

Just like the simple smoother, but more recent payouts have a much greater impact on the “average”, which otherwise can take what feels like forever to rise. you get up to speed more quickly, and if you take a long break, the algorithm “notices” more quickly, switching to more conservative payouts, which may extend how long the off-week payouts will last.

Living Wage Only

Like the others, this stabilizer withholds some money of each week’s earnings and stores it in a buffer for later weeks. But it isn’t a smooth on-ramp like the averaging. In fact, when you earn less this week than your living wage, it’s a pure direct output of what you earned (but the idea is to set the living wage low enough that you would almost always surpass it). That’s only when there’s nothing in the reserve, though. Every week you surpass your MVP, the “excess” gets stored in the buffer, which is used to make up the difference on weeks you don’t make quota!

This way, you can literally use the income as a guaranteed payment for your rent, utilities, food, and whatever else you need to survive, not just during your work weeks, not just during your off weeks, but even for X weeks after you stop working forever. The longer you participate, the bigger X gets!

Living wage with bonuses

This Stabilizer works just like Living Wage Only, but instead of taking 100% of the surplus income for the buffer, it takes some other amount, say 50%. This means you can still feel the reward on the weeks you contributed a lot! That is missing from the other stabilizers, and may be an important motivator for us to do great work in big batches. You work a lot more this week, you get paid a lot more. You work a lot less this week, you’ll still get enough to cover your expenses.

And if you only care about the buffer being “big enough”, the percentage taken off the top can go down as the buffer fills up!

A bit geeky but, If you tend to have really huge spikes some weeks, the portion of the top can be logarithmic rather than a percentage. That way you still always get more when you earn more, but you also save more on the weeks you can most afford to.

Flat Salary with investment

Elsewhere on this forum the idea had been floated to simply pay everyone the same amount, so long as they met the threshold for a given week. This would obviously fail to give greater reward to more valuable work, but it raises an interesting desire of forced short-term equality. With a flat salary, either of $X for everyone, or $(local cost of living + X) for everyone, everyone would get paid in a salary-like way that creates a nice feeling of equality.

Rather than taking the surplus earnings from those who contribute more, though, it simply goes into their buffer. Therefore, the extra work gets them a bigger retirement fund, or alternately super-contributors can take longer vacations, paid by their long-term investment in the buffer.

Benefits: Healthier budgeting, by default

Not only would Stabilizers allow for us to think of SourceCred earnings the way we think of traditional salaries today (perhaps even better, because there may not be an abrupt end!), it helps a lot of the things that humans are bad at: personal budgeting. That is, we naturally prioritize short-term interests over long-term ones, and the act of countering this is the cerebral and sometimes difficult process of good budgeting. Even though “you need a budget” is true for everyone, many of the people who have the spend-itis the worst, have the hardest time finding the discipline to get there.

Every time you get paid more than usual, there’s an opportunity for budgeting and future investment, as well as an opportunity for lifestyle inflation. The former can take discipline, the latter can be hard to recover from. you need to be mentally prepared to make the better choice every time you get paid. For weekly payouts, that’s a high demand of consistency - and the number of people who are still living paycheck-to-paycheck (when the could have broken the cycle by now with budgeting) goes to show how valuable it would be to avoid this constant reliance on willpower.

With Stabilizers, you make this choice only once! It’s truly set-and-forget, and you only spending the willpower during the initial setup, where you decide your minimum viable income and how much you care about realtime bonuses. As described above, you may even have your own “unemployment fund” taken care of, or a few years of “passive income” into your next job (especially enticing if the value is stored in something inflation-resistant like Ampleforth coins).

And all this happens before the money hits your wallet and you do your own budgeting, if applicable. Cool!


interesting read. thanks!