Transforming ownership to create a better economy | Armin Steuernagel | TEDxZurich

Private ownership of companies drives our economic system but it has also created corporations that put profit above everything else, a divided society and a planet on the brink of destruction. Armin Steuernagel proposes a new way to think about ownership: steward ownership. It replaces executives with leaders who are truly responsible and accountable. It creates an economy where companies are owned by the most able, not by the highest bidder, and where a purpose is at the heart of every company’s DNA.

A serial entrepreneur and author, Armin founded his first business at the age of 16. He is co-founder and managing partner of Purpose Foundation and Purpose Capital. He works to help companies stay mission-driven by transforming the ownership structure: they become steward-owned companies. Armin is member of the Club of Rome, TT30, co-founder of the international NGO Democracy International and co-founder of the Think Tank Neopolis Network.

This talk was given at a TEDx event using the TED conference format but independently organized by a local community. Learn more at https://www.ted.com/tedx

I own a company, and I have a problem.

To be honest, I think
we all have a problem.

Because we all stopped discussing
one of the most important questions.

A question that affects all of us.

A question people died for
100 years ago in revolutions.

Private ownership or state ownership?

Capitalism or communism?

Who should control the institution
that all of us spend most of our time in?

Who should control our companies?

Greedy capitalists
or mindless bureaucrats?

Or maybe, but just maybe, none of them?

Many people say, "Fuck capitalism!"

But, you know,
should we "fuck capitalism"?

(Laughter)

And if so, how?

(Laughter)

At this point, I have
to make a confession.

I am a capitalist.

I founded my first successful
business when I was 16,

and while my friends had girlfriends,
I fell in love with my company.

I love private ownership.

You know, it gives you the power
to shape the environment you live in.

You have an idea at night,
you can realize it the next day.

You identify 100% with what you own.

It's like having a child.

You feel responsible
for the company like a parent

If the company is struggling or ill,
you have to be there.

You can't hide, you can't make excuses,
and that is what's so great.

(Laughter)

That is what's so great
about private ownership.

It clearly defines
who is responsible and accountable.

Not nobody, not everybody,
you as the owner.

You are responsible
and accountable for it.

That is the big promise of ownership.

But, I'm here today to tell you,
this great idea of private ownership,

it needs us.

It is ill.

This fascinating innovation,
this history-changing idea

that we, as humanity,
had more than 2,000 years ago,

it is in deep, deep trouble.

It is misused against us,
against us all, against humanity.

And if we don't reclaim it,
if we don't reconquer it,

it will destroy our economy, our society,
and maybe even our planet.

So, please join me
to understand the illness

and find a cure to heal private ownership.

Our first stop on this journey
will be a hospital in eastern Germany.

When I was young, I visited it a lot.

My father was the director there.

It used to be a great hospital.

They had a wonderful warm
atmosphere, happy employees,

well-taken-care-of
patients, organic food.

And they made healthy profits.

So, nothing that required a change.

But in recent years,
the ownership of the hospital was sold.

Once, twice, three times,
eventually four times

to a public stock market company.

And each investor paid a higher price
to buy the hospital,

and so each investor
had to put more pressure on the hospital

to increase profits,
to earn back the high price they paid.

They forced my father to outsource
the kitchen to a low quality provider.

They forced him
to fire half of the doctors

and cut the time they're allowed
to spend per patient.

Today, the place is filled with
unhappy employees and frustrated patients.

They're now part of a large corporation
that manages 70,000 hospital beds,

and they receive orders
and directions from Paris,

2,000 kilometers away
from the headquarters.

So decisions are made by people

who have literally
never been to that hospital.

They have no understanding
of what is needed there.

They don't know what it means

when they order doctors to spend
no more than five minutes

for a first conversation with patients.

These guys in Paris just know one thing.

They have to produce better numbers.

Otherwise, they get fired.

And what really drives me crazy,
we cannot blame them!

They're not bad people!

They eat organic food, etc.

You know, these people
are pressured by others,

by stock markets,
by anonymous shareholders,

and to be more precise,

by supercomputers and algorithms that do
99% of the trading on stock markets today,

and sell, and buy ownership
in nanoseconds.

