7 ms·

>Time for people (_especially_ young people) to consider alternative arrangements like worker co-ops. The issue isn't philosophy. The roadblocks to worker-own

by jasode 3y ago

>Time for people (_especially_ young people) to consider alternative arrangements like worker co-ops. The issue isn't philosophy. The roadblocks to worker-owned co-ops taking off are money and capital. Picture a Venn Diagram of 2 circles: (1) the circle of founders with some money (or don't have much money themselves but have the ability to get funds from investors) -- are not interested in forming worker co-ops. The founders want to own the business and hire employees to pay them wages. (2) the circle of workers who want to share the ownership in a co-op don't have the money to fund the business. Those 2 circles do not intersect for the most part. There isn't any alignment between the founders-with-money who want employees -- and -- the workers-without-money who want co-ops. This is why you don't see those with some money and/or access to money (e.g. ex-Google ex-Facebook employees creating new startups) creating co-ops. Likewise, examples of disappointed workers (e.g. tech layoffs, etc) who wished for a different corporate structure that gave them more ownership, are also not forming co-ops because they don't have the money. They're just trying to land the next job to pay the upcoming bills. That's why the repeated advice and lectures to workers about "form co-ops" don't seem to make any progress. The reality is the workers just don't have the money.

MathMonkeyMan 3y ago
People with money would like to control what they buy with that money? Interesting... The issue could be organizational, though. You, Bob, Mary, and I form a company legally. Then we work to get capital for that company, however anybody does that. But we decide beforehand that we are equal part owners, and when we need to find more people to help with the work, we sign them up as part owners instead of as conventional wage employees. I think that technically, stock options are a version of this, but the disparity in ownership between "founder" and "twentieth employee" might be so stark that the latter is better off taking a wage. Maybe the founders _could_ decide to give everybody a bigger piece of the pie, so to speak, with proportional increases in responsibility to those hired and difficulty in finding people. It would be a different kind of company.
- gruez 3y ago
  >we sign them up as part owners instead of as conventional wage employees. That's basically how startups work. They pay less, but they presumably make up for it in terms of equity. However, the common advice when it comes to startup options is to value them at $0, which makes sense given how much risk there is. I can't imagine many people taking up on the "you get equity instead of wage" offer. The "options are worthless" problem doesn't exist for large publicly traded companies, but then at that point shares in the company and cash is basically interchangeable. What real difference is there between $300k in meta stock vs $300k in cash? I'd guess most people would still rather take the cash than the equity so they can have some sort of worker co op. >but the disparity in ownership between "founder" and "twentieth employee" might be so stark that the latter is better off taking a wage. Maybe the founders _could_ decide to give everybody a bigger piece of the pie, so to speak, with proportional increases in responsibility to those hired and difficulty in finding people. It would be a different kind of company. The problem is that in terms percentage ownership of the company, giving out equity is a zero sum game. You can't give everyone a significant stake (eg. 5%), because that would wipe out the founders/investors.
  - MathMonkeyMan 3y ago
    > The problem is that in terms percentage ownership of the company, giving out equity is a zero sum game. You can't give everyone a significant stake (eg. 5%), because that would wipe out the founders/investors. I agree that it's a problem, but only if the founders think that they are due a much bigger share than anybody else. It's only natural to think so. But, if you're doing the cooperative thing, you have to share. I don't really know anything about it, but that's why I described it as a different kind of company.
    - gruez 3y ago
      >but that's why I described it as a different kind of company. You mean... like a partnership? It works well for professional services (eg. lawyers, accountants, consultants) because there isn't much capital required and are limits to scalability, so you giving your partners equal share isn't that much of an issue. However, I can't see it working for tech companies where there's a massive amounts of capital required, and the impact of a single contributor can be enormous. Why would investors invest the "different kind of company", the returns will only be shared among the workers? For the founder that has a $1 billion idea and has the skills to execute on it, why would he create an organization where he gets the same share as a junior developer who care barely make a CRUD app?
wahnfrieden 3y ago
