Coops is one of the structures that the author talks about in "Developer Hegemony". The bulk of the book is about the inverted pyramid that modern software development houses are (with production being at the bottom, and manager on top).
I really like this passage:
> “Consider a law firm. Do the founding partners go out and hire a Lawyer Manager to order them around, and then do they hire a VP of Lawyering to order the manager around? Do they then hire a CEO to rule over everyone and a CFO to handle the finances and a COO to schedule court dates and such? Of course not. There’s no historical precedent for all that fluff. Rather, they handle facets of the business themselves. What they can’t or don’t want to handle, they delegate to subordinates that they hire. The partners don’t specialize in finance, sales, marketing, or operations. That would be silly. But they understand enough about it to act as the boss.”
...and this one:
> “It turns out that treating knowledge work pursuits like manufacturing operations doesn’t work particularly well. But it was the model inherited from the Industrial Revolution, and it’s been hard to shake. The thinking goes like this: if you break a complex operation down to its individual components and then have people specialize in those components, batching the work and letting people get good at tiny slices of it leads to greater efficiency. This works well for stations on an assembly line but not so much for writing software.”
Lawyers also operate within a sort of guild, culturally and otherwise. They make a lot of their own rules, which is especially relevant to a rule-based business.
One of the guild-like rules that often exists limitations in the types of organisation types lawyers can form. There are rules against listing law firms and cashing out. Lawyers are required to manage themselves.
'One of the guild-like rules that often exists limitations in the types of organisation types lawyers can form.'
This makes little sence - How would the limitation that you are talking about even work?
The person at the top is not required to be a lawyer in the first place. There are plenty of corporate layers that work for public or private shareholder-held companies.
Lawyers can work for a corporate client, but those corporations can't offer legal advice to third parties.
Law firms that take on clients must be lawyer-owned.
"Under Attorney Rule of Professional Conduct 5.4, law firms are barred from offering ownership or other investment/revenue-sharing opportunities to non-lawyers. Some recent developments in several states, however, offer the possibility that these long-standing restrictions could be scaled back, creating potential for dramatic changes in how litigation matters are funded and managed."
Does this analogy really fit? I can imagine a software consulting firm targeting small businesses could work where the individual programmers are "in charge" and they hire some support staff because each individual contract is small enough that one or 2 programmers can handle it.
OTOH I can't really imagine teams making large projects not specializing. A browser, a AAA game, or an OS for example. Some programmers know GPU techniques. Some know Database stuff. Some know Video compression/decompression. Others know USB driver level details. Others know networking issues. Another few know audio related stuff.
Senior partners in law firms also have specializations. That’s one of the ways how flat organizations self organize. People specializing in tax law aren’t in competition with people specializing in divorce etc. Further they can keep slicing the law into ever smaller specializations which ends up improving the firms reputation.
Aka go to a big firm and someone is more likely to specialize in exactly the issue you’re having.
Even so, the fact is that the more hierarchy there is, and the greater the bounty at the top, the more perverse incentives for managers and would-be managers there are. Good management is, by its nature, very minimal.
I think the problem is that "assembly line" manufacturing has always been the wrong analogy for software engineering. A better analogy would be like a construction contractor or a machine shop. How many machine shops are not run by a machinist?
Perhaps an interesting extension of the machine shop analogy is that many organizations do not run their own internal machine shop. If they need a part, they find a shop that can make it. Software naturally tends need more ongoing maintenance and attention than machined metal parts, but I think there's an argument to be made that perhaps companies should be less eager to hire software engineers, and more eager to hire an agency.
Moreover, assembly line manufacturing is suited to a very particular scenario that software engineering is almost never in: high volume, high rate production of exactly identical things, which can be broken down into individual components.
>How many machine shops are not run by a machinist
Well, I think that's probably overall true of a lot of small businesses of that general type. The odds that I'm going to wake up some morning and decide to open a machine shop, electrical supply store, etc. and just hire people people who know what they're doing (not that I would necessarily know) are probably whole lot less than someone with some savings who has worked in the business their whole life.
It's not just the trades and adjacent though. I worked for a small IT industry analyst firm for a number of years and the founder/CEO had worked for a bigger such firm for a long time. And that's a very common pattern.
That’s a really impressive lack of understanding of the economics and culture of technology and partnerships.
Law firms don’t operate like normal companies because the lawyer’s guild in every country I’m aware of has enough power to make comprehensive legal services companies illegal. If you wanted to use a partnership to argue it makes sense for technology companies to be partnerships better to use accounting firms, except they do have all those officers. Even with similar restrictions on non-guild members telling guild members what to do. And every big accounting firm grows and then throws off a professional services firm (Accenture, CapGemini, etc.)
Or look at other industries that used to be dominated by partnerships, like investment banking. As soon as the restrictions making it illegal go away normal corporations took over from partnerships.
