Insights into Post-Capitalism: Why the Next Dominant Firm May Be Non-Distributing

[aurum]

2 hours ago, Bjorn K Holmstrom said:

Risk isn't infinite. When you pay off a mortgage, the bank doesn't own your kitchen forever. Why should a VC own a company forever?

You cannot compare VC investing to mortgages.

They have different terms because they operate differently, with different goals and incentives.

If startups wanted a bank loan, i.e a mortgage, they could get one. But notice they often don't. They specifically seek VC funding, because VC funding is superior for their goals.

VC exists precisely because what you are describing doesn't work for innovative firms.

Risk IS functionally infinite for a business because survival never ends. It doesn't matter how big you are, you are always at risk of losing it all. There is no time when you are in the clear. There are always competitors, changing markets, recessions, regulatory changes, lawsuits, loss of employees, etc.

2 hours ago, Bjorn K Holmstrom said:

 NDEs are for-profit engines that reinvest 100% of surplus into wages, R&D, and growth.

Because they don't leak 10-20% of revenue to passive shareholders, they can outcompete extractive firms on innovation and resilience. That's a competitive advantage, not idealism.

If they're so competitively advantageous, then where are they?

Why isn't Amazon an NDE?

2 hours ago, Bjorn K Holmstrom said:

 Pension funds and sovereign wealth funds (managing trillions) actively seek the stable 7-12% yields that NDEs provide

That's fine, but that's not going to get you innovative firms that rise to prominence.

You need high-risk investing. End of story.

 

 

 

[Bjorn K Holmstrom]

1. "Where are they?"

Bosch (€90B revenue, massive R&D) is an NDE. Rolex is an NDE. The model scales, it's just rare because the current financial ecosystem selects for extraction, not retention.

As that ecosystem shows strain (enshittification, monopoly degradation), the niche opens. We're in the transition phase, the legal and funding instruments are being built now.

Your question assumes the current dominant model is optimal. It's just current.

2. Risk types

You're conflating operational risk (company might fail) with capital risk (investor loses money).
Operational risk is infinite, the company must always fight to survive
Capital risk is finite, once an investor has 5x return, their capital risk is zero
Why should they extract 10% of profits in year 20 when they have zero skin in the game? That's not risk compensation, that's a tax.

3. The founder's choice

You claim startups choose VCs because the model is superior. But if founders had a real choice:
Option A: Sell 20% forever (VC)
Option B: Sell 20% until I repay you 5x, then I get it back (redeemable equity)

Every rational founder would choose B. They choose A only because B doesn't exist at scale yet. And yes, in Option B you still get the VC's expertise and network during the growth phase. You just don't pay for it forever.

We're not arguing banks should fund startups. We're arguing for high-risk/capped-reward instruments that align incentives without permanent capture.

You're looking at today's menu and asking why everyone isn't ordering a dish that doesn't exist yet. We're writing the recipe.

[Davino]

@aurum Yes, those are all good points. As I mentioned on the limitations of NDEs, it's all about getting the ball rolling. My assumption is that over the next centuries, some company will get that ball rolling, getting into top positions and making a powerful statement into the global economy.

[Davino]

Another important general point: this a prediction/tendency for the next 300 years, don't be short-sighted in this sense, you gotta see very long term how this will play out.

Edited 2 hours ago by Davino