The Limits of Idealism

Last night, at the Denver release event for Ours to Hack and to Own, an attendee asked what the biggest challenge is for platform cooperativism right now. I was tempted to say what most people in the movement would say, I suspect: financing. But I couldn’t. A few minutes earlier I’d been speaking with a staff member at a local community bank who reminded me that she would love to invest in co-ops, but there aren’t enough fundable startups out there. The Directory has no shortage of financing options, and the list is growing. So I tried another answer: idealism.

In the year between the first platform cooperativism conference and the second one last weekend, we’ve come a long way. Lots of projects, new and existing, have come into view. Policymakers, unions, investors, and techies have been taking this movement seriously, and rightly so. But a good number of the startups that were about to launch last year are still—well—about to launch. And the ones that have launched are not all doing well. (This stuff is hard, and I want to emphasize that I am so, so amazed by all of these courageous pioneers.) There appears to be a common shortcoming, from my various anecdotal conversations: the ideological appeal of being a co-op doesn’t necessarily translate into a loyal user-base or a sound business. It turns out that, co-op or not, enterprises need to earn their users.

I’m reminded of something the great co-op developer Enric Duran once told me as we were walking through Paris to a meeting with a credit-union president: “I want to create commons for commoners, not for people who talk about the commons.” I felt pretty humbled by that, because I’d been geeking out and asking him a lot of theoretical questions about the commons. And I think the history of cooperative enterprise presents a similar lesson; the most successful co-ops are those that meet people’s needs better than they could otherwise be met. They’re not successful because they appeal to fans of co-ops.

I’ve had the privilege over the past few months to spend a good amount of time with Brianna Wettlaufer, Nuno Silva, and Margaret Vincent of the stock-photo platform co-op Stocksy United (which was founded, I should note, before the term “platform co-op” was coined). Stocksy is proud of its co-op identity, to the point that “co-op” is on the company’s logo. By making its photographers co-owners, it has been able to succeed in a highly competitive market by securing better photographers and higher quality work than its much larger competitors. But it has had more than just cooperation going for it.

The reason Brianna and her co-founders believed the co-op model would succeed in their market was because they knew their market really, really well. They’d actually been executives at a company that would be one of their major competitors, so they knew its shortcomings inside-out. They knew how to find well-paying clients. It also helped that they had a million dollars or so to invest upfront—but that might have been raised in other ways based on their track record, and it wasn’t long before they paid themselves back with revenue. Now, they’re turning down investors left and right.

As proud as Stocksy is about being a co-op, the company doesn’t let that get in the way. You can tell immediately how much the executives care about their members, and how they love being accountable to that membership rather than a bunch of random investors. But they also take their role seriously as leaders, making sure that they have the room to make the big, quick decisions that are necessary in a fast-moving industry. They also ensure that their staff members have the authority to make decisions in their domains without, for instance, putting everything up to a vote with the whole co-op.

You see the effect: Stocksy does what it does really excellently. It’s there even in what most people don’t see. Once, over lunch, Nuno allowed me a glance at the annual reports that members receive. They were works of art.

Stocksy is a co-op, and it uses cooperation as both a competitive and ethical advantage. But Brianna and her team don’t use the fact of being a co-op as an excuse not to also be a really sound business that clients turn to because its product is awesome.

A lot of the same features, also, are at work in Green Taxi Cooperative, a platform-powered co-op that is now the largest taxi company in the state of Colorado. Its members are mostly very experienced taxi drivers in the region, many of whom were highly educated professionals in other fields in their home countries. They have hired expert office staff and legal support. And they have turned to cooperation in large part because it’s a way of significantly reducing the cost of doing business.

I’m one of those who believe that cooperation is a good in itself, and that the rules of markets should be changed to give co-ops intrinsic advantages over extractive businesses. But in most of our circumstances, this isn’t the reality yet. Even if it were, a lovely vision still wouldn’t guarantee a successful enterprise. For those who want to move their platform co-op projects beyond the limits of idealism, here are a few lessons from what I’ve observed, both across our movement and back through co-op history:

  • Experience – Make sure you know your market inside out, or that you have people on your team who do. How can you convince market experts to join?
  • Competitiveness – Design a cooperative model that creates competitive advantages as well as ethical alignments. What can you do as a co-op that you couldn’t do otherwise?
  • Excellence – Don’t expect any breaks because you happen to be a co-op. Many potential clients, and even members, probably won’t care, or won’t care very much. What will make people who couldn’t care less about co-ops want to join?
  • Leadership – Being accountable to members doesn’t mean abdicating the task of leadership, especially in large organizations. I, for one, am glad that my credit union isn’t calling me every hour of the day to make sure I agree with its decisions—but I’m also glad it’s not calling Wall Street either. What trust and authority needs to be carved out to enable leaders to play their roles effectively?
  • Flexibility – A lot of the most exciting new co-op models I’ve seen (like Enspiral and SMart) have fostered powerful cooperation not through existing co-op law but by hacking other legal forms. This has enabled them to focus on innovating around members’ needs, not bending their members to fit some abstraction. What if you threw out the rulebook for a moment?

I say all this as an idealist, through and through. I believe the promise and potential in cooperation is that it’s a way of grounding our economy in human needs and wants, giving us each the time, space, and power to live out our most cherished commitments. But part of this tradition’s glory, too, is its practicality, and its capacity to include people whose idealisms don’t happen to be fully identical. If you’ve read this far, I bet you’ve got plenty of idealism to go around. What about the rest?

