Spirit of the Law

More and more often in the various types of news outlets we can read about horrifying applications of the law, that seem too harsh, too disconnected from actual damage done, or completely unrelated to the actual idea behind the original law that has been enforced.

And I am not really talking about criminal law - more like patent, copyright or similar laws that have been created to give some benefit to society as a whole, by enforcing some rules on individuals or granting privileges to some.

Patent law is the most obvious example - originally patents were introduced, so inventor could have limited time monopoly on usage of his idea, so there would be some more incentive for people to invent things. Mind you - even without patents invention happen - patent law just made it more beneficial to do so, hence improving the rate of innovation.

Nowadays we have abstract concept of patent and no-one really cares much about original intention of the law, about why it was introduced in the first place. When you look at Apple suing Samsung about roudned corners, or some companies patenting concepts of math, and others mass patenting anything they can think off, but never actually producing anything based on the patented ideas - just keeping patents for intent of suing - where is the original spirit of the law in all this madness?

There are of course other examples, most similar being copyright - how exactly does society benefit from royalties being paid to authors relatives after he has been dead for decades? Creators have to be rewarded for their work, no doubt, but their grandchildren? How they can have 'rights' on old songs sung by their long deceased grandpa? How exactly does it help us as a society? You as a creator create something, you make money off of it, if you manage your accounts wisely, you end up leaving nice pile of gold to your kids as an inheritance. And that's should be it. No '77 years after authors death' type of nonsense.

Those are just most known examples, I am sure there are tons more laws that have been completely stripped of their dignity and with entire industries around them, that live and prosper on interpreting the law the way they like it.

There are two ways I think that could rise level of legal sanity.

First is - mandate that lawmakers always write down not only law itself, but also description on 'why' it has been introduced. Say, you as a lawmaker from last century, introduce bill to criminalize homosexuality, with true belief that it is disease that can be transmitted, or 'though' to others. If that reasoning is written down in a 'why' section of the law, then, after it has been scientifically disproved, it would lot harder to keep law alive as well. But if there is no 'why', politicians can simply keep law for granted and never change it, but just keep adjusting unwritten reasoning of why law exists.

Ban marihuana as something very unhealthy, and then when that is disproved, come up with new kind of reasoning on why it should stay banned. Or invent value added tax as 'temporary measure', and consider it a cornerstone of taxation half a century later. De facto, with no reasoning.

Add "why" to laws, that is first approach. Second one I offer is special court where one could appeal other courts decision on the basis that it is not according tot he spirit of the law. This is taking on the problem from very different angle than first suggestion, but still could be effective.

Currently, depending on the country, you usually can appeal to the higher courts either on the basis that verdict is wrong or on the basis that sentence is not adequate. And usually only highest courts, constitutional courts or supreme courts deal with sanity of laws themselves. And obviously it is rare that one gets to appeal there.

So, lets introduce lower level courts, that would try to deal with appeals based on spirit of the law. If you feel that first court has ruled correctly and according to the current law, albeit stupid one and not really meant for this, you do not appeal to higher order court that would try the case using the same approach - instead you appeal it to the court of spirit of the law. And there, judges try to figure out original intentions of the law and how do they compare with current case, how it was interpreted and how to interpret it better.

And after judgment by this court, case can be escalated to constitutional court, or some intermediate institutions, if participants do not agree with the result. If enough cases reach the top court, where they often have some kind of power over lawmakers as well, law can get changed. Maybe even with 'why' clause included.

Of course, such system would need to have some safeguards built in, so large corporations would not start to flood it with 'rounded corners' type of patent wars as well. Maybe if complaint would be considered stupid, court could put some penalties on complaintant as well. And as this court would be all about common sense, they probably could judge what is reasonable to complaint about and what not.

Now where to get people to staff such courts? Some sort of monastery of common sense?

Crowd laundering

Note: this blog is about making world a better place - money laundering is not part of that.So take this as purely mental exercise and fun read with a twist at the end.

 I am not your typical criminal mastermind, and nor I have large sums of stained money. However, in a daily stream of ideas I tend to get, one was about using crowdsourcing to launder money.

And of all the crowd involving possibilities Kickstarter style funding intermediates sounds the best, at least on the surface. Imagine online funding project, that contains pledge to write some very niche book, preferably e-book, kind of book that real person would be unlikely to fund. And make smallest donation slightly above normal, to drive away already unlikely people. And then bring in some sort of bots to send in money. Or even better - ask your bribers, protection money debtors (can I say racketeerees?), customers of illegal substances, supporters of Nigerian princes in exile etc.