Tech is most primed for it thanks to open source and other things that make it easier for workers to afford automation and distribution with sometimes up to near 100% margins / zero unit cost. So the most challenging cost becomes free time. Which wage labor does make challenging to find, but that's not as hard as also not being able to afford the means of production at all as in other fields/industries I’d like to start writing playbooks from experience on how to optimize this approach vs big capital up front style. I’m bootstrapping off b2c+b2b app revenue and spinning up worker coop structures a lil to start scaling up as fast as I can give at least livable share of revenue in addition to equity share for help to grow the businesses. I bought indiedevstack.com to blog and productive this approach but haven’t set it up just yet
jraby3 3y ago
It just seems like a huge risk. Basically it seems like if you lose, you lose, if you win, everyone shares in your winnings. Stock options that allow the founder to keep control and to receive more significant profit for the extraordinary risk they take makes much more sense imo.
- jt2190 3y ago
  Exactly this. Startup employees are essentially compensated like this: * Base salary that is very low risk because they have a “liquidity event” every pay period, and there are numerous legal protections that ensure that they get paid. * Incentive Stock Options, which are very high risk because they backed by a company that might not succeed, might never experience a “liquidity event”, are not nearly as liquid, and have far fewer legal protections. It seems that more than a few people have not considered that ISOs will be a part of their overall investment portfolio, and they should think about how much of their portfolio they want invested in high-risk assets.
  - maerF0x0 3y ago
    Making it illegal to have the company block/veto the sale of shares would definitely improve the picture. IMO it's a break in property law to have a contract that says "You own the property and have all it's liabilities (like taxes) but you do not have the right to sell that property to a willing, SEC qualified, and able buyer" ...
    - NavinF 3y ago
      > company block/veto the sale of shares Example of this happening IRL? I've seen right of first refusal and tag along rights that make it harder to find a buyer, but nothing that actually prevents sale of vested shares.
      - maerF0x0 3y ago
        As I understood the few contracts I've had they barred me from selling to anyone unless the company approved. That in practice meant I had no liquidity unless IPO or got to sell to investors in the next fund raise round (very very rare). And think about it a bit further, who's going to go through any due diligence if their research and offer is going to first hit the board/company and potentially completely vanish for them? I certainly wouldnt invest time/resources to see if I wanted to buy shares from an employee to potentially find out the company decided to buyback those shares instead. This property would massively lower the price I'd be willing to offer. (as a compensation for my risk taken)
goodpoint 3y ago
You are missing a massive blockers. Coops are often ostracized by private corporations. To the point that coops have to build coop networks to resist.
- nickpp 3y ago
  Interesting. In what way ostracized? Can you give some examples?
  - goodpoint 3y ago
    It's well known that private corps are reluctant to engage and sign contracts with coops.
indigochill 3y ago
As I understand, you don't really need money to make a co-op, but what you need is cash flow. The most plausible route I've heard is freelancers forming a co-op where they pitch in some portion of what they make to a shared pot to even out the lean time in any particular freelancer's stream of gigs, as well as potentially sharing work if a client asks for more than an individual can do. Of course, that requires the participants know and trust each other, but it seems a plausible way for individuals without a bunch of money to start a co-op.
- jasode 3y ago
  >As I understand, you don't really need money to make a co-op, [...] The most plausible route I've heard is freelancers forming a co-op where they pitch in some portion of what they make to a shared pot [...] , but it seems a plausible way for individuals without a bunch of money to start a co-op. Yes, your realistic scenario of a co-operative is something I already outlined in a previous comment of "consultants co-op office" : https://news.ycombinator.com/item?id=14647223 https://news.ycombinator.com/item?id=14647223 But that type of freelance co-op isn't really what most people are thinking about when the discussion follows the template of "Big company <X> did something bad so why don't workers form a co-op <Y> instead of being screwed over by <X>?!?" In this thread, the topic is "IBM" laying people who are "too old". In response, some observers think "workers should form co-ops" to avoid being screwed over. In other words, the hypothetical co-op version of an "IBM" wouldn't lay off old workers. The "freelancers co-op" doesn't apply to this story of an IBM middle manager (MaryKathryn Doheny) being laid off. The issue is that companies like IBM, or Google, or Tesla, etc are by their very nature -- capital intensive -- so there won't be co-op alternatives for those. Still the same underlying economic factors: the car workers don't have the money to pool together and form a worker-owned car factory -- and the founders/investors who are motivated to start a new car company are not interested in sharing equity with a 100% worker-owned structure. That's why the employees who don't like Tesla's ownership structure can't quit and go work at a worker-owned co-op electric vehicle manufacturer.