These people cannot behave
like responsible owners.

They're not allowed
to identify with what they own.

They control the business,
but they're not connected to it.

And the hospital of my father
is just one example.

It happens all over.

Every day, hundreds
of mission-driven companies

get bought by large
profit-driven corporations.

And they all lose their caring stewards.

They lose their parents.

And they end up with ... with what?

With absentee owners,
with speculation owners.

And this eating up of small companies
by large corporations

doesn't only create companies
without parents.

It also creates a centralized economy
with fewer and fewer corporations.

The US has lost, in this way,
over the last 20 years,

half of its corporations.

So absentee ownership,
it's not only poisoning our companies,

it is the enemy of
our decentralized market society.

Now ladies and gentlemen,
who are these absentee owners?

Are these the rich?

Are these the super rich?

Are these large corporations?

All wrong.

Look at that.

That is where investment capital
on the stock markets comes from.

87% from insurances and pension funds.

From you all and me.

It's our money, that is the scandal.

Just imagine that,

we, western half-riches,
we have created a system,

a vicious circle that takes our money
and uses it against us.

You know, when I understood this,
the scales fell from my eyes.

You know, how is that possible?

Private ownership, this great idea,

has a double face.

It can create responsibility,
that's for sure.

But at the same time, private ownership,
as absentee ownership,

can destroy responsibility.

It can create an emptiness, a vacuum,

a situation in which
nobody feels responsible.

That was a first tough stop
on our journey.

Let's move on.

We've understood the illness, I would say.

Let's look for the cure.

What would a company look like
that had true parents?

A company we could really trust.

And this guy, Ernst Abbe,
the co-owner of Zeiss,

found a way to do this
for his company 130 years ago.

Zeiss is a typical German hidden champion.

A world market leader for microscopes,
optics, with 70,000 employees.

And none of our smartphones or laptops
could be produced without Zeiss.

So it's an important company.

Ernst Abbe thought a lot about ownership
when his co-owner passed away.

He asked himself,
"Have I created all this wealth?

Is this all my work?

I have not.

My employees have done most of it.

Even my invention of the microscope,

was only possible due to many generations
of scientists and researchers."

So he wrote, and I quote now,

"The law gives me the absolute right
over this company.

The law gives me the right
to take everything.

But I feel that is not right.

It doesn't all belong to me.

It also belongs
to employees and society."

So what did this man do?

He realized there were no good
legal forms of ownership

that would reflect this thinking.

He was an inventor,
so he invented something.

He used the legal form
of a non-profit foundation,

and then he donated the entire company
to that foundation.

So it's the first foundational
company in the world.

From that moment onwards,
Zeiss has belonged to itself.

No absentee owners can steer Zeiss
from far away and push them to harm us.

No hedge fund can come along and buy it,

because it's not
a tradable commodity anymore.

Instead, there are skilled people
who are steward owners for a certain time,

you know, without a right to sell
or inherit the company.

And profits are
either reinvested or donated.

Their donations have financed
several universities,

and the entire city of Jena in Germany
was basically upgraded by them.

So this company exists now
for more than 130 years,

it has survived several political systems,

and it is still highly successful.

I recently visited it
and employees told me

"the company belongs to us."

And the interesting thing is,
they are intrinsically motivated,

because they know they're not working
for somebody else's private pocket,

they are working for a purpose.

So Ernst Abbe has found a cure
to heal private ownership,

and by this,

he has redefined, he has revolutionized
the way we understand company ownership.

And the good news is, he's not alone.

Many other companies
have found the cure as well.

The famous company Bosch, for example,
is only owned by stewards.

John Lewis Partnership made
70,000 employees steward owners.

Rolex in Switzerland, Playmobil
and Dr. Hauschka in Germany,

and many, many others.

I studied many of them.

I visited them, conducted interviews,

and what I found,

they all follow two simple rules,
the two rules of steward ownership.

Or you could also say the two rules
of decommodification of the company.

So what are these two rules?

The first rule is
the rule of self-determination.

The rule of self-determination says,
make sure the company,

or the control right of the company,
is not a tradable commodity.

I say it again because it's so important.

Make sure the control over the company,
or the company itself,

is not a tradable commodity.

