A world where all workers are owners adjusted by their magnitude of contribution

This article is a follow up to my previous piece on capitalism, but contains somewhat different ideas and hence can be read on its own.

We can imagine a world where pure owners do not exist. There should not exist a world where owners are able to reap the benefits of the workers whlie contributing nothing in return. However, that is precisely how the world works today. Investors do not materially contribute to anything to the company especially if the company is no longer in the investment phase. In this case, the company simply employs the CEO, and workers etc to make all decision and the company would run autonomously and the profits will go to the owner without the owner doing anything. This world results in a situation where you have completely incompetent people who might have inherited wealth and ownership while possibly contributing nothing to society and yet spending luxuriously.

Instead, I explore another world where workers and a perfect and equal subset to owners. Every worker is a owner and the degree of ownership depends on the magnitude of value they generate for the company, determined by the free market.

The key ideas of socialism can remain, but we patch the bug where socialism inhibits innovation from happening. The goal here is to take some of the ideas of socialism and supercharge it with the power of innovation.

There the fundemental principle is that a company should aim to pay its employees as much as possible, just enough to break even. Each employee should be treated as a human, with thoughts, feelings, goals and passions. We should throw away of the ideas of treating labour is a simple commoditiy. We should throw away the ideas of aiming to pay each worker as little as possible. Instead, we aim to pay each worker as much as possible as long as the company to sustain itself (break even). Moreover, the pay each worker receives will be determined by merit, based on how difficult the job is. Fundementally this will still be determined by marketforces, but instead of paying each worker a monetary amount, each worker will be paid the profits of the company, and the pay is a percentage of the profit. For example, the CEO might be hired and be paid 1% of all company profits. The sum of all pay percentage of all employees will then sum up to 100% and the profits of the company will be distributed as such. The right to ownership comes with work, and the magnitude of ownersihp comes with the quality of the work produce. No work equals no ownership. No ownership also means no power. Decision of a company can still be made, here we can take some inspiration from DAOs (decentralised autonomous organisation), where each worker/owner can place their votes to another person for them to vote on behalf on them. However, this choice should be purely under the freedom of the worker. In a sense, if everyoone places their votes to the CEO, then the CEO has full reign over any decisions that the CEO wants to make. Note that the percentage of votes = percentage of pay = percentage of ownership. So in this case, the CEO has the voting power of 1% but can then have 91% augmented voting power if 90% of the employees pass their votes to the CEO. Realistically, I imagine a hierarchical system of layers and layers of Markov blankets where votes are propagated up in a hierarchical tree fashion and eventually reaching the CEO.

But how then will we have innovation? If there is no excess profits and reserves then there should be no way to invest for a long term vision right? Here, is the trick. Each worker can choose to take a paycut to 'invest' in innovation. Again, this choice/decision is made by similar mechanisms as descibed above. Moreover, this 'paycut' can be backdated, meaning that if a person wants to invest in a project that is expensive, the person can backdate the paycut and use the money on the project. This 'paycut' from each worker can then be rewarded via more potential future percentage earnings if the profit of the entire company increases. For example, if 20% of the people in the company decide to 'invest' in building a large language model, this is funded by the paycut of these people, so this will encompass buying of GPUs and paying for electricity costs. Additionally, only the people who are working on bulding this large language model can 'invest' in it. Remember that the vision here is for a world that have no owners that don't do work. So if a person is not working and contributing to bulding the large language model, then the person cannot take a paycut to invest in it. The people that have taken a paycut to work on building this large language model will then reap all the profits generated from this project, this is measured based on the contribution to the large lagnuage model project. Particularly, the more an individual contributes to the large langauge model project, the larger the paycut the employees is able to take, and hence the larger the ownership the employee is able to have. Remember, work = ownership = pay. When the large language model starts generating profit, then the profits will be allocated accordingly to the people that are working on it based on the percentage contributions.

I note that there will be some situations where the paycut taken by the people working on building the large language model is not sufficient to fully fund the project. In this case there can be a case for internal loans to take place. This will still allow us to ensure that only the people that are directly contributing to innovation will yield the upside potential while will providing enough capital for this to occur. In this case, other people in the company that are not working on the large language model can likewise take a paycut to fund the project, however, because they are not working on the large language model, they will not receive the profits of the large language model project. Rather, the revenue from the large language model project will be used to repay the internal loans with a standard interest. The concept of interest is interesting there, because this concept may not exist in this world anymore with such a structure. Currently, this simply serves as a motivation for liquidity provision. However, profit from the project does not always go well and there will be cases where money invested in the project will not yield returns. In this case, the people that invested in the project will have taken a paycut without significant profit opportunities. How then would the these loaners be paid back. Here we must guanrantee that the loaners will definitely be paid back the money they have loaned. Perhaps the trick here is to be able to have an internal banking system which is able to manage this risk, this internal bank will provide all the loans instead. The net goal of this intenral bank is to manage risk and not to make a profit. If this internal bank is in net surplus, then something is wrong. Essentially, this internal bank will earn an interest for the loan that it provides, this interest rate is determined by an objective prediction of failure rates. For a highly risky project, it would have very high interest rates and if it is successful, then it would collect a large surplus of money. This money is then used to fund the projects that failed, in the end of the day, this internal bank should reach net zero in terms of accounting. It's goal is simply to provide liqudity.