maerF0x0 3y ago
Why cant the workers pool their available capital, and if they're sufficiently productive why cant they do some to generate more? Tech workers are considered to be highly paid, so if anyone could accumulate capital it's them.
- jasode 3y ago
  >Why cant the workers pool their available capital, [...] Tech workers are considered to be highly paid, The highly-paid workers can pool capital... if we're speaking in hypotheticals. The hypothetical tech workers can hypothetically pool their capital together to form a 100% worker-owned co-operative. On the other hand, my comments are explaining what real people have been doing in the real world. E.g. ex-Google employee Kevin Systrom didn't form Instagram as a workers co-op. And ex-Yahoo employees Jan Kuom and Brian Acton also didn't form WhatsApp as a workers co-op. They could have -- hypothetically -- but they didn't. (Those startups did have Incentive Stock Options but that's not the workers ownership people are thinking about when speaking of "workers co-op".) We can see that most ex-employees with access to money do not form co-ops. Why? The ex-employees-now-the-founders see no financial incentive to do so. The workers who actually _want_ co-ops are not the ones out there creating new companies.
  - maerF0x0 3y ago
    The coops i've seen, in practice, are mostly low capital required things. So your point does make sense. I've mostly seen coffee shops, bike/repair shops, breweries, some restaurants. These are both not capital intensive, and are pretty well commodified too unfortunately.
  - WalterBright 3y ago
    Harry Hardworker is also not going to want to share his compensation equally with Dan Deadwood.
deleted 3y ago
[deleted]
WalterBright 3y ago
Unions have the money.
robocat 3y ago
People start businesses because they want to make money. Co-ops and charities are usually set up for other purposes, and have other constraints. People also start businesses because that is the simpler default that you will be pushed towards: by your clients, your accountant, your suppliers, your lawyers, your mother, your bank, and most everybody else. > The roadblocks to worker-owned co-ops taking off are money and capital. That cliché just doesn’t apply much to many professionals, because the biggest expense is salaries. Watch a new business form, and professionals can often afford to self-finance during the initial period. A few professions need to rent, but say lawyers and some doctors have cheap chambers and clinics to service the market for individuals starting out. And lawyers and accountants do form a type of co-op: they call them partnerships. There are a huge number of self-funded software startups because so long as founders can pay their bills, they can afford their salary. Most self-funding software startups could just as easily be formed as co-ops, yet they are not. The reason is not because they are forced to become a business because they need capital. Note I am talking about self-funded startups - funded startups are obviously different. Finally, co-ops are fundamentally unfair to the founders. Starting a business costs a lot more than money, and businesses are how we try to fairly repay that. And the #1 reason why co-ops don’t exist? Because people have seen them and they don’t want to join them.
- jasode 3y ago
  >That cliché just doesn’t apply much to many professionals, because the biggest expense is salaries. The context of my reply was this thread's article: IBM laying off a middle-manager employee like MaryKathryn Doheny. There isn't a co-op of "middle managers" charging an hourly rate. I previously explained that a "freelancers consultants co-op" doesn't apply to her situation: https://news.ycombinator.com/item?id=35930165 https://news.ycombinator.com/item?id=35930165 >And lawyers and accountants do form a type of co-op: they call them partnerships. No, the professional partnerships like law firms are not "100% workers' owned co-ops" that people are thinking of as I've explained before: https://news.ycombinator.com/item?id=31459215 https://news.ycombinator.com/item?id=31459215 >Most self-funding software startups could just as easily be formed as co-ops, yet they are not. The reason is not because they are forced to become a business because they need capital. [...] And the #1 reason why co-ops don’t exist? Because people have seen them and they don’t want to join them. Your chain of reasons is overcomplicating things and doesn't answer the mystery for the workers who already know what a co-op is and want one. On the other hand, I'm explaining that the workers who already bought into the concept of co-ops -- are not the ones creating new companies as co-ops. Why can't those pro-coop workers "Be The Change They Want To See" , as the proverb advises and create those co-ops?!? Because they have no money.

