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ShaperTalk: Worker-Owned Cooperatives

A Discussion with Amy Johnson, Hillary Abell, and Taran Ramage

On May 20, SF Shapers Adam Flyndersticks, Randy Lubin, and Tim Hwang brought together San Francisco Shapers and guest speakers Amy Johnson, Hillary Abell, and Taran Ramage for a ShaperTalk discussion on Worker-Owned Cooperatives.

Worker cooperatives are business entities that are owned and controlled by their members, the people who work in them. Procedures and practices differ, but they are defined by shared ownership and some form of democratic self-management. Worker-owned cooperatives are one part of a large spectrum of mutual control and ownership that also includes things like employee stock-ownership plans (Recology) and various forms of workplace democracy (Valve’s flat hierarchy, or Brazil’s Semco, made famous by its CEO and majority owner Ricardo Semler).

The roots to the modern cooperative movement lay in late-19th century reactions to the industrial revolution. That’s where you see the formation of things like mutual aid societies, credit unions, and with the Rochedale pioneers of northern England, who started the first consumer co-op. Co-ops were an important part of rural electrification in America, pushing for railroad regulation in a fight oddly similar to net neutrality, and the only successful irrigation in the west prior to the Bureau of Reclamation. They were also a huge, and until recently unheralded part of African-American survival and organizing under Jim Crow. (Jessica Gordon Nembhard, Collective Courage). The Mondragon cooperative network, founded amid some pretty hostile conditions during the aftermath of the Spanish civil war, now employs over seventy thousand people and is one of the top ten enterprises in that country.

Worker cooperatives tend to be less susceptible to perverse incentives, which means they tend to operate with greater long-term stability. They’re associated with high quality products and significant net benefits to the community.

Cooperatives are currently experiencing a surge in popularity. Partly, that’s because there’s greater support infrastructure and sharing of information about what works, partly because institutions and governments are increasingly looking to them as a means of creating jobs, reducing inequality, and building community resilience. (Reading, PA, Jackson, MS). To put it plainly, a lot of them have tried the standard recommendations— exotic financial instruments, tax incentives for corporations— and they’re ready for something else.

Evergreen in Cleveland was a novel way for anchor institutions to deal with the inequality and poverty surrounding them. In 2009, hospitals, universities, and the city government gave seed money to a new group of businesses, and now contract with them for laundry, energy retrofits and fresh produce. More locally, you can look at the work done by WAGES, now known as Prospera, fostering the development of several successful worker-owned cleaning services, with a specific focus on low-income Latina women.

There are still a lot of obstacles, and not every situation might be best for a co-op. To share more about co-ops, we’ve invited three guests to speak to Shapers and friends tonight: 1) Amy Johnson, co-executive director at the US Federation of Worker Cooperatives; 2) Taran Ramage, a worker-owner at TechCollective; and 3) Hillary Abell, a member of Project Equity who has researched some of the obstacles and pathways to scaling cooperatives. A summary of our discussion is below:

Opening Discussion:

  • Amy Johnson described the work of the US Federation of Worker Cooperatives, which is along the lines of a trade association, except for a particular form of business. They have a membership of a couple hundred, some of which are nonprofits who practice workplace democracy, as well as a number of accountants and lawyers who specialize in working with cooperatives. They provide a lot of resources and tools for worker-owners and advocate for improvements in the regulatory environment. They've recently received a lot of interest from governments and institutions regarding co-op development, which led them to spin off the Democracy at Work Institute, a sister group that fits more of that demand.
  • Hillary Abell spent much of her twenties as a worker-owner and board member at Equal Exchange, the Fair Trade co-op in Boston. She then worked for a number of years at WAGES/Prospera, helping set up cleaning cooperatives of low-income Latina women. She's spent the last few years studying the obstacles and opportunities for cooperatives to scale up, both at a firm and a society-wide level, and recently started Project Equity, which aims to build jobs and opportunity in low-income communities through co-operative development.
  • Taran Ramage is a worker-owner at TechCollective, and their most public face. He had done IT, tech support, and system administration (among many other hats) at a number of high-performing startups, and was looking for something else when he found TechCollective. He's also in communication with other cooperatives across the country and abroad working in tech. He's interested in showing the viability of cooperative structure beyond the familiar grounds of "bike shops and bakeries."

How do decisions get made? What is it like on a day-to-day basis?

It depends on the nature of the decision and the size of the firm, but also by the structure that they've set up. Tech Collective is pretty small, so things can be decided through discussion and dividing up of tasks. Sometimes it's hard to get out of the hierarchical what-boss-says-goes mode, and they're trying to figure out more forms of accountability beyond social pressure.

