What is managerial capitalism?

Managerial capitalism refers to a system where there is a separation between ownership and management of businesses. In this model, a professional managerial class runs the companies, while ownership is typically spread among a dispersed group of shareholders who do not actively manage the businesses. This is distinct from the older bourgeois capitalism, where the owner of a business directly managed it, often putting their name on the door and owning a significant or complete stake in the company (1).

James Burnham suggested that this shift was necessary due to the increased scale and complexity of modern industrial and post-industrial organizations, which require specialized managerial skills to operate effectively (2). A primary advantage of managerial capitalism is its capacity to efficiently run large-scale operations. However, it has the downside that professional managers often avoid risks and do not actively pursue innovation compared to entrepreneurs and startup founders (2).

Marc Andreessen points out that while venture capital helps in the inception of new businesses, which often follow the older bourgeois model, most of these businesses eventually transition to managerial capitalism as they grow. This hybrid approach aims to combine the strengths of both systems (3).