Most law firms are very small (relative to tech companies). In very large law firms, you'll see more of the typical managerial organizational chart at play, even though almost everyone employed there has passed the bar. Big law firms like Latham & Watkins for instance have a CEO and c-suite.
>> “Consider a law firm. Do the founding partners go out and hire a Lawyer Manager to order them around, and then do they hire a VP of Lawyering to order the manager around? Do they then hire a CEO to rule over everyone and a CFO to handle the finances and a COO to schedule court dates and such? ..."
Large law firms often/sometimes do have CEOs, COOs, and CFOs. However, often the CEO is one of the partners.
I think whether the comparison is appropriate boils down heavily to what kind of software developer you're talking about.
For example in the games industry I think there's a quite a few smaller companies in particular that work like this. A lot of people being generalists and taking over business functions and social aspects of the job.
But I think a lot of engineers de facto do work like assembly line workers. Much of software development is not 'knowledge work'. If you're in a company toiling away at some gigantic Java codebase you're not going to have much in common with someone managing a law firm.
Happy to see this list here on which our coop startup appears! (https://kantree.io) It is very challenging to raise funds as a coop indeed but we have managed to do it on small amounts (a few hundreds of thousands). We are one of the few product based coop and not service based.
France (where we are based) is actually a very interesting market for coops. There is a very good legal framework around coops and a growing percentage of them. There's even an investment fund of tech coop as of recently! https://coopventure.fr/
I think coops are a great ownership model for the future and for a more responsible economy. It is too bad that there is still very little support and recognition around it.
From what I understand, there is no limitation regarding the type of company when it comes to the French Tech Visa (as long as it qualifies on the other requirements which focus more on the innovation aspect). (my coop would be eligible for example)
Starting a coop is like starting any other kind of company so same rules apply. (You must be at least 2 people of course!)
Not necessarily (the coop I work for is one though). There are 3 possible types of coops in France: SCOP, SCIC and CAE. To make it short:
- SCOP: adheres to the international definition of coops
- CAE: a coop of freelancers. You are an employee of the structure (with a work contract) but you have to bring in your own revenue to pay your salary. A percentage of your revenue goes towards the coop budget for shared services (accounting, hr, ...) and cash reserve
- SCIC: a multi-party coop. A good use case would be platforms where you could have multiple groups of stakeholders: employees of the platform, users and service providers. (eg. with a Uber like coop: employees, users and drivers could all be separate groups of owners). Each group has a voting percentage. No group can have more than 50% ownership.
I see great potential for the 2 other types of coops that France has in the context of tech. I do not know of any equivalent elsewhere (but would be happy to learn it exists!)
I deeply wish this was more of a thing. If you look at the way law firms work, this is how they take their specialized knowledge and keep more of the value they create for themselves. I don't see any reason we can't/shouldn't have a similar model in software engineering be the de-facto now that the field is mature enough to support it.
>What would be the difference from a company owned by five individuals that also do all the work and a coop formed by five individuals?
Parent is probably talking about "BigLaw" (thousands of lawyers) and boutique law firms (hundred lawyers or less). Most lawyers at the firms are employees (i.e. the associates) and not part-owners (i.e. the partners). They are not co-ops.
Even in a tiny local law firm of 5 partners/owners and no junior associates, they'd still have the staff paralegals and secretaries as non-owner employees so they're not really co-ops either.
FWIW, farming co-ops are often more similar to the lawyer model, in practice: A small number of owners who hire out lots of manual labor.
You could certainly have a similar model for software co-ops, using contracts for various non-central parts of the work.
Most worker co-ops also include a probationary period for new hires before they become part owners (because to do otherwise would be a bit insane). A really long probationary period with a low chance of conversion starts looking a lot like the lawyer model...
Because the model of a law firm is maybe 10 senior partners own the company and there's 200 attorneys and several hundred assistants and paralegals under them. Its not much different than most modern corporations having a bunch of shareholders and a board in practice.
One major difference is that a law firm makes money by selling billable hours whereas a tech company makes money by producing, selling, and distributing an actual product.
You don't see law firms raising millions to open shop, but it's almost a pre-requisite for serious tech companies. A law firm can be profitable from day one. This difference makes it much harder to use the co-op model for tech companies unless all the workers are independently wealthy and don't need VCs.
In the US, at least, all members of a law partnership (or professional corporation) must be licensed attorneys. That's baked into both state law and rules of professional conduct, and is a serious limitation on organization that tech professionals are not saddled with.
Yeah, LLPs/PLLCs might have the credentialing requirements. However, I am not sure law firms have to organize with those structures -- I admit ignorance in that case. I was thinking more generally.
Law firms don't have economies of scale. Two partnerships can serve N clients roughly as well as one larger company could. Most software has huge economies of scale, so it's unlikely small partnerships would be successful long-term unless they filled a tiny niche (read not-very-profitable) that wasn't worth pursuing by a bigger company.
> Law firms don't have economies of scale. Two partnerships can serve N clients roughly as well as one larger company could.
