Bitcoin is a revolution in money, but better money alone does not guarantee better businesses. To truly align our companies with the future that Bitcoin makes possible, we need a system for decision making and value creation that reflects the same economic, philosophical, and moral principles that drew many of us to Bitcoin in the first place.
That system already exists. It is called Principle Based Management, or PBM. PBM is the distilled operating model developed and refined over decades by Koch Industries, one of the most successful private companies in history. Grounded in Austrian economics, classical liberalism, and scientific theory, PBM offers Bitcoin entrepreneurs a powerful way to build resilient companies that reflect the values of decentralization, integrity, and individual freedom.
At its core, PBM is about sound economic reasoning. It sees every individual employee as a unique source of knowledge and value creation for a company and challenges everyone to apply critical economic thinking when making every-day decisions.
That mindset is already deeply familiar to Bitcoiners. We understand what happens when incentives are distorted and information is manipulated. Bitcoin fixes this at the level of money. PBM fixes it inside the company. By applying economic reasoning at every level of the business, PBM encourages us to ask the right questions. What value is being created? Who is it for? What are alternatives? And how can we ensure that incentives, decision rights, and information flows are aligned to support long-term success?
The Five Dimensions That Power PBM
PBM is built on five practical and mutually reinforcing dimensions.
1. The first dimension is Vision. Every company needs a clearly defined purpose and long-term goal. This framework ensures that employees understand what the company does for its customers and empowers those same employees to make more effective decisions that drive results. Koch writes in Good Profit, “Every company, no matter what size or type, should strive to develop and clearly communicate a unique vision of its own.”[1]
2. The second dimension is Virtue and Talents. PBM emphasizes the importance of both character and competence in building a principled culture of success. We’re better when we hire people for skills and values as opposed to just skills. The right person is someone who shares the mission and can be trusted to act with integrity over the long term. This means sometimes trading off against skills to hire someone who is the right values-fit for the role. Koch explains: “Our experience confirms that when a person has the appropriate values, beliefs, and intelligence, the needed skills and knowledge can usually be developed.”[2] Bitcoin businesses require people who can think clearly, act independently, and resist the short-term temptations of the fiat mindset.
3. The third dimension is Knowledge Processes. PBM promotes local knowledge as a better way to solve problems over top-down regulation from a central command. It focuses on creating systems where knowledge flows from the bottom up to help create effective measures and benchmarks. People closest to action should have the freedom to experiment, the responsibility to learn, and the tools to share what they discover.
4. The fourth dimension is Comparative Advantage. PBM helps organizations and teams “[foster] superior application of individual abilities, cooperation and teamwork” [3] through the comparative advantage dimension. It stands in sharp contrast to traditional corporate bureaucracy, where decisions can be made by those not close to the problem. Again, this mirrors Bitcoin. There is no central authority in Bitcoin, only a distributed system where consensus emerges through clear rules and aligned incentives. PBM adopts the same philosophy inside the business.
5. The final dimension is Motivation. This is the one Bitcoiners may appreciate most. In a fiat economy, incentives are often distorted, encouraging short term behavior. PBM is different. It insists that people should be rewarded for their contributions to creating long term value, not simply meeting short term targets or based on years of experience. By aligning incentives with genuine contribution and customer value, PBM builds a culture of ownership, trust, and sustained performance.
Why PBM Fits the Bitcoin Ethos
These five dimensions provide a powerful framework for solving problems in an organization. They give us five different perspectives by which to assess an organization’s performance, helping us better diagnose problems, build high-performing and trusting teams, and focus our efforts on the long-term vision for the company.
As a reminder, PBM also reflects the same principles that support free and open societies applied to business, decision-making, and management. Charles Koch has long argued that the values that lead to prosperity in society, including voluntary exchange, individual liberty, property rights, and decentralized experimentation are the same values that build successful organizations.
That is why the 5-dimensions approach inside of PBM is a natural fit as a business management philosophy for Bitcoin entrepreneurs. Both are built on low time preference. Both value decentralization and transparency. Both rely on distributed knowledge and incentives rather than authority and coercion. Both promote skin in the game and long-term value. And both stand firmly against the central planning mindset that has corrupted our financial institutions and corporate cultures.
Bitcoiners are already pioneering new technological and financial paradigms. But we also need to build businesses, institutions, and internal cultures that reflect our values. PBM gives us a cohesive set of tools and a proven path to do that.
Charles Koch said it best: “If you create real value for others, you do not need to cheat, trick, or force anyone. The market will reward you.” That is the kind of business Bitcoiners can build with the 5-dimension framework from PBM as its operating system.
[1] Charles Koch, Good Profit, p. 101. 2015.
[2] Ibid, p. 119.
[3] Principle Based Management website: https://www.principlebasedmanagement.com/en/fundamentals/five-dimensions.