If you go public you will be enshittified

Wall Street has perfected this cycle. If you accept investor money, you will be enshittified. Their only goal is to make as much money as fast as possible. They don’t care about your future, your company’s future, the country’s future or indeed even their own future. They want money now and will twist the screws on you until they get it. Think of “investors”/Wall Street as The Mob and you’ll get an idea of your future if you should ever be so desperate as to deal with them.

You hit the nail on the head with reference to going public. At that point, it’s pretty much out of your hands. You might think you can maintain 51% of the control with the owners, and everything will be fine, but… honestly, just don’t go public.

Best by far is just to build it up over time without taking outside investment (or borrowing from family or friends you trust, or from the bank, not investment with shares but just borrowing and paying them back). Going the route of big angel investors is so tempting because it opens up so many possibilities, and trying to bootstrap it is so slow and uncertain, but it is absolutely inevitable that the people who gave you a bunch of money are going to wind up calling the shots. If what you’re talking about is something you care about, I would go the bootstrapping route.

I’ve seen companies work well by bootstrapping themselves up over years of small client work until they were big enough to grow up into real companies, the right way. I’ve seen companies work well by taking out massive loans and paying them back with interest with these big punishing payments every single month. I’ve never seen a company that opened itself up to outside investment survive in its original form as time went on. If what you’re talking about is important to you, I would do everything you can to stay away from it.

IDK, if you already took on some investment, then I would just work with it as best as you can, and keep in mind trying to get out from under it because you’ve outgrown it, as quickly as you can. I don’t know how you do that really, but that’s the direction I would be thinking if you care about these issues.

On top of that, things to keep in mind:

1. The culture. You want people to be able to speak their mind and you want to be able to do the kind of work you want and not the kind that you don’t.
2. Point out examples of early Google beating out all the enshittified solutions, Facebook and Yahoo squandering their dominant positions through enshittification, things like that. In the long run, it really is a bad idea to cheat your customers and business partners. Maybe pointing that out to a money-focused person will make an impact on their thinking. Maybe not.
3. Make sure your investors trust you and respect your judgement. If they see you’re wise financially, focused on the bottom line, being responsible with what you’re doing week by week, they’ll be less prone to want to override you with “sensible financial decisions” that will lock you into something horrendous that you won’t want to be doing.

As stated by other people here, the first rule is simple:

1. Do not accept outside investment. Ever. Plan your business through organic growth, not through investors.

But aside from that, there are other things to consider.

2. Inspect your incentives. Enshittification is the inevitable outcome of perverse incentives. This means don’t pay anybody based on share performance in any form, for example: there’s too many ways to briefly boost share values in ways that can be gamed. (This is true whether the company is private or public.) Pay by performance, yes, but make sure that you’re measuring real performance, not short-term hits that cause long-term pain.

3. Foster a culture of equality. Don’t be an arrogant asshole that says “I’m the boss, so I’m smarter than you”. The people who do the actual work for you often know far more than you do about the fine details of the company’s operations; listen to them with an open mind and set aside your ego. They may save your company. As an example of this, I told my boss back in 2021 that we needed to stop taking American clients. He listened to my (counter-intuitive) advice and did a modified thing of what I’d recommended. We kept the ones we had, but we simply stopped taking new American business and instead branched out into other countries. I think that has made us more competitive in our little niche now that the USA has become a toxic shithole that other companies are joining us in avoiding: we already have relationships in the countries they’d avoided.)

4. Develop a fine touch for management. Some people need close management (usually junior people): make sure you provide it to them. Some people need a light touch in management: back off and let them work independently, just monitor their progress and offer minor course correction here and there. Some people need micromanagement: let them go (humanely) because this is not a fit for their talents. In the end management is a people skill, not a technical one. If you lack people skills, hire a manager who has them; don’t try it yourself.

5. In any conflict between your employees and a customer, consider carefully: one customer who is unhappy will badmouth you to a few friends. One employee who is unhappy will generate a dozen or more unhappy customers. If you throw your employee under the bus in such a conflict, you will have an unhappy employee (or more than one!). If the employee is in the right, support them. If the employee is in the wrong, guide them. Don’t throw them under the bus.

6. Related: remember that you can (and should!) fire some customers. There are customers who will generate nothing but horrible drama for your company; drop them. Send them to your competition if they’re really bad and you hate your competition enough. Personal anecdote time again: we had a customer who felt that by paying us he was entitled to micromanage every step of our process. He was constantly calling in and demanding people drop work to cater to him. Finally our department manager compiled a document that listed each time he’d done that in the past 30 days, estimated the direct cost in time and the indirect cost in lost productivity attributable to his behaviour. It outweighed (by far!) the amount of money he was bringing in. My then-boss called him up on the phone and told him that we would not be continuing in the contract; that he could take his business elsewhere. (Weirdly enough the people who’d been hounded by this asshole were extremely loyal to said boss later when business took a downturn.)

7. Never, ever, drop the “we’re a family” line. No business is your family and attempts to make it a family are just plain-old abuse. Your business is a place of employment. The people you hire have their own lives outside that business with their own family, their own friends, and their own time. Do not try to encroach on that space for cynical purposes like getting unpaid labour out of them. It may work in the short term, but it leads to burnout, embitterment, and backlash. As soon as I see “we’re a family” in business, these days, I start looking for another job.

8. Related: don’t ever demand free labour. Either hire enough people to do the work, or pay the overtime. I did marketing for a software company in Ottawa and watched as they sucked the life out of their developers by not only forcing overtime, but having that overtime be caused by the developers having to do mindless, bureaucratic make-work like scheduling their own meeting spaces and times, making their own copies, etc. (They had developers being paid in high five figures standing in front of seriously intimidating copying machines and trying to figure them out instead of having someone paid in low five figures doing the work for them expertly.) For the cost of a single person paid in low five figures they could have freed the developers to do the work they’re actually there to perform all within the span of an ordinary workday. Instead they did the “penny wise, pound foolish” thing of grinding their developers into hamburger, burning them out, and losing them. Pay for your excess labour or, even better, run your business intelligently so that you don’t have to!