Of course, direct monetary link between criminal lord and his victims/other thugs would not be very good for long term sustainability of such business relationship. So, this strategy could be chained between several crowdsourcing sites and between them could also mix in sales of bogus antique items via online auctions and donations to charity.

... just realised that even breaking bad  similar laundering setup at one point of time ...

Anyway, scheme would end with local godfathers young nephew becoming raising star of local startup incubator. And as there are no direct bank-to-bank transactions (or they are less direct at least), also entities sending and receiving money are using small amounts, then traditional rules of monitoring financial institutions might be less of a help.

...so, as this is too similar to something that average TV script-whiter (*gasp*) can come up with, let me invent something grander ...

So, this of course takes ages to set up and involved links are not permanent - crowd sourcing campaigns can not last forever without producing anything meaningful, and lots of money donated to something that average slashdot geek would not like could also arise suspicion.

To fix all this there is a clear need for  large wholesale provider of laundering schemes via crowd sourcing. So, lets crowd source something grand. Like a great hollywood style movie. Full blown movie, costing millions of dollars. Independent and Indy, yet full of special efects, actors, scenes to build, sounds to record, etc.

Put it on a kickstarter, and start selling the possibility to launder. Bring in first thousands of dollars for a fee of say 25%, use those 25% to build a great movie trailer. Spend 75% on 'special effects' and other supplies at godfathers nephew owned shops. If movie idea turns out to be not very good - close down shop and try something else. If it is perceived good, then money would start trickling in. At first match every dollar donated, with one or two to launder. Later, stop laundering intake and start to concentrate on actual movie, so at the end there would be around 20-25% of money laundered (and already given back to owners), while remaining would part be used to actually produce a movie, as that is costly business.

Movie stars, directors and other involved persons need not to know anything about the dirty part of the deal. All they have to know is that they are part of great European movie industry revival.

And that movie is about eastern European mafia learning new technologies, partying in London and having dynastic marriages with Sicillians.

C'mon - there are billions of euros waiting for an enterprising movie launderer! It is Europe!

Real digital rights management

We all have heard of DRM, about how it sucks, how it does not let us control what we have bought, it requires connection to internet for us to enjoy our game, it requires strange built in player to play CD on computer, it does not allow to copy our music library to another platform, all sorts of things. Not very good things.

Lately it has become less obtrusive - buying games on Steam, music on iTunes and e-books on Amazon, does feel all right, even if you end up completely locked in with vendor, it will run only on their platforms, devices and software. And require internet connection at all times. I guess vendors have just became, how to put it best, less dumb on how they implement their DRM. That does not mean it is nice, though.

Do not get bored - this is not just another blog rant about evils of DRM. No, quite the opposite in fact.

Problem is not in DRM itself, problem is in whose Digital Rights does it 'Manages'. Purpose of DRM in its current form is to protect content creators/owners/distributors from people illegally copying protected digital goods and in the same time provides them with nice proprietary lock-in and all the opportunities it brings. It does not however protects rights of me as a customer. My rights to actually own the digital goods.

Owning something is nice - I do want to pay for stuff that other have spent their time and energy to create, I do not want to 'steal' it, if I can avoid it. I do not want to give copies of it away to other people, if I have paid for it. But, I also do not want to pay full price of product once more just because it has been released in new type of disc, cassette, tape or vinil. Or because of moving to new device vendor, with my music library being locked away with old phone with no way of moving it. I do not want vendor to remotely delete or alter content I have bought. I do not want to have to buy again a game just because it has '3 activations' policy and after upgrading my PC three times, It wont work any more.

In short - I want my rights of ownership to be managed. Digitally.

DRM should be there, it should work globally. And it should be set in law that what I have bought, is mine and stays mine. And no-one has a right to ask me to pay for it again. If it can be considered a theft, when someone copies it, then it should be likened to physical good in other senses as well.

How would that work? There should be global, distributed DNS style system - maybe with not so many nodes, but still - that would aggregate what does everyone own electronically. And yes, it is obvious that there are huge privacy issues stomping around the room with lifted snout and scary tusks. Yes, but as I wrote in my previous post - better methods of identification in intertubes can not be avoided and has to be embraced as our loving and caring overlords of the future.

