Limited Liability – Limited Profit¶
Here is my favourite idea for fixing the bug described in Subdue the greedy giants!.
Our problem is that we grant private corporations unlimited rights to profit while demanding only limited responsibility for the risks. We grant limited liability without demanding limited profit.
My solution is theoretically simple: we just need to make sure that every private corporation will get nationalized when its investment-to-profit ratio exceeds a certain threshold. IOW when we can say that the investors have made enough profit.
This nationalization won’t harm the corporation’s activity. We just change the recipient of the profit. It is just a new strategy of distributing the profit.
Nationalization is imposed by the state because –of course– the owners of an expanding business don’t want to give away their shares. It is a simple obligation, as obvious as a yearly tax declaration. Failing to do it in time simply leads to increasing fines and ultimately criminal prosecution of the responsible managers.
It is a form of expropriation. Of course the owners don’t like to get expropriated (unless they bought for speculation, which is an edge case). But they have no choice. Expropriation happens when some public interest becomes more important than the private interest. The public interest of subduing the giant is more important than the private interest of its owners.
Of course the gory details are to be regulated by clear legal rules. There must be a balance between giving to investors what they deserve and keeping the corporation’s activity alive. For example who decides when the investors have made “enough profit”?
Implementation note: Google, Amazon, Microsoft and Facebook are registered in the United States. But only the parts that actually exist in the US will go to the US. The Belgian headquarter remains private as long as the Belgian government doesn’t decide to nationalize it in turn.
Inspired (also) by How Facebook and Google fund global misinformation and Alarming reports after the COP26.
What’s wrong with the idea I describe in Limited Liability – Limited Profit? Why don’t we start doing it?
Yes, I know that reality is more complex than theory, but why don’t we repent in theory, at political level, i.e. decide that we change our direction and want to start moving towards a new horizon?
An example of how things go: “A company aims to power the world for millions of years by digging the deepest holes ever. And it utilizes a nuclear fusion technology.” (2022-06-28 interestingengineering.com)
An approach that maybe goes in the right direction: In March 2019 OpenAI shifted from nonprofit to “capped-profit” in order to attract capital. They created OpenAI LP (“Limited Partnership”) as a hybrid of a for-profit and nonprofit. The profit is limited to 100x: if you invest a million, you will get “only” the first hundred millions of profit in return. (techcrunch.com)