There's a growing debate about how "users" can be better investors than "investors." This provides insight into how user-based networks can create long-lasting structures in cryptocurrencies.
Shareholder primacy was not originally a fundamental principle of business.
Until the early to mid-20th century, American corporations pursued a management-centered "managerial capitalism" approach, focusing on maximizing shareholder value rather than focusing on maximizing profits. Management was central to corporate governance, and they viewed the corporation as a single, permanent institution, taking into account diverse stakeholders such as employees, customers, and the local community. During this period, shareholders weren't necessarily considered the owners of a corporation, and the greatest beneficiaries were often the management themselves.
A prime example is the CEO of the tobacco company RJ Reynolds, who used his fleet of private jets to squander corporate resources for personal gain, such as golf trips and dog visits. The extravagance of capital, as portrayed by Gordon Gekko in the film "Wall Street," such as "golden parachutes, private jets, and hunting trips," also satirizes this era.
Friedman's Manifesto: Corporations Should Exist for Shareholders
In 1970, Harvard economist Milton Friedman argued in a New York Times article that corporate managers were merely agents representing the interests of shareholders. This article marked a turning point in American corporate philosophy. "Shareholder primacy" became a core corporate principle for decades to come.
However, legal scholar Lynn Stout points out that this argument is a fiction, not based on legal fact. She argues that "corporations are legally self-owned entities, and shareholders are merely contractual parties with certain rights." She argues that shareholder rights are based solely on contracts, and there is no provision that requires a corporation to operate solely for the benefit of shareholders.
Can Cryptocurrency Networks Be Structured for Users, Not Shareholders?
Stout points out the fallacy of shareholder primacy and argues that a management approach prioritizing long-term value, as in the past, can offer a new alternative in cryptocurrency. Railway and canal companies, which built early industrial infrastructure, focused on social utility over short-term profits. This structure, where investors and users aligned, enabled them to create efficient services.
If so, isn't it unnecessary for cryptocurrency protocols to grant token holders strong ownership rights? Applying Lin-Stoutian logic, token holders may actually be better off in the long run if they remain users and investors with limited management rights.
Such experiments are already underway in the actual cryptocurrency ecosystem. For example, in the DeFi and NFT communities, the active contribution of users and investors to projects is completely different from the shareholder structure of a typical company.
What kind of network would be created if users were investors?
When token holders are not simply "owners" but actual "users" of a service, protocols can grow along a different trajectory than traditional enterprises. This suggests that a network based on actual participants, rather than a shareholder structure focused on profit maximization, can be more flexible and long-lasting.
Ultimately, the key lies in how motivated participants are to "make this network work well." Stout's perspective is noteworthy, as it demonstrates that cryptocurrencies are a platform for experimenting with "a new form of capitalism."
๐ Market Interpretation
From a different perspective than traditional shareholder-centric cryptocurrency networks, a user-centric cryptocurrency network structure offers greater flexibility and long-term growth potential. This approach, which prioritizes practical utility over short-term profits, is gaining traction, particularly in decentralized networks.
๐ก Strategy Points
1. Design that strengthens the user base while simplifying the legal rights of token holders.
2. Establish an incentive structure that encourages users and investors to participate in the project's success.
3. We need to experiment with new asset structures that don't fall prey to Friedman-style shareholder primacy.
๐ Glossary
- Shareholder primacy: A management philosophy that states that a company should exist solely for the benefit of its shareholders.
- Managed capitalism: A management-led business operation that takes into account various stakeholders.
- Decentralized protocol: a network operated by a decentralized user community rather than a centralized management.
๐ก Want to know more? AI-prepared questions for you:
A. It began with a column Milton Friedman wrote for the New York Times in the 1970s. He argued that shareholders own the company and that managers should work solely for their benefit.
A. Because users and investors are more likely to be interested in long-term network growth than short-term profits, they may have a real incentive to make the protocol successful.
A. Without clear legal ownership, token holders cannot have traditional rights structures. However, this can actually be an advantage for a user-centric network.
A. Because railway investors were often users and consumers, decisions were made with long-term utility and public interest in mind, ultimately leading to the construction of a large-scale social infrastructure.
TP AI Precautions
This article was summarized using a TokenPost.ai-based language model. Key points in the text may be omitted or inaccurate.
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