Review: Making Mondragon

makingmondragonIf I had to recommend just one book on worker-ownership, Making Mondragon by William and Kathleen Whyte would be at the top of my list. The Mondragón cooperatives in the Basque Country in Northern Spain are the most successful group of worker-owned businesses in the world. In 2015, the Mondragón corporation employed a total of 74,335 workers world-wide and had a gross annual turnover of 11.37 billion euros.¹ Making Mondragon was first published in 1988, and then revised in 1991, and covers the early history of the group. The first Mondragón  cooperatives were founded in the 1950s under the leadership of “that red priest” (p. 29), the radical cleric, Father José María Arizmendiarrieta, and Making Mondragon documents in detail the development of the group over these early years: from its foundation in the 1950s, through a period of unprecedented growth in the 1960s and 1970s, and finally through the challenges of the Spanish recession in the 1980s.

While still very successful, the Mondragón group of cooperatives have faced a number of significant new challenges in the 25 years since Making Mondragon was last updated, and one could argue that this book is now very out of date, but in reality, I don’t think that that matters too much. As a social history of the early years of the cooperative group, this book covers the period of Mondragón history that would be of most interest to readers of this blog. The Mondragón cooperatives are responsible for modernizing the cooperative model, taking the basic Rochdale principles and elaborating on them to create a mature form of workplace democracy that can successfully compete with capitalist multinational corporations in the 21st century. Making Mondragon covers all of that early modernizing process.

As an introduction to worker-ownership, Making Mondragon is both informative and profoundly inspiring. There is plenty of practical detail about the design of the early cooperatives that will be useful to new socialist entrepreneurs, but it is William and Kathleen Whyte’s readable account of the origins and growth of the Mondragón group that puts Making Mondragon at the top of my list of favourite books about worker ownership. At the same time, this is a rigorous history. While the authors celebrate the successes of the Mondragón cooperatives, they also openly examine the controversies, contradictions, and setbacks the worker owners faced as their cooperative movement grew.

The idea of founding a worker-owned business is certainly daunting, but the story that the Whytes tell in Making Mondragon demonstrates that with smart collective effort, we can create organizations that not only survive, but that grow and diversify. Successful Mondragón cooperatives can now be found in almost every sector of the Spanish economy: in banking, manufacturing, high-tech, service, retail, and agriculture. In this book, the Whytes describe a group of collectives that serve as a real-world example of how a thoroughly democratic economy might be built. Both practical and inspirational, Making Mondragon is far-and-away the best book on worker-ownership I have read so far.

White, William Foote and Kathleen King Whyte (1991) Making Mondragon: The Growth and Dynamics of the Worker Cooperative Complex. Ithaca, NY: ILR Press.

¹  Mondragon Corporation (2016) Press Release for the 2015 Annual Report. [Accessed 27/2/2017].

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Interview: Elisabeth Barton, Echo Adventure Cooperative


Echo Adventure Cooperative is a new worker-owned outdoor guide company established by four experienced guides who are based in the Yosemite wilderness in California. The new cooperative had the opportunity to take advantage of some recent legislation in California aimed at normalizing the worker-cooperative model in the state, and I had a chance to interview founding member, Elisabeth Barton, about how they got together and how they set up their company.

Tim: I guess the first thing I’d like to do is ask you if you could briefly tell me a little bit about the history of your cooperative, and maybe about some of the motivation behind starting a cooperative, about why you thought of doing it in the way that you did?

Elisabeth: Yes, great question. We incorporated in early August, and then operations began on the first of December, so it’s still really new.

It was an exciting adventure getting to this point; there are four of us that started this coop, and we had all come out of awkward job experiences. Guiding in and of itself is a relatively exploitive industry. A lot of people don’t realise, but oftentimes guides are making less than minimum wage and living in tents behind the homes of the owners that they work for.

So we had all experienced these exploitive practices and we were looking to transition, so then it just sort of happened over coffee, beer and a few conversations. Maybe within a month we were legitimately looking at incorporating, so it was very quick.

We always knew that we wanted a cooperative, or what we thought a cooperative was, so that guides could have a better chance at having a family and a career at the same time. We didn’t quite understand what it took to get there, so that’s why there was such a long time between when we incorporated and when we began operations.

Tim: Excellent, could you explain a little bit about what you learned and why it took so long, and what you had to adjust to?

Elisabeth: None of us are MBAs. I’ve worked in management for years, specifically recreation management, so I had that side of it on lock-down, but I’ve never started a business. Our CFO, William Holtsman, has been in finance for years, but he’s never seen terms like non-member profit and member surplus. Everything about the cooperative model is the opposite of traditional business, from profiting to terminology.

So we had to relearn an entire subject, or not really relearn, we had to learn an entire new subject. It was tedious for sure, but when we spoke with our lawyer for the first time, this amazing guy that helped draft the California Worker Cooperative Act, he laughed and said, “You guys know way too much about this. You’ve done most of my job for me.” So we may have over studied. (laughter) I’m realising now that not everybody needs to go as in depth as we did.

Tim: What were some of the resources you used to learn about starting a cooperative? What did you take advantage of?

Elisabeth: There were three things in particular. It began with a lot of web searching, and in that process we found a really amazing website called California Center for Cooperative Development. We didn’t know at the time, but the California Worker Cooperative Act had passed in 2015 making Worker Coops a legitimate entity. The CCCD had done a really wonderful job at translating the Act and putting it on their website. So all of the sudden we had a relatively new document that we could read, and learn what the expectations were for our structure, and then decide if that’s how we wanted to go forward.

Then we had the Tuttle Law Group. Sushil Jacobs is our lawyer, and he helped craft the California Worker Cooperative Act, and this is all by coincidence. I don’t know if it was his first opportunity to apply the new law to a new business, but he definitely couldn’t have been more excited for us and couldn’t have been more helpful.

Tim: Excellent, so then can you explain a little bit about your organizational structure? I noticed on your website that each member is also a member of the board. Could you talk a little bit about that and how, through this new California law, your coop structure is designed?

