
Worker-owned tech cooperatives find a niche near Silicon Valley - sethbannon
http://america.aljazeera.com/articles/2015/5/26/worker-owned-tech-cooperatives-find-a-niche-near-silicon-valley.html?
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nickpsecurity
One of the best I've seen that's similar to this model is Publix:

[http://www.forbes.com/sites/briansolomon/2013/07/24/the-
wal-...](http://www.forbes.com/sites/briansolomon/2013/07/24/the-wal-mart-
slayer-how-publixs-people-first-culture-is-winning-the-grocer-war/)

They're an employee-owned, private company in one of the most low margin and
cut-throat industries around. Both their profit and effect on the competition
is incredible. Also, their management to worker ratio. ;) It would be
interesting to see tech companies adopt a model like this. The results could
be exciting to watch and maybe lead to more job security as well given every
other kind of company likes to sell out.

~~~
allochthon
> Also, their management to worker ratio.

Can you elaborate?

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dredmorbius
From this line of the article, quite low: "A distribution-center manager
overseeing 800 associates..." That is, many workers per manager.

Which suggests that workers 1) know their jobs, 2) do them, and 3) managers
facilitate and largely get out of the way.

~~~
nickpsecurity
Exactly. Likewise, their stores had 400 workers and 2 managers. Most retail
workers I know say their company keeps staff too low to get the job done while
having way too many managers with micromanagement. One of the top chains local
store recently had only 2 stockers per fast moving department with about 40
managers auditing and coaching them on best practices. Walmart and Target
employees told me they had similar issues but not as extreme effect.

So, as dredmorbius says, they have managers that pick good employees, give
them incentives, show them justifiable best practices, listen to feedback, and
otherwise stay out of the way. And the management works for the employees, who
are the shareholders, not Wall St. Results: highest profit in industry,
highest customer satisfaction, one of highest retention, and little risk in
operation. IT startups should copy this if they're not just about selling out.

~~~
allochthon
> Most retail workers I know say their company keeps staff too low to get the
> job done while having way too many managers with micromanagement.

This is definitely not a problem limited to retail. I see it all the time in
software development.

~~~
nickpsecurity
I believe it. One grunt I know always says "too many chiefs and not enough
Indians" in all these companies.

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jasode
The co-op structure is interesting but it's ultimately constrained by the
members'/employees' financial resources to contribute capital. That's why co-
ops are always modest businesses like grocery stores, or a co-op of cleaning
people, or in this article's case, a co-op of IT techs.

If you want to start a capital-intensive business like Google Inc or SpaceX,
you have to use the typical corporate structure because you need the $X
million in investments from angels, VCs, and the stock market.

The typical employees don't have a million dollars in their bank accounts to
pool together and launch a Google-sized business as a co-op. The enormous
costs for rack servers and data centers to scale out would outpace the
employees' tiny cash contributions.

~~~
koolkat
I don't think employees are investors in co-ops. They are like founders. A co-
op can still get capital from investors. Can't they?

~~~
thedufer
The problem with that is there are tax implications to giving someone a chunk
of a company (it's technically income), even if it is completely illiquid. Tax
implications the employee probably can't afford much better than a buy-in.

~~~
mauricemir
coops normally have special status to get round some of these issues.

And coop members can have direct or indirect ownership a full on worker coop
normally has direct ownership and organizations like John Lewis have indirect
ie shares held in trust.

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bcx
This article is "OK", but their example is a 4 person co-op, which makes you
think that all co-ops like the food co-ops you see in college towns.

There are actually multiple forms of co-ops. Typically capital does come from
the members (whether they be companies or individuals), but it could also come
in as debt i.e. from a bank.

For example:

Sunkist is producer co-op owned by citrus growers to vertically integrate.
[http://www.sunkist.com/about/cooperative.aspx](http://www.sunkist.com/about/cooperative.aspx)

REI is consumer co-op owned by the shoppers of the store (though arguably
managed much like a normal corporation): (And did over $2.2 billion in sales
for 2014) [http://www.triplepundit.com/2015/04/reis-co-op-business-
mode...](http://www.triplepundit.com/2015/04/reis-co-op-business-model-
produces-record-results/) [http://www.seattleweekly.com/2003-06-18/news/who-
owns-rei/](http://www.seattleweekly.com/2003-06-18/news/who-owns-rei/)
[http://www.rei.com/about-rei/financial-
information.html](http://www.rei.com/about-rei/financial-information.html)

Ace Hardware is a retailer-owned cooperative. Where the franchise board is
owned by the member franchises. [https://www.myace.com/invest/about-
ace](https://www.myace.com/invest/about-ace)

~~~
jasode
>Ace Hardware is a retailer-owned cooperative. Where the franchise board is
owned by the member franchises.

