Power Futarchy

A simple way to apply futarchy to for-profit firms is profit-futarchy: make markets that estimate total firm market value given key firm choices, like who is CEO, what are key acquisitions, or what are key firm policies. Then do what such markets advise. But a big problem with this approach is that top people, like the CEO, often do not see their personal success as maxed by firm success. For example, they tend to be wary of losing control over key firm choices, even if that would make such choices more profitable.

So CEOs block the application of futarchy to firms. You might think that investors could just force CEOs to use futarchy, if that would max investor gains. But investors also can’t seem to prevent the adoption of poison pills, which also cut investor gains. It seems we must accept that top managers have power sufficient to induce firm outcomes that don’t max profits. Investors do not in fact fully control firms.

Okay, then what if we flip this script, and set decision markets to the task of directly achieving the selfish managerial ends that likely drive managerial power politics? Create a metric of the total success of an individual manager over their future career, and then make advisory power-futarchy markets that estimate this personal success given key choices under that manager’s power. And to discourage sabotage, give everyone who that might be able to act to greatly hurt this success a positive stake in that success, a stake they aren’t allowed to trade to below zero.

Would this supercharge power politics, via better informing political strategies? Plausibly this would improve both offensive and defense political choices, and also make political info more symmetric. Managers could less often win via strategies that rely on rivals not noticing their plans until too late. So might power-futarchy actually cut harms from firm politics? Maybe, relative to the alternative of no markets at all, helping managers have successful careers also on average helps firms to max profits.

Of course such markets may advise top managers to not create power-futarchy markets to aid their subordinates several levels below them. Such markets might even say to instead give such subordinates futarchy markets tied to key firm or division outcomes. If so, that might usefully limit the scope of power-futarchy. Yes, this might over time undermine support for power-futarchy, but maybe not before current managers achieved great success from it.

Some kinds of power politics strategies may be hindered by open markets estimating their power effectiveness. But we needn’t have such markets regarding all possible managerial choices. Though, yes, the choice to not create such a market on some key choice might be taken as a bad sign about the politics behind that choice. No doubt there would be many new tricks to be found when playing power-futarchy.