Elisabeth: We’re legally considered a Collective Board Worker Cooperative Corporation, organised under the California Cooperative Corporation Law, an obscene sentence! (laughter) What that means is that anybody who comes on, after they go through a six-month vetting process, they become a board member with full access to all of our information and documents as well as full voting rights. Eventually we hope to have our bylaws, our articles of incorporation and everything on our website for anyone to see, but right now our members have full access.

In this industry in general, guides give up a lot to live their dream, so the four of us felt like this was another step in becoming a productive member of the community. Being a Board member gives guides full access to their company and the opportunity to make decisions about how the company operates in the community in which they live. What other questions do you have in terms of our structure?

Tim: I think that explains it pretty well. I also noticed that you have a very transparent process on your website for joining your cooperative, and that struck me as particularly remarkable. Could you talk to me a bit about how you envision that process working?

Elisabeth: Yes, I should say that our guiding agency is really the next step in guiding, so somebody who is in finance or is a professor or maybe an amateur birder, we’re really not the place for those people to step in and to begin a career in naturalist activities… I guess in Europe naturalist means nudist doesn’t it?

Tim: I understood what you meant! (laughter)

Elisabeth: In a career in the natural world, maybe I should say. We’re really here for those guys who’ve been around for a while; they’ve done their time in their tents. What we wanted to do was provide two things. First, our requirements help eliminate those that are not experienced or serious. For example, we tried to make the amount of money to join the cooperative as low as possible, but still be just enough money to be serious. People wouldn’t just throw down $2,000 for nothing.

Then we also wanted to give a map or a blueprint for those people who were stepping out of their old careers and heading into this industry. It’s important for us that somebody can come to our website, without feeling awkward or having to call and ask questions, and read the information and know exactly what they need to do, what decisions they needed to make in their career to eventually either create their own cooperative, which would be awesome, or join ours.

Tim: Yes, I noticed that you mention different certifications that you wanted to see and so forth. That’s really interesting, that you’re kind of pitching your new cooperative at people who have some experience anyway, so they kind of know about the industry and what you do, is that correct? You’re not so much envisioning that you’re going to be training new guides?

Elisabeth: Exactly, however, that being said, one of our goals in the near future is to have mentoring programs for people who are either just out of high school or college, or maybe making a career change. Having these details on our website is just the first step. Eventually we want to offer mentoring and volunteer opportunities, beginner job referrals to local B-corps like Evergreen Lodge and Rush Creek, and a comprehensive a guide school.

Tim: Excellent. Stepping back a little bit, could you talk to me a little bit about the philosophy of your group? What appealed to you about the cooperative model and why was starting a worker coop something that your group decided you wanted to do?

Elisabeth: That’s such a great question. I think ultimately all we knew is that we didn’t want to be exploited, and we knew that we didn’t want to exploit. People in this industry always start out with really wonderful intentions, saying, “I’m going to profit-share and I’m going to give these huge bonuses at the end of the season.” Then, for one reason or another, they don’t and guides are left with, “But I thought…”

So from the beginning we wanted to build in egalitarian approach to business, as well as goals and guidelines for things that we wanted to accomplish in the future. It was really important to us that no matter how we structured our business, that our stake holders and the things that we’re the most passionate about were always considered. That’s our community, our environment, our member guides, and our guests, the people who pay for our service.

It was difficult to cement those ideas into our business model when we started to look at traditional corporate structures. So when we found out that worker cooperatives had just been established in California as a new legal entity, it was so perfect, because it gave us this blueprint for including those four stakeholders and gave us opportunities and ways to work towards protecting or enriching those four things.

So I guess the short answer is we wanted to build in protection for when we’re really wealthy and famous, and our company is known around the world (laughter), that we would be forced by the way we are structured it to continue to look after our four stakeholders on a daily basis.

Tim: Looking back over the last few months, and as you’ve been putting your business together and organising yourselves, are there lessons you’ve learned that you would like to share? If you were talking to other people who were thinking about starting a cooperative, what advice would you give them?

Elisabeth: Totally! The first one is just do it. We desperately need more cooperatives. This is something that I say all the time, but we really believe that coops are to the service industry what unions were for manufacturing. The only way that we’re going to have the kind of impact that unions had on manufacturing is if there are more of us.

And it really is easier than it appears at first. I guess that would be the second thing I would tell people. When you go out looking for your cooperative model, don’t expect to find a step-by-step guide for how to create your cooperative. The thing that makes cooperatives so beautiful is that they are a reflection of the values of their shareholders or their members, so each one is uniquely different

I think that gets a little overwhelming when people first go out there and start looking, because they really want to find their template, where they can plug in their information and simply print out a business plan and their articles of incorporation. It just doesn’t work like that, but again, that’s one of the most beautiful things about it is that your cooperative is solely a representation of what you’re passionate about.

So I would keep those two things in mind, and don’t get discouraged! Really just keep moving forward, and make it happen. It’s so much easier once it’s done. You’ll look back and say, “Oh, it’s done. OK. Cool. Let’s go!”

Tim: That’s really inspiring. That’s excellent. That’s perfect because we’re just at about 20 minutes and this a good place to stop. Thanks so much Elisabeth for sharing this.

Some links:

Text of the California Worker Cooperative Act AB 816

A helpful summary of the Act

Pictured: (the Echo team, left to right) Jamie Plouffe, Bryant Burnette, William Holtsmans and Elisabeth Barton

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Interview: Constance Laisné, Altgen

constancebeagAltgen is an educational workers’ cooperative based in the UK that aids and advises new worker-owned start-ups, and as such, their work is very close to the topic of this blog. Altgen was founded in 2012 by Constance Laisné and Rhiannon Colvin, and Constance has kindly agreed to answer a few questions by email about Altgen for the Socialist Entrepreneur. Constance and Rhiannon have been interviewed before and have also written a number of articles about how they founded Altgen and about why they think worker-ownership represents a better alternative for young people who are just establishing themselves new careers, and I will add links to those interviews and articles at the end, but here I would like to take the opportunity to ask more about the nature of their mission and how they help worker-owned start-ups get off the ground.