The Ace Hardware franchise requires ~$1 million[1] in startup costs to open a
store and be part of the "co-op". Most employees don't have that kind of money
and they don't have the collateral to secure a $1 million loan from the bank.
When the ticket for admission into the "co-op" costs $1 million, that's not
the type of co-op people are discussing. The REI stores co-op is also not a
good example of what workers are thinking about. REI is not employee-owned.

I think we need to level-set. When threads pop up about cooperatives, the
driving sentiment is from typical workers/employees who don't like the
corporate ownership structure (founder has equity worth millions/billions,
and/or CEO is drawing $500,000+ salary, etc).

Therefore, the co-op structure where all employees are also the owners and
share the profits looks very attractive. The problem is it will end up being a
modest business. E.g. a cooperative of IT consultants. The IT Consultants Co-
Op don't need members to contribute $1 million each to capitalize the
business; they just start billing clients right away. They can pool their
modest funds from their hourly billings to buy the shared office a laser
printer and a coffee machine.

It would be great if a cutting edge big company (like Google, Amazon, or
SpaceX) with ambitious and very expensive goals (driverless cars, drone
delivery, Mars colony) could be "employee-owned" but it can't. Employees don't
have the money.

[1] [http://www.franchisechatter.com/2013/08/31/franchise-
costs-2...](http://www.franchisechatter.com/2013/08/31/franchise-
costs-2013-detailed-estimates-of-ace-hardware-franchise-costs-2013-fdd/)

~~~
nickpsecurity
See my comment and article about Publix. It can happen but requires management
to have that vision to begin with. Thing is, most have never heard of this
stuff working and wouldn't even consider it. Past that, there's the whole
angle of "let's get rich owning our own company and selling out our workers
later." But, get word out about the successes, then we might get more of them.
And maybe I'll be lucky enough to work for one. :)

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innovator116
Multi-stakeholding coops [http://community-wealth.org/content/solidarity-
business-mode...](http://community-wealth.org/content/solidarity-business-
model-multi-stakeholder-cooperatives-manual) and open cooperativism
[http://p2pfoundation.net/Why_We_Need_a_New_Kind_of_Open_Coop...](http://p2pfoundation.net/Why_We_Need_a_New_Kind_of_Open_Cooperativism_for_the_P2P_Age)
points to transition towards post-capitalism. As for lack of capital
fairshares model is interesting [http://www.fairshares-
association.com/](http://www.fairshares-association.com/)

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davidbanham
This sounds like a wonderful way to work. I can't figure out who died the
sales though. How do they attract clients. Is that just everyone's job?

~~~
thaumaturgy
This is actually something I'm actively working on in my area, where there are
a number of independent small tech consulting companies (most of them with
just one employee), all with different niches and skillsets, and none of whom
have offices or shops.

So everyone already has their own client base. The goal is to share some work,
leverage eachothers' skillsets, and share a common space with inventory and a
shop setting where you can meet customers in a professional environment.

The downside is that everyone's pretty independent-minded so it's a bit like
herding cats. But the upside, if it works, will be pretty great for everyone
involved.

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anonhn82
If this is such a good way to run a tech company, why isn't it also a good way
to develop software? In other words, why are projects led by BDFLs like Linux
and Python so successful, while the design-by-committee approach is usually
regarded as producing substandard outcomes?

~~~
thaumaturgy
Because the software development industry is stupidly fragmented.

Get 12 developers together in a room and you'll get 12 different answers on
the best way to build anything.

~~~
michaelchisari
It's a cultural problem, definitely.

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walshemj
Tech coops are a new thing really as an ex poptel member that is news to me
:-)

Though you might have thought that a politically aware organisation which all
coops are would know what Al Jazeera's line was in running this story - hint
it isn't a dedication to the Rochdale principals.

~~~
Joeboy
I don't know what you mean. What was Al Jazeera's line in running the story?

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omouse
I like this idea but only as one strategy for an exit for software engineers.
A majority of employees are stuck being employees and need some assistance.

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Kalium
I've seen one or two of these. I've also not seen any really successful or
compelling products come out of any of them.

~~~
lawnchair_larry
Pick any 2 random conventional startups, and this will be just as true.

~~~
Kalium
True!

That said, my personal experience with coops is that they tend to be
consensus-driven and give everyone a veto. This is a problematic model when
vision is required. Works well for more readily-defined things like grocery
stores or running a dorm, though.

~~~
nickpsecurity
The kinds that have management representing the coop work around that problem
a bit. They have someone with vision, experience, and the ability to work
through disagreements. That person normally does his or her thing with others
adding opinions, votes, or whatever. The critical benefit is that such a
person can step in to clear out obstacles caused by a lack of consensus.

So, even with its issues, representational democracy can be better than pure
democracy so long as everyone is doing his or her part. :)

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apineda
According to this article co-ops are a place where non-whites congregate and
find their safe space. Wow. Bringing ignorance to the masses I see.

~~~
mauricemir
Not in the USA its mostly Farmers and American coops don't have the left wing
roots that they do in Europe and to a lesser extent in the UK