11 thoughts on “The Limits of Idealism”

  • Surely coops have all sorts of commercial advantages over extractive, overtly ‘for profit’ models. In other words they have a competitive advantage. Put it another way ‘for profit’ models are disadvantaged. We should remember that.
    I say this as someone who has just applied for two days of consultancy with Coop UK, having woken up to the massive appeal of being involved within the cooperative sector, having grown heartily sick of the dominant psychopathic business environment.
    It may not be widely discussed, but I suspect the majority of business owners, as well as those who work for them, are thoroughly disillusioned by a narrative that we are programmed not to question. A light bulb moment may be contagious.

    • Thanks for your comment. I do think there are many competitive advantages to be found, and we need to find more rigorous ways of identifying them. One useful resource, which I came to thanks to Keith Taylor, is Henry Hansmann’s The Ownership of Enterprise, which identifies a number of ways that cooperative ownership models can reduce contracting and transaction costs.

  • Thanks Nathan, another insightful piece. When discussing entity options for start-ups the co-op model is often seen as an idealist model but too hard to manage & too hard keen the cats inthe herd. Co-operatives are businesses and need to understand that they are a means to to the value based social outcome of their vision. Any business needs to satisfy the. Reds if it’s market or committed to a common cause or not a producer co-operative can fail as they have not focussed on the both their consumer and their members as suppliers.

  • Thanks Nathan, another insightful piece. When discussing entity options for start-ups the co-op model is often seen as an idealist model but too hard to manage & too hard to keep the cats in a herd. Co-operatives are businesses and new ventures need to understand that they are values based but legislated governance structure with to facilitate the value based social outcome of their vision. Any business needs to satisfy the needs if it’s market. Committed to a common cause or not a producer co-operative for example can fail as they have not focussed on the both their consumer and their members as suppliers. A business requires the exchange of goods or services for a fee which is is above the cost of production & distribution. Looking after members is essential.

  • Yes, a true idealist must also be a realist. Thanks Nathan for this much-needed dose of realism. No doubt the #BuyTwitter campaign was on your mind as you wrote this post. As you know, it faces a huge challenge in building enough financial support. Most strategies seem to require a lot of co-op idealism from big funders and/or from millions of supporters. So it’s difficult, for the reasons you describe here.

    Instead, one possible strategy is to grow financial support by providing value to members through a software users’ co-op that uses bundling and bulk buying power to negotiate better deals. I’ve outlined it at https://votermedia.blogspot.ca/2016/11/a-global-software-users-co-op-could.html

  • Thanks Nathan, a helpful piece for all (of us) idealists out there.

    I’m struck by the comment you received that “there aren’t enough fundable startups out there.” I disagree but solely on the basis that it depends almost entirely on whose definition of ‘fundable’ is being used.

    Tim O’Reilly (in a podcast interview) pointed out that while every second city is trying to be the ‘next Silicon Valley’, it’s impossible because Silicon Valley has one thing that no other city will ever have: hundreds of multi-millionnaires who are willing to throw cash at every second startup to see what sticks.

    While I agree with virtually everything you said, most startups can’t find that level of market knowledge and product excellence without a bucket of cash to burn through on their journey from idea to product. (And most will still fail.)

    If the platform coop, as a model, is going to beat the plain old platform, we’re going to have to find some of that Silicon Valley attitude amongst out multitudes. IMHO at least.

    • Fair point, and that’s where I think policy could come in. Probably the greatest and most successful burst of cooperative energy in the US was when the USDA made essentially free financing (and cheap renewable energy from New Deal dam projects) available for the formation of rural electric cooperatives. Either we need policy that makes such large-scale financing available for cooperatives at affordable rates, or we need market mechanisms that can make large-scale cooperative financing appealing to private investors.

      I appreciate the reminder that co-ops are not alone in sometimes putting idealism before pragmatism! One need only binge-watch Silicon Valley.

  • This problem is endemic which, profoundly, may originate in the proclivities if not capacities of the brains of those to which cooperatives resonate. To use your word, “kumbaya” (Draft: Internet of Ownership 9/7/16, which you prohibit quoting) has great appeal to most of us inspired by the cooperative vision, it’s essence valuing relationship over profit. Our vision, in my opinion, is far more ambitious and magnificent than Jeff Bezos’s. But, Jeff Bezos starting from nothing is now the second wealthiest man in the world. I’d wager his vision, albeit comparatively circumscribed, is far more informed and detailed by reality. Generally speaking, we may be at genetic disadvantage when it comes to management and planning.

    I concluded after serving on a food coop board 1979 – 1982 that the essential meaning of our collective effort was in our personal relationships which the institution served to stimulate. This $500,000/year, nine year old enterprise folded for lack of competence (after my departure) and its pieces picked up by one of its employees who seeing the money in it, grew it into New Leaf Community Markets, now a thriving Northern California six store chain which has made a lot of money for him.

    I don’t want to see that happen again in any coop I’m involved with. Consequently, I look to management dedicated to the welfare of its members, but insulated from democratic incompetencies. Have you examined platform entities with governance and management along the lines of consumer coop REI which seems to have kept its soul, treats its employees well and economically thrives?

    By the way, you’ve left out of the discussion one extraordinary asset available to cooperative start ups: the support of non-bank cooperative institutions and their members.

  • Clarifications:

    I concluded at the the time that our coop (and perhaps all institutions) served essentially, most meaningfully as a vehicle for intimate social communion and personal development.

    I don’t mean to imply any particular business competence on my part. I mean we collectively were short of it.

    I mean that democratic ownership should not impinge upon wise and capable business management focused on economic issues. My question is, how may the organization be structured to do this and rigidly maintain democratic ownership? REI appears to have accomplished this.

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