Tim:   Constance, could you explain a little about the day-to-day work of Altgen and what sort of advice and aid you provide to aspiring worker-owners?

Constance:   We inspire youth groups and young isolated freelancers to re-think work and our current economy. We run participatory workshops, either at universities, or in our Altgen space in Borough where we invite them to identify their common issues with today’s work reality for the young generation, such as: zero-hours contracts, not enough jobs for people, not enough meaningful jobs, extreme competition, unpaid internships, neither sick pay holiday pay nor maternity leave for freelancers, isolation, loneliness, etc.

We also facilitate the coming together of groups that already work together informally. We reach out to people and get to know them through networking events and meet-ups that we organise. We invite them to think about how they could turn their projects into co-operative businesses. We go through the reasons we find co-ops are so relevant for youth in today’s precarious work environment and how workers’ co-ops can turn the current economy and system inside out, how they bring back democracy, equality and solidarity at the workplace. We explain and explore the principles of the democratic workplace, of common ownership, and of economic participation, and their practical and tangible impact on the social and political well-being of our communities.

And finally, we support groups to set-up their own co-ops by going through the essential steps with them. We use design thinking and graphic design to go through the co-operative development methodology. We use the DNA. We have made it really easy and fun to go through. It’s not about spreadsheet, but at Altgen it’s a nicely designed handbook. The jargon has been translated into young people’s words.  We go through the essential questions: Do you have a team, a vision, an aim, a mission statement? Do you know how you want to achieve this aim through tangible objectives? Are these objectives achievable by the current team? Does the team have the skills and capacity to achieve those? Etc. We run sessions with the new teams where we act as facilitators, mostly to answer questions about the tasks that the teams have to complete, and to keep the timing tight. We team up with co-op development co-operators such as Siôn Whellens, who is a treasure, both for legal-business knowledge and for co-op registration.

We are constantly asking the co-op movement to fund it (as it is education; not business) but it is a real challenge to be constantly chasing up bits of funding. It takes time of from the amazing work we do. The Solid Fund (a new amazing fund for workers’ coops) is supporting our new series of workshops and meet-ups on freelancers co-ops. This is real, practical solidarity, in spite of the fact that the worker co-op movement is far from being the richest of movements. Co-ops UK is helping us to find some funding for this project as well. We are on very good terms with Ed Mayo that has shown is support in the past and continues to support us. We are talking to established, philanthropic co-ops all the time, encouraging them to help us renew the movement by sponsoring our workshops. I really think that the movement should have a common pot, a fund for education. It shouldn’t give to charities at the end of the financial year, but give back to the movement. The movement as a whole should be accountable and should stick to Rochdale principles five and six.

We also get paid for talks and conferences by universities and institutions. We do consultancy work, helping established co-ops to think about their organisational and democratic structures and of ways of collaborating to be more relevant to younger generations.

We provide a service that no one does, and as it is led by young people (we are still young at Altgen! and we make sure that we are), we understand the problems of our generation in a more inside way. As we have experienced these problems of work and capitalist exploitation first-hand, we also know how we want to learn and to be taught about the co-op alternative. We basically don’t want to be taught; we want to co-create and co-produce. We are talented, and probably faster than the previous generation, more agile. We are not patient enough to be lectured. We need to participate and we google stuff all the time. We are a collaborative generation that grew up in a very fast changing technological world.

Tim:   Excellent. Following on from that, in your experience, what is the biggest challenge that young worker-owners face when setting up a new cooperative and what sort of advice do you give them to help them face that challenge?

Constance:   Well, with all new worker-cooperatives, there are always issues with raising start-up capital, but here I would like to highlight issues of membership: the initial and continued engagement of members with the co-operative way of approaching work that is both democratic and collaborative. Cooperative self-management requires a special openness, a willingness to learn and improve and accept the others in your group, who are not your bosses, but equals, and to give and accept constructive criticism. Being actually entrepreneurial in a flat hierarchical organisational structure like a cooperative takes a new mind-set — there is a process of unlearning hierarchy and learning to take the lead on stuff. We were part of setting up the Young Co-operators Network a year and a half ago. We just had our winter gathering last week-end, and I can tell you that those guys know how to co-operate. They have the right approach to collaboration. It’s all about how we do it. We don’t talk about the seven principles; we practice them all the time.

So yes, overcoming the behaviours and modes of thinking associated with hierarchical organisation is the key to successfully making cooperation happen, and thankfully that’s what we’ve specialised in in our educational content, when we run workshops in universities. So we have the materials for educating ourselves inside the co-op — and Altgen is all about how we become co-operators — but it is still a massive challenge to find the time to re-educate ourselves while coping with the day-to-day pressures of running a business. It is difficult but I think we manage well.

My advice would be look at some stuff from Seeds for Change, to go on trainings on power and privilege, to go on an Altgen trainings on Why and How co-ops. I think that we have radicalised young people already, inspiring them to change their practices. We must kill these persistent competitive behaviours that are ingrained in our thinking, the thinking of the neoliberal generation, and start practicing solidarity and collaboration. It is political, but we are a collaborative generation! If you think about the internet, we were born with it you know. So it is a paradox. It is incredibly exciting. I think that we are a new type of human being and the revolution has started already with the way we share knowledge on the web and the way technology is deconstructing the old ways, the old hierarchies. And to come back to our workshops, we build them on the idea that the personal is political, and the way we run co-ops is all about changing the way we communicate with each other, and to understand that alone we are nothing; it’s all about the collective and the commons. It’s not about the individual entrepreneur; it’s about the network of co-operators.

So yes, the challenge is that there is a massive need for a cultural shift, and it must start at the work place. It’s great because it’s practical. It’s not theoretical. We are making change happen while creating sustainable livelihoods. It is about social and economic change in one go.

