Chapter 6
Why the Forward Business Model Will Win

​​​Who will prevail in open competition over time? 

Observe that the Forward Business can:​

 

1. Pay its workers up to 50 percent more [see FN1].

2. Significantly increase its investment in R & D and marketing.

3. Leverage its ethical model to strengthen customer and supplier loyalty.

4. Do all this without raising prices.

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In most cases, it shouldn’t even be close.

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Over multi-year or multi-decade horizons, these advantages compound. The forward model won't win every quarter or matchup—markets remain brutal, execution always matters, and backward competitors can often appear more 'efficient' by distributing cash quickly to please the interests of short-term investors. But structurally, the math favors the forward model in most sustained head-to-head scenarios.[1]​

 

The Achilles’ Heel of the Modern Capitalism

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The forward model exploits what is essentially the Achilles’ Heel in today’s dominant form of capitalism:  the shareholder.  Consider, for example, what happens after the seed capital has done its job. In today’s backward model, investors become a permanent siphon—extracting wealth long after their risk has been repaid. Each dollar pulled out is a dollar no longer strengthening the enterprise that created it. In effect, the shareholder becomes both benefactor and ball and chain: necessary for birth, parasitic in maturity.

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This is not a moral observation, but a structural one. Dividends and buybacks under the backward model transfer resources from the company’s future productive capacity to present owners. The firm appears more profitable today, but it does so by reducing the resources available to the enterprise for innovation, training, resilience, and future growth.

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A Forward Business severs that tether. It uses the same seed capital but locks the flow of profits into perpetual motion and reinvestment—fueling new growth, new jobs, and new innovation instead of bleeding them away. This means it’s inherently more powerful and competitive, preserving all the core strengths of free enterprise—freedom, competition, and innovation—while discarding the self-limiting flaw of extraction from the investor.

 

The Evidence Is Plain to See

 

The competitive advantages of the forward model are not theoretical — they show up in customer loyalty, worker performance, innovation output, and survival rates through downturns. Decades of research on shared-capitalism firms across more than 15 nations confirm it: companies that share profits with workers are more profitable, more resilient, and grow faster than those that don't.

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This doesn’t guarantee the success of every single firm — but like the House in Las Vegas, which wins on only a small probability edge, the outcome over a longer period of time becomes increasingly predictable.

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Forward Businesses, if granted a sufficiently long runway to perform, will win — not by decree, but by math.

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Which raises an obvious question: if all of these advantages are real, why hasn't the forward economy happened already?

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What Could Go Wrong?  (And Why it Still Wins)

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The honest answer to why the forward model hasn't emerged within the economy yet is this: financial markets too often reward speed of return, not durability of return. And for stretches — sometimes long ones — a backward firm distributing profits to shareholders can look more efficient than a forward firm reinvesting them.

 

That illusion attracts capital. It can win quarters. It can even win decades. 

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This tendency to focus on shorter-term gains is not a character flaw — it stems from evolution. For most of human history, survival meant responding to immediate threats and immediate rewards, not slow compounding changes over decades. This makes us easily duped into mistaking a firm that is quietly consuming itself for one that is growing and strong — until it's too late.

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General Electric is the classic cautionary tale here. At its peak in the late 1990s, GE was the most valuable company in the world — a genuine industrial giant with world-leading divisions in aviation, power generation, medical imaging equipment, appliances, and applied research. It was a company woven into the fabric of modern life with deep engineering roots and more than a century of hard-won industrial achievement behind it. And then, quietly, it was gutted — by short-term earnings management, financial engineering, and the relentless pressure of quarterly expectations.[2]

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Too often in today’s economy, executive compensation is tied directly to share price.  Executives are handed a powerful personal incentive to do whatever raises the stock today — even at the cost of the enterprise tomorrow. Buybacks inflate the share price by reducing the number of shares outstanding. Long-term investments in R&D, workforce development, and infrastructure get deferred or cut entirely, because their payoff arrives in years that fall outside the CEO’s compensation horizon. These incentives ultimately produce the wrong outcome.  It’s a primary reason why American ingenuity and strength are losing ground to other nations that invest. 