That's not really accurate. Larger law firms can have more specialized attorneys; they can offer clients a more comprehensive set of expertise - not only in areas of law, but geographically ('let me call an IP attorney in the Paris office'); they can have larger personal and business networks, which provide access to more resources, more business, enable them to broker more solutions for clients, and which give them more influence.
Large law firms provide a one-stop-shop that some clients, like large businesses, are willing to pay a premium for due to the convenience factor. They’re not providing law services more efficiently, measured by cost, compared to smaller firms.
It's more than one-stop-shop services (see the GP), and it is more efficient in one way: One stop shop, specialized legal skills, etc. are more efficient for certain tasks than the services small firms provide. Also, it can be more efficient in another way: If I said low-wage software developers were more cost-efficient, what would you say? The same goes for attorneys.
I find myself on the side of big firms here, but small ones also are more efficient in some ways. My only point is that, for some services, there is an economy of scale.
By the definition, software isn't an economy of scale. Unit cost doesn't decrease by magnitude as output increases. A utility company is an example of economy of scale.
Economies of scale don’t just have to be areas where unit marginal costs decrease as volume increases, they can also be areas where fixed costs dominate marginal costs, which is the case for many software firms because marginal costs are usually very small
Economies of scale exist when the average cost decreases as the number of units increases. The average cost for N units is the sum total of all fixed and per-unit costs divided by N.
Don't law firms, like software companies, usually have a small inner circle of founders and key staff who make the decisions and keep most of the profits?
And don't law firms treat the average staff lawyer worse than software companies treat the average developer?
Not necessarily founders but BigLaw has partners at various levels and then associates plus various support staff. And, yes, BigLaw (like investment banking) has a reputation for really working associates hard in addition to having something of an up or out structure. Which probably works OK for law because a lot of the associates probably went to law school because they weren't sure what else to do with their liberal arts degree--and don't necessarily want to stay in law long-term anyway.
Up or out is right. But the most common “out” path is to a corp legal department. Better hours, and now the partner that used to work your ass off buys you lunch to court your business.
Yeah. Though I know a lot of lawyers who migrated into non-law positions after a few years, including politics (also usually for a few years depending on their leanings and the climate--e.g. White House) but also a variety of other things. As you say, there are also a variety of corporate legal positions including government affairs and the like in addition to straight law jobs.
I’m optimistic about worker coops, and would love to see them become more commonplace. I’ve noticed a lot of tech coops are dev shops, which kind of makes sense, but I hope more product focused tech coops become successful as well.
I'm studying business in the hopes of helping people start co-ops. Don't know if there's enough of a market to do it for a living, but I would deeply wish to.
With many businesses using contract labor instead of full time workers, creating a worker co-op that operates as a contracting firm could be like a shadow union.
I’m very interested in this but also want to understand a stark reality: Co-ops have existed in concept and practice for 100+ years but haven’t gone mainstream (representing <<1% of employers with no clear exponential growth)
Why? Are there lessons we need to carry forward when creating new ones?
I want to say a lot of it is that legal and financial structures don't support it very well, it could also be said that since it's such a small minority of businesses (I want to say <1%) that education resources on it are also scarce.
For example getting funding to turn a business into a coop, let's say it's a one man owned business who is going to retire and has no family, so he offeres to sell it to the employees so they can turn it into a coop. Financially almost no investors would take that bet, the banks wouldn't really give a loan to 10+ people who make salaries, really the main way this could happen is if the owner took a hit and did something like a persona loan and let them pay him back from the profits over the course of 10 years.
I've also heard that there isn't much information on how to start or run one, like looking for books in the library can often fall short or you will only find something outdated. I think the lack of information is part of it as well as it's been so disincentivized for so long that most we can find are either run in a hippie commune style, or created by a small town government to provide services a corporation wouldn't (Best internet I've had was due to them having set up a coop), on top of that I can only think of one college that even teaches coop structure and that's Mondragon in spain[1] but on searching deep enough I also found U of Wisconsin[2] has something too, that's still not a lot.
From my perspective as someone currently forming a startup co-op: It simply takes longer. You cannot go it alone and it requires a community effort. Democracy is harder than autocracy (which most companies are, by default). Bank loans and more require collateral from an individual, which a co-operative by design deflects against (so there's co-operative friendly lenders).
I'm hoping the trend goes in a different direction for tech companies and they see that there's an alternative - but the fundamentals of co-operatives won't (and shouldn't!) change.
I think Main reason is that coops so do not fit Well in our profit maximizing Economy. We do produce profits but due to the Nature of our organization there is no incentive for Investors that seek high margins. ( In fact we dont allow external Capital in to remain in Control of our decisions). So linear growth it is.
I think a lot more growth than you Like is Made by exploitation of the workforce. Without doing that you have a Harder time prooving yourself in the Market.
Private companies and banks see coops as the devil [for very obvious reasons] and fight them using regulatory capture and not engaging in business with them. It's pretty well-known in the coop world.