But this is connected to another challenge: democratic participation. Again, in our lives, typically we haven’t learned what consensus is. We haven’t learnt how to learn together, either in our families or in educational institution. It’s all about patriarchy. There is nothing in my life that has taught me how to express my needs and feelings, how to disagree in a constructive way, and how to be sensitive and listen to the needs of others. So at Altgen, that’s what we are trying to learn through doing it: consensus decisions making processes and collective, distributed leadership. I am not sure exactly what you would call it, but it requires lots of human skills or people skills. I think everyone is able to do it; we just need to switch it on. We may not have done it before and certainly is not how things are done in our current political system.

Tim:   Thank you. Finally, I would also like to ask you a question specifically about Altgen as a cooperative. Founding and running a successful educational cooperative must be very different from founding and running other types of cooperatives, such as retail cooperatives or manufacturing cooperatives. As a cooperative with an educational mission, what advice would you give to others who are thinking of setting up a similar venture?

Constance:   DO IT — and make sure that you have a committed group of people that will stick to the same mission and values. Make sure that you inspire each other and that your mission is tackling one of the social/environmental issue of this world. Make sure you have the skills around the table and the capacity in terms of time and emotional determination. Make sure that you care for each other. Setting-up your own co-op business is a challenge, it’s not the easy path but it feels amazing to be part of social and political change, being part of something bigger. And then I would say: join the Young Co-operators Network where it’s about friendships and business relationships, a powerful combination. We are a group of dedicated co-operators of the young generation, supporting each other, sharing best practices, that insists on going dancing together at our gatherings!

Further information about Altgen and their approach:

The young co-operative campaigners fighting for a fairer economy

Diary of a young co-operative startup

Diary of a young co-op startup: the importance of collaboration

AltGen Are Giving Hope to Depressed Students at Careers Fairs

Altgen on Facebook

Altgen on Twitter

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Cooperative Incubators in Brazil

I often wonder why there aren’t more business schools for socialist entrepreneurs? There are some (for example, see here and here), but they are not common, and that definitely limits the growth of the cooperative economy. Classic business-management programs are expensive to set up, expensive to attend, and cater to a very specific type of student. If, in order to expand worker-ownership throughout the economy, broader opportunities for cooperative business education are needed, are there examples of cooperative business schools that are more egalitarian than classic business programs and that could be replicated relatively rapidly?

Well, it turns out, there may be one such example of cooperative business education flourishing just now in Brazil. These business schools are called ITCPs (Incubadoras Tecnológicas de Cooperativas Populares; Technological Incubators of Popular Cooperatives), and in several respects, they are very different from the classic model of a capitalist business school offering MBAs:

First, they are practical. They don’t just educate; they are also directly involved in setting up new worker-owned businesses. They aim to both incubate new worker-cooperatives, and at the same time, give new worker-owners the skills that they will need to succeed.

Second, they are radical cooperative education projects established as extension schools at traditional universities in Brazil, allowing academics who study management, entrepreneurship or cooperatives to get their hands dirty and use their expertise to practically assist in growing the worker-owned model.

And third, the ITCPs explicitly target the poorest communities in Brazil, helping economically disenfranchised Brazilians start their own worker-owned businesses as a concrete strategy for ending poverty and empowering marginalized communities.

The first ITCP was started in 1996, at UFRJ (Universidade Federal do Rio de JaneiroFederal University of Rio de Janeiro), and there are now 42 ITCPs throughout Brazil. Since its founding, the ITCP at UFRJ has incubated 125 new worker-owned businesses. These businesses average 50 to 100 employees, so that would be something like 6,000 to 12,000 new jobs created by just one cooperative incubator.

You can read more about ITCPs in the following article:

Leca, Bernard, Jean-Pascal Gond, and Luciano Barin Cruz. (2014) “Building ‘Critical Performativity Engines’ for deprived communities: The construction of popular cooperative incubators in Brazil.Organization 21(5): 683-712.

Unfortunately, the article is behind a paywall, but there is also a copy on which you may be able to access. As you can tell by the title, the authors use the example of the ITCP as a vehicle to discuss their particular school of sociological theory, in this case, critical management studies. The first section is slow going and full of insider jargon, but if you skip to the description of the ITCP at UFRJ on pages 691–697, the jargon mostly drops away, and the authors discuss in some detail how an ITCP actually works.

See also: Universidade Federal do Rio de Janeiro (English); Universidade de São Paulo (Portuguese); Universidade Federal do Paraná (Portuguese); Fundação Universidade Regional de Blumenau (Portuguese); Universidade Comunitária da Região de Chapecó – Unochapecó (Portuguese); University of Vale do Itajaí (Portuguese).

If you know of any other online sources of information about ITCPs, particularly in English, please share them in the comments!

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Interview: Rich Bartlett, Loomio

Rich portrait beagLoomio is a fascinating project. The web and the internet have fundamentally altered how people around the globe network and share information, but up until now these technologies have not much changed how people make democratic decisions together. Loomio is a new online tool that aims to fill that gap.

Loomio was created by a group of Occupy activists, social entrepreneurs, and software developers who met at Enspiral. Their aim was to create an open-source tool that would allow disparate networks of people to communicate, and then to turn that communication into radically democratic plans for action.

As such, Loomio might be an interesting tool for worker-owned start-ups who need an online space to communicate and to make decisions, but Loomio is also of interest because it is being developed by a group that is itself a worker-owned start-up, one that is structured as a radically democratic, horizontal cooperative.

To learn more about this cooperative and how they organize themselves, I spoke on the phone to Rich Bartlett, one of the founders.

Tim:       So the first question I have is about capital. Raising capital is one of the central problems for new worker cooperatives. You’ve raised capital for your business in a number of innovative ways. In the beginning you held two successful crowd funding campaigns and then more recently you raised half a million dollars from investors using redeemable preference shares.

Rich:      Yes, that’s right.

Tim:       I’m specifically interested in that second financing instrument. Could you explain a little bit about how these shares work and maybe talk a bit about the risks involved in this type of financing with respect to preserving worker ownership and control, and also how you try to mitigate those risks?