So, if there is a system that clearly identifies what I own, then no-one will ever be allowed to ask me to pay for the same thing away. Done with the Nook and want to move to Kindle?  No problem - get the device and your book collection should be already there. And web book store managers can actually create innovations, increase productivity, widen their offerings - do some actual competition with service against service, instead of just trying to reach large enough locked in customer base.

Imagine the competition if each and every vendor will compete only in quality of service, selection, ease of use?

And of course, such system would have to be global. And as we see with example of Internet, such global distributed systems are possible to make and they can be very hard to break after they have grown fully. Imagine if someone would want to lure you over from Internet to AooleSoftNetwork or something like that, owned by single corporate entity? The same feeling you would feel when someone would want to take away your real DRM and replace it with cloud stored, remote wipeable, content-you-do-not-really-own-but-are-licenced-to-use nonsence.

With such a system, governments will not be that easy to lobby into creating laws like additional semi-private tax for empty storage media,  additional tax if you listen to music you own 'publicly', or even make it illegal if you simply listen to your own music, in private, but with a method 'they' do not like.

Of course, comparing to system like Internet, there are mountains of legal problems to overcome - rights to distribute content is country based, different countries have odd laws on what is allowed to be sold and what is not (e.g violence = ok, sex = bad type of laws).

And no, various types of open/free content licenses are not the ultimate answer. Creative Commons work would fit ok within Real DRM schema though, it will not be that useful to ascertain your rights to something that is free though. And maybe governments will be more keen on them as well.

Problem with those licenses are that they are for work that creator wants to to be free. But what if I, as a creator, want to charge every single user of my work? Even if it is pay as much as you want scenario, I still want (and need) to earn money, and for that, creative commons does not feel well suited. If I want to enjoy protection (albeit limited) of protection laws, it will not be possible with such license.

And given that more and more of global economy is becoming services as opposed to goods goods, and digital services/digital goods (hard to draw a line there I guess) are also getting larger and larger share of the economy, It feels certain, that all of that will never be for free, hence the need for proper ownership control.

And yes, if there is re-re-release of Starwars: Episode IV, I do not want to pay full ticket price. Just the price for added value since last time I have seen it.

Local system evolution

If you talk with anyone who has been IT world for a while and has actually listened to what is going around, you will hear a lot of stories of projects going wrong. Lots of money wasted, lots of good initiatives botched, lots of tasks unfulfilled. And especially true it is about big projects - bigger it is, more often you will hear that company x has cancelled project after millions of euros invested and several calendar years spent. Or government agency awarding too big money to fishy company to deliver something needed in theory, but never finishing, or overspending, or some other company suing said agency and delaying everything by seven years. Or combination of everything mentioned and some other progress thwarting nonsense thrown in. And everything too waterfall to ever reach finishing line, or too agile to ever gasp the whole scope of the project.

So, familiar stuff. What I want to suggest is taking more natural approach. And by natural I mean something that we could probably see in nature, not something that is natural in project management, government contracting and corporate life.

I want to think local and introduce some competition. First draft of my idea applies to local governments - in Europe we have thousands and thousands of local governments. Provinces, cities, suburbs, parishes, counties, townships and even occasional micro duchy. What makes all of those political entities similar is the level of independence they always strive for. Most of European countries have it written in their most sacred laws and most certainly every locally elected person does want to have as much local control as possible. And all that ends in hundreds of thousands of similar contracts awarded to similar IT vendors to build similar software that performs similar functions.

Of course, I bet there have been initiatives by national, federal and higher up government bodies to try and unify various software platforms. And most likely results have been either over budget, over deadline or without all functionality being delivered. And most likely all three factors combined. I might be wrong, but it certainly feels that nothing else can come out of solution that is imposed top-down to lots of slightly different entities.

My suggestion is to do build software locally, but with certain rules. Rules or framework, that is imposed top-down from as top down body as possible. Rules that govern such things as general architecture - modularity, interface standards, security level, source control, needed documentation, stuff like that. All that then is made publicly available for comments, ridicule and revisions. Next step is removing at least half of it - threat such rules like a good novel during editing, not as usually - by adding more and more adendums, extensions and clarifications. Make it a good read instead.

Next, push it down to each smallest municipal entity in a form of law. And force every single IT contract awarded to include this framework. And when software gets built, enforce framework by using spirit of the law,  not the letter. And yes, it is possible - why not to include reference to special arbitration court in case of any disputes. Arbitration court that would consist of wide jury of actual peers of vendor - geeks, scientists, developers and IT contractors of all levels. Once framework gets traction, it anyway will be easier to develop for that, instead of doing some hackish workarounds. And we will have achieved our result. Actually, we will be at the half way.

