# Hockett
Collateralized ESOPs and ESOP as the lenders for secondary shares seems precarious. Are the vulnerabilities in this system similar to 2008 collateralized debt serving as an obfuscation for bad actors (eg leveraged ESOPs could be abused in some way?)
"If everyone has an ESOP share" seems indistinguishable from "if everyone owned stock", which seems like it doesnt and cannot solve the initial underlying problems of elites hoarding their capital. How would a market of elites be expected to respond?
1990: there were 300-600 registered new ESOPs per year
Tax Benefits for ESOPs:
1) deduct corp contributions to the employee tax plans
2) no capital gains on the shares
The public/private tradeoff
less taxxes, public tax benefit write-off, for more private ownership
Where ESOPs fall short:
1) income risk concentration, the deferred comp is just another channel of income from the same source as wage labor
2) structural slumps, business cycles, and unemployment: labor would just work itself into capital and out of a job
3) only supports labor patronage, where work is often done otherwise to earn capital or support a business
4) only exploits one source of credit, where purchase of ownership is dependent on creditworthiness of the corp entity
Hockett advocates for 2 new twists:
1) sources of credit (i.e. sources of credit to purchase ownership)
2) sources of patronage (e.g. paying or qualifying)
CuSOP (Customer Stocker Ownership Plan)
- loyalty, trust
- public utilites/monopolies should employ CuSOPs as no choice or lack of market options means otherwise regulated monopoloy or public ownership
- think of a water utility or lone grocery store in a remote town that everyone must patronize
RentSOP (Rent-recouping Stock Ownership Plan)
- alaska oil dividends, rent, windfalls
- public spreading on condition of being able to receive the windfall
CitSOP (Citizen Stock Ownership Plan)
- applying SOP to overall citizenship
- citizenship itself counts as patronage (or rather, good citizenship)
- seems odd to apply criteria to citizenship
Some interesting ideas of secondary Meta-SOPs, or ESOPs in ESOPs to ensure diversification and protect against eggs-in-one-basket risk.
The second dimension of expanding sources of credit comes from the argument that tax breaks alone are not enough to incentivize ESOPs. Hockett draws from Home financing and Higher Education loans as prior art for moral justification and "The Finance Method".
The government sponsored enterprise is the main vehicle for ‘full-faith’ public credit for SOPs. Fannie Mae (FNMA), Ginnie Mae, Sallie Mae, Freddie Mac are all government funded programs to underwrite expanded capital ownership for housing, higher education, farming, etc. These orgs became private and still pay back dividends to the Federal Reserve and U.S. Treasury.
One offered theory is that these GSE's were created from external moments of crisis: the Great Depression and Cold War technological-race (Sputnik) for housing and higher education, respectively.
Basically, the largest possible credit source is public credit, and the largest possible SOP potential would only come from leveraged public credit.
Some anticipated arguments:
1) Market distortion; imposing standards or quality conditions on corp entities would distort the market. The rebuttal is that all securities are somehow graded anyway whether by Moody's or 'investment grade'.
2) Subsidized speculation; enforce standards with things like tax penalties for early withdrawal from an IRA.
3) Cost recovery; betting that FNMA would continue to produce dividends; again relies on quality standards e.g. only dividend yielding stock would qualify for SOP financing.
4) "What market is missing?"; the market would have made it work if it could have worked, e.g. portfolio diversification already exists.
5) Subsidized indolence; once capital is owned, is it still earned? housing: you have to work the land, education: you have to learn and put it to practice to pay it off. Rebuttal is that consumer demand grows with wealth and income.
#### TODOs
look up Blasi 1988 ESOP catalog
footnote 225: why did it fail?
NDEA act of 1958, Higher Education Act 1965, did it give out funding?
What happened to Sallie Mae/FMAC?
what is the history of mutual funds?
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# Dmitry Kleiner: Venture Communism
Telekommunist Manifesto: http://media.telekommunisten.net/manifesto.pdf
Disintermediation
- corporate walls through existing institutional wealth, capital and influence
- end-to-end: all functionality exists in the end nodes, allows for stuff like privacy
usenet
Anti-disintermediation
- profit requires centralization!
- centralized VC firms replace open commons, and capital captures profit
- basis of VC firms: capture of users, growth at all costs
- "if its free, the product is the audience. you are the product"
- in order to sell you as the commodity, they break away the privacy
Counter Anti-disintermediation
- federated groupware didnt fight of anti-disintermediation
- federated groupware won't win!!
- fundamental problem is capitalism
in order to work, new firms must apply:
- transvestment, co-ops, federated, tech disobedience, apply towards counter politics
- the more users they have, the more users it cost
* idea, get DO to donate server time
- no servers, no admins
- every new user adds to the networks resources, not drains
- assets held in common, all workers part of membership
- exvestment, transvestment, modes of capital
- e.g.
cuban technology, use it for people
- end goal must redirect the economic power it creats to take on capitalism, not just
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# Nancy Kurland
ESOP Plus Benefit Corporation: Ownership culture with benefit accountability
Good breakdown of the permutations of ESOP + PBC, and the forces at odds/play when you combine them.
Questions:
What is the ideal structure for a public good? With growth?
rebuttals for lack of adoption?
Is there a killer app or is it best suited for small size?
appear of accountability: e.g. donating lowers vlaue, how to measure market sentimient for accountability?
Could it work for amazon, apple, or other exploiters?
Bear sterns, enron, united air - accountability seemed to have failed
Has tech made us better off? ie will labor be replaced by working capital?
UBI?
thoughts on Hockett altSOPs
pirate ships?
TODOS:
look up EA engineering, the environmental consulting shop that was the case study
- https://www.eaest.com/
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# Han Kim and Paige Ouiment
Employee capitalism or corporate socialism? Borad-based employee stock ownership
ESOPs serve 2 main functions
1. thwart hostile takeovers
2. delayed compensation for workers, especially in cash-constrained firms
generally, ESOP firms increase shareholder value, but this varies based on the competitiveness of the industry.
# call with Robert Ashford
got really angry at me, not sure why
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# Ashford
Binary economics: an overview; 2012
Binary economics: the economic theory that gave rise to ESOPs; 2007
Capital democratization; 205
These were OK short summaries of Kelso stuff.
Labor vs capital, homestead act, democracy includes ownership of economic power in addition to political power
Capital will replace labor, full employment won't happen
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# Andrew Stumpf
Fifty years of utopia: a half century after Louis Kelso's the captialist manifesto, a look back at the weird history of the ESOP
Perpetual motion machines: ESOPs don't pay for themselvds
an ESOP critic: mainly for the tax angle.
questions: history of 401k? history of stock options?
much better summary of Kelso, the story of selling senator Russell Long on the idea, the ERISA benefits.
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# call with Robert Ashford
got really angry at me, not sure why
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