Rich:      Sure. It’s one of the most important questions, right. The way that we have approached the capital question is in keeping with the way we’ve approached every question about how we structure ourselves and our business model. Being the kind of personalities that we are, we have a reflex to reject everything that already exists, and then to start from a blank slate, to ask: if we could do everything with a pure commitment to our ethics, how do we do it? Then we go on a research journey and try and balance our idealism with some pragmatism and come up with something reasonable.

That process last year landed us on the redeemable preference shares, which I had  never heard of ― I don’t know much about investment ― but when I actually got talking with people, it turns out they’re not so rare. They have a long history and people were more or less familiar with them. Obviously, they’re not super common in the start-up financing world, but in co-ops they are. I’m not an expert, but as I understand it, here is a handful of people who have invested in us, in a social mission that they care about deeply, and in a group of people that they trust to be credible, a group of people with a track record that makes them think that we’ve got some shot of delivering social impact in future.

In mechanical terms, it’s basically a very generous loan, a loan on very generous terms. There’s no trading of investment for governance rights, so the governance is still 100% with the workers, and the risk remains with the investors. If we default for some reason, then the risk is on them. It’s extraordinarily generous. As for the risk of losing ownership, losing worker control, this is a relatively small financing round as far as they go. To some members, I think it’s probably a ‘getting to know you’ kind of loan. The investors might be up for some more in the future, but I would expect that they would only be up for more if they can have more of a stake in the governance. We’ll design that relationship according to our principles and balancing idealism and pragmatism when we get to that. We’ve got a constitution that is pretty explicit about putting our social mission ahead of any other kind of mission, so we feel pretty confident about that.

The other component is that the product we’re building lives in the commons, so it’s open-source software. The decision to put the software in the commons really says, “look if at any point in the future the community feels that we’re not doing an effective job of stewarding this product, then anyone else can just take it, fork the code and do their own version.” This creates quite a strong incentive on us to maintain our ethics.

I can certainly imagine at some point in the future that we might do a different kind of investment or we might change the terms in some way that gives the investors a seat at the board or a role in some other kinds of decision making spaces. We will just have to design that in a way that is in alignment with our principles. It is a never ending challenge of being an enterprise that puts social impact over financial impact. You’ve just got to continuously be evaluating the impact you are having in the world and the resources you need to get there and try to make your best judgement calls about designing systems that work for you and still make progress every day.

Tim:       Excellent. I think it would be worth it at this stage asking a second question, and that is, from the beginning, your business has had a radically horizontal structure based on direct democracy and consensus. Could you talk a little bit about the benefits first of this type of organisational structure and also about the challenges this structure presents and how do you work with those challenges?

Rich:      The benefit would be … it’s a long list. Because we have a central organising principle that no one can tell anyone else what to do, we’ve excluded force from the equation. That creates a fundamental shift in what the organisation looks like in practice and it’s quite a big thing. It’s hard to just summarise into a bullet point, list of five benefits or something like that. When you exclude force you immediately get to the question of what do people want to do and why do they want to do it and how do we align what we each want to do into something that’s actually more or less coherent, and productive and progressive? As far as I know the only way to do that is for the individuals involved to actually care about each other. So our organisation sort of requires people to care about each other in a way.

I mean there’s a real emphasis on care and it’s just a lovely place to be. It’s tremendous for us to be in an environment where everyone really cares about each other, where your feelings are legitimate information that is taken into consideration in decisions. Compared to any other job I’ve ever had, it has fundamentally changed my quality of life to go to a place where I’m expected to feel fairly good most days. In previous jobs the expectation was that work sucks but that’s why they pay you for it: a trade-off that me and most of my friends were not happy with but we just sort of conceded that’s just what work’s like. But to be in a place where you’re deeply engaged with the work and deeply engaged with each other and doing it due to intrinsic motivation, not extrinsic motivation, doing it because you believe in the outcome and you’re surrounded by people that you trust, actively working for your goals, that is really an incredible work environment. It’s quite remarkable and I attribute much of that to the decision that we’re going to organise without force.

I think ― and this is a hypothesis ― but I think that in the long run it’s also a more resilient and a more innovative way to work. When you include the widest perspectives in your decision making, you tend to develop decisions that are better than the decisions any individual could develop their own. That’s the core hypothesis that we at Loomio are testing. Right now I can report that it feels really good! In the long run, we’ll see whether it actually delivers results. It seems like it delivers results just in terms of the amount of the impact that we’ve had compared to the resources that we’ve put into it. Because people are so engaged, they really give an awful lot more than the meagre wages would account for, because they’re engaged with each other and engage with a mission that they actually believe in.

It gives us a kind of resilience as well that’s been quite remarkable. This kind of work of starting a cooperative it’s stressful and difficult like starting any business is stressful. We’ve had times where say one of our key people had said, “Look I need a little rest; this is too much.” Because we’ve got quite a high degree of overlap between the different kinds of work people are doing, we can handle it when someone says, “I need a rest.” We can rearrange and cover it. Sure there is some specialisation and there are some people that would be harder to replace than others, but no one is completely irreplaceable because we’ve got an emphasis on distributing power and influence around which means we’re distributing context around and distributing relationships around. Not endlessly, but there’s always a couple of people that know more or less what needs doing in any job. That gives us a kind of long-term resilience that I hope will pay off. It’s early days for us but I think it will pay off in the long haul.

As for the challenges then … man! It’s incredibly challenging because for one thing we’re inventing everything from scratch. I mean, we do our research and try and not reinvent the wheel, but the process of bringing, well now it’s 13 people along for the ride of: “Okay what would a good investment structure be or what’s our conflict resolution process going to be?” All that sort of stuff. We have systems to delegate work out to different small working groups, so we don’t have to get full consensus every step of the way. We’re quite fluid and dynamic in that regard. But still it’s a lot of work. You spend a lot of time in communicating and then synthesizing diverse inputs and hopefully in the process coming out with stronger outputs but still the work of synthesizing is complex. It requires emotional intelligence and I’d say probably political nous.