Coops sometimes mitigate this disadvantages by networking with each other.
Coops and startups are in different categories. It doesn't make sense to lump them in to the same group here, though I understand we are on a very techie-oriented forum.
From what I've read it's mostly that it's more difficult for coops to access capital. Banks and investors are extremely hesitant to provide capital to an organization where the employees can just vote to use the money to give themselves all raises.
They'd much rather extend loans to traditional businesses with owners who are willing make cutthroat, unpopular decisions and fire employees if it's necessary to defend and preserve their capital.
> All worker cooperatives have two common characteristics: 1) member-owners invest in and own the business together, and share the enterprise’s profits, and 2) decision-making is democratic, with each member having one vote.
I think you’d have to find examples of companies that only do #1 or only do #2 and look at their outcomes versus companies that do both.
My guess is the root cause of what you’ve observed is the distributed decision making and the attendant latency and diffusion of responsibility it brings.
If you're founding a coop, you're probably more interested in organizational theory than doing the work. There are cost savings when it comes to group buying or trade; so works well for farmers. But to do this for software is not about building better software IMO.
You can kinda see a hint of this in the spelling of Toronto as Tkaronto. I don't think this benefits the list. It's a kind of meta work, a convenient distraction from doing something of value.
If you're a builder you'll preoccupy yourself with the thing you're building. If you're driving by an ideology, you'll spend most of your time there, and legal frameworks will be of secondary concern, a means to an end.
> If you're a builder you'll preoccupy yourself with the thing you're building.
If you're one person building a thing that one person can build, that might be true.
If you're building a thing that needs or merely benefits from having more people doing the building, you almost certainly need to think about how to structure and coordinate what people do. That's true even if your decision is "no structure and no coordination".
Sometimes, that process will be implicit (and likely a more or less direct reflection of the personality of the initial builder). But for the most, once you start involving other people (or they involve themselves), organizational structure and behavior starts to become a thing you have to start paying attention to. Getting it wrong can destroy whatever you're trying to build.
I don't think this is the book parent was referring to, but Developer Hegemony by Erik Dietrich describes an almost law parnership-like model for developer shops.
One of the more interesting articles I've read about talks about the fact that there are a lot of domains that you need to work all at once together to form a coop. And they were experimenting with ways to "franchise" coops into structures that help that.
Co-ops and partnerships can work well for businesses that are very low capital intensity. A law firm is the typical example, but software development can also be very similar.
I think one of the reasons is that there can be too many people implied in taking decisions.
Another reason might be that if somebody is a co-owner with many others in an enterprise, he might not feel motivated to work.
In socialist countries the quality of most products and services was poor because no one cared and no one fel obligated to do a good job, since the enterprise was owned by all the people. Instead there were many small thefts from the workplace.
In normal stock companies all (voting) stocks vote, and those can be distributed globally to all sorts of people and institutions who have no idea about the reality on the ground.
By comparison the decision-making in cooperatives is much better grounded in reality and has fewer disinterested and uninformed participants.
Yes, that's how it works for larger cooperatives where direct democracy can become problematic. Even in direct democracies in societal level, presidents are typically elected, and there are ministers and managers by necessity. The same goes for cooperatives.
It's one person one vote applied to the corporation. In principle there's no reason why we should demand any less democracy inside corporations than what we demand in societies at large.
It's curious how many of these comments in this post could be reframed to be basically: "democracy can never work" or "democracy is clearly an inferior system to feudalism".
One of the largerst supermarket chains in Spain (Eroski) is a Coop and IMO they have the best service overall. Maybe not the chapest but cheap, their white label brand has very good stuff plus very clear and well though nutritional information, good variety, etc.
Brando Milanovic wrote up a pretty clear-eyed description of the problems with worker-owned enterprises, even in states that market socialists look to as better examples such as the former Yugoslavia [1]. He speaks with some authority, as both an economist and someone who worked in one of those. To me, it seems like there are important unsolved problems with worker-managed enterprises at scale (exceptions like Mondragon notwithstanding), but I’m speaking as an armchair observer. I agree with the aims involved (workers should enjoy the full fruits of their labor and have control over their working conditions), but it seems there are still challenges to scaling this sort of organization up.
Does anyone know if there's a term for structuring a corporation where one person can own no more than a certain percentage of the company?
I believe that the central cause of wealth inequality isn't so much about taxation or regulatory capture etc, as it is about individuals going to great lengths to maintain control of their companies. So someone can be worth a billion dollars with a 51% share but not be able to convert any of those stocks to cash, for fear of losing their power.
That's why they resist even a modest property tax on their stock, while the rest of us must pay property tax on our homes. This is self-evidently unjust and one of the major loopholes which allows the accumulation of extreme wealth while countless millions of people spend the entirety of their lives working to make rent under a negative net worth.
A possible solution to that might be to limit individual ownership to something equitable, say less than 1/3, 1/5 or 1/7 (my preference) of the total.
