The Gradual Path to Fixing Capitalism

Because Overthrowing it Sounds Exhausting

Capitalism sucks. What began as a clever hack for moving stuff around has morphed into a ravenous paperclip maximizer that enriches the few while turning our planet into a post-apocalyptic yard sale.

But hey, capitalism didn't conquer the world by accident. It's a wizard at dangling carrots: markets crush it at bushwhacking through valleys (think startups, VC, IP) and grinding up hills (corporations with their OKR and KPIs). At this point, capitalism has basically achieved root access to civilization's OS. Good luck uninstalling that without bricking the whole system.

It’s easier to imagine the end of the world than the end of capitalism - Fredric Jameson

It’s so hard to imagine alternatives to capitalism because it’s not just in our markets, but in our currency, legal systems, and governments. One giant tangled web. And I’d argue we don’t even want to get rid of it altogether, just a better version of it. Keep the innovation and optimization machine, minus the “oops, we melted the ice caps” side quests.

Utopian tech bros wanting to rebuild the whole shabang from scratch with their network states and fictional cities on Mars exceed even my capacity for optimism. How about we nudge the beast gently toward sanity, one tweak at a time?

We focus on the gradual path to fixing capitalism in this piece (no Mars visas required). What slightly better forms of capitalism are just one step away? To do that, we zoom in on capital itself, the mitochondria of our economic system. We will scheme and dream about better capital by rethinking how we structure and run companies.

Root Problems of Capital

Wait, so what is capital in the first place? Capital is money in the form of potential energy. If currency (from “current”) is like a river, slushing goods and services around in the economy, capital is like a lake, a reserve of money to be used in the future. It makes sense for water to gather in certain places to be redistributed later but we don’t want stale lakes and dried out rivers. We're after lush deltas and mangrove parties, not concrete canals and soulless dams. These are the problems at the root of our current form of capital.

The Rich get Richer

"For whosoever hath, to him shall be given, and he shall have more abundance: but whosoever hath not, from him shall be taken away even that he hath.”

Classic: You need money to make money. Money has this delightfully biblical tendency to clump together—the Matthew Effect, where “to everyone that hath shall be given”. This is due to compound interest and the fact that capital returns tend to outpace economic growth (Thomas Piketty crunched the numbers).

How can we get rid of the biblical black hole energy of capital? Taxes, right? If it weren’t for this neat trick with lawyers and boats that billionaires and corporations have discovered: If a country raises taxes, they simply move to the nearest tax haven. Plus, let's be honest, the track record of government bureaucrats at spending money efficiently isn’t exactly great. Undoubtedly, that’s what international tax optimizers whisper to themselves in the mirror: “I got this rich because I’m a genius at allocating capital, better than those government drones. Therefore, I should keep it. QED”.

Only problem: they will only allocate capital towards producing more of it. Capital is pure optionality. In a fast-changing world, the dominant strategy, given the Matthew Effect, is to continually accumulate optionality at an increasing rate rather than acting (spending). Until, at the end of his life, Scrooge McDuck turns to philanthropy and seeks to reshape the world to his preferences, utilizing all that latent potential. Examples abound, from Bill Gates to George Soros.

Hoarding aside, the drive for profit also creates a much more insidious danger: externalities that slip through the cracks of market oversight.

Externalities: The Collateral Damage of Capitalism

Game theory time: If money can buy everything, and multiplies like gremlins, the winning strategy is maxing out wealth. This principle operates at every level. Governments maximize GDP, investors ROI, companies shareholder returns.

Enter externalities. The quickest way to make money? Dump costs in areas where the market does not recognize them. A tree has immense ecological value but only acquires monetary value once cut down and sold as timber. Schmachtenberger nails it: aiming for infinite growth on a finite rock is game over, sooner rather than later.

Regulations could fix the eyesight of markets, in theory, through carbon offsets, pollution limits, etc., but nations are caught in a prisoner's dilemma: The first to tax carbon gets economically kneecapped, so stalemate. And just a few brave nations taxing externalities wouldn’t help, since international corporations would just move. Even deeper, how to measure externalities in the first place is a key part of the problem.

The Measurement Trap

Life's a messy fractal, not a tidy spreadsheet. We can measure the carbon a tree absorbs, but not all the ways it sustains its ecology. Qualitative aspects like biodiversity, mental health, or social trust are invisible to the paradigm of quantification.

