even good companies are destined for evil

This is a musing. It is gloriously incomplete. The author retains the right to disavow any opinion shared here.
Consume at your own peril.

Let’s say I want to start a company. The company will build a special type of widget, that could be used either for benevolent purposes, say curing disease, or for malevolent purposes, let’s say something military based.

I’m well aware of the potential for evil, but I genuinely believe this widget can help a lot of people. I learned about the widget while studying on a public funded grant, and a lot of the early work on this topic has been done by other public grants. But the widget won’t go to market unless someone builds it, and I think I’m uniquely placed to do this. Let’s say I have a 50/50 business partner, who’s more motivated by the intrinsic benefits of having their own business, rather than the good the company could do. I’m going to be CEO.

I start with 50% of the company, but I need some capital to make my widget factory. Realistically, this means finding investors. We’d probably do a pre-seed and a seed round, but after that, let’s say we’ve raised $2.5 M. That’s great, we can build our first factory. The downside is, I now only own 40% of the company. But that’s fine, between me and my business partner, we still have control, and while my business partner doesn’t feel particularly strongly about not doing the evil military thing with our widgets, they respect my wishes, and we carry on using it for good.

We make sales, the business is bringing money in, but we’re really getting stung by the cost of sales. Our customers love our widget, and it’s doing good, but we can’t produce enough of it, and things would be so much easier if we could get bulk discounts on things. If we had 5 factories instead of 1, the business would work so much better. So we go to raise money again. This time we raise $10 M, and my shares get watered down to 30%. No worries, we’re still in control.

At this point a big military company comes and tries to buy us. They want to use our widgets for the evil military use. We say no, between me and the co-founder, we still have that control.

The business is going well, the widgets are making money, and in 5 years all our investors will make profit on their positions if things carry on. But there’s more demand than we can produce, some big widget producers are starting to set themselves up as competitors, and we really need to establish ourselves. So we raise more money. We do two rounds, raising $70 M in total. We build more factories, we also start making other types of widgets. Everything is good. But me and my partners shares have been watered down to 24% each. We no longer have control. If the military company came asking to buy us again, me and my partner couldn’t single handedly block it.

We make more progress, more sales, more factories, and need more money. Now it’s time for an IPO. We’re all going to get very rich, and we’ll have done so while doing something that actually helps people. Great. We IPO, we raise more money. We water down our shares more. We only have 20% each.

A few years go by, we continue expanding. Then we finally make it to where we are aiming. We’ve hit the point where the entire worlds need for the widget (for non-evil uses) is being made by us. We’ve reached where we were aiming for. The company is healthy, very profitable, and our customers are happy.

Our shareholders aren’t though. You didn’t grow this quarter they say. We don’t need to grow we say. We’re very profitable. But they don’t care about that. A lot of our investors are pension funds. They need their pension pot to grow, it needs to outpace inflation. So our business needs to grow.

Our shareholders organise a consultancy to come in. They look at the business, and offer 3 suggestions:

  1. Sell the widgets to the military companies
  2. Make the widgets worse, so they break sooner
  3. Pay our workers less, make redundancies, and make people work longer hours. They suggest we do all three. I refuse. I’m given a choice, implement the suggestions, or I will be removed as CEO.

This is why enshittification exists. This is why major corporations are unable to act ethically, even if they wanted to. We have a system that forces constant growth, over sustainable businesses.

But systems can be changed. There must be better ways of funding companies. There must be better ways of paying for retirement than needing pensions invested in the market.

Solving this problem would solve so many other problems. The internet is shit because of the need for constant growth. Climate change is worse because of this need.

If you were to come up with a boring financial Innovation that solved this problem, and be in a position to implement it, you would do so much good for the world. Until then, fund some public investment banks or something.

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