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Not to be cynical, but I doubt the lesson will ever get learned. These things start with big ideas, hope, and an ignorance of the practical details. Over time,

Not to be cynical, but I doubt the lesson will ever get learned. These things start with big ideas, hope, and an ignorance of the practical details. Over time, practical realities, like paying for goods and services, crop up. In a capitalist society, most of the ready-made solutions to that look like businesses. And our current culture of capitalism then shifts toward short-term revenue-maximization, putting things in the hands of predators and sociopaths. I know people have made attempts to solve this, like B Corps and groups like the Apache Foundation. But I don't think we're there yet. One could try to create a foundation that specifically incubates projects that go beyond open source to open/collective services. But even if one solves funding for that, there's still the problem of finding the naive starters of things and crushing their dreams just enough to get them on a better course, but not so much that they quit.

tialaramex 4y ago
Because profit motive is the usual problem, you can deliberately design that out if you're careful. England (where I live) had a lot of Building Societies - mutual institutions where some members are saving money, and those savings are lent to other members (borrowers) to buy homes to live in, the interest from which of course makes this a good deal for the savers done at scale (so as to smooth out inevitable losses when some borrowers default). This can be a very lucrative line of business during a housing boom, and many of these societies found themselves with a considerable cash positive position in the 1980s. Since the members own the society, they can just change the rules of the society and "demutualize", extracting the cash for themselves. Of course this destroys the society, an important institution which has helped so many people to own somewhere to live - but hey, you've got some money and isn't that what's really important? My parents voted "Yes" to demutualize the society where they'd saved money and from which they had borrowed to buy the house I grew up in, I (as an idealistic teenager who had my own modest savings) voted "No", the "Yes" votes won and the resulting entity, now a bank, eventually was mired in scandal and no longer serves the purpose the proud building society had served before. But hey, they got their money. People like them were nicknamed "Carpetbaggers" in the UK as a result, by analogy to the US concept. Now, I mention this because as several larger societies were demutualised this way, the remainder realised that the same fate could be theirs, and many swallowed a "poison pill" to prevent it. They changed their rules so that all future members (savers, borrowers, whichever) signed away rights to the proceeds of any demutualisation (e.g. giving it to a charity). So you could vote to tear the society to pieces, but you would no longer make a penny from doing so, and suddenly that's not very attractive. It worked.
- nocoiner 4y ago
  That was an absolutely fascinating story, thank you for sharing. Very redolent of “there’s no such thing as society.” Although my politics aren’t theirs, I don’t hate the Reagan and Thatcher types. I don’t think they were bad people per se (or at least not any worse than anyone else who is capable of ascending to the apex of political power). But I do think they changed some things in their respective cultures for the worse, and those are things that we’re still grappling with today.
- jmyeet 4y ago
  Most if not all big investment banks are now corporations, usually listed on the stock exchange. It wasn't always this way. Prior to the 1970s investment banks couldn't be listed on the NYSE. Goldman Sachs (etc) weren't corporations. They were partnerships, basically like a law firm. This is a key difference because a partnership has unlimited liability. This tends to make such organizations very conservative with risk management, for obvious reasons. But when this changed, all these partnerships incorporated instead and listed on the stock exchange. Incorporation shields the leaddership from the downside of their bad decisions. As we've seen, the governmen thas stepped in to assume that risk for really no good reason at all ("too big to fail"). Interestingly, I'm not sure there's a legal barrier preventing law firms from listing on the stock exchange but they don't, which is interesting. So in your case these mutual societies and community banks existed for the benefit of their members and they (including the members) took the (one time) bag and was shielded from accountability. I see investment banks as falling into this same trap.
  - nocoiner 4y ago
    For law firms, there is a barrier (in the United States, at least): law firms must be owned by lawyers. Other common law jurisdictions, such as Australia, have eliminated this requirement and have publicly traded law firms. I assume soon, you’ll start seeing what’s happening here with medical and other professional service practices that have similar ownership restrictions where ownership, services and revenues are theoretically decoupled through creative contracting arrangements, but I don’t know of that having happened yet with a law firm. Most law firms in the United States are now organized as LLPs (a limited liability partnership, which segregates liability among the partners), but notably the most profitable law firm measured in a per capita basis, Wachtell, is still organized as a general partnership with unlimited partner liability. They deliver their clients one-line invoices, containing numbers with many, many more zeroes, for “services rendered.”