In any organisation, regardless of the structure, you’ve got those kinds of challenges: How do we structure ourselves? What policy makes sense? What strategic decision? That’s always difficult. But it’s definitely made more difficult because our structure is less common. Consider the ludicrous start-ups in the United States that get funding at the drop of a hat. If you’re willing to structure yourself along traditional corporate lines and fund yourself with traditional venture capital funding, there are doors that open a lot more rapidly than if you choose to do things like: “Well we’re not a charity but we’re not a traditional profit-maximising company either. And, ah yea, by the way, the thing that we’re building: that lives in the commons, and oh yes, we live in New Zealand… Yes, we’ve got a pretty much iron-clad commitment to ethics over everything else.” It really does make it harder than if we were willing to play it by the traditional set of rules.

But it’s not really a choice for us. If it weren’t for these ethics, we wouldn’t be doing it. It’s just a reflection of who we are. So it’s a huge challenge but it’s also so rewarding. The sense of solidarity is it’s unparalleled. I’ve had a little bit, not a lot, but a little bit of experience with different activist groups and the solidarity there is pretty amazing. When I was participating in the Occupy movement, that was my first taste of solidarity, where I was part of this collective identity called Occupy, and then I saw these people on the other side of the world that shared that identity, and then their struggles were my struggles. When I saw them getting beaten by the cops that affected me in my guts. It was like, “OK, this is what solidarity feels like.”

It was a tremendous experience, but it expired. That collective identity expired. With other activists projects that I’ve been involved with, the community so often expires because it’s up against such a huge foe and it’s always coming out of people’s volunteer time and surplus energy and what they can manage to squirrel away from the boss or whoever. So people are forever burning out because you’re relying on people volunteering. So to have an enterprise that is on track to sustainability means that we get that sense of solidarity in participating in activist project that is mission driven. We keep getting to do that day after day after day. That sense of solidarity is deepening to an extraordinary degree, that I know that these people deeply care for me and can turn that care into really practical support when I need it.

Tim:       Excellent Rich, that was really inspiring answer and we’ve spoken for about 20 minutes. If it’s okay I’d rather keep the interview relatively short and on those points that you raised. But I wanted to also ask, before we end, if you have anything else you wanted to add or if there was a question that I should have asked that I didn’t ask, that you wanted to answer.

Rich:      The question that’s on my mind at the moment, is about scales: so Loomio was one co-op that is a member of a collective of companies called Enspiral. There’s about a dozen different companies that are siblings and we are mostly based in New Zealand and we’re now exploring how to scale out across the rest of the world. One of the tracks we’re exploring that seems most promising is not for us to expand our collective identity globally but actually to just make good friends with the others, to find others and connect with them.

I guess really a simple question is: I’m really interested to hear what’s happening in your hemisphere that you’re finding it exciting or that’s got some promise or is worth connecting with. I’m on a mission at the moment of connecting with all the interesting people that are trying to invent this new economy and supporting each other to do so.

Tim:       Maybe it’s a question for readers of this blog, is that fair?

Rich:      Yes. My sense is that we’re trying to do something very challenging, to invent an economy that’s based on ethics. One of the ways that we can increase the likelihood of success is by supporting each other’s work. We’re all so busy doing our thing that it’s hard to get our heads up sometimes and pay attention to what else is happening. So I’ve just in the last couple of months sort of opened my ears a little bit to hear what else is going on. So yes, a question for people reading the blog is a great idea.

Tim:       Excellent. Rich, thank you so much for taking this time to talk to me.

Rich:      It’s a real pleasure.

For more information on Loomio, see:

Wired: Out in the Open: Occupy Wall Street Reincarnated as Open Source Software

How a Worker-Owned Tech Startup Found Investors—and Kept Its Values

Posted in Interviews | 2 Comments

Degeneration and Regeneration

Like all businesses, cooperatives can fail. Cooperatives can go bankrupt, but they can fail in another way too. Over time, cooperatives can degenerate. Cooperatives are said to degenerate when, under economic pressure, they abandon their cooperative principles and start adopting capitalist business practices and structures. In the worst case, given enough time and economic pressure, cooperatives can fully degenerate into privately-owned, capitalist businesses. Such businesses might still be economically viable ― they will have avoided bankruptcy ― but they can no longer be considered successful cooperatives.

This can easily happen. Cooperatives have been described as islands of socialism in a capitalist sea, and the pressures to make compromises with the surrounding capitalist business environment can be very difficult to resist, particularly if the economy is in recession. Given that degeneration is such a danger, is there any way that the founders of a worker-owned firm could structure their new business to make this less likely to happen? Are their lessons we can learn from other cooperatives that might help us build new worker-owned firms that are more resistant to degeneration as they grow over time?

This spring, scholars published two separate studies of a particular case of degeneration that go some way toward answering these questions. Both papers are studies of the most renowned and admired group of worker-owned cooperatives in the world: the Mondragon Corporation in the Basque country in Northern Spain. With 74 thousand workers in 260 firms, the scale of the Mondragon Corporation is truly impressive. Further, the Mondragon cooperatives have pioneered a number of business practices that have significantly modernized and strengthened the cooperative business model. The Mondragon cooperatives are frequently praised by economists and activists as an example of how a broader worker-owned economy might feasibly work in the future.