So a worker-owned cooperative could be thought of as ownership not exceeding 1/N employees.
That would give us a spectrum of possible structures rather than having to choose between the extremes of public and private ownership. Apologies if this concept already exists or is commonplace.
> I believe that the central cause of wealth inequality isn't so much about taxation or regulatory capture etc, as it is about individuals going to great lengths to maintain control of their companies.
I’m not really sure what you’re basing this on? Most of the richest people in the world don’t have controlling ownership of their businesses. Zuckerberg is the most notable exception here, and he took a lot of risks to get there. But companies knocking on trillion dollar valuations that aren’t public and don’t have diluted ownership structures are the exception rather than the rule as far as i can see.
One of the chapters in Radical markets* talks about doing this, but primarily as a means of stopping the anticompetitive actions of active investors like Blackrock, which have an interest in coordinating the actions of their investments.
In a lot of countries it is possible to simply change the way share based voting works.
By default 1 share equals one vote. But quite a few jurisdictions allow companies to define a different voting scheme, allowing to f.e. limit a person's votes to at most 20% of the total amount of votes, regardless of their share ownership.
This of course depends on the jurisdictions in question.
> Although employee shareholders receive dividends, their shares do not entitle them to any direct influence in management decisions, but enables them to vote for members of the 115-person Representatives' Commission [which governs the company] from a pre-selected list of candidates.
Love this. I'm starting a food co-op in my area [1] and I can safely say "P6" [2] is real - cooperation amongst co-operatives has been the biggest way I have learned (for free!) about how to make this effort real. Co-ops and co-op culture are huge refresh from the tech industry and there's much to learn that feels like the antidote to VC/the current trend of capitalism.
[2] Principle 6: Cooperatives serve their members most effectively and strengthen the cooperative movement by working together through local, national, regional and international structures.
My understanding: there are a lot of varieties of coops, consumer coops (REI, the Green Bay Packers, in some respects) are primarily owned by their customers, purchasing coops like ACE Hardware are owned by a group of businesses to increase buying power, and most relevant to this thread, worker coops are where workers own the enterprise. Multi-stakeholder cooperatives blend multiple forms of ownership to try to align the incentives of the enterprise with everyone who has a stake in its success. To me, it sounds really hard to get right, but also transformative if you can, so I’m very interested to learn more!
Multi-stakeholder co-operatives are co-ops with more than one "owner" class. For example, a multi-stakeholder food co-op could be owned by both consumers of the store, and the workers of the store. The co-op's by-laws determines how the groups differ and how the equity share (and patronage dividends) work out.
can somebody explain how these organizations handle a bad actor or collusion towards bad goals?
Say somebody comes along and wants to use Oracle suddenly, what sort of measures exist to prevent that from happening, how is arbitration, enforcements and distribution of profit calculated?
The only successful corp i can think that is similar to this is Valve but it isn't quite worker owned, it seems to distribute profits more fairly.
Whether it's a hostile board takeover, or a bad hire in a CxO position (or even any regular employee with influence), those risks exist everywhere.
Actually, I think a co-op is better protected.
A co-op should have founding principles, and acting against them should raise red flags.
For distributing profits, etc, again, standard legal docs. Here in Quebec, there are orgs who can help with that (reseau.coop).
The biggest challenge is growing: I'm in a 5 person co-op. In a previous life, I was in a 25-person collective which became hell to manage, as everyone wanted to be heard, but few wanted the responsibilities.
So in our current co-op, two of us tend to enforce the bottom line, in our respective areas. I mean, legal structure and org structure, while there may be influenced, can be pretty orthogonal.
>So in our current co-op, two of us tend to enforce the bottom line, in our respective areas. I mean, legal structure and org structure, while there may be influenced, can be pretty orthogonal.
In some sense, then the two of you may extraordinary - a combination of ethics, IQ and integrity. Your biggest challenge will be handing over the reigns when you are ready to leave (usually only due to bad health or age, it's life long thing). More specifically the task has to begin decades before you leave. If it's not done (often the case) the enterprise's morals rot, even if it continues to be financially successful.
Yep, I see this in small shops of older friends. Some just close shop, or sell their business for almost nothing. Although there are ways to exit profitability from a co-op, I don't expect much. If it survives, I'll be happy.
We're not a big SaaS with exponential growth. We're based on Free Software and I often help competing shops because it helps an otherwise dying ecosystem.
I make most of my money off consulting and my co-op pays me well, and I'm generally really happy with work. Good enough for me.
> The biggest challenge is growing: I'm in a 5 person co-op. In a previous life, I was in a 25-person collective which became hell to manage, as everyone wanted to be heard, but few wanted the responsibilities.
yeah but you see the problem here? without a central leadership, everybody will have equity and you can't really steer the ship anymore.
