Thursday, March 31, 2011

Tyrannical control freak's guide to starting a commune

A commune is simply an equal partnership in an organization.  My outline of Communal Equity Principles respects the contributions of labour and capital, and provides financial structure for entering and exiting the commune applicable to very large partnerships.

From the perspective of a single owner or existing partnership there are advantages and a disadvantage to forming a commune.

advantages

  • Allows owners to monetize their stake in the company, as new partner funds generally go to existing partners.
  • Allows owners to sell shares for higher price than market, because communal transfers are made at the democratically determined median offer price, instead of the lowest offer price set in market transactions.
  • Partnership transactions can be effected electronically and without an external exchange's transaction fees.
  • Through reinvestment formula's adjustments to sales price, new partnership funds can fund the organization as well.
  • Equality of ownership creates perfect alignment of interests.  
  • Intrinsic fairness of equality enhances sustainable motivation of partners.
  • An organization with many financially invested partners is more investable because internal controls and detection capacity designed to protect partner interests also protects external lender interests.
disadvantage
  • The leadership, vision, and opinions of original founders or founding partners is diluted by a wider equality of voices.
  • A false disadvantage is that slower decision making is worse than dictatorial control.
Before I address how to satisfy deeply held tyrannical impulses for control, let me spend a bit of time outlining how control can be counterproductive.

Delusions of control

The best recent example of counterproductive control is Intel's purchase of McAffee (My original analysis) for $7B, and estimated to have been overpaid by $4B.  An obvious equivalent alternative to purchasing the entire company for Intel would have been to contractually incentivize McAffee for $338M per year in perpetuity for whatever benefits McAffee can provide Intel.  While irrational pursuit of control is the most likely explanation for the purchase, presuming rational actors leads to natural speculation that McAffee as an independent brand might not cooperate with Intel.  As recent revelations of Samsung admitting to installing spyware/keyloggers on its laptops (though its most recent position is that the admission was mistaken) show, it is reasonable to speculate that Intel's McAffee plans involve at best an illusion of security features.

The key cost of control is that minions are more expensive than independent free partners.  Entrepreneurs are willing to sacrifice income and security for control and freedom.  Acquiring companies pay premiums to control acquired companies.  Independent brands and partners bring inherent legitimacy to activities due to being free of the naturally corrupting influence of master/minion relationships.

Management and motivation theory has always focused on conjuring an illusion of freedom in minions.  Town hall meetings are more opportunities to explain dictatorial positions rather than seek constructive input.  Employee free-time (made famous at Google) on its own is merely a tool to motivate minions in enhancing their master's property.  Magical tools of charm and propaganda may be effective, but they lack the intrinsic sustainability of real rights and equitable control.  More importantly, when partners are paying for the privileges of joining an association, magical promises are not effective compared to contractual rights and freedoms.

yeah yeah yeah... "but I am a tyrannical control freak"

As the founder of an enterprise or organization it is natural to have feelings of deserving enhanced control and rewards, and natural to feel that original vision has intrinsic importance.  You can simply choose enhanced reward over enhanced control.  There is substantial difference in price between selling a 49%, 50% or 51% stake in an enterprise.  You can retain complete control and stay alone.  Offer a small stake for a small price, or an equal stake for the best price.  (The other option is unthinkable to you).

Another tool at your disposal is to keep temporary control over some operational activities for a fixed term (say 1 to 5 years), as a corporate bylaw prior to accepting new partnership investment.  Natural governance principles are that normally egalitarian partners will vote on functional mandates, budgets, and leadership for as many roles as practical without granting fixed terms.  A fixed term is an exception to envisioned normal natural governance ideals, but strict restrictions on what partners may vote for is not part of natural governance principles.  

Use the self confidence in your vision and operational capacity to believe that you will be the best candidate (as seen by your partners) to continue main oversight of most of your operational duties when your term expires.  Even if you retain complete control over a fixed term, your finite reign of tyranny means higher partnership share value, since there is a fixed date where complete equality of partners is achieved.

The rational explanation for insisting on complete control involve ambition to corrupt organizational goals.  An egalitarian partnership/commune assures society and stakeholders that this is less likely.  So there is magical public relations value from founding/transforming into a commune.

2 comments:

  1. Good Point! Government must have the principles andfinancial services qualifications it's very important to know and maintain the financial quo of our society.

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  2. Very Detailed Indeed. I'm a student from Australia takingFinancial Planner Classes this ideas you have is very helpful for my assignment thanks a lot!

    ReplyDelete