At this point, if we have for example HR system or payroll system, that is built using the same framework across hundred or two hundred organisations, but the same amount of contractors, we will have one or two hundred systems. Similar, but with different prices, support models, look and feels, functions and general user experience. Very different in many aspects - but, most importantly, comparable in apples-to-apples fashion. So, we let systems work for a year or most likely two - delivery times will differ from one place to another, anyway - and then we compare. And during those couple of years we do not let too much new changes ordered, so there is some backlog and some need for improvement is felt.

Then comes important bit - we do not make country wide beauty pageant to determine who did best, no, because choosing one would bring us back to the bloated mega project we discussed at the beginning. Instead we compare only locally, we compare cities, counties and hamlets that lie next to each other. Geographically local. Why? Because they are most likely culturally similar, they have similar history, similar people, similar politicians and most importantly - similar needs and hence requirements.

We do public comparison of offers from vendors who delivered first batch of systems, we introduce new requirements that were gathered for all systems and include those as well. We choose one vendor and after a year or two, depending on system complexity we have unified system in five to ten neighbouring organisations. Of course, it is not easy task to implement and year may sound a little bit too short to do that - but remember that everyone is working within the same framework, so systems are technically similar - and this newly chosen vendor - second level vendor - must be given very deep and good access to inner workings of all first level systems. And of course - documentation is part of the framework.

After second level is done, wait for a year or two and repeat. Around six to ten years have passed, and we have one good working system for every single local government in a country. And yes, it is time for a first picture of this blag. With colours.

And if you think ten years is a long time, remember that big top down projects can easily take just as long - but in this case, all those years everyone has had a usable, constantly improving system.
And yes, framework should not change more often than couple of times during those ten years. And if it is not too prescriptive, those changes can be avoided. Just threat it as a law - those do not changed too often. (At least, those that forbid something, those tend to hang around for eternity, but that will be theme of next post)

So that was first draft of an idea - next I thought about how to apply that to something less politicly awkward than local governments. And more interested in saving money and raising productivity.

So, what kind of corporation would be in any way similar to local government? It should have lot of branches that are a bit different, yet similar, more than nil of independence and bunch of IT systems. Well, everyone has at least one or two IT systems. So what would this branchful corporation be? Bank? No - there is as little independence as overlords can achieve. Manufacturing? Nope - not that many branches, and not that local.

There might be more, but currently I am thinking about retail chains that are built on franchise basis. Or any chains that are built based on franchise. Retailers would have only 3-5 systems per store, depending on what they are selling, while other franchises might have more.
Hotels come to mind - lot of stuff happens in hotels, reservations, many workers, big inventory, add on functions - restaurants, conference centres. And all that quite similar between partners, yet often with enough local differences. Different countries, different financial, labor laws. Yet similar idea.

Of course, when you build corporation and franchise from scratch - when you actually build those hotels from ground up, then all the systems can be adapted, can be unified from the start. But what when you buy? Merge? Divest? Leave other and join your franchise?

Even better if framework standards would be then set with some sort of industry associations - something that businesses have sat up themselves, and that can decide of such whole sector improving standards. While keeping an eye of all anti-cartel laws, of course.

Whole world is trying to merge, cut costs, improve - and doing it with local evolutionary principles might be a good idea.

p.s. any interesting examples of industries this idea could apply to?

Magical identity

Couple of days ago I was struck with idea about how private secret name versus publicly used nicknames is very similar in fantasy books like Earthsea by Ursula K. Le Guin and in modern Internet world. 

All those privacy concerns regarding exposing your SSN, birth date, full name, personal information. Surely 'identity theft' seems similar to special powers knowing mages name gives in fantasy world. There, with a known name, one can conjure up more powerful spells to destroy the person, while on the internet, with some personal data powered google-fu foe (or prospective employer) can find out things about your past and present, that could pretty much be likened to 3rd level fireball at career potential. Not to mention possibilities of empty bank accounts, destroyed romance-to-be and pity in the eyes of your children. 

Heroes of fantasy worlds (I am sure this idea has been exploited in many novels as well as being essential part of at least three distinct cultures in early dark ages), fought with this dark side of naming, by keeping their identities secret. Only closest relatives were allowed to know their names and for the rest of the world, they went by silly nicknames, that become less and less silly as more power and skills got acquired over the years. 