There is no means to ensure the founding values are maintained once you go public. Iron-clad bylaws that do not permit malfeasance can be rewritten or amended to pervert the founding values and all that takes is enough votes.

Motivations of people can change, money is strong leverage, and morals are flexible enough to break with enough bending.

The best you can do is try your best and surround yourself with people who have values that align with your own while actively fighting against anything that even slightly compromises what you stand for. Understand that public influence will defeat you and you can only hold out long enough to make enough to do some good after the cards fall where they do. See what is coming and know when to release your intellectual property into the public domain and open source before you can’t.

Gah! I missed this thread. Hope it’s not too late to contribute. I am the C.E.O. (and an Economist) of a medium-sized I.T. firm in Canada and designed the company to be as ethical as it could possibly be from the ground up.

• All employees have equal votes after their initial 3 months is up in any part of the company that they are engaged in. I can (and have) been outvoted.
• After employees are here long enough (a few years), they can purchase shares if they like.
• I am the lowest paid full-time employee at the company by design. I do not take dividends.
• We operate on a Matrix org chart meaning that the “boss” on every project changes based on who is best suited to lead it and who has experience in that area.
• We have it in our charter that there are never any outside shareholders allowed. If you leave the company, your shares are purchased by the company for current market value. This includes myself. This is why employees owning shares is a good idea; it becomes a retirement plan. Unlike most corporations, we don’t want solely financially invested shareholders as they’re in business to extract value. They are parasites.
• We have acquired other companies. We have never had to pay for one. Our procedures are so thorough and ticket counts so astronomically low compared with other I.T. companies (which are called MSPs) due to our subsystems and customizations that they literally give themselves to us.
• We are as environmentally conscious as we can be. We redo and donate old systems to nonprofits and schools where we can. The only waste we put out is utterly dead hardware - no forced upgrade cycle. Electricity bills also drop dramatically at clients we take over due to more efficient machine use.
• During COVID, we gave away over $500k in free support. I figured it was more important that our nonprofit clients stay open than we stay open.
• We have a full FOSS stack that we can deploy if a company is open to it (and would like to save a bit of cash to boot).
• In nearly ten years, we’ve never had an employee leave, and never had a client leave (well, we had one restaurant client close during COVID, but I don’t count that).
• We have full benefits.
• We have zero interest in “infinite growth” as it’s not a functional model. We have turned down clients because they don’t “get” us and would be a headache for our staff.
• Our current goal is a 9-5 (not 8-5), four-day workweek for all staff.

I understand that not every business owner is “good.” I believe that with proper regulation, however, we can make them at least behave way, way the fuck better than they do now. It’s what I call Social Capitalism and it’s exceedingly functional from my experience.

I’ve built this model out in hopes it will catch on. I feel that if most companies operated under Social Capitalism that we’d be substantially better off. Certain aspects of it are so important and such a step up from the norm that I don’t understand how they weren’t obvious to other owners. But… greed I guess. Greed hurts every system it’s in.

Also of interest, we don’t have an issue with The Peter Principle as you’re never forced to move out of a position of competence or interest. You’re not salary-limited simply because you don’t want to be a manager; in fact, there are no managers.

Big problem is CEOs are paid in stock and are thus incentivized to boost shareholder value at the cost of all else. Prevent CEOs from being paid primarily in stock and it would help. Would it be the be all end all? No, but it’s a start.

There is an Open Science platform already being taken advantage of for researchers to pull data from other researchers to stop replication and accelerate science. Check your competition, because if there is already an initiative you will have to cut costs to compete.

Regarding “retaining control” there are a number of stakeholders that almost never “retain control”.

• customers have no direct control over your strategic direction, but they have indirect vote with dollars. Companies will often hire a “FP&A analyst” to try to guess the trends and the ways that a customer will need to be, but often you need straight up contact with customers (interview a random 25 customers each quarter about questions key to your competencies and areas of frustration before the FP&A guy starts crunching numbers and saying that “this is where the market is” in a garbage in and garbage out manner)
• employees (not management) have no direct control over your strategic direction, but they have an indirect effect on productivity and profits. In my opinion, there should be a benefit like “donation to a office worker union” that represents employees but does not actually make them salt/unionize in your office unless you start the path of enshittification.
• regulators have no direct control over your strategic direction, but they can dry up your supply or your demand with hurdles to jump over. Spending a little bit of money to have a seat at the table in regulations that are directly applicable to your business is an important civic duty of businesses. If you have legal counsel on a retainer, then they should be able to give you a summary of laws and regs that are being considered so you can make your voice heard.
• vendors have no direct control over your strategic direction, but they can produce synergies or referrals if you treat them right. Keeping a pulse on your vendors and being willing to take an insurance policy out incase a crucial vendor will cause you to lose revenue if they fail is a good business.
• Hedge against stupid risk - try to match your variable revenues to variable expenses. Also try to match your fixed revenues to fixed expenses. Example: if you have a lease on a building that costs a fixed amount no matter what monthly, then try to have that office serve recurring contract customers at least equal to the cost of rent. You can then spend the rest of capacity on Variable revenue that correlates closer to the variable expenses like salaries of salespeople.

The only company I can think of off the top of my head that hasn’t had this issue is valve. Like they obviously aren’t perfect, but they are consistent and don’t cash in user trust for short term profit. I can’t help but see the fact that they never went public and don’t have some kind of weird money fetishist at the helm as key to that.