"One person, one vote" is the capstone, but the vote can be to select representatives/liaisons to handle the details or work with another group. The co-ops set up by WAGES/Prospera tended to be strongly representative in structure, in part because of the time constraints placed on most low-income latina women. Rainbow Grocery was cited as a highly structured direct democracy, with departments (like "cheese") having a lot of autonomy. Their protocol for making sure that general assemblies don't take forever was called "a thing of beauty" to see in action. Amy noted that some of the resources she offers as part of the USFWC include a matrix for determining which decisions can be delegated and which ought to be decided by the general assembly. Randy asked about whether vote-proxies were a common practice, and it didn't sound like they were organically, though it is an option in Loomio, a platform that Taran mentioned.

It's also worth noting that while voting tends to be entirely democratic, cooperatives can vary on compensation. Some have flat salaries or compensate by hours worked, some organize pay scales and profit-sharing by type of work done. Still, co-ops have much less of a pay disparity compared with most corporations; even those co-ops with a hired general manager rarely if ever exceed 5:1 ratios.

What are obstacles to scale?

First and foremost, it's a question of access to capital. Most lending assumes a sole proprietor, or otherwise a single person who can . There are a number of regional cooperative development funds, but there could be a lot more. Credit Unions (which are basically banking cooperatives) are limited by law in the size of the business loans they can make, so getting rid of that, or at least getting rid of it for co-op investment, present an interesting opportunity. They're working on it, but this is a problem that is very much ripe for more thinking, bridge-building, and experimentation.

Amy related a story she'd heard from an engineering co-op about visiting Mondragon, about the realization that their goal, first and foremost, is job creation. "We created sixty jobs. Mondragon created sixty thousand." That's different from profit maximization, which is something we miss: even successful co-ops in America may think more in those terms than the creation of livelihoods for more people. There's also more challenges that go along with growing your co-op, both social and economic, and require capacity-building for both. A lot of the people starting co-ops may not have a ton of business education, or if they do they might not have a lot of experience with non-hierarchical decision-making/operations.

What can be done to raise awareness that this is even a thing you can *do?*

One opportunity that occurred to me might be in education: there's a lot of backlash at the administrative class of universities, whose admonitions to "run it like a business" seem to yield short-sighted practices that end with tuition increases, rather than the longevity you see from cooperative practices. Amy noted there are a number of cooperatively-run charter schools, which handle the multiple-stakeholder problem (parents, kids, teachers) in different ways.

What might tech do to or for cooperatives?

Despite both being deeply rooted in the Bay Area, at present there isn't a great deal of crossover between tech and co-ops. Part of the issue lies with the current shape of work inside a start-up; VC money puts you on someone else's aggressive schedule, and drives for eventual acquisition or IPO. This leads to a lot of high-risk, high-reward decisions and a 'frothy,' turbulent environment, very different from the steady, durable jobs we associate with co-ops. So while rhetoric and ethos of a pre-series-A startup is often quite similar to that of a cooperative, and the entire notion of outside investment is more palatable than it was a decade ago, VC funding for co-ops might be a red herring.

Perhaps cooperatives might find better models in the slow, steady growth of Mailchimp and 37Signals (the makers of Basecamp). Both of these firms started as web design companies that eventually moved further up into the "pick and shovel" world of tools for businesses instead of one-off projects.

Namaste Solar is an interesting example of a conversion, in that its founder set up principles akin to co-ops before learning that such entities even existed. This led into an interesting discussion of the problem of "Founderitis," which is unsurprisingly also a problem in start-ups. There's a tremendous amount of energy and resources put on the line in founding a business, cooperative or not, and we're still finding ways for founders to feel compensated if/when they want to exit. (Conversions also make a lot of sense when it comes to retiring boomers looking to pass on their business, but we didn't get too far into that topic.)

Many of these workplaces are still places; bike shops, bakeries, etc. Working remotely is something that tech enables and often rely on--does this present an obstacle to the type of group cohesion co-ops need? Taran noted that they recently put in a rule that requires a certain amount of face-to-face, even if via skype. They mentioned Loomio, an occupy-inspired platform for collaborative decision-making, as something that could enable more decentralized cooperatives.

One of the hanging questions we touched on but didn't fully explore was about Uber-ization; the process of tech creating interfaces for the work of mostly 1099 workers. There didn't seem to be any particular reason why the independent contractors (an often precarious work situation) couldn't be members of cooperatives instead. There might be interesting work to be done in creating a unified front-end for hiring cooperatives of a given industry, which could allow scale in operations without needing to unduly scale the organizations themselves.

Questions or projects to think about:

  • How might the shapers help build bridges between co-op developers, tech, and city government?
  • What might be done to reimagine cooperative investment and access to capital?
  • What could be done to raise awareness about cooperatives as an option, particularly conversion?
  • Why aren't there co-op web dev firms in the Bay?
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