Welcome to the "measurement trap." By focusing only on what can be measured, we neglect what truly matters. And then humans proceed to hack whatever metric is defined into oblivion (Goodhart’s law). This is what capitalism is doing with profit, at the expense of deeper notions of value. Forests become timber reserves, education becomes test scores, and healthcare becomes a series of billable procedures. Second- and third-order consequences don’t show up in profit statements. Markets are myopic to the slow erosion of ecosystems and the breakdown of social cohesion. So, quarterly wins rack up while the long game crumbles.

So how do we fix this? Rather than overthrowing the entire system, we can transform capitalism by redesigning how individual companies operate.

Towards better Capital

We can reduce both externalities and inequality by changing how we build and structure companies, while avoiding falling into the measurement trap.

Value-driven Companies

Remember when startups wanted to *make the world a better place*? Facebook was going to “bring the world closer together”, and boy did they deliver! Just not in the way anyone hoped. The naive techno-optimism of Google’s “organize the world's information” makes me nostalgic for the times we thought the internet would be used for learning instead of arguing about whether birds are real.

We can’t afford to be naive any longer. We know the plot twist: Profits hijack the wheel, turning idealism towers into ad-click dopamine sweatshops. Founders became zillionaires while their users' attention spans turned into confetti.

This movie gets endless sequels in our current system: Startups grow from idealistic dreamers into extractive corporations. Live players eventually become power players cordycepted by Moloch if they care enough about winning. Machiavellian scheming is not even required for that outcome. The dominant strategy of any corp (legally required to maximize profits) is to cut corners and trees. We need to prevent blind profit maximization at the onset of a company.

Encoding Purpose

Imagine if missions weren't vaporware? What if “don't be evil” were enforceable, not erasable? We can hard-code the mission of a company into its legal DNA with the Steward Ownership model. An independent third party holds the company accountable to the purpose initially outlined. Patagonia, Bosch, or Novo Nordisk are successful examples.

This flips the foundational logic of a company: Instead of the mission being a means to make money, making money becomes the means to achieve a mission. Importantly, companies should not attempt to quantify the mission in a single metric to avoid the measurement trap.

More radically, it's possible to wire in a kill switch into the articles of association of a company: Once the mission is achieved, the corporation dissolves. This avoids zombie corps self-perpetuating beyond their expiry date like economic cancer.

I dream of companies that are like arrows, clearly aimed at a worthwhile target.

Developmental Organizations

While purpose-primers exist, they are rare. How can a sustainable company compete with profit maximizers? The answer is personal and cultural development. As people have more choices, they'll increasingly refuse to work for or buy from soul-sucking profit maxis. Plus, growth-minded leaders play the infinite game better.

Purpose should be combined with development: If all stakeholders (employees, suppliers, consumers) are embedded in growth loops, the company up-levels continuously. Kegan and Lahey's "Deliberately Developmental Organizations" (DDOs) blueprint workplaces as growth gyms. Feedback cultures, edge-pushing processes, even therapy and zen sessions on the clock.

Sure, ethical companies can't exploit workers for 80-hour weeks or source materials from Evil Corp. But turns out, when people actually care about their job, they do better work. Wild concept, I know.

I dream of companies that are genuine learning environments.

Putting a Leash on Capital

Limiting Profit

How about cutting straight to the chase, limiting the profit motive directly? Set caps for reinvestment and investor returns, and donate the rest to aligned causes.

Since the upside is limited, the temptation to max out profits at the expense of social or environmental dimensions goes away. This supports mission-alignment by legally subordinating financial incentives.

Profit limitation also acts as a filter: only investors who care about the company’s mission will join. Patagonia is a great example since the company distributes all its profits after reinvesting in the business to environmental causes. And yes, the irony that their vests have become the favourite garment of VCs is not lost on me.

The biggest issue with limiting profit is the arms race dynamic. OpenAI had a profit cap until they realized that saving humanity from AI might require, you know, building competitive AI. Oops. While profit caps might not work in industries where competition is mainly about raising the most money, that still leaves most of the economy.

I dream of companies that make enough money, but not more than that.

Separating Profit and Control

Default mode: Equity bundles profit and control rights. Shareholders puppeteer the board, who jerk management's strings. Linking profit and control rights drives companies away from purpose as they expand since wider share distribution means shareholders unite around the lowest common denominator, profits.

