Capitalism Works...If You Let It
Part I of The Root of It: Re-linking Value Creation & Ownership
We are launching a new mini-series – The Root of It – where we delve into understanding problems starting from the foundational first principles. Viewed from this lens, we can observe and fix issues at the 'root' cause – rather than wasting time arguing about symptoms. Additionally, these pieces lay the groundwork for our own manifesto of sorts – putting together the scaffolding that supports our mission and vision.
Our first piece in The Root of It – everyone talking past each other (ETPEO, pronounced like C3PO) edition – is on capitalism. Apt timing given the recent rise in the pro-socialist movement, particularly amongst the youth. Outcomes like this are symptoms of a deeper root problem. Outputs of an out_dated system that needs up_dating.
Everything from extreme wealth inequality to historic stock market concentration stem from the design and incentives of the system itself. And movements like this come in response to these persistent imbalances. People inherently feel that things are not 'fair,' but most cannot put their finger on why…
Enter The Root of It. Rather than guessing or blaming, we're here to help present the facts. And offer solutions.
Our vision: a new system designed with aligned incentives and built utilizing the latest technology.
On to capitalism…
The capitalism debate has everyone talking past each other. One side points to wealth concentration. The other defends free markets. Both miss the fundamental issue: we didn't break capitalism – we broke the connection between value creation (labor) and asset ownership (capital), between those who do the work (labor) and those who reap the benefit (capital).
This link breaking effectively destroys the social contract. And what we're left with today is a system that systematically invests in the old at the expense of the young. Leaving the young with no stake (or even a negative stake) in the system – so is it a surprise that they revolt against it?
True capitalism has one elegant principle: those who create value should own the capital they create and determine how to allocate it. When this link holds, capitalism becomes an engine for human flourishing and value alignment. When ownership concentrates among those who no longer create value – and who use that power to block innovation to retain power – the system degrades into extraction (i.e., rent-seeking). Since ~2000, this is exactly what has happened – at every turn, capital was chosen over labor – and now the pendulums have swung too far.
The Misalignment Problem: Capital Serving Capital
Today's system has inverted the proper relationship between labor and capital. Instead of capital serving as a tool to amplify human productivity and creativity, we've created a structure where human labor is subservient to capital – creating several issues:
Rent-seeking over value creation. The current system rewards those who already own capital far more than those who generate new value. Asset price appreciation consistently outpaces wage growth by design, meaning capital ownership becomes the primary determinant of wealth accumulation rather than productive contribution.
Short-term extraction over long-term building. When capital ownership is concentrated among a small group with no direct stake in value creation, incentives skew toward extracting maximum short-term returns rather than building sustainable, long-term value. This misalignment manifests in everything from quarterly earnings obsession to a focus on financial engineering over operational improvement.
Innovation gets stifled by gatekeepers. With concentrated, centralized control, those in power do not want change – so they actively stifle innovation to retain power. These gatekeepers create artificial barriers to entry, often via lobbying and resultant regulatory capture, to maintain monopoly-like status.
Ultimately, when ownership concentrates in a few hands, incentives bend toward rent-seeking, time horizons collapse, and progress stops. Today, the system has reached a period of stasis – one that siphons wealth to a handful of entrenched individuals while stifling the very innovation that should drive collective prosperity.
This isn't capitalism failing; it's capitalism being prevented from working as intended. With modern technology, it's not difficult to attribute value creation, it's just that existing power systems have no incentive to actually implement that attribution. Rather than focusing on solving the underlying root problem, those in power continue to apply temporary fixes to mask symptoms and preserve the current system — while the true foundational issues to continue to metastasize.
The Imbalanced Output: Feudalism Dressed in Capitalist Clothes
The output today is a system that looks more like feudalism than capitalism. A small class extracts value from those who actually create it. The top 1% owns over 30% of all wealth while the bottom 50% owns just 2%. While concentration begetting concentration is an output, a deeper issue is that capital allocation decisions are completely disconnected from value creation.
This combination creates perverse incentives everywhere. Executives optimize quarterly earnings over long-term value. Investment flows to financial engineering instead of innovation. Workers – the primary value creators – put little thought into deploying the capital they help create. The system as its structured systematically protects capital and subverts labor – leaving the labor vs. capital power divide wildly imbalanced. Left unaddressed, the chasm would continue to widen given the current vicious cycle feedback loop.
The redistribution (socialism) response – taxation and regulation – addresses symptoms, not root causes. There are plenty of historical examples of how socialism does not work because no one is incentivized to work. Band-aids to address symptoms and win short-term votes is a waste of energy.
The fix is not redistribution. It's restoration. We need to re-incentivize long-term collective thinking, over short-term selfish extraction. We need to rebuild the value-to-ownership connection. Just think about how you treat a car you rent versus one you own. A system with true value attribution designed with properly aligned incentives is simply better — and building it has never been easier.
Blockchain: Infrastructure for True Attribution
Blockchain is the infrastructure layer for accurate value attribution. Its core innovation isn't cryptocurrency – it's the ability to create transparent, immutable records of who contributed what, when, and how much. Blockchain is not a panacea, it is simply a technology that helps streamline value attribution — you can absolutely do this without it, and plenty are. Blockchain just makes it easier.
Consider the current challenge: how do you fairly attribute value in complex, collaborative work? Traditional systems use crude proxies – hours worked, hierarchical position, legacy ownership structures. These systems are opaque, manipulable, and disconnected from actual value creation.
