Back in the 1970s, when the main debate about how to organise the economy seemed to be about whether key businesses should be state owned or whether they should be in the private sector, economists used to talk about certain industries which were “natural monopolies”. This referred to industries where it was universally seen as prohibitively expensive or impractical to replicate infrastructure, and where competition was not seen as a feasible way to improve customer experience. No one considered building rival sewage pipes, for example.
I think in this decade we are seeing the consolidation of a trend in the online economy towards the creation of what I would call “unnatural monopolies”. These are businesses which are eminently capable of being replicated, but which have become so dominant in their area of business that they are very hard to challenge. The likes of Google, Amazon, Ebay, Uber and Airbnb have dominance in their spheres. Some of them have almost complete dominance. And they display typical monopolistic behaviour. If you are a trader on Ebay you’ll know they sometimes force you to take a loss on things like postage, and impose rules that put you at a disadvantage in disputes. An Uber driver once told me that although the amount charged to customers and paid to drivers was supposed to fluctuate with supply and demand, he had in fact encountered situations where the price to the customer had gone up but the pay he received had not.
Some of these new behemoths seem to be “here today and gone tomorrow”, reaching considerable scale and then vanishing from the scene. Remember Myspace for example?
What’s particularly galling for co-operators is that these “unnatural monopolies make their money by facilitating what are essentially mutual transactions, freeing up value that was previously unused – someone’s empty house for example. Hence the misleading title “the sharing economy”.
In the co-operative movement, we’ve succeeded in carving out a role in some of the industries that were once considered “natural monopolies” although there’s much more to do. The Phone Co-op has proven that we can operate in a former state monopoly, with a real culture of public service, financed entirely by our own members, pioneering ethical ways of doing business, and making a real difference. Midcounties Co-op has shown through Co-operative Energy, which now has a quarter of a million customers, that a co-operative approach can work in energy supply. And many co-ops have been set up to generate renewable power too.
Our challenge now is to take on the space occupied by the “unnatural monopolies”. This looks simultaneously easier, and more difficult. Easier because all we need to do is create the software platform, and find the users. Easier because many people hate the overbearing behaviour of the new monopolists, and are looking for something else – a co-operative model would appeal to them.
Yet it is harder because these “unnatural monopolies” came into being as a result of huge risk-taking that we find it hard to replicate in the Co-op Movement. Venture capital investors spread their investments over many start-ups, each with a tiny chance of success, in the hope that overall they come out ahead because the successes are super-successful. In the Co-op Movement, we are oriented towards meeting member needs, and we don’t want to lose our members’ investments, so this kind of approach is anathema to us.
Some are making inroads:
- I salute the efforts of Fairmondo, a new co-operative model, owned by buyers and sellers, that is taking on Ebay and Amazon, providing an online marketplace both in the UK and in Germany.
- And of the Canadian-based Stocksy, a co-op which offers royalty free photography online, taking on Getty. It’s owned by the artists.
- In the US, Loconomics, a worker-owned co-op helps people find better terms than TaskRabbit in the so-called “gig economy”.
Like The Phone Co-op, these organisations started with limited resources (The Phone Co-op started with £35k in a spare bedroom), and by sheer sweat and effort are growing and making their mark for a fairer economy. They are true co-operative entrepreneurs.
The Phone Co-op has grown every year since we started. I’ve no doubt these new co-ops will too. But if we are to make the impact we as co-operators really aspire to make, to become global beacons of co-operation, playing a really significant role in these new markets, we will need new ways to finance our ventures. The market is changing faster than our co-ops typically grow, in our traditional model.
Yet in some ways we had the tools long before these new entrants came along. You could say that co-operators were the first crowdfunders. The Rochdale Pioneers raised small amounts of capital from large numbers of members to create their co-op, a model copied by thousands of co-ops in this country since, and millions the world over. The new model pioneered by Co-operativesUK, Community Shares, has opened the door to many new co-operative ventures. But it isn’t really suited to super-high risk ventures. Can we really ask ordinary co-operators to invest and tell them there’s a 95% chance they will lose their money? If the venture succeeds, co-operative values don’t really square with a “super-return” to investors either.
I think there is a real need for new thinking. If, as co-operators, as a movement, we want to see ventures of this kind take off, we need to find new mechanisms for sharing the risks. I don’t have a precise solution in mind, but I would like us to put our heads together, drawing on the immense innovative spirit that characterises our movement, to try to find one.
I could imagine a crowd-funded co-operative venture capital fund, which invests in a variety of new “platform co-op” ventures, perhaps taking some kind of royalty from the really successful ones, and accepting losses on a higher proportion of the others than we normally would in our world.
On the other end of the equation, I believe we could reduce risk, and avoid pouring money into some of the worst performers, given our values-driven approach, taking the greed out of the situation (let’s be honest, some so-called entrepreneurs are quite happy to take a salary, paid for by investors, knowing there’s little chance of their venture succeeding – I wouldn’t expect to see that so much in our sector). Collaboration on open-source software, already co-operative in nature, also reduces costs. That way we could improve the success rate.
I’m proud that The Phone Co-op is sponsoring the Open 2017 Platform Co-operatives conference next month in London, which will bring together over 500 people to debate taking this model to the next level.
As I say, I don’t have all the answers, but I believe this is a direction we should be exploring, if we are truly to be on the eve of a new era of co-operation, based on platform co-ops taking their rightful place in the online economy, we need to find those answers. Let’s do this together.