by jasode 3y ago

MathMonkeyMan 3y ago

People with money would like to control what they buy with that money? Interesting... The issue could be organizational, though. You, Bob, Mary, and I form a company legally. Then we work to get capital for that company, however anybody does that. But we decide beforehand that we are equal part owners, and when we need to find more people to help with the work, we sign them up as part owners instead of as conventional wage employees. I think that technically, stock options are a version of this, but the disparity in ownership between "founder" and "twentieth employee" might be so stark that the latter is better off taking a wage. Maybe the founders _could_ decide to give everybody a bigger piece of the pie, so to speak, with proportional increases in responsibility to those hired and difficulty in finding people. It would be a different kind of company.

gruez 3y ago
>we sign them up as part owners instead of as conventional wage employees. That's basically how startups work. They pay less, but they presumably make up for it in terms of equity. However, the common advice when it comes to startup options is to value them at $0, which makes sense given how much risk there is. I can't imagine many people taking up on the "you get equity instead of wage" offer. The "options are worthless" problem doesn't exist for large publicly traded companies, but then at that point shares in the company and cash is basically interchangeable. What real difference is there between $300k in meta stock vs $300k in cash? I'd guess most people would still rather take the cash than the equity so they can have some sort of worker co op. >but the disparity in ownership between "founder" and "twentieth employee" might be so stark that the latter is better off taking a wage. Maybe the founders _could_ decide to give everybody a bigger piece of the pie, so to speak, with proportional increases in responsibility to those hired and difficulty in finding people. It would be a different kind of company. The problem is that in terms percentage ownership of the company, giving out equity is a zero sum game. You can't give everyone a significant stake (eg. 5%), because that would wipe out the founders/investors.
- MathMonkeyMan 3y ago
  > The problem is that in terms percentage ownership of the company, giving out equity is a zero sum game. You can't give everyone a significant stake (eg. 5%), because that would wipe out the founders/investors. I agree that it's a problem, but only if the founders think that they are due a much bigger share than anybody else. It's only natural to think so. But, if you're doing the cooperative thing, you have to share. I don't really know anything about it, but that's why I described it as a different kind of company.
  - gruez 3y ago
    >but that's why I described it as a different kind of company. You mean... like a partnership? It works well for professional services (eg. lawyers, accountants, consultants) because there isn't much capital required and are limits to scalability, so you giving your partners equal share isn't that much of an issue. However, I can't see it working for tech companies where there's a massive amounts of capital required, and the impact of a single contributor can be enormous. Why would investors invest the "different kind of company", the returns will only be shared among the workers? For the founder that has a $1 billion idea and has the skills to execute on it, why would he create an organization where he gets the same share as a junior developer who care barely make a CRUD app?

wahnfrieden 3y ago

Tech is most primed for it thanks to open source and other things that make it easier for workers to afford automation and distribution with sometimes up to near 100% margins / zero unit cost. So the most challenging cost becomes free time. Which wage labor does make challenging to find, but that's not as hard as also not being able to afford the means of production at all as in other fields/industries I’d like to start writing playbooks from experience on how to optimize this approach vs big capital up front style. I’m bootstrapping off b2c+b2b app revenue and spinning up worker coop structures a lil to start scaling up as fast as I can give at least livable share of revenue in addition to equity share for help to grow the businesses. I bought indiedevstack.com to blog and productive this approach but haven’t set it up just yet

jraby3 3y ago

It just seems like a huge risk. Basically it seems like if you lose, you lose, if you win, everyone shares in your winnings. Stock options that allow the founder to keep control and to receive more significant profit for the extraordinary risk they take makes much more sense imo.