But the Mondragon Corporation is not perfect. Since the 1990s, the Mondragon cooperatives have significantly degenerated away from their founding worker-ownership model in at least one key respect. In the 1990s, to compete with multinational corporations, the Mondragon cooperatives adopted a strategy of ‘internationalization’ and started acquiring subsidiary businesses both in Spain and around the world. This could have been an opportunity to spread the Mondragon model of worker-ownership globally, but critically, the Mondragon cooperatives decided not to convert their new subsidiaries into sister cooperatives, but rather, they continued to administer their subsidiaries as capitalist businesses. The employees of the subsidiaries in essence became employees of the Mondragon cooperatives, rather than worker-owners in their own right. By 2007, this degeneration had progressed so far that only 29.5% of the Mondragon cooperatives’ total workforce remained members-owners. (Storey et al. 2014, cited in Bretos & Errasti 2016, 2)

How did this happen? Why didn’t the Mondragon cooperatives use the opportunity that internationalization presented to grow their worker-ownership model outside of the Basque country? And now that this has been done, are the Mondragon cooperatives doomed to fully degenerate into capitalist businesses or can the damage be reversed? Can the Mondragon cooperatives ‘regenerate’ themselves back into full worker-owned businesses in the future? These two studies come at these questions from two contrasting perspectives, and as such, they are particularly interesting and useful if considered together.

The first study is by Sharryn Kasmir, an anthropologist from Hofstra University who has been strong critic of the Mondragon Corporation in the past. In her recent paper, “The Mondragon Cooperatives and Global Capitalism: A Critical Analysis,” Kasmir comes at the problem of degeneration in the Mondragon cooperatives via a case study of Fagor Electrodomésticos, a flagship business in the Mondragon group. In 2013, Fagor Electrodomésticos went bankrupt. The Mondragon cooperatives are famously resilient, and the bankruptcy of a flagship company was an unprecedented development. But more troubling still, Kasmir’s research shows that the different classes of workers in Fagor Electrodomésticos faired very differently after the failure of the business.

Kasmir describes how degeneration created three distinct classes of workers in the Fagor Electrodomésticos cooperative: full members in the Basque country (1,900), wage labourers on short-term contracts in the Basque country (200), and wage labourers in international subsidiaries (3,500). (Kasmir 2016, 54–5) After the bankruptcy, most of the full members transferred to other Mondragon cooperatives and remained employed, but in contrast, the wage labourers both at home and abroad simply lost their jobs.

Kasmir argues that the Mondragon cooperatives long ago created a labour aristocracy in the Basque country that has undermined working class solidarity in the region, a divide that has only deepened as the Mondragon cooperatives have degenerated. She contends that these failures demonstrate “the inescapable limits of the ability of cooperatives to challenge capitalist social relations.” (Kasmir 2016, 56)

But are these limits actually inescapable, or could Mondragon cooperatives find a way to extend solidarity to the workers in their subsidiaries? Is there any possibility that the Mondragon cooperatives could reverse this trend toward degeneration and extend membership to all their workers? Could the Mondragon cooperatives find a way to regenerate?

The second study by Ignacio Bretos and Anjel Errasti of the University of the Basque Country tries to answer these questions. In their paper, “Challenges and opportunities for regeneration of multinational cooperatives: Lessons from the Mondragon Corporation — a case study of the Fagor Ederlan Group”, they evaluate the success of the Fagor Ederlan cooperative in its efforts to convert its subsidiaries to worker-owned businesses. The Fagor Ederlan Group is an automotive supplier in the Mondragon Corporation comprised of eight factories located in the Basque country and six subsidiaries located in Spain, in Brazil, in Slovakia and in Kunshan, China. In 2003, the Mondragon Cooperative Congress approved a new strategy of ‘social expansion’ to try to reverse the trend toward degeneration in the Corporation as a whole, and shortly thereafter, the Fagor Ederlan Group began work on extending worker-ownership to its subsidiaries.

To date, Fagor Ederlan has had its greatest success with its Tafalla subsidiary in the neighbouring region of Navarre, Spain. By 2014, 485 of Tafalla’s total workforce of 688 had become member-owners. (Bretos & Errasti 2016, 9) Fagor Ederlan also had some success with two other subsidiaries in Spain, to the extent that worker-ownership in the Fagor Ederlan Group as a whole has risen from 36% in 2007 to 65% in 2015. (Fagor Ederlan 2009 and Koop 2015, cited in Bretos & Errasti 2016, 9)

However, Fagor Ederlan has been much less successful with its remaining subsidiaries, and has found its foreign subsidiaries particularly challenging to reorganize as worker cooperatives. In the second half of their paper, Bretos and Errasti ask why this is the case. Scholars have theorized that a number of external factors may make extending worker-ownership to employees of  subsidiaries difficult: extending membership to workers in subsidiaries is economically risky for the parent cooperative, particularly if the future viability of the subsidiary is uncertain; the legal framework in some countries may make establishing new cooperatives difficult or practically impossible; the work culture in some countries may make it difficult to establish cooperative values in a subsidiary firm; and members of the parent cooperative may also risk losing control of their investments if employees of subsidiaries become members.

In their research, Bretos and Errasti found evidence that all four external factors acted as barriers to regeneration in the Fagor Ederlan Group, but they also argue that internal factors may have been even more important. They contend that the reluctance to extend solidarity to the workers in subsidiaries may be more a result of a general weakening of the cooperative ideology in the Mondragon Corporation over time:

This is also consistent with research conducted by Heras (2014) who concludes that there is a clear decoupling between Mondragon’s principles and the daily activity of the worker members, and that the strongest tie binding them to the organisations is not their closeness to the cooperative model and culture, but rather job security. Ultimately, if the members of the Basque plants are not themselves strongly bound to the cooperative principles and values of Mondragon, it seems unlikely that strong interest in extending the cooperative model to foreign subsidiaries will arise.

(Bretos & Errasti 2016, 14)

And this I think that is the core message: ideology matters. Worker-owned businesses are not only creating jobs and building social wealth, they are also advancing an new ideology about social ownership, and this research suggests that unless this ideology is nurtured in each new generation that comes to work in a cooperative, degeneration is all but certain.

As islands of socialism in a capitalist sea, there will always be strong pressures on worker cooperatives that can push members to compromise on their values. The final bulwark against degeneration is a workforce that is committed to collective ownership and to work-place democracy.

Together, this research shows that while degeneration over time poses a real threat to the worker-ownership movement, full degeneration is not inevitable; with the right effort, regeneration is also possible. However, Bretos and Errasti’s research in particular shows that rebuilding solidarity in a degenerated cooperative is not easy, particularly across boundaries of geography, nation and culture. It would be far better to structure a cooperative so that degeneration did not take place in the first instance.