Fresh startups tend to be starry-eyed and mission-driven. After going public, passive fund zombies own the show and they regress to the norm. Legal jujitsu can retain founder control through a dual-class share structure: Class A shares (traded publicly with 1 vote each) and Class B shares (10x votes, held privately).

The Steward ownership model already sets boundaries to shareholder control, and dual-class structures can further limit the influence of financially interested actors. An even bolder approach is issuing instruments that don’t grant any control rights to shareholders, but only profit rights.

I dream of companies controlled by those who deeply care about their mission and have the competence to execute it.

Limiting Externalities

Companies need to take ownership over any mess they cause environmentally and socially. It’s implausible that regulation with real teeth will get passed due to the economic competition between nations. And even if they did, the end boss of the measurement trap is still waiting. For now, we need to pray that companies take responsibility. And they are getting better at that, right?

Sure, they recycle and install LED bulbs. Just look at their ESG reports: clean sans-serif fonts, lovingly held in forest green page payout, celebrating how they've achieved carbon neutrality (by buying offsets from a eucalyptus tree farm in Paraguay) and started exactly one (1) coding bootcamp for refugees. Greenwashing is easy, and most ESG in sustainability theatre. Codes of conduct and CSR reports aren't enough.

Real change requires companies to gut-renovate their decision-making. How information flows, what goals are pursued, how employees are rewarded. EGP instead of OKRs.

On the environmental side, companies need to take responsibility for their whole supply chain, including what happens to products after they are sold. In order to do that effectively, environmental constraints need to be built in from the getgo, including product design and resource allocation processes.

On the social side, the most important recognition is that technology is not values-neutral. Technology influences the values of its users. Even if Ken Wilber’s hot take that the plow ended animism and set up patriarchy seems like a bit of a stretch, you probably agree that social media has royally messed us up: shorter attention spans, polarised filter bubbles, Hunger Games for status. Instagram driving body dysmorphia and depression in teen girls by disseminating unrealistic beauty ideals (accelerated by beauty filter arms races) provides a concrete example.

While 4D chess with systemic effects of new technology is not obvious, many negative effects of internet services could have been predicted (and in fact have been, e.g. by Jaron Lanier). In addition to constraining the product design process to not cause obvious harm, second order consequences can be limited by “orange teaming”, a cross-functional team working together to model, test, and mitigate potential externalities. Basically, do a round of “how could this go horribly wrong?” before even starting to work on a new product.

I dream of a world where the first order of business is “do no harm”.

Distributing Capital more Widely

To counter inequality, instead of fighting the losing battle of labor vs capital, let’s just make everybody an owner. Spread capital like butter. It’s not just fair, it also helps companies win. ESOPs are the gold standard for startups because if employees become owners, they act like it. Outside tech startups, this is still rare. Besides occasional examples of food coops or retailers, most companies still have the same bifurcation between owners and employees that enraged Marx two centuries ago.

And why stop with employees? Could we make customers and suppliers owners as well? Especially those who took a leap of faith on an emerging business or showed loyalty over years. “Airdrops” in the crypto space have established the practice of distributing capital to users. Often, a significant part of tokens (crypto capital) is distributed to its users upon launch. If done right, passive users turn into hype squads, helping the company succeed.

As AI capacity increases, the barrier to entry of creating companies and capital is decreasing, adding a further democratisation effect to how capital is distributed. Soon, everyone with internet access can vibe code their way into being a shareholder.

I dream of a world where all stakeholders are co-owners.

Plant a Tree, the Revolution Can Wait

Look, I know this sounds like the kind of hopeful manifesto that gets written right before everything collapses into Mad Max cosplay. And maybe it is! No, slightly better companies won’t fix the root problems. Maybe I’ll even take a megalomaniac shot at redesigning monetary and legal systems from the ground up in a cheeky blogpost.

But here's the thing about gradual paths: we can execute on them right away while the big revolution keeps going down the whitepaper to art project pipeline (with a few t-shirts sold on the way).

Let’s get started with the low-hanging fruit. Mission-machines, capital leashes, and distributing ownership widely. Change will come from the ground up, as founders, workers, and customers vote with their feet and their wallets. As environmental and social alarms blare, profit maxis will have a harder time selling their products. If this cultural shift continues, responsible companies will increasingly have an edge.

The capitalist realism crowd will tell you this is all naive incrementalism, missing the forest for the trees. Fair enough, but someone still has to plant the trees. And if we're lucky, maybe we'll grow a forest weird enough that even Moloch can't figure out how to strip-mine it.