That means, the company is not a thing.

It's not a shoe that you can sell and buy.

It's not a puppet
of anonymous stock markets.

But it is a being.

It is a being that has stewards
who are only stewards

as long as they are connected
to the mission to the company.

They can't sell, they can't
just pass it on to their children.

So that's the first rule.

The second rule is the rule of purpose.

And the rule of purpose says,
make sure profits are seen as a means.

They're important, but they're a means
to an end, not an end in itself.

I'll repeat it, because
that's an important rule.

Profits are seen as a means to an end,
and not an end in itself.

That means, profits are mainly
reinvested or donated.

And this means these companies exist
to create value for us,

to solve problems in the world,
not to make money.

They exist for us.

Now, these two rules are very simple.

That's all, basically,
what I have to give to you today.

But they're super revolutionary
at the same time.

They are actually family business 2.0.

Instead of giving your company
to your blood relatives -

you know, the lottery of sperm, etc. -

instead of giving it
to your blood relatives,

you give the ownership of the company
to value and ability relatives.

You know, that means you make sure
the company has parents

and not speculation owners.

So our journey has led us now
to the solution.

It is neither state ownership
nor private ownership.

But it is something new,
or you could also say,

it's something revolutionary,
but quite old at the same time.

It is just true private
ownership, nothing more.

Or to say it differently,
it is steward ownership.

A steward of a company
is like a parent for a child.

Now, let's not stop the journey here yet.

Le's go on and understand
how exactly can we realize this today.

And of course, the state doesn't offer
steward ownership as a legal form.

Not yet.

And so you have to find ownership hacks,
you have to hack around it.

That's what I did with my company.

I put the two rules of steward ownership -
I put them up again -

I put them into
the articles of association,

into the constitution of my company.

When a hedge fund comes along, they can
obviously just give a lot of money,

and you could change the rule.

So to prevent this,
we founded a foundation

that holds a veto right,
a golden share,

and prevents changes to those rules.

Now, when I made this public,
you cannot believe how many employees

and how many customers
wrote me and told me

it changes their relationship
to our company completely.

They're no longer instruments
to make me rich.

The company is truly there for them.

When I talk about this
with mainstream economists

or mainstream lawyers,
they often say, "Armin, come on,

you are naive; this cannot work.

You're turning off
the engine of capitalism itself."

And I am, yes. But, the good thing is ...

(Laughter)

the good thing is,

many studies of hundreds
of steward-owned companies

prove these mainstream economists wrong.

Studies show these steward-owned companies

have a six times higher survival
probability after 40 years.

They live longer.

And they're more profitable
in the medium term and in the long term.

Data shows customers trust them more,
employees earn more, stay longer,

and are more motivated.

So steward ownership's actually
better for our companies,

and better for us all.

It is the right cure to this poison
of absentee ownership.

And that's the reason why I got together
with several other entrepreneurs

to found the Purpose Foundation
that helps other entrepreneurs

to start and transform companies
based on steward ownership.

We also founded Ownership
Transformation Investment Fund

that helps steward-owned companies,
and can buy companies off the market

and make sure they never have
absentee owners again, but only stewards.

So let me conclude.

We can obviously not just say,
"fuck capitalism,"

but we can stop being puppets
of absentee owners,

of anonymous stock markets.

We all know this feeling

of powerlessness in face
of a gigantic anonymous system,

a wild animal that we call economy today.

But, ladies and gentlemen,

how can this wild animal
have so many arms to harm us

if we don't lend our arms to it?

How can it have so many feet to trample
on our economies and our environment

if these were not our feet?

How can it have any power over us
if not through us?

We can tame that animal.

We can stop being puppets.

We can, if we are unhappy
in our workplaces,

if you're a frustrated entrepreneur
or a frustrated employee,

we can get together with our colleagues,

and you can make your absentee owner
an offer to buy them out

and reclaim your company.

Let's not leave our companies
and our economy to these wild animals,

neither to greedy capitalists
nor mindless bureaucrats.

Let's reclaim it.

Let's reconquer it.

Let's become true stewards of our economy.

Not for profit, but for purpose.

Thank you.

(Applause) (Cheers)