tialaramex 4y ago

Because profit motive is the usual problem, you can deliberately design that out if you're careful. England (where I live) had a lot of Building Societies - mutual institutions where some members are saving money, and those savings are lent to other members (borrowers) to buy homes to live in, the interest from which of course makes this a good deal for the savers done at scale (so as to smooth out inevitable losses when some borrowers default). This can be a very lucrative line of business during a housing boom, and many of these societies found themselves with a considerable cash positive position in the 1980s. Since the members own the society, they can just change the rules of the society and "demutualize", extracting the cash for themselves. Of course this destroys the society, an important institution which has helped so many people to own somewhere to live - but hey, you've got some money and isn't that what's really important? My parents voted "Yes" to demutualize the society where they'd saved money and from which they had borrowed to buy the house I grew up in, I (as an idealistic teenager who had my own modest savings) voted "No", the "Yes" votes won and the resulting entity, now a bank, eventually was mired in scandal and no longer serves the purpose the proud building society had served before. But hey, they got their money. People like them were nicknamed "Carpetbaggers" in the UK as a result, by analogy to the US concept. Now, I mention this because as several larger societies were demutualised this way, the remainder realised that the same fate could be theirs, and many swallowed a "poison pill" to prevent it. They changed their rules so that all future members (savers, borrowers, whichever) signed away rights to the proceeds of any demutualisation (e.g. giving it to a charity). So you could vote to tear the society to pieces, but you would no longer make a penny from doing so, and suddenly that's not very attractive. It worked.

nocoiner 4y ago
That was an absolutely fascinating story, thank you for sharing. Very redolent of “there’s no such thing as society.” Although my politics aren’t theirs, I don’t hate the Reagan and Thatcher types. I don’t think they were bad people per se (or at least not any worse than anyone else who is capable of ascending to the apex of political power). But I do think they changed some things in their respective cultures for the worse, and those are things that we’re still grappling with today.
jmyeet 4y ago
Most if not all big investment banks are now corporations, usually listed on the stock exchange. It wasn't always this way. Prior to the 1970s investment banks couldn't be listed on the NYSE. Goldman Sachs (etc) weren't corporations. They were partnerships, basically like a law firm. This is a key difference because a partnership has unlimited liability. This tends to make such organizations very conservative with risk management, for obvious reasons. But when this changed, all these partnerships incorporated instead and listed on the stock exchange. Incorporation shields the leaddership from the downside of their bad decisions. As we've seen, the governmen thas stepped in to assume that risk for really no good reason at all ("too big to fail"). Interestingly, I'm not sure there's a legal barrier preventing law firms from listing on the stock exchange but they don't, which is interesting. So in your case these mutual societies and community banks existed for the benefit of their members and they (including the members) took the (one time) bag and was shielded from accountability. I see investment banks as falling into this same trap.
- nocoiner 4y ago
  For law firms, there is a barrier (in the United States, at least): law firms must be owned by lawyers. Other common law jurisdictions, such as Australia, have eliminated this requirement and have publicly traded law firms. I assume soon, you’ll start seeing what’s happening here with medical and other professional service practices that have similar ownership restrictions where ownership, services and revenues are theoretically decoupled through creative contracting arrangements, but I don’t know of that having happened yet with a law firm. Most law firms in the United States are now organized as LLPs (a limited liability partnership, which segregates liability among the partners), but notably the most profitable law firm measured in a per capita basis, Wachtell, is still organized as a general partnership with unlimited partner liability. They deliver their clients one-line invoices, containing numbers with many, many more zeroes, for “services rendered.”