Can we build a platform co-op to challenge Über? Interview with Duncan McCann of the New Economics Foundation

 

Dave of Lowimpact.org / Noncorporate.org talks with Duncan McCann of the New Economics Foundation (see video below), about platform co-ops. Duncan is starting a taxi platform co-op called Faircab, to challenge Über. He’s planning to start in Brighton, after the licence in London was changed from £2.5k per year to £2.5 million!

What’s a platform co-op?

It’s a platform-based businesses that is owned and controlled by its members, and is formalised into a co-operative. There are many forms – where the members / owners are workers, but also, acknowledging the nature of a platform as a two-sided beast, many are multi-stakeholder platforms, which have space, not just for the workers, but also for the customers / users. Workers and users can have different rights in terms of governance or profit-sharing – there can be different tiers of membership, but because both groups contribute to the value of the platform, both can be acknowledged as members / owners.

I guess if customers are part-owners, that’s going to encourage them to use it more?

Exactly. Co-ops force people to think beyond short-term profits, which is great, but they often become inward-looking, focusing on the members. So if members come from one particular group, with a particular set of interests, those interests can become entrenched inside the company. That may not necessarily what’s best for the wider community. So this is a challenge, because co-ops have usually functioned best when they have homogeneity of membership. An example is the large fruit growers collectives – everyone is doing the same thing (growing fruit), and wants the same thing from the co-op (getting the best possible market price for their fruit). When you start getting a more complicated system, there is a wider range of interests, and sometimes, the different groups can almost be in conflict – for example, in a taxi co-op, drivers would like to obtain the highest income possible, but users want the lowest fares possible. So there will be conflict in the governance. If those conflicts can be resolved, the organisation can be much stronger, because there will be agreement between the two core groups.

You mentioned ‘ridehail’ to me earlier. What’s that?

That’s the coverall name – you have an app to hail a ride, a taxi. So Über falls into that wider category.

Is there a platform co-op to do that?

It’s what I’m working on at the moment. We’re getting towards the end of the business plan. We were hoping to launch in London. We did a crowdfunder to raise some money to employ some Über drivers. But around that time, Transport for London changed the licensing conditions. It was £2500 for a five-year licence for an operator, and they changed it to 2.5 million pounds. So as a co-op with no track record and low returns for investors, we couldn’t hope to raise that. So we’ve abandoned London temporarily, and we’re going to launch in Brighton.

Brighton banned Über, but there’s a political climate there that’s much more favourable to interesting, radical business models. We’ll hopefully be starting in 2019.

 

                     

 

Why do you think TfL increased the licence fee to 2.5 million pounds?

I went to see them and I said ‘do you understand that the way you’ve structured this new licence cements Über’s dominant position here, and makes it virtually impossible for any other business not operating on their business model (i.e. highly-capitalised, highly-extractive) to come into London. You’ve basically banned everyone else.’ – they said that they’d never thought of it that way. They weren’t doing it to stop people like us. They just saw Über as causing them a lot more work, because they’d be trying to avoid regulations, their drivers were working too much, sometimes unregistered, so we need to charge the appropriately.

It was the same with the GLA. I went to see their transport committee, and they didn’t realise either. They said that they’d love to encourage small-scale competitors to the big players.

So you think the regulators would be on board as long as they understand the issues?

I do. The reason we didn’t pursue it was that it would be a couple of years work to get the licensing situtation changed, and we want to start right away. But I think regulators are warm-ish to the idea of differentiating cost of licence depending on size and business model. The problem is that it requires a lot of effort. I get the impression from talking with them that if we were prepared to put the effort in, they’d be amenable to creating a social licence, which would be much cheaper as long as we only distributed profits to members, rather than extracting it. I get the feeling that they really want to encourage the kinds of things that we’re working on. But they get to talk with corporate representatives much more than they talk with people like us. Give them the right arguments, and I really believe that they do get it, and would like things to be different, but they’re so overworked that we really need to hold their hands. The corporate sector has the money to pay people to hold their hands, so it’s harder for us to find the time and energy to do it.

That’s quite encouraging.

I think so.

We’ll promote you like mad if you launch a co-operative alternative to Über.

Well it would be really exciting. Platform co-op has been a buzz phrase for several years now, and what has perpelxed me is why we just don’t see any out there.

So there aren’t any we can go to, now?

There’s one starting soon called the Equal Care Co-op, going to be doing social care through a platform co-op. But at the moment, as far as I know, there are no platform co-ops in existence.

And other countries?