Blockchain enables programmable value attribution. Every contribution gets recorded transparently and immutably. Smart contracts automatically calculate ownership stakes based on measurable value creation rather than historical accident or office politics.
This isn't theoretical – it's happening. Projects like CrowdCent envision tying prediction accuracy directly to rewards and influence in investment decisions. When researchers improve models, developers optimize code, or analysts provide better insights, their contributions are recorded and rewarded proportionally. The system creates positive-sum dynamics where everyone benefits from making it better.
And it spans all industries. Imagine a world where a nurse who develops a better patient care protocol owns meaningful equity in the health improvements that protocol generates. Where engineers who design more efficient systems share in productivity gains. Where researchers own their discoveries and benefit from their widespread application. Where artists own the cultural value they create.
This isn't about cryptocurrency or financial engineering. It's about building economic infrastructure that recognizes and rewards actual value creation at every level of society. Incentives drive outcomes. And we must re-link the end-to-end value chain. It's simply human nature to care more about things that you own than things you don't.
Flipping the Incentives: From Rent-Seeking to Value Creation
Current capitalism rewards rent-seeking over value creation. Patent trolls extract value without innovation. Financial intermediaries capture spreads without adding efficiency. Established players use regulatory capture to prevent disruption. These behaviors are rational within the current system but destructive to prosperity.
The new model flips these incentives. When ownership ties to ongoing value creation rather than historical position, everyone has skin in long-term success. Short-term extraction becomes self-defeating because it reduces the value base that determines ownership stakes.
This is not complicated – it's practical system design that embodies the essence of capitalism. Organizations structured around ongoing value creation (think Amazon, Costco) consistently outperform those organized around legacy ownership and extraction (think PE-owned retailers). The blockchain layer makes this scalable by automating attribution and governance mechanisms that previously required intensive human oversight.
Moving from Centralization to Decentralization
The attribution layer is a part of the solution. Reform at centralized institutions – notably the Federal Reserve – are required in tandem. The current policy to actively suppress wage growth (labor) while propping up asset prices (capital) is not sustainable. We need decentralized pricing and control of capital determined by market forces.
This is all possible and happening, today. We see it on-chain via active, liquid decentralized exchanges. The technological feasibility and scalability exists – we simply need to unleash it (we'll talk more about this more in another piece).
Implementation Through Value Flows, Not Force
The transition doesn't require revolution – it requires better infrastructure and voluntary adoption. Organizations implementing fair value attribution systems will attract superior talent and capital because they align incentives properly.
We're already seeing it. Open-source projects reward contributors with tokens representing ownership and governance rights. Investment platforms like CrowdCent plan to tie rewards directly to prediction accuracy and community contribution. Decentralized autonomous organizations experiment with governance where influence follows contribution rather than just initial capital.
The key: this transition happens through value flows rather than forced redistribution. Better-aligned entities outcompete extractive ones. Talent flows to organizations that reward value creation fairly. Capital follows because better-aligned organizations generate superior returns.
This creates a positive feedback loop: organizations adopting fair attribution systems perform better, attracting more talent and capital, proving the model and encouraging broader adoption. Once the underlying system infrastructure and incentives are fixed, no central authority needs to mandate change – it emerges from the competitive advantage of better alignment.
The Network Effect of Aligned Ownership
As more organizations adopt blockchain-enabled value attribution, network effects compound. Talent develops portable reputation systems. Capital flows more efficiently to the highest-value opportunities. Innovation accelerates because creators capture more of the value they generate.
This creates a new form of capitalism that actually lives up to the name – one where those who create value own the capital they create. It's not anti-capitalist; it's pro-capitalist in the truest sense. It restores the fundamental contract: energy and innovation are rewarded with ownership and influence.
The output of the non-zero-sum mindset is abundance. Better alignment between value creation and reward means greater human motivation and engagement. More value creation means more prosperity to distribute. Widespread ownership means broader stakeholder investment in long-term success. Societies with skin in the game build for permanence, not extraction. This practical alignment shift naturally encourages a mindset shift from scarcity to growth.
The old guard will resist because they benefit from the current misalignment. But resistance doesn't matter when better systems provide durable advantages. Organizations that don't align incentives properly will lose to those that do. The current vicious flywheel turns into a virtuous one.
The Capitalism Renaissance
We stand at an inflection point where technology finally enables us to build economic systems that live up to capitalism's original promise. The tools exist to create transparent value attribution, dynamic ownership structures, and collective intelligence systems that reward value creation rather than value extraction.
Plenty of people point to problems. Few offer real solutions. We must stop blaming and start building.
The recent pro-socialism rise is a response to persistent and worsening system imbalance. We must correct our perceptions and understanding of the system itself to ultimately build back better. The pendulums have swung too far to cover up the symptoms anymore, we must fix the root of it.
We must rebuild from the foundation and embrace this transformation — to create a system that actually enables collective human flourishing rather than preserving the wealth of a small group of gatekeepers.
The future is a system where value creators own the capital, where collective intelligence trumps centralized authority, and where long-term value creation becomes the dominant strategy. This is the natural evolution of capitalism.
True capitalism is about to make a comeback, and it will be more powerful than ever because it will finally work the way it was always supposed to: with those who create the value owning meaningful stakes in what they build.
The future is here. Let's build.
Want to be part of building the next generation of capitalism? Join the CrowdCent Community and the CrowdCent Challenge to help create investment systems where merit determines rewards, not legacy position.