Users are the best investors to have

The idea that companies should be run for the benefit of shareholders is a relatively new one.

For most of the 20th century, American corporations were instead operated according to the principle of managerial capitalism:  “a form of capital accumulation and organizational control in which managers are the central agents of power.”

This was the era of the “Organization Man,” when control of a company was decoupled from ownership and professional administrators considered themselves stewards of a permanent institution, responsible for balancing the interests of a broad array of stakeholders rather than serving shareholders alone.

Often, the most favored stakeholders were the executives themselves.

In Barbarians at the Gate, the tendency to corporate self-dealing was vividly illustrated by the “RJR Air Force” — a fleet of private planes the CEO of R.J. Reynolds used for weekend golf outings and personal trips to his vacation home.

In one memorable instance, the only passenger on a corporate flight was the CEO’s German Shepherd (sent home early from a weekend trip to avoid the consequences of biting someone).

The excesses of managerial capitalism were also dramatized in the movie Wall Street, when Gordon Gekko tells the shareholders of Teldar Paper they’re being exploited by the company’s management: “You are all being royally screwed over by these bureaucrats, with their steak lunches, their hunting and fishing trips, their corporate jets, and golden parachutes.”

Gekko’s message to Teldar’s shareholders — that they owned the company and executives should therefore work for them — was rooted in the thinking of Milton Friedman, who argued in a 1970 New York Times op-ed that “in his capacity as a corporate executive, the manager is the agent of the individuals who own the corporation.”

“In a free‐enterprise, private‐property system,” Friedman added, “a corporate executive is an employee of the owners of the business. He has direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires.”

In the case of publicly traded companies, he reasoned, shareholders owned the business, so that’s who executives worked for.

Intuitive as that seems, Lynn Stout says it’s all wrong: “Corporations own themselves,” the legal scholar argues, “just as human entities own themselves.”

What shareholders actually own, she explains, are, well, shares: “a type of contract between the shareholder and the legal entity that gives shareholders limited legal rights.”

Nowhere in that contract does it stipulate that executives work for shareholders. Or that they should favor investors over any other stakeholders, be it employees, customers, suppliers, society at large or the environment.

“The idea that corporations should be managed to maximize shareholder value,” Stout says, “is based on factually mistaken claims about the law.”

Nevertheless, that’s exactly how US corporations have been run, almost universally, for the past three or four decades (since Gordon Gekko, basically). 

Stout laments the short-termism she believes that’s led to, arguing that a cult of “shareholder primacy” has caused corporations to aim for near-term profits at the expense of long-term investing.

(I’d counter, however, that the current boom in AI investment probably disproves that.)

Stout advocates instead for a return to the kind of managerial capitalism that, in her telling, successfully built infrastructure like railroads and canals with less regard for the profits they’d produce and more regard for how useful they’d be.

“Investors in these early corporations were usually also customers,” she reasoned. “They structured their companies to make sure the business would provide good service at a reasonable price – not to maximize investment returns.”

Is that how crypto protocols should be structured, too?

The current debate in crypto is how to grant token holders the kind of rights that shareholders think they have in traditional finance.

But if Stout is right, that may be the wrong goal.

Without formal ownership rights, tokens might attract investors less like Goron Gekko and more like the 19th-century shareholders who so eagerly funded societally beneficial railroads and canals.

Railroads and canals were networks, after all — networks that may never have been built if 19th-century companies were run strictly to maximize profits for their shareholders.

And protocols are networks, too. 

Even if those protocols are often run like companies, Stout’s work shows that there’s more than one way to think about what kind of rights investors should have.

If crypto protocols are only about maximizing returns for investors, then, yes, token holders should be granted rights that more formally make them Gordon Gekko-like owners.

But if crypto finance is meant to be a new kind of participatory capital, it might be more productive to grant token holders fewer rights. 

Or maybe even none at all. 

Rather than offering the kind of legal protections likely to attract profit-maximizing investors, protocols could instead rely on their users to fund their development. 

This might allow them to evolve into something fundamentally different from profit-maximizing corporations.

Conceivably, that could turn out to be the most useful guarantee for token holders, too: Investors that are also users may be treated better than investors that are only owners.

When the customer and the capitalist are one and the same, the only way to maximize value for both investors and users is to build something that actually works.

— Byron Gilliam

_{Brought to you by:}

On December 15, Grayscale announced the publication of its 2026 Digital Asset Outlook: Dawn of the Institutional Era.

What lies ahead? We expect 2026 to accelerate structural shifts in digital asset investing, which have been underpinned by two major themes: macro demand for alternative stores of value and improved regulatory clarity. We also outline our Top 10 Crypto Investing Themes for 2026, reflecting the breadth of use cases emerging across public blockchain technology. In each case, we include the relevant crypto assets associated with each theme.

Click here to learn more. Investing involves risk and possible loss of principal.

Crypto's premier institutional event is returning to NYC this coming March 24-26.

Get your ticket today with promo code: BREAKDOWNNL for $100 off.