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Re: anonymous companies
On Fri, 17 May 1996 [email protected] wrote:
> At 06:42 PM 5/16/96 -0700, Wei Dai wrote:
> >
> > I'll just give one problem: the principal-agent problem. How do owners of
> > the company make sure the managers operate the company in their best
> > interest?
>
> Actually looting of companies happens a lot right now today, and very
> seldom leads to criminal charges. Twice I have lost a job because the
> company I worked for went under, apparently due to looting.
Be careful to distingiush "owner" from "employee." All to common a
mistake I fear.
Until someone passes a constitutional right to not be fired, well, you're
employeed at the will and by the good grace of the owners and your boss.
> > Solution: reputation. If the managers don't do the right things, the
> > owners arrange so that the managers lose reputation and won't get hired in
> > the future. Unfortunately the science of reputation is not so advanced
> > that we know this will actually work.
>
> At present venture capitalists seem to rely on the sniff-their-arses
> method. They talk to people and try and get a feel as to whether they
> are planning a robbery. This method is obviously likely to be less
> effectual as businesses move to the net.
And even this is vulnerable to "last round" problems.
> In some businesses we can solve this problem by cryptographic control
> mechanisms, such as open books banking.
I really wish someone would publish a paper on this. (hint hint).
> In others, such as net startups,
> I see no solution other than increased reliance on personal individual
> capital.
Still, vulnerable to last round problems.
> Athenian capitalism worked largely on personal capital. Because of their
> terrible arithmetic system, bookkeeping was really bad, and in consequence
> stock investments tended to go sour. Socrates lost a bundle in this
> fashion, which may explain his lack of enthusiasm for capitalists.
He also made a killing on predicting crops by his knowledge of the
weather. Go with what you know. If you aren't a good corporate analyist,
that's what mutual fund managers are for.
> > Solution: smart contracts. This is Nick Szabo's idea of building
> > contractual obligations into cryptographic protocols so that the parties
> > have no choice but to fullfil them. But again we don't know whether this
> > will actually work for this problem.
>
> It will work for many particular cases of this problem.
But what happens when there are nuances or circumstances which contracts
do not anticipate? This "complete" reliablity is also a curse for
flexibility which fast moving entities need to survive.
---
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"In fact, had Bancroft not existed, potestas scientiae in usu est
Franklin might have had to invent him." in nihilum nil posse reverti
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