I don't know too much about reseau or how it functions but i have a lot of difficulty with say a SaaS being run like a coop. 25 developers divide equally the loot? But there will be disagreements and disproportionate equity right off the bat. How do you remove somebody who plays politics and is able to win consensus but you know its going to impact your business? How do you arbitrate disagreements over distribution or spending of resources or the manner in which they conduct operation?
> How do you remove somebody who plays politics and is able to win consensus but you know its going to impact your business? How do you arbitrate disagreements over distribution or spending of resources or the manner in which they conduct operation?
Who is this "you" in "your business"? The business is as much "theirs" as it is "yours". If they can convince enough people of a course of action, even if somr are not convinced, why do you assume that the course of action will be bad?
The biggest weakness of traditional companies is exactly that a sibgle hair-brained boss can wreak havoc on the whole organization below them. Democracy solves this problem, it is much more resistant to a bad actor than autocracy is.
I think top-down and bottom-up organizing styles create essentially two different, but similar, versions of this particular failure mode.
In top-down there's always the risk of someone coming in and making a long string of bad decisions and essentially wrecking everything by leading everyone on a wild goose chase, while in bottom up the risk is someone obstructing good things happening by either being a drag or exercising whatever veto or FUD power they have (whether designed or organic) to prevent action. This looks less dramatic as it's happening but stagnation is just as powerful a force as havoc in the long run.
There's a really tricky balance to strike somewhere in there.
I like the concept of shepherding, not leading. Being on the sidelines, encouraging people to take the lead, but bring them back on track when necessary.
I can’t provide a generic answer but in my experience, there were two mechanisms. First, people are hired partly based on their political values and through word of mouth, which limits ways for bad actors to join. In the same vein, the pay is below market-rates, which reinforces the phenomenon of ideological homogeneity. Second, decisions are made through consensus using formalized methods. Frequent meetings that are prepared in advance following a set of rules, disagreements that are discussed using techniques that minimize the subjective dimension of it and are solution-oriented, elections without a candidate (in French: “élection sans candidat”), etc.
but what happens when its not in the interest of the business to make consensus based decisions? like what you described can quickly devolve into "how do we get everybody to keep their responsibilities unchanged and still make payroll?" vs "how do I delegate responsibilities and adjust payroll to resources that generate revenues vs expenses"?
I just have a hardtime believing this could work. Corporations reflect militant hierarchy for a reason because effective decisions often cannot be made through consensus or utilitarian drivers. Corporations thrive when they are lead by profit incentives of executives who are beholden to profit incentives of liquidity/capital lenders.
You simply do not see a "collective" trade publicly.
In the UK for example, we have the John Lewis Partnership (10.5billion GBP revenue), Co-operative group (11billion GBP revenue), and many in the 50+ million revenue bracket like Suma Wholefoods.
We've also had many major public or private corporations rescued from collapse by worker co-operatives that were able to maneuver out of problems that the centralised organisation could not. See for example Meriden and National Express.
Also, many people's financial services are provided by building societies and other co-operatives. Many of the largest banks have been these kinds of organisations at least once. HSBC for example.
That's just in the UK - it would be astonishing if there weren't many more examples disproving your conjecture from every other country.
The business are the owners. And, unless they are woefully mislead or incapable, the owners will vote what is in their best interest. If the best thing for the business is NOT to grow, because a majority are happy with the current state, then the business shouldn't grow, especially if that would require sacrificing the desires of some of the workers.
This is identical to how privately owned companies are often run, especially family owned small businesses, which can be extremely successful.
Profit is at best a proxy for success, it is not a goal in itself.
It works though, and typically when these cooperatives grow large enough they easily outcompete the privately owned businesses where the profits are siphoned out to people who contributed nothing and who have no knowledge or clue about the actual business. In cooperatives the owners actually know what is happening on the ground because they work in the company, and the profits don't flow out of the business.
I encourage anyone interested in this concept to check out Opolis. I have been happy so far. Seems to be one of the few companies actually making this happen right now.
Going to make a PR to add our company O(1) Labs. It’s very rare in that it’s VC-funded by prominent VCs, but still majority worker-owned and fully worker-governed.
The board is composed of workers, selected by workers on the basis of one person on vote, and we hold General Assemblies for workers to make and vote on proposals.
I'm really curious what's in it for VCs with funding a coop? Usually VC wants an exit possibility, if not plan, but it's hard to imagine exits that aren't essentially destructive to worker ownership (at which point are coop workers going to be happy with golden handcuffs and such?).
I know of Windings: "an Employee Stock Ownership Plan (ESOP) is a legal business structure that utilizes shares ... ESOP shares are only available to employees of the company"
> In 1998, as part of Ryberg’s retirement strategy, Windings Inc. formed an Employee Stock Ownership Plan (ESOP) for a planned purchase and transition of Company stock to the Windings employees. Ryberg retired in 2006, and by 2008 the company became 100-percent employee-owned.
There are several states that have adopted a worker-coop LCA (Limited Coop Association) law from the ULC LCA https://www.uniformlaws.org/committees/community-home?Commun.... There are also a couple of states not listed here that adapted the ULC draft to better fit existing corporate laws, for example, IL.