jt2190 3y ago
Exactly this. Startup employees are essentially compensated like this: * Base salary that is very low risk because they have a “liquidity event” every pay period, and there are numerous legal protections that ensure that they get paid. * Incentive Stock Options, which are very high risk because they backed by a company that might not succeed, might never experience a “liquidity event”, are not nearly as liquid, and have far fewer legal protections. It seems that more than a few people have not considered that ISOs will be a part of their overall investment portfolio, and they should think about how much of their portfolio they want invested in high-risk assets.
- maerF0x0 3y ago
  Making it illegal to have the company block/veto the sale of shares would definitely improve the picture. IMO it's a break in property law to have a contract that says "You own the property and have all it's liabilities (like taxes) but you do not have the right to sell that property to a willing, SEC qualified, and able buyer" ...
  - NavinF 3y ago
    > company block/veto the sale of shares Example of this happening IRL? I've seen right of first refusal and tag along rights that make it harder to find a buyer, but nothing that actually prevents sale of vested shares.
    - maerF0x0 3y ago
      As I understood the few contracts I've had they barred me from selling to anyone unless the company approved. That in practice meant I had no liquidity unless IPO or got to sell to investors in the next fund raise round (very very rare). And think about it a bit further, who's going to go through any due diligence if their research and offer is going to first hit the board/company and potentially completely vanish for them? I certainly wouldnt invest time/resources to see if I wanted to buy shares from an employee to potentially find out the company decided to buyback those shares instead. This property would massively lower the price I'd be willing to offer. (as a compensation for my risk taken)

goodpoint 3y ago

You are missing a massive blockers. Coops are often ostracized by private corporations. To the point that coops have to build coop networks to resist.

nickpp 3y ago
Interesting. In what way ostracized? Can you give some examples?
- goodpoint 3y ago
  It's well known that private corps are reluctant to engage and sign contracts with coops.

indigochill 3y ago

As I understand, you don't really need money to make a co-op, but what you need is cash flow. The most plausible route I've heard is freelancers forming a co-op where they pitch in some portion of what they make to a shared pot to even out the lean time in any particular freelancer's stream of gigs, as well as potentially sharing work if a client asks for more than an individual can do. Of course, that requires the participants know and trust each other, but it seems a plausible way for individuals without a bunch of money to start a co-op.

jasode 3y ago
>As I understand, you don't really need money to make a co-op, [...] The most plausible route I've heard is freelancers forming a co-op where they pitch in some portion of what they make to a shared pot [...] , but it seems a plausible way for individuals without a bunch of money to start a co-op. Yes, your realistic scenario of a co-operative is something I already outlined in a previous comment of "consultants co-op office" : https://news.ycombinator.com/item?id=14647223 https://news.ycombinator.com/item?id=14647223 But that type of freelance co-op isn't really what most people are thinking about when the discussion follows the template of "Big company <X> did something bad so why don't workers form a co-op <Y> instead of being screwed over by <X>?!?" In this thread, the topic is "IBM" laying people who are "too old". In response, some observers think "workers should form co-ops" to avoid being screwed over. In other words, the hypothetical co-op version of an "IBM" wouldn't lay off old workers. The "freelancers co-op" doesn't apply to this story of an IBM middle manager (MaryKathryn Doheny) being laid off. The issue is that companies like IBM, or Google, or Tesla, etc are by their very nature -- capital intensive -- so there won't be co-op alternatives for those. Still the same underlying economic factors: the car workers don't have the money to pool together and form a worker-owned car factory -- and the founders/investors who are motivated to start a new car company are not interested in sharing equity with a 100% worker-owned structure. That's why the employees who don't like Tesla's ownership structure can't quit and go work at a worker-owned co-op electric vehicle manufacturer.

