When we think of cooperatives, we often associate them with images of small, local, community-driven businesses. Our first thought might be a grocery store owned by its customers, a bookstore owned by its workers, collectives of agricultural producers or a credit union.
Co-ops are businesses that are collectively owned by their workers or customers– and they are rarely associated with tech startups. One reason for this is that there are few examples of tech-enabled cooperatives. Moreover, cooperative values and culture are often at odds with those of Silicon Valley.
While startup culture is biased towards growth, and value extraction– cooperatives promote self-sustainability, sufficiency, and advancing the interests of their members rather than creating wealth for founders or investors. As unrestrained capitalism continues to trend toward consolidation, monopolization, and unsustainable wealth inequality– collective ownership, particularly in tech, could provide an increasingly attractive alternative.
Consider cooperative versions of existing platforms. An Uber owned by its drivers or Patreon owned by its creators.
We need to ask this question more often and more critically: “Who owns it?”. If we begin to apply cooperative models to tech-enabled startups, the answer could be us.
The past: Investor ownership
Currently, the default for startups is VC investor ownership. The playbook for startups has become fairly standardized: operate at a loss to prioritize growth, attempt to monopolize a large addressable market, and then hope to sell the company or go public so that VC investors and founders can liquidate their ownership.
This hegemonic startup playbook is problematic for several reasons. It creates artificial incentives for moonshot growth, misaligns interests between communities and investors, drives wealth inequality, and can kill otherwise sustainable companies.
The co-op model of shared ownership could provide a constructive alternative to investor-owned startups. Co-ops are resilient businesses that distribute prosperity more broadly, allow workers and users to capture the value they create, and activate the power of collective labour.
What if there was a focus on building the next generation of platforms so they could be collectively owned by their workers or users?
“Silicon Valley loves a good disruption. So let’s give them one.” – Trebor Scholz, scholar-activist and Associate Professor for Culture & Media at The New School in New York City
Silicon Valley has its fair share of self-identifying contrarians and celebrates the disruption of the status quo. To create new growth we could easily innovate around ownership models, disrupting the current economic system, to have workers and users collectively own the code on the platforms we use.
The future: Community ownership
By applying a cooperative model to the scale of the web, there’s an enormous opportunity to democratise wealth and power and create tools that are better aligned with our common interest. In many ways, it’s an exciting and provocative way of rethinking both corporate governance and human organization.
Collective community ownership in tech is more than an altruistic aspiration, it can be good business. Co-ops keep wealth within communities, are more responsive to community needs, and are remarkably resilient businesses.
Collective ownership structurally aligns interests
Unless a company is incorporated as a Public Benefit Corporation (like Kickstarter), for-profit companies have a fiduciary responsibility to act in the interests of its shareholders. And very often, what is best for shareholders is not best for those that rely on a particular platform or service.
As an example, Spotify doesn’t make decisions based on what is best for the livelihood and basic needs of musicians. It makes decisions based on which is best for their investors. This is demonstrated when Spotify, in their publicly available investor relations reporting, labels artist payouts as “cost of revenue”.
The only way to structurally address misaligned interests between communities and shareholders is to make communities into shareholders. Co-ops are motivated by service to members, while corporations are motivated by increasing shareholder value.
Broad-based ownership is a structural solution to wealth inequality
The winners of our economy have one thing in common: their wealth comes from ownership.
If Apple were structured as a worker-owned cooperative, the ownership stake of each of its 150,000 workers would be worth over $14m. On top of that, each employee would receive an annual dividend of over $400k. Ownership creates wealth, and its concentration helps create staggering wealth inequality.
Spotify CEO Daniel Ek, who owns 16,000,000 Spotify shares, saw his wealth increase by over $2b since social distancing measures started, while musicians faced an existential crisis. In fact, at Spotify’s current market cap of over $48 billion, Spotify founders Daniel Ek and Martin Lorentzon’s combined ownership stake is worth over $14.5 billion. In order to earn $14.5 billion, a musician earning the median wage of $25,000 would have to work for 580,000 years. That’s a timeframe so massive that it’s literally before human prehistory started.
Through collective ownership of tech platforms, we can more equitably distribute economic rewards, and allow workers and users to capture the value they create, instead of it being extracted from them. This is particularly true of platforms with user generated content. Let’s remember to ask: Who is generating the value? Who is capturing it?
Co-ops can compete against huge incumbents
The key to beating large incumbents is to do something they are structurally unable to do: rewrite the rules of ownership.
When Lyft went public, it tried to give some of its most loyal drivers some shares of the company. However, due to regulatory constraints from the SEC, and the classification of drivers as outside contractors rather than employees, Lyft was unable to grant pre-IPO shares to drivers. Instead, Lyft gave some drivers the equivalent of a gift card: cash that could be used to purchase stock if they wanted to.
By being intentional about sharing ownership, control, and financial interest from the outset, co-ops have a unique and compelling value proposition. And interestingly, democratic ownership is something that VC-funded startups are structurally unable to and disincentivized to implement.
There’s power in worker organisation
There is a growing malaise and discontent among tech workers. There’s frustration that some of our most brilliant minds are busy working on projects that boost arbitrary KPIs or serve growth for growth’s sake, rather than solving pressing societal problems or helping more people meet their basic needs. Tech mission statements are becoming increasingly hollow, while shareholder value is prioritized over any social good.
It should be no surprise that worker action in tech is on the rise. Tech workers are becoming more keenly aware of their absence from a seat at the table when it comes to strategic decisions that directly impact them.
Owning the future
Building a next generation of user owned and controlled tech cooperatives won’t be easy. Co-ops are more difficult to finance in the initial stages. There’s a lack of mentorship, legal difficulties in starting a co-operative and little information available on how to start one. The hegemonic startup ecosystem largely ignores ideas that don’t provide the possibility for lottery ticket investment returns.
And there are a growing number of examples of co-op platforms. Stocksy is a platform for stock photography owned by photographers. Savvy is a healthcare data co-op owned by patients. Ampled, a platform I co-founded, is like a Patreon for music– owned by its artists and workers.
And there are counter-cultural communities trailblazing alternatives to traditional Silicon Valley dogma. Zebras Unite is a founder-led group of entrepreneurs that value building sustainable, inclusive, and equitable organizations.
The ecosystem to support cooperative tech companies is growing. And in the next decade, we should expect to see more companies rethinking ownership and platforms that exist to serve communities, rather than the other way around.
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