In late nineties, when Internet was still not in everyones phone, TV and fridge, all the identity that could be lost'n'found was nickname in IRC or mailing list. Since then, possibilities have grown considerably. Gigabytes of social history in Facebook, Twitter and that dating site you vowed to never go back again.  Every web browsing bit remembered by some tasting looking cookies. Global payment history just click away in Paypal, Google checkout and internet version of your bank. Your medical records stored in lowest-bidder built government software. Every torrent you have ever downloaded, stored somewhere, yes, including those very badly named torrents you downloaded from the site you registered account using your teenage nickname. Every stupid comment (non-stupid comments are a rarity, you must admit that if you look at your past commenting, right?) you have posted at any hotly debated political, technological or plain yellow news story in your news portal. 

Heck, do you remember that kinky toy you bought on Ebay to present on your best friends bachelor party? Stored!

So idea is simple - have private name private and have nickname public. Or more than one nickname. Can you imagine the world, where medical records and other such very personal facts are kept under your real name, which only your mom and dad knows, while everything you do on the internet, or in shop, or in class, or work, is done under various public names. 

How cool would be the fact, that you could have kid name from age 1 to 12, then you change schools and start new place with the new name. Or maybe just move to next class with new name - do you even remember names of your classmates in grade six? Their surnames? If they would have different ones in 7th grade, it would take long time to remember anything about first six years of miserable period of life called school. 

And then comes teenage years - have you read soppy letters teenage girls write to teen magazines? In perfect world they would like them erased when they hit eighteen birthday. And that could be possible, if they would change their name to something new when high school is finished or 18th birthday comes, whatever is later.

And then you would start your adult life with no excess baggage to possibly drag you down later. 
Wait. On the other hand, maybe we should introduce another name change, when 25th or 27th birthday is there - early tweens is not the most adult part of many memories. Let that gone-wild identity be past as well. Just carry SSL proven college diploma into adult chapter of your life and that is. 

And worried about separating private and work life even after that? Keep your Linkedin and Facebook names separate! Tweet about being gay, walking eight dogs, having slight hangover on Tuesday and having a crush for your boss without fearing repercussions on next company picnic.

Want to connect to some work-friends socially as well? Share your private life name, no problem. It is not like it is your real name after all. 

Only mom knows that.

Clans and Tribes: Incentive for good

Tribal human

People used to group together into clans and tribes for millennia, mostly for shared resources and protection against dangerous animals, humans and times. Over time such organisations got less and less important in our daily lives, and depending on culture and historical circumstances, has often disappeared all together.

Clans used to be couple of extended families grouped together, each family having several dozen members. Families might have shared ancestry in the past, maybe it was just bigger extended family split into several families. Or maybe some families could have formed a clan by intermarriage.

And tribe used to be several clans sharing same culture, ancestry, religion. After tribe grew too big, more than thousand members, it could also split in several related entities.

Modern nation states, after hundreds of years of feudal oppression and then few more centuries of industrialisation have pretty much destroyed those entities. Now state is protecting us, each of us can make living good enough for food (more often, than not) and there is not much need to bond together to create a hunting party.

So, we are all by ourselves, with nearest family close by and extended family further than 1st cousins stays pretty much unknown.

Not!

During recent times, word "tribalism" has often been heard with negative connotation. Like in Iraq or Afghanistan, some tribes fight against rule of government, or that there are deadly blood feuds between tribes, or that corruption and nepotism is in the record highs due to clans sticking to their own.

Somehow, in Europe, only places where I have heard clans mentioned, are Scotland, with its harmless rituals, and Italian Mafia clans, with their not so harmless line of work. In England, Sweden, Austria or Switzerland there are no such thing, yet "tribalism" is still considered something evil. Why? I am not sure - it might be because of old rivalry between nation state and its interests, and interests of tribes and clans. Regardless, one can hardly imagine such issues in modern Frankfurt or Krakow.

Yet people still like the idea. It provides warm feeling of belonging to the group, being protected, not being alone against the universe. I have always wanted to be part of the group. During teenage years in school, during university, when I set to conquer internet for first time, when I joined club of interests for first time. Lots of love for bonding myself with others. 

Also, I have noticed that when reading Fantasy or Science fiction books, I always like and enjoy a lot that heroes have clans and structures they protect until their last breath, swear allegiance to and act all honourably no matter what happens. 

