ESSAYS on THE NEW ECONOMY #5

because Co-Ops can be cool

I’m writing to you today to talk about worker-owned co-operatives.

What’d you say?

I’m talking about worker-owned co-operatives. Because we don’t know what we don’t know, but it’s time we talk about something that already exists and isn’t too far out imagining, as it’s a thing that already is happening if we can see it. Then,

What is a co-op?

It is a for-profit business that is owned by the workers. The profits (and losses) are shared by the worker-owners, and decisions are made through collective governance (each person gets a vote and a say, regardless of their capital contributions). The idea is that if you contribute to the value the business is creating, then you share in the financial outcomes.

We get used to the idea that business is a hierarchy, where those who have advanced up the career ladder are deserving of more pay and more power. It’s not the only way.

In fact, there are tens of thousands of co-ops that exist already in the US, in France, in Spain, in India, in Brazil and elsewhere.

There are private equity firms whose impact teams are currently being accompanied in buy-out transformations (in which the company gets bought, transformed into a worker-owned structure, and then sold — with employee stakeholders benefits alongside investors). Ownership Works is one non-profit operating in this space, accompanying private equity teams toward this purpose.

There are also funds, foundations, state-level employee ownership centers, co-operative conglomerates, and impact-driven non-profits helping facilitate the moves toward worker-owned structures. Billions of dollars are being directed toward the purpose in the United States alone.

There are several scenarios in which a co-op could be formed. Co-ops can be created through a startup choosing the structure at the beginning. Another option is for a business to be converted into a co-op, which is often more successful long-term. Co-ops can also be a mechanism for elevating community wealth and bridging the racial wealth gap. No matter how it’s done, wealth is shared and that’s a powerful thing!

While it often takes a philanthropic effort that’s needed to educate on the topic and help prove a hypothesis, once off the ground the benefits are widely attested to. Employees, when they become owners, are more motivated and more likely to stay at the company longer. Sales usually improve. Companies last longer. In other words, value is created beyond the sum of the parts.

If wealth were a pizza, and it were shared via a co-operative business structure, then the pizza would never run out. Each would eat his share, and yet also contribute his share, and so the pizza party (aka celebration of shared wealth creation) continues.

Some worry that distributed decision-making slows down important business processes. Others complain about the ‘unnecessary’ politics. These are realities to be aware of. That said, when one realizes how wide is the gap between the number of people with experience-based knowledge on the subject and the people who criticize without having actively participated, it becomes easy to dismiss any lingering hesitancy and dive deeper into the real details.

The fact remains that co-operatives have existed for more than a century, and the movement is growing!

Increasing impact investment is focusing on the need to find a solution to a very dire problem: Millions of retiring small business owners are looking for an alternative to selling to their competitor or to a large multinational. With more investment comes also more people showing interest, educating themselves on the topic. Already as well, at the government policy level, things are changing.

Myself, I am invested already in several organizations in the US supporting the co-operative ecosystem. After 3+ years invested, none of the investments have defaulted, and all have recognized financial returns as well as the social impact benefit.

I’m also involving myself in a partnership here in France that will seek to support (in greater numbers) the transfer of operations and profit share from retiring small business owners to the workers of their team, alongside an ecological transition. We are in early days and inspired by the incredible market opportunity.

Something else unexpected: In the US, it’s not uncommon to stereotype the French as ‘lazy’ or ‘un-motivated’ when it comes to work because we hear about the strikes and the ease with which people can go on unemployment and the preference for dinners and friend-time rather than working long hours, and of course there are exceptions to all of this. & stereotypes usually only ever tell a small part of the larger, more complex, more interesting story.

But also - there is the surprising fact that the generous unemployment / social security and the leisure time in France actually supports a very entrepreneurial culture… where people do their research properly and launch a small business not as a side hustle but as their main thing, and are able to sustain it long-term and grow it smartly because they had the time to rest and consider wisely their next move.

By analogy then, I expect unexpectedness from the evolution of the co-operative industry and this growing reality that small business owners can sell to their employees. What can I learn from the reality in France? What can I bring from my American heritage? The work my partners and I have planned is a massive undertaking and will benefit from collaboration with others. More on that later.

Summing up then:
Beyond informal partnering with and learning from others, which is its own type of cooperation, there are types of cooperation that run deeper.

When we can allow for a share of the business ownership itself, not because of capital invested but rather because of labor, then we know very real equality is in our grasps. It is good to recognize the true value of labor. Worker-owned cooperative structures is one way this can be done.

Hopefully what I have written here helps spark some curiosity to understand better the topic. For those who want to read more, here is an excellent report helping map out the ecosystem: Opportunity Knocking - Fifty by Fifty

Let’s talk again soon :)