 

Competitors in China, Germany, Japan, and South Korea, and others are planning for the next decade, building factories, training workers, funding research, and playing a longer game — not because their people are more virtuous, but because their rules foster building for a different time horizon.

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The forward model corrects this defect. Through careful design and a focus on governance structure — explored in full in Chapter 17 — the architecture prioritizes long-term deferred compensation, an independent board, patient capital, and broad profit-sharing.  The result is the model has enough runway to outlast the inevitable setbacks.

 

It is built on the evidence that long-horizon enterprises — Berkshire Hathaway being perhaps the most celebrated example — can survive and ultimately outcompete their more extractive, short-term rivals. The catalog of successful companies pursuing this strategy goes far beyond Berkshire, however, and is provided in Appendix A.

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Durability, in other words, is not a side benefit of the forward model. It is its competitive edge. And as the next section shows, its advantages don’t stop at company walls.

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When Prosperity Compounds

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The real test of any economic model isn't how it performs in a single firm over a single year. It's what happens when enough firms run on the same rules long enough for the results to accumulate.

 

Consider what a forward economy looks like not at the company level, but at the level of a city, a region, a nation. Workers earning profit-sharing bonuses spend that money locally — at restaurants, on home repairs, on their children's education. That spending becomes revenue for other businesses, which hire more workers, who share in more profits. Forward funds, reinvesting continuously by charter, seed new enterprises that create new jobs. Noble-cause allocations flow into communities, reducing the burden on government and strengthening the civic infrastructure that makes productive economies possible in the first place.

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This virtuous, regenerative loop requires no central planner or government mandate. It is the market doing what markets do best — allocating resources toward what works — except under an elevated set of rules. Resources now flow purposefully toward the long-term health of workers, communities, and the enterprises themselves, instead of hoping that shareholders will make these contributions on their own. 

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This is strategic compounding in its fullest sense. Not just financial returns inside a single balance sheet, but prosperity regenerating itself across an entire economy — each forward business strengthening the conditions that allow the next one to take root and the people inside it to thrive.

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The first and most direct beneficiary of that compounding is the American worker. What it actually means, in dollars, for the people doing the real work day by day — that is the subject of the next chapter.

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Notes:

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[1] The S&P 500 represents only 18 percent of the nation’s workforce — meaning the precise uplift will vary in other sectors of the economy.  It remains, however, the clearest window into how our current economic rules tend to distribute value due the availability of public data, and therefore the best place to illustrate how changing those rules can change outcomes.  Some observers have noted that outcomes in smaller firms will vary from the S&P result. While true, the directional logic holds across the economy. If anything, profit extraction may be more concentrated in smaller, privately held firms where there is even less accountability to workers or communities than in the S&P 500. The forward model's advantages (relative to the S&P 500) do not necessarily diminish as one moves down a given company’s size ladder. In some cases, it may even grow.

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[2] At its peak in 1999, General Electric's market capitalization exceeded $450 billion — nearly a trillion dollars in today's money — making it the most valuable company in the world. Under CEO Jack Welch, named Fortune's "Manager of the Century" that same year, GE had become the ultimate Wall Street darling, posting consistent earnings growth quarter after quarter for nearly two decades. What few understood was how that consistency was being achieved: not through superior industrial performance, but through financial engineering and a practice he called "differentiation" — mandating that the bottom ten percent of employees be fired every single year, regardless of whether the business needed the cuts. Thousands of workers were laid off on schedule — not because the enterprise was struggling, but because the compensation structure rewarded the share-price boost that layoffs reliably produced. His successor, Jeff Immelt, inherited what looked like a great industrial company but was in significant part a highly leveraged financial firm dressed in industrial clothing. When the 2008 financial crisis hit, the subsidiary GE Capital nearly brought the entire enterprise down. Over the following decade, GE shed businesses, cut its dividend, and watched its stock lose more than 75 percent of its value. In 2018, it was removed from the Dow Jones Industrial Average — an index it had been part of since 1907.

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