Something just draws me to that, even if such set-up is impractical,  not easy to set up, and bound to create hard to solve problems.

Idea for modern society

So, lot of reasons why we might love clans and lots of fair reasons of why we do not have any.

Could we use this concept to our advantage, while keeping all the potential issues locked away for good?

Yes - why not. There are lot of times when we could use helping hand and feeling of belonging to a group, without that deteriorating into feuding, bribery and general rot. And sometimes government also could use the fact that there are groups of people who stick together. 

And no, I am not talking about collective punishments there  - that would be very very bad, and such government would not live too long. My idea is exactly opposite, but with the same effects. 

Lets create collective incentives, based on clan. Clan could be 3-4 extended families tied together, either randomly by government, or by their own choice, or by some clever mix of the both, that makes things nice, clean and even. In any way, if we have group of people, not bigger than two hundred, I would say - it has to be comprehensible and has to feel real for average person, then we as a government, can set some quite easily achievable targets for whole group and then reward the clan with some tax break or another. 

For example, it is very important for our collective safety, that everyone has been vaccinated for all the preventable diseases - even small percentage of population who has not, can create huge risk for everyone. So, we can set a target for a clan, that if over 97% of clan members of appropriate age have been vaccinated, then clan receives discount on family doctor fees for next five years. Such a scheme might actually pay for itself, as vaccinated people would have to visit doctor less often anyway. And collective pressure - imagine if 20% of your clan are old ladies for whom such fees are very important - will shoot vaccination levels sky-high with no extra effort from government. All the money booked for 'social advertising' could be spent elsewhere. 

Let me give you several more ideas. For example, education, if at least 90% of clan who are of age from 19 to 65 have finished high school, then everyone trying to enroll into state university, will have slightly better chance of enrolling. Or slightly smaller school fee. Or a bit better deal when getting student loan. 

Or, for example, if everyone of age from 18 to 65, are either in school/university, has a job (including being businessman and paying salary to themselves) or has registered in state unemployment agency and shows up for trainings/job interviews/etc - then all the clan pensioners get 105% pension and all the toddlers have slightly better chance to get into state kindergartens. Imagine peer pressure to pay taxes, seek job and keep thyself in school! 

And of course, if that was hard to achieve in previous days and ages, then now, in 21st century, there can be simple page in internet, connected to your favourite social network, that would show achievable targets and (personalised) benefits that you as a member of a clan would receive, if achieved.  And list of people who has or has not performed/complied with said target.

And of course, if you are loner, like to live in the forest and hate everyone - you can opt out of such schemes. Of course, if there are no taxes incoming from you, then state might get more suspicious of you than others.

Bigbrotheresque issues of course are valid concern. And state should not invent more information to gather from people, and should not increase pressure in any other ways and of course - never should do collective punishment. Government already has tons of targets on what consensus is there - those are then prime candidates for usage within  this paradigm. And yes, state most likely already has all the data mentioned above - it just needs to be put together and used appropriately.

Time limited virtual shares

Pros and cons of profit-sharing

I, like many more people before myself, have often pondered about benefits of profit-sharing schemes within corporation. In theory various option packages could give some more incentive, but given the fact that I work in old and large company, not some startup, there would be limited possibility of those options growing into something huge. And of course, as company has very large amount of employees - my share would be exceptionally small.

Also, as I am just one of thousands of people working for the company, and I am not in very high up position, my influence to general profits and therefore share value, would be very very small. So, I would not feel much correlation between my work and extra benefit of being a shareholder.

If there would be any other profit-sharing scheme, then result would be similar - person working in supporting, IT, Network or Accounting department, would be too detached from actual business decisions to feel that his work is directly influencing the company profit in any meaningful way.

Also, sometimes my feelings as an employee, could completely contradict those that shareholder would feel. For example - if large corporation would decide to cut the workforce of marketing department by half, thus making extra savings and keeping company leaner - then shareholder might get happier and stock value could increase by couple of percent points. On the other hand, for employee of marketing department, it would seem that he has to do extra work (if he is not fired), and as he owns so little amount shares, then any increase in their value would be barely noticeable - thus forcing that person to fight against the change.

Or, for example, if company would decide to move some of its operations overseas, employees would not like it, even if companies profit (including their profit sharing part) would rise. There would be no productivity gain by having profit sharing agreement in those scenarios. In fact, option packages for employees might even become problem in a longer term - as that would mean that people working longer in the company would have more stock than new hires, even if their contribution to bottom line is far lower. That would reward loyalty over merit, and while it could be beneficial for particular employee, for company as a whole it would surely be bad.