Another important note here is that the ownership will constantly be adjusted based on the contribution to a project. For the founding members, their ownership would be elevated, however, if they start contributing less to the project over time, then their ownership will start to decline and the people that contributes more to the project will gain more ownership and henceforth be able to claim more of the profits generated from the project. Note, that there is indeed some stickiness to the decline of ownership if contribution falls, and this stickiness if calculated based on a mathematical function. Risk and paycut taken to invest in the project will be taken into account in this mathematical function. This means that there is a lag between when contribution falls to when ownerhship falls. This lag is important to provide a reward structure for people who have made great contributions to the project in the past to reclaim some level of upside before it declines. In this sense, we can see this as some sort of cumulative contribution multiplied by risk with a decay function. So in this case, the higher the risk taken by someone to start a project within a company, and the higher the contribution made to the project, their cumulative contribution rises. For a extremely high risk project, it will result in very high cumulative contribution. Note the people entering the project when most of the risk has mitigated will then have less cumulative contribution for the same amount of work done. How is this different from the current capitalistic structure? Because in this case too we see that the people who take more risk get higher upside and people who take less risk get lower upside. The answer is the decay function. In capitalism, the upside remains forever, but here we say that the upside remains only if the person continues to contribute to the project. If the person stops contributing to the projct, then the decay function will step in, subtracting from the cumulative contribution over time and eventually the percentage revenue reaped by this person will decrease with cumulative contribution.

It is important to note that this cumulative contribution and decay mechanism works for people leaving the company too. If a person works 20 years building something that has yielded no profits (probably because this project needs a long time to reach critical mass), but because of some illness, this person has to quit the company. However, the hard work of this person finally yields result in the 21st year of this project and results in billion and billions of dollars in profit. It only makes sense for this person who has worked 20 years on this project to be rewarded accordingly, even though this person has left the company. This is where cumulative contribution comes in. Within the 20 years of working on this projecct, this person's cumulative contribution would have accumulated to a very high level. And therefore, this person would yield a significant profit from the project even after this person has left the company. However, it is important to note that perhaps after another 5 years, the new people working on this project has contributed very significantly and is largely responsible for the continued progress of the project. At this point, the decay function might have decayed the cumulative contribution of the initial employee to 0 and therefore this person would no longer reap the profits from the project anymore. But it doesn't matter, for the efforts of 20 years, this person probably have already become a billionaire from the 5 years of reaping profits due to the large cumulative contribution accumulated, adjusted over the decay function. This mechanism rightful rewards people who are active contributing to the project while also rewarding people that have previously contributed to the project. It is important to also note that if the person who has worked 20 years on thsi project, and this project did not yield any results, then the person would have lost a lot of potential incoome, this instill a level of risk taking decision choice to all individuals.

The system which I have describe above have several benefits. For example, this ensures that innovation is properly motivated in everyone. Those that take more risk would be rewarded accordingly. Only those the do the work will be rewarded. Only those that take the risk will claim the upside potential. Moreover, this ensures that no legacy leeches will occur in the system, people will only be rewarded if they do work, no work means no pay. Gone are the days where we have a few rich people which inherited wealth and ownership and does nothing everyday but are yet rich. If a person does not work, they do not get any ownership.

Moreover, this ensures that everyone is motivated for the good of the company, doing great work for the company directly translates to higher rewards. There is no longer some intermediary that has the power to decide whether they should reward you for doing great work. If the work produces results and generates value, you WILL be rewarded by default. As a comparison to the capitalistic society, if the employees work hard and the company doubles their profit, the 'owners' of the company can choose to give only 20% bonus while keep the rest of the profit. This does not happen if everyone are direct owners, where the doubled profits will be immediately allocated to workers based on their percentage contribution.

Lastly, this system ensures that everyone has skin in the game. Everyone is responsible for the actions that they take. Messing something up for the company will directly impact the profits reaped by that individual. Innovation and investment is directly correlated to real paycuts people take and therefore, they will really have to care and judge risk appropriately instead of spending frivolously.