Cooperative education has been a central pillar of the cooperative movement since the Rochdale Principles were first agreed, and a strong ideological commitment to workplace democracy among worker-owners is the best long-term defense against degeneration, but this research raises the practical question: how is this commitment fostered in a worker-owned business as it grows over the years, decades, generations?

I am currently looking at research published on this question, and I plan to review this research in a future post. Stay tuned!

Bretos, Ignacio and Anjel Errasti (2016) “Challenges and opportunities for the regeneration of multinational worker cooperatives: Lessons from the Mondragon Corporation — a case study of the Fagor Ederlan Group.Organization.

Kasmir, Sharryn. (2016) “The Mondragon Cooperatives and Global Capitalism: A Critical Analysis.” New Labor Forum 25(1): 52-59.

A video of Sharryn Kasmir giving a brief talk on some of her research can be seen here.

Posted in Research | 1 Comment

Worker-owned Firms: Five Myths

I just read a wonderful review article entitled “Worker Cooperatives: Good, Sustainable Jobs in the Community.” It was authored by Virginie Pérotin from the Leeds University Business School and was published in the Journal of Entrepreneurial and Organizational Diversity. In this article, Pérotin reviews recent research on worker cooperatives and uses the latest data to puncture some persistent myths about worker ownership. Below I have summarized Pérotin’s main points in list form, with the notion that this information will be helpful to socialist entrepreneurs, not only in planning their own worker-owned ventures, but also in discussions with other stake-holders, e.g. community members, potential fellow worker-owners, and particularly, banks, credit unions, building societies or other potential sources of start-up capital. The first four of these misconceptions are fairly common and are therefore likely to come up in discussions about your venture with future partners and backers. While Pérotin’s article discusses some of her own research, it is a review, so most of the data comes from other researchers’ work. I have included the page numbers from Pérotin’s article so that you can easily follow the citation trail to the original data if you are interested.

Five common myths:

1. Worker-owned firms tend to be small, niche businesses.

There are not a lot of comprehensive data on worker-owned firms as a population, but where this data exists, it appears that worker-owned firms tend to be just as large or even larger than capitalist firms on average. Even though huge worker-owned cooperatives like Mondragón or John Lewis are relatively rare, it is also true that most capitalist firms tend to be small and that massive capitalist firms are also statistically rare. There is no evidence that worker-owned firms are any smaller than average, and while it varies from country to country, globally, it also does not appear that worker-owned firms tend to cluster in any one specific sector of the economy. You can find worker-owned firms in most industries. When you look at the data, it turns out that worker owned firms are more ‘normal’ in these respects than many assume. (pp. 36–7)

2. Worker-owned firms tend to be less capital-intensive.

Researchers have long assumed that worker-owned firms would tend to be involved in less capital-intensive businesses (food coops vs airlines for example) because socialist entrepreneurs would tend to have less access to capital (i.e. be poorer) than capitalist entrepreneurs and would find it harder to start businesses where large capital investments are required (buying airplanes to start an airline for instance), but again, looking at the data, it does not appear that worker-owned firms are any less capital-intensive in general than capitalist firms. (p. 37)

3. Worker-owned firms tend to fail.

Again, the data is patchy, but in cases where good population data exists for both worker-owned and capitalist firms, worker-owned firms appear to be at least as robust as their capitalist counterparts, and in some instances, may actually survive better than equivalent capitalist businesses. (p. 37)

4. Worker-owned firms tend to under-invest in the long term.

This is perhaps one of the most persistent theories in research on worker-ownership. The idea is that since in many cases workers can’t take their stock in their cooperative with them when they retire, they will tend to think of investment in the company only in the short-term and will be more likely to spend profits on wage increases rather than plowing profits back into the company as an investment in the future. Pérotin discusses two common solutions to this perceived problem: tradable membership shares and compulsory profit plow-back rules. Both of these ideas relate to initial coop design and this topic is so important to the subject of this blog that I plan to revisit it in detail in a future post. In this review, Pérotin presents some interesting ideas on the relative merits of these two design options, but she also notes that, regardless of what micro-economic models might predict in theory, it does not appear that there is any evidence for under-investment in worker-owned firms in practice. Worker-owned cooperatives appear to invest in themselves at the same rate as capitalist businesses everywhere this has been studied. (pp. 37–9)

5. Worker owners will be tempted to fire their fellow workers in order to raise their personal incomes.

This is another academic critique of worker-ownership, and while this theory is probably less common outside of academic circles, it is still worth discussing. Based again on micro-economic analysis and modeling, the theory is that when prices for a particular cooperative’s product rise, worker owners in that cooperative will be tempted to exploit the opportunity and fire fellow workers in order to capture the extra profits as higher wages for themselves. On the face of it, this doesn’t sound likely, and even the name of the theory suggests that it is a fairly counter-intuitive idea: “the perverse supply response”. And indeed, whatever the models might predict in theory, there is no evidence that this actually happens in practice. Pérotin suggests that this may be because worker-owners are not solely trying to maximize personal income (as theorists assumed), but rather, that they manage their businesses to also maximize job-security. Pérotin argues that worker-owners in a cooperative will probably understand their business more as a general social good rather than simply and narrowly as a profit opportunity, and therefore, they will work to preserve that social good for themselves and for their fellow workers into the future. Indeed, all of the evidence suggests that worker-owned cooperatives are actually better at avoiding lay-offs (redundancies) in times of economic crisis than are capitalist firms. (pp. 39–41)

In general, Pérotin’s review article is short and delightful to read. I strongly recommend it, and best of all, it is open-source so anyone can access it. Here is the citation:

Pérotin, Virginie (2013) “Worker Cooperatives: Good, Sustainable Jobs in the Community.” Journal of Entrepreneurial and Organizational Diversity 2(2), 34–46.

Posted in Research | 2 Comments