Coops interest me a lot because of the autonomy and I think codified autonomy is critical to longevity of health within an organization.
Worker owned co-ops are 100% compatible with capitalist regimes, since they're just people freely consenting to a work/ownership arrangement. I think they're cool experiments, if anything.
With that said: if they're so much better than traditional firms, they why haven't they taken over the world? That is, if they were so good, greedy shareholders and investors all over the world would demand that their firms restructure into Cooperatives, and firms that weren't Cooperatives would tend to lose out in the marketplace (being beaten by the more efficient Cooperatives). But we don't see this happening.
This seems like strong evidence to me that they don't offer a superior arrangement (at the firm/system level) for producing goods & services more efficiently.
They might be net positive for the workers within the co-op (at the median anyway) versus taking on outside investors and giving them a slice in search of larger scale.
For diversified investors, it's more valuable to have some of your companies return higher gains even if others don't work out. For an employee though, their income is totally concentrated in their one job.
The employees can be rational in not wanting investors, and the investors are rational in not wanting to invest in those firms (at terms the co-op would accept).
The problem really comes from the capacity for a coop to raise funds. A coop is a non-capitalistic company so very few investors are interested.
There is no valuation other than amount of shares x value of share. Voting power is not dependent on share (1 person = 1 vote).
Making an exit is thus not a possibility. Investors have little interest to finance a traditional company that would only yield dividends (if it does, which is not mandatory).
The problem of speed is also often cited: democracy takes more time. While I think that's true, I haven't felt that was a limiting factor. Financing is a much bigger one.
It's a bit sad that so many people think democracy means "voting to select the least bad option".
The employees work together to find solutions that cut costs. That might involve sacking some people, but it might also involve people volunteering for a temporary pay cut, or renegotiating with a landlord, or a million of other things that reduce expenses.
What never happens, though, is that the CEO "sends people to the chopping block" to protect his own bonus.
See, from my perspective, democracy isn't a very good form of governance, and I don't understand why it should be applied as an end in and of itself in every area of life. This is in relation to co-ops, but also to the recent "democratization" drive in general.
I think it's the least bad form of governance for states because it seems to result in atrocities and genocide less regularly, but when it comes to other systems, (such as businesses) centralization and hierarchies are far more efficient and the decision makers are generally much more informed with the relevant data. With democracy, you spread the decision making across a vast number of under-informed people, which seldom results in superior outcomes.
Sure, incentives matter, I agree with you there. But the incentives aren't corrected when you add a democratic vote of all employees to the mix. The incentive alignment stay the exact same, where everyone is trying to save their own skin even at the expense of others or the firm as a whole. The only thing you've changed is reduce the liklihood of a data-driven decision, and increased the cost, complexity, and response time of dealing with dynamic and rapid changes affecting the organization.
> centralization and hierarchies are far more efficient
Efficient at what? Dictatorships are efficient at maximizing centralization power (and therefore creating wars), not efficient at making citizens happy.
Private companies are efficient at maximizing profit for the shareholders, not efficient at making employees and customers happy.
> With democracy, you spread the decision making across a vast number of under-informed people, which seldom results in superior outcomes.
Wrong. You are trying to applying direct democracy at specific, technical decisions. This would be like passengers on a flight voting on what flap configuration to use.
But democracy is not the Borg and does not automatic mean "everybody decides everything together". Specific knowledge and division of labor can still exists.
> but when it comes to other systems, (such as businesses) centralization and hierarchies are far more efficient and the decision makers are generally much more informed with the relevant data. With democracy, you spread the decision making across a vast number of under-informed people, which seldom results in superior outcomes.
See, I would argue the exact opposite. In a feudal hierarchy, the people making the decisions are usually the ones with the least relevant information -- or in the best case, with the most outdated information.
Hierarchies are great at distributing information downward, but not particularly good at aggregating it upward. This is often for power gradient reasons: people enhance the truth to look better when communicating upwards. Even when people communicate honestly, there's a lot of context and nuance that gets lost as a message travels from person to person.
In an actual democracy, you'll generally find that the people with the best view of the information and consequences of the decision (by virtue of being the ones affected by the decision) are the ones to make that decision.
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Edit: I think I see where the misunderstanding comes from! In your typical corporate hierarchy, the people at the bottom usually don't care about understanding the information that is needed to make a decision -- because they won't be asked to have an input on that decision anyway.
In a sense, the corporate hierarchy is a self-fulfulling prophecy. By dumbing down the role of the employees and preventing them from having any real responsibility, the employees turn into mindless ass-covering robots without responsibility, and then the corporate hierarchist uses the argument that "democracy doesn't work because employees are just mindless robots that cannot take responsibility."
My experience is that when you give people authority over their own selves with a "I dare you to be responsible" what happens is that most people, well, are very responsible.
