A16Z's Ambition: The Future of Organizational Governance

Editor's Note: This article is from:DeBankView (ID: DeBankView)Editor's Note: This article is from:

DeBankView (ID: DeBankView)

DeBankView (ID: DeBankView)

, Author: Scott Kupor, reproduced by Odaily with authorization.

Translator: Ma Buyan

Note: The article is not a literal translation, and some opinions are the translator's personal opinions. Those who are interested can read the author's original text through the original text link at the bottom.

Traditional corporate governance has always been advocating "shareholders first", putting the pursuit of maximizing shareholders' interests at the top of corporate governance. Such a governance model actually deviates from the long-term value of the company, and the success of Bitcoin in the past ten years has undoubtedly given some new ideas to traditional organizational governance.

shareholder first

Between 2008 and 2017, companies in the S&P 500 spent $4 trillion on stock repurchases and $3.1 trillion on stock dividends, and 93% of profits were returned to shareholders through buybacks and dividends. In 2018, thanks to Trump's tax reform, a large amount of overseas profits repatriated, and the repurchase and dividend payout reached a record 1.25 trillion US dollars. What is the concept of this number? In 2018, the U.S. GDP just topped $20 trillion.

Are executives just letting shareholders keep extracting value from the company? In fact, the remuneration of most executives is based on the stock price. Repurchasing the company's stock and paying dividends are beneficial to the executives. The executives were bought and continued to arbitrage the company by colluding with them. And when executives and shareholders are focused on raising their own stock prices, the company's employees' training and technical investment will be greatly limited. Although operations such as stock repurchases have boosted stock prices in the short term, in the long run, the production efficiency of enterprises will be affected, and the long-term value of enterprises will disappear. Shareholders and executives are rich, while ordinary corporate employees are left to their own devices.

The issue of profit distribution within the company has further led to the widening of the gap between the rich and the poor in the United States, which eventually led to the American political circles starting to take action. Propose legislation to resolve conflicts between the interests of company shareholders and ordinary employees. If shareholders do not take into account the demands of employees or other stakeholders when making decisions at the shareholders' meeting, they can sue the company based on this. This policy is very similar to the consistent style of the US government. In my opinion, this policy has no practical value other than continuing to intensify the conflict between the two.

Customers first

In fact, there is no absolute choice between shareholders and employees. For an excellent company, there has never been a conflict between the two, but it should never be the primary goal of the company. Really excellent companies have always understood a truth: in order to maximize the long-term value of shareholders, they must understand what their customers, employees, and other stakeholders gather for. Only by achieving incentive compatibility among customers, employees, and enterprises is the most beneficial to the long-term value of shareholders. Therefore, for truly excellent companies, what is admired has always been "customers first, employees second, and shareholders third" (such as Ali?).

First of all, the existence of the company is to provide products and services to customers. If there are no customers and no market, then there is no need for the company to exist. Under capitalism, customers vote with their wallets, which is why customer-initiated brand boycotts are often far more effective than laws and regulations. The work of shareholders and employees should be carried out around the needs of customers. Failure to do this will mean that the long-term value of the company will be damaged, and ultimately affect the long-term benefits of shareholders. Therefore, responsiveness to customer needs drives the company's long-term growth, profitability, and shareholder value. Only under this governance structure can the win-win situation of the three parties be achieved.

Cryptonetwork Governance

With an encrypted network like Bitcoin, we can think of it as a "community owned and operated digital service". The ability of this new network to coordinate human activity far exceeds that of traditional corporate structures. This type of encrypted network does not rely on the self-discipline of centralized enterprises, but is spontaneously composed of users, speculators, maintainers, etc., and the value they each generate in the network will be returned to them in different forms. The respective value of community members is measured through proof of work, proof of equity and other mechanisms, and the incentive compatibility of economy, governance and reputation in the community is achieved through the distribution of "tokens". In this sense, the encrypted network will allow more people to fairly obtain the wealth they have won, and have their own voice in the governance of the organization.

Summarize

Traditionally, we think that the reason for the existence of a company is that its internal transaction costs are lower than the market, so it is profitable to establish a company, but now such an encrypted network may be much more efficient than a traditional company. The author thinks this means that with the help of the encrypted network, the granularity of the company will be further reduced. The original large company will be eliminated by the market because of its low internal organizational efficiency, and it will be split into more independent and dedicated teams. .