Steward Ownership is a potential economic reward model for regenerative capitalism because it gives organisations the economic freedom to be socially responsible & integrate their externalities without lowering investor returns, while at the same time rewarding investors with fair and rich returns. This works because Steward Owned company or asset can't be sold, so it can not develop a speculative value and it uses a capped profit share to reward investors. It essentially removes the ability to optimise for profit at all costs, and enables organisations to spend money on social responsibility without lowering investors returns.

• Example Scenario

However, Steward Ownership has a major weakness in its current design, preventing it from scaling to the needed multi-deca-trillion dollar market cap it needs in order to make a lasting change to the way capitalism currently works.

The crux is that because you can't trade assets, SO misses out on 2 important functions that Capitalism currently provides:

• Price Discovery: We as a society need to be able to find out where our resources are most efficiently allocated. Trading assets allows for the necessary decentralised bartering to discover this.
• Gambling: People who buy and sell stocks/equity like to gamble, they like to win, they like to be better than others, they like to have luck. We need to be realistic that this is a current incentive structure that any new model needs to provide, otherwise the chances are low it can scale up. It's not the goal to nurture this kind of motivation in the long run but for any next step it is important to factor this in.

What is needed is a way for enabling a level of trade and speculation on assets of the company that also limits the maximum returns investors can extract out of a company.

We think Tokenizing Steward Ownership offers a way forward.

Steward Ownership investments are practically loans with very high interest rate (300-1000%) that are paid back with a % of the profits a company makes.

To enable a level of tradeabilty while incorporating capped returns for investors, it may be possible to tokenize those debt agreements that could then be traded on the open market to enable price discovery and speculation up until the return value of the loans they encode.

It could work the following way:

1. Alice runs a company "Wonderland" and raises 100.000€ from Bob.
2. Bob gets 500.000€ worth of tokens from Wonderland, representing a 500% return for Bob.
3. Wonderland makes an annual profit of 1m€ profit and agreed to puts 20% (so 200k) of those profits into a liquidity pool tied to a Smart Contract that has the single purpose of automatically buying back Bobs tokens AND BURN them.
4. Bob has 300k€ of Wonderland's tokens left but wants to cash out earlier so he can buy a new car. Chris offers Bob 200k€ for those 300k€ tokens.
   • Very unlikely Chris would offer Bob more than 300k because this means he would make a loss as soon as his tokens are automatically bought back and burned by the Smart Contract. This circumstance is what effectively caps the amount people will speculate on.
5. Bob argues that the company is going really well, so the risk is low and makes a counter offer of 250k. Ultimately they agree on 225k (=Price Discovery and signalling to the market)
6. Chris is now the recipient of the 20% share of Wonderland's profits and will make 75k€ profit once all of his remaining tokens are bought back by Wonderland's Smart Contract.

With this model we could keep the cap on investor returns intact and at the same time enabling a level of speculation that provides the utility of price discovery & gambling.

A roadmap of implementation

Tokenizing Steward Ownership (TSO) has a few legal hurdles that need to be overcome, mainly around the need to provide KYC (Know your customer) in case a company uses this model to fundraise to a large base of potentially unknown customers.