People get together for common causes and sometimes they need to be reminded what that common cause is, but once they have that in mind, they're fairly good at cooperating productively.
I don't think that giving everyone a vote makes them suddenly driven to inform themselves. For instance, in your average co-op do all the guys on the bottom rung understand what Return on Equity is and its relevance to long term strategy? I can't imagine that they do. But the C-Suite does.
Look at democracy in governments. We have a lot of data about that. Giving everyone a vote certainly doesn't drive them to make informed voting decisions. After all, the average American seems to think that the president controls gas prices.
Yes, in a well-run co-op, all people understand return on equity and other such concepts relevant to long-term strategy. Why? Because they apply such techniques locally (to their department) as well as globally (for the entire company, and in society at large).
You might think my qualification of "well-run" co-op is a bit of a "no true Scotsman", but the fact is that in all forms of business, there are well run ones and badly run ones. A feudal C-suite does not universally understand things like return on equity – in fact, I suspect, many companies are run feudally with a C-suite that has no idea what they are doing.
> See, from my perspective, democracy isn't a very good form of governance, and I don't understand why it should be applied as an end in and of itself in every area of life. This is in relation to co-ops, but also to the recent "democratization" drive in general.
Because of autonomy: The only people making a decision should be the ones effected by it.
In other words, if everyone did the radical thing and asserted that they cannot be threatened until they do something they don't want to do, democracy is the only thing that could possibly work.
Anything that's not democracy ultimately rests on threatening people into compliance. Often implicitly ("be a team player and take this third overtime in the month because I'm under pressure from upper management"), sometimes explicitly ("I call the shots on hiring and firing, so you want to stay on good footing with me").
now that you mention it, i would love to see a long-form conversation between a coop engineer and a DAO engineer! granted, they likely work in different arenas, but i'd mostly be interested in hearing about the work dynamics and how they manage each other, not so much the clients/products they take on.
But in terms of getting a company off the ground right now, you'll have difficulty getting financing and as companies start off they generally have no or limited profits to distribute. In times when financing is easy, perhaps that's no big deal -- get easy access to capital to pay a liquid salary, and then give people equity for a share in future profits.
Right now, however, I would be very wary of starting a company, especially if you're planning on starting a type company that limits your ability to seek investment.
Draw an accounting fence around the 100% employee-owned coop. Any losses could only come from capital invested or retained earnings (losses to the employees) or from bad credit extended to the coop. It’s true that the latter represents an opportunity for there to be losses that don’t hit the employee owners, but that’s typically only after the company is wiped out, so it’s a “good news, bad news, but mostly bad news” situation if being an LLC is coming into play.
For an on-going operating company, 100% of the gains and losses accrue to the owners (employees in the case of a 100% employee-owned entity). That’s working as intended/designed/desired.
I mean, the point is that the difference between working for a company and being part owner of a co-op is the difference between you still earning the same salary or you earning nothing and owing creditors.
When a company is healthy it is able to pay salaries to employees and profit to owners. When it's bankrupt is paying 0 salaries and 0 dividends.
When it's in trouble, a company will have to choose who to sacrifice: firing employees or cutting dividends. The priority of privately owned companies is to maximize value for the shareholders. They are more important than employees, by design.
In a coop workers and owners are the same people so they are the first priority, that's all.
Statistics show very clearly that coops have a higher survival rate.
> you earning nothing and owing creditors
Once again, no, as an owner of a limited company going bankrupt you don't owe to creditors.
Oh, you can owe money you personally guaranteed. You're also jointly and severally liable in a general partnership. LLCs are nice in that you can have the tax benefits of a partnership and the liability protection of a corporation if set up correctly. This 'corporate veil's only puts the value of the money that you put into the corporation at risk i.e. the value of your investment. However, certain actions could 'pierce' the corporate veil if the LLC is setup incorrectly or if certain conditions are met.
From an accounting standpoint, GAAP doesn't much care if you're a private company with shareholders or if you're a private company with employee-owners. There are tax nuances and accounting for equity differences, but the books are mostly the same animal.
I really like this passage:
> “Consider a law firm. Do the founding partners go out and hire a Lawyer Manager to order them around, and then do they hire a VP of Lawyering to order the manager around? Do they then hire a CEO to rule over everyone and a CFO to handle the finances and a COO to schedule court dates and such? Of course not. There’s no historical precedent for all that fluff. Rather, they handle facets of the business themselves. What they can’t or don’t want to handle, they delegate to subordinates that they hire. The partners don’t specialize in finance, sales, marketing, or operations. That would be silly. But they understand enough about it to act as the boss.”
...and this one:
> “It turns out that treating knowledge work pursuits like manufacturing operations doesn’t work particularly well. But it was the model inherited from the Industrial Revolution, and it’s been hard to shake. The thinking goes like this: if you break a complex operation down to its individual components and then have people specialize in those components, batching the work and letting people get good at tiny slices of it leads to greater efficiency. This works well for stations on an assembly line but not so much for writing software.”