maerF0x0 3y ago

Why cant the workers pool their available capital, and if they're sufficiently productive why cant they do some to generate more? Tech workers are considered to be highly paid, so if anyone could accumulate capital it's them.

jasode 3y ago
>Why cant the workers pool their available capital, [...] Tech workers are considered to be highly paid, The highly-paid workers can pool capital... if we're speaking in hypotheticals. The hypothetical tech workers can hypothetically pool their capital together to form a 100% worker-owned co-operative. On the other hand, my comments are explaining what real people have been doing in the real world. E.g. ex-Google employee Kevin Systrom didn't form Instagram as a workers co-op. And ex-Yahoo employees Jan Kuom and Brian Acton also didn't form WhatsApp as a workers co-op. They could have -- hypothetically -- but they didn't. (Those startups did have Incentive Stock Options but that's not the workers ownership people are thinking about when speaking of "workers co-op".) We can see that most ex-employees with access to money do not form co-ops. Why? The ex-employees-now-the-founders see no financial incentive to do so. The workers who actually _want_ co-ops are not the ones out there creating new companies.
- maerF0x0 3y ago
  The coops i've seen, in practice, are mostly low capital required things. So your point does make sense. I've mostly seen coffee shops, bike/repair shops, breweries, some restaurants. These are both not capital intensive, and are pretty well commodified too unfortunately.
- WalterBright 3y ago
  Harry Hardworker is also not going to want to share his compensation equally with Dan Deadwood.

deleted 3y ago

[deleted]

WalterBright 3y ago

Unions have the money.

robocat 3y ago

People start businesses because they want to make money. Co-ops and charities are usually set up for other purposes, and have other constraints. People also start businesses because that is the simpler default that you will be pushed towards: by your clients, your accountant, your suppliers, your lawyers, your mother, your bank, and most everybody else. > The roadblocks to worker-owned co-ops taking off are money and capital. That cliché just doesn’t apply much to many professionals, because the biggest expense is salaries. Watch a new business form, and professionals can often afford to self-finance during the initial period. A few professions need to rent, but say lawyers and some doctors have cheap chambers and clinics to service the market for individuals starting out. And lawyers and accountants do form a type of co-op: they call them partnerships. There are a huge number of self-funded software startups because so long as founders can pay their bills, they can afford their salary. Most self-funding software startups could just as easily be formed as co-ops, yet they are not. The reason is not because they are forced to become a business because they need capital. Note I am talking about self-funded startups - funded startups are obviously different. Finally, co-ops are fundamentally unfair to the founders. Starting a business costs a lot more than money, and businesses are how we try to fairly repay that. And the #1 reason why co-ops don’t exist? Because people have seen them and they don’t want to join them.

jasode 3y ago
>That cliché just doesn’t apply much to many professionals, because the biggest expense is salaries. The context of my reply was this thread's article: IBM laying off a middle-manager employee like MaryKathryn Doheny. There isn't a co-op of "middle managers" charging an hourly rate. I previously explained that a "freelancers consultants co-op" doesn't apply to her situation: https://news.ycombinator.com/item?id=35930165 https://news.ycombinator.com/item?id=35930165 >And lawyers and accountants do form a type of co-op: they call them partnerships. No, the professional partnerships like law firms are not "100% workers' owned co-ops" that people are thinking of as I've explained before: https://news.ycombinator.com/item?id=31459215 https://news.ycombinator.com/item?id=31459215 >Most self-funding software startups could just as easily be formed as co-ops, yet they are not. The reason is not because they are forced to become a business because they need capital. [...] And the #1 reason why co-ops don’t exist? Because people have seen them and they don’t want to join them. Your chain of reasons is overcomplicating things and doesn't answer the mystery for the workers who already know what a co-op is and want one. On the other hand, I'm explaining that the workers who already bought into the concept of co-ops -- are not the ones creating new companies as co-ops. Why can't those pro-coop workers "Be The Change They Want To See" , as the proverb advises and create those co-ops?!? Because they have no money.