The Stakeholder Economy & The Prospects Of Collective Ownership
Brands have become decentralized — the memes, content, and daily conversations of the masses increasingly define a brand. The next generation of projects and businesses are also on a path to becoming decentralized — where new blockchain-driven organizational constructs turn owners and customers into a community of stakeholders. This confluence of decentralization will advantage emerging brands and local businesses, and could prove to be the most disruptive force against the internet behemoths and global marketplaces that rule the world. Yes, a bold proclamation, but bear with me here…
The Antiquation Of One-To-Many Businesses
A theme of the last few decades in tech has been massive internet-based business behemoths using their pricing power and algorithms to crush local small businesses. Most of us are customers of these companies, but they’re owned and operated by a precious few (sure, you can buy stock, but you‘re just along for the ride). Similarly, such companies have long leveraged traditional media to define and force feed their brand to the masses. While I have long marveled at the speed and prowess of such companies (and enjoy pithy taglines), I also wonder what insight or innovation could shake things up. How might emerging or local businesses ever compete?
I see two exciting disruptive forces at play that, together, could change everything. The first has been boiling for over a decade: Brands are now collectively determined by the content generation of the masses as opposed to a creative agency and a nationwide ad buy. Today, for all but the most iconic brands in the world, a brand is only as good and fresh as the latest content and conversations taking place. In a sense, brands are at the mercy of memes and social sentiments. Brands have become decentralized. What your friends say — or even a stranger authentically expressing satisfaction or disappointment — seems to have more sway than Superbowl commercials. Why? Because we still crave the ancestral “small town” of reputation and brands built on trust. The consensus in real-time from individuals on social media is powerful. In early 2018, I wrote a post about the idea of Microbrands, thousands of tiny brands with low overhead, high on design merchandise, and supremely efficient customer acquisition tactics. Now looking back, many of these brands are no longer “micro,” thanks to the organic growth and user-generated content they got on social media —from customers and influencers, and often for free.
The second disruptive force at play is the construct of decentralized organizations turning customers (and employees) of businesses into owners. We’re seeing this happen in the aptly named “Web3” space. Packy McCormick defines Web 3 as “the internet owned by the builders and users, orchestrated with tokens.” And the pioneering all-things-crypto investor Chris Dixon (also one of my early seed investors for Behance back in 2011) further explains,
“In Web 3, ownership and control is decentralized. Users and builders can own pieces of internet services by owning [or earning] tokens, both non-fungible (NFTs) and fungible…Tokens align network participants to work together toward a common goal — the growth of the network and the appreciation of the token. This fixes the core problem of centralized networks, where the value is accumulated by one company, and the company ends up fighting its own users and partners.”
While Chris’ focus is mostly on the benefits of decentralized online services and big platforms, I can’t help but imagine the same technology being applied to the long tail of smaller businesses both on and offline. Imagine if your favorite online publications, e-commerce brands, and small businesses in your town — from restaurants and laundromats to ice cream shops and barbers — were able to frictionlessly (read: without a prohibitively expensive “IPO” or massive infrastructure to manage) distribute ownership to every stakeholder. Might the benefits of collective ownership of small companies be the biggest threat to big companies? If every stakeholder of these businesses was deeply incentivized to help build, improve, market, and patronize the brands, would that become a competitive advantage against the big guys? Would a “many-to-many” business out-market a “one-to-many” business in a material way?
In A Stakeholder Economy, Every Business Is Its Customers
The concept of “stakeholder capitalism” describes a system in which corporations are oriented to serve the interests of all their stakeholders. But I think the confluence of decentralized brands and decentralized businesses gives rise to a new era where the boundaries between companies and their customers are harder to discern. This idea is most powerful where there is the most pain right now: small towns and locally-owned businesses.
What might this look like in the future? Perhaps we will all own a piece of the many online businesses and marketplaces we frequent, as well as our favorite local restaurant, ice cream shop, and coffee house. Imagine every subscriber to your newsletter becoming a stakeholder as well as a reader, and what that would do to viral marketing? When you like a brand or service, you can buy tokens or earn them by contributing labor in the form of clearly defined and measurable tasks. Our tokens would entitle us to vote on certain decisions (flavors of the month?), serve as an engagement vehicle, turn us into passionate unpaid marketers, and would carry (perhaps even grow) a residual value that can be sold on an open 24/7 market to new residents and customers (or speculators seeking exposure to mom and pop shops in stable communities) — or perhaps these tokens can even be redeemed for merchandise? Perhaps you’d be able to buy your ice cream with (tokens in the) ice cream (shop)?
There are a number of technologies and increasingly popularized business models and product experiences that could help make this possible. First, there is the rise of the DAO (decentralized autonomous organization) that makes it far easier to incorporate a business and sell tokens (with or without a vesting period) to a community of new and interested “owners” that feel incentivized to patronize, improve, and grow the business. These DAOs are increasingly turnkey and a broad variety of tools are being built to administer them. Second, the concept of subscriptions could easily be leveraged for local shops and services and managed centrally in a town subscription app. With the stability of subscription-based revenue (and a modern tech stack and CRM), many small businesses would not only survive but thrive by doing more bundles with other shops and efforts to surprise and delight customers.
The Stakeholder Economy & The Good Ol’ Days
I’ve come to call this concept “The Stakeholder Economy” because the traditional construct of “owners and customers” is being replaced by a far larger and more deeply incentivized group of “stakeholders” that will, with the right system design, give the advantage to decentralized marketplaces and businesses with better retention and business stability, and radically cheaper costs of customer acquisition and marketing.
Perhaps the reason I am most excited about the Stakeholder Economy is that it takes us back to the way things once were. When forecasting the future of tech, I’ve long subscribed to the sentimental reflex of tech — that we inherently long for the way things once were and, in every transaction and experience, seek a return to intimacy, relationships, and small town mechanics. We want to be known, we want to support people we trust, and we feel a personal benefit when our community benefits. Suddenly, our local shops are not only supported by the community, but grown and advantaged by a level of dedication only felt by true owners, but at scale. The Stakeholder Economy can restore a sense of small town pride, at scale to the world of brands and business.
As we all have the opportunity to own a part of everything we enjoy — from an online marketplace, a publication, a local ice cream shop or your favorite beverage company — the key levers of business like marketing, sales, and distribution will be transformed by the natural tendencies and preferences we’ve always had within us. There’s nothing more authentic and effective than helping sell something you genuinely love and own.
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