Outsourcing as an answer

On the other end of the scale for the company is outsourcing the whole sectors of its work to side companies, while keeping only profit generating departments in-house. In such scenario, profit-sharing schemes might work, as only those people who directly impact the income, would be affected, while all supporting functions are outsourced under contracts with strict SLAs.

Problem with this way of doing business, is that in a longer term, all knowledge of supporting functions stays outside the company, processes are harder to change and multiple vendors become harder and harder to control and there is a premium to be paid for vendor profit margin as well. And of course, people employed by vendor do not feel any connection to client-company profit at all, so all productivity boosting is solely in the hands of vendor management.

Those are two extremes of strategies company could have, with most companies being somewhere in the middle. But 'in the middle' only regarding amount of profit-sharing and outsourcing used, not in the sense of ideas they have employed.

So, how could we put those to extremes together to create some median version to gain productivity and stay competitive; and have all that both short and long term?

Idea

My answer is something you could call "time limited sub-shareholding". Lets take IT department of an medium sized company - it has around 80 people, it has a budget, it has a plan for changes for a year ahead, it has a top manager.

Lets take this department and turn it into virtual company with virtual shares. And virtual profit. All while keeping every single employee/asset/contract as a part of original corporation.

I bet, that many people (Myself included) have often thought about some improvements that could be done to their daily work tasks, environment, assets, software, etc; but could not be bothered, as that would hardly give themselves some direct benefit - more often than not, it would temporarily bring more hassle and more work, to result in long term benefits for the company. Long term benefits for an employee are usually lot less predictable and are along the lines 'will see when we decide yearly salary increase' or 'will take that into account when handing out quarterly bonus'. And often even less.

So, lets take planned yearly budget and give every dollar that is saved directly to employees themselves, at the end of the year. Make figures public and predictable. And keep your promises.

Lets give our example IT department 80 employees, average salary with taxes €70'000, yearly office costs €128'000, software license costs €1'500'000 per year, various vendor support costs  €800'000 per year, amortization and depreciation for hardware and other equipment - €500'000.
It is very simple approximation of our theoretical costs  - but keep in mind, that every organisation does such a budgeting for departments anyway. And hopefully the fore casted budget breaks even.

With this budget of around 7,2 million, it becomes interesting to see what happens if we could cut lets say 20% off of it, each employee could cash in almost €18'000, which is a lot of money for an person who earns €70'000 a year. For a company of course there will be no difference - it will still have to pay 7,2M.

Lets dig in deeper on how to make this work. Obviously if this virtual company with savings shared between employees would last only for one year, then it would be hard to ensure that long term goals are achieved as well. Employees could just decide to do something stupid for a short term gain, without any thought of long term health of say IT system. Other problem would be that changes in staffing would be problematic, if everyone is a stakeholder. Also, new investments for longer term plans would not work well, if not especially catered for.

Answer to first issue would be extension of benefit gained. For example, if, in above example, we see that everyone who has helped to cut 20% of expenses will get 18'000 after year has ended  - we could easily extend this benefit for sub-sequential years as well. If benefits stay as-is and no problems arise because of cuts. Lets say, that people would continue to receive monetary bonus every year for five years, each year twice as small as the year when costs were saved. First year, 18'000 second year 9'000, third year 4,500, fourth year 2250, fifth year 1125, sixth year 562. Good incentive to keep medium term planning good. And if costs start to go up again, benefits are stopped.
Company would start gaining from second year, but it would still be better than no productivity gains at all.

Nice touch would be, that virtual company would exist only in some years, not all the time. So, we have it for one year - everyone involved makes boosts the productivity as much as possible, gets the bonus and start waiting for sub-sequential bonuses. At the same time, virtual company is dissolved, and it becomes department again. Top management then can state, that if department has survived this experiment in a good shape, and for next two years everything works very good, they will repeat the virtualisation. That will give incentive for people who participated in the first round, and also for people who have joined company afterwards and thus do not have previous incentives to look forward to. Of course, planning needs to be clever - so people do not start amassing unnecessary things in their budgets, so they would have something to cut, afterwards.

So, please comment the idea, if you find it interesting. Also, comment if you have constructive criticism.
Btw, if this idea has been described somewhere else already, it would be interesting to read that.