The US has several. Up and Go is a popular one. It’s based in New York, and provides cleaning services. There are a few others in the transportation sector, although maybe not fully-registered co-operatives.

Why is it so difficult?

It’s all about turning this fantastic idea – so much of the damage that the traditional platforms do are mitigated, counteracted, neutralised by encasing it in the co-operative model. The problem has been turning this great idea into reality – and the difficulties are around setting them up. There are a few different reasons for that. first, is there already a dominant, highly-capitalised platform operating in the same sector? It’s much harder to set up a platform co-op providing taxis, food delivery, accommodation, for example. Über, Deliveroo and Airbnb have deep pockets, and if anyone tries to compete, they will out-spend them. So maybe the place to start is in sectors without those dominant players. Second, what do the users of the platform think about it today? Why the Equal Care Co-op is such a great opportunity is that in social care, at the moment, the providers know that the system is broken. They get paid below minimum wage, and don’t have enough time to provide all the care they’d like to. The receivers of care also know it’s broken. It costs a lot, carers don’t have enough time. So both sides are looking for something new. So a vision of a new system with service at its centre rather than profit, offering users and workers control is very attractive.

So the best sectors are ones where the users and workers are unhappy, and there are no giant capitalist platforms already operating.

With Über, the drivers – even the ones that earn quite well from it – understand the nature of their relationship with the company. They don’t have control, there’s no technical support etc.

And 25% of the money they earn will be taken away to give to shareholders.

Yes, and this is increasing to 30% for new drivers. Über are losing money ($4.6 billion in 2017), and so they’re going to need to recoup it. They’re happy to lose money in an attempt to gain monopoly position, but once they have it (and now they do), it will be time to recoup their losses. The drivers understand the exploitative nature of the relationship. Offer them an alternative with drivers’ rights at the centre, with a stake in the governance and a share of the profits, you’ll get the drivers pretty quickly. They may be skeptical as to whether you can compete with Über, but they like the idea.

But co-ops don’t have to extract 30% to give to shareholders – that must be an advantage?

Yes – I think 5% of fares can be used for admin / the running of the company, and the drivers keep the rest. We might hedge at 10% initially, but the aim is 5. There’s a co-op in France taking just 3%.

So drivers like it. However, talk to an Über user in London, and they like it much more than the drivers. It’s quick, easy and cheap. So although it’s easy to attract drivers, it’s harder to attract customers. To get them to switch is a huge effort – and cost millions in marketing. Same goes for Deliveroo, Über Eat etc.

So platform co-ops have to offer the same simplicity and price, don’t they?

Yes. The model we launch in Brighton should appear to be no different from the corporate platforms. It shouldn’t be easy to see that it’s ethical, and a platform co-op. Actually, maybe this isn’t the case in Brighton – but in general there’s a risk that if it wears it’s ethical credentials too clearly, people might assume that quality of service or price may be compromised. That’s deep within people’s mindset at the moment. We need to get the price and the service right first, then make the co-operative foundations clear. We’ve got marketing people helping us with that.

Give us a bit of history. How did the platform co-op movement start?

In the 90s, we didn’t have the giant platforms we have today. Now, 7 of the top 10 companies in the world are platform companies like Amazon, Facebook, Über etc. 5 are US-based, 2 are China-based. The idea that platforms are the place to go to get the things we need has grown exponentially. Unfortunately, they’ve also turned out to be highly exploitative and extractive. They take a huge cut of people’s work.

And they make a tiny number of people extremely rich, by taking value from millions of people’s work.

Yes – by creating these global marketplaces. The origin of the platform is really the medieval marketplace. A town would provide a physical space that would allow producers and consumers to come and exchange on the physical platform – ie the market. Platforms have reinvented the marketplace for the digital age. Just as in medieval times, owning the town / city square gave you control over the city, today, opening these large platforms has proven to be a potent way of extracting value.

The reasons for that are that they grow seamlessly – once you have the initial infrastructure, you can bolt on additional bits very easily. It’s why Über have been so effective at jumping from city to city. Also, as the platforms grow, their utility doesn’t grow in a linear fashion – it grows exponentially, because it produces giant networks with more chances to link customers with producers.

It’s only recently that there’s been a bit of a backlash, as people wake up to the fact that these companies want to dominate completely. Über’s aim is to completely control transport globally – to make it impossible to compete, or to find alternatives. The same is happening in the food sector, energy sector, finance sector etc, and it’s very dangerous to have such essential things in the control of so few people.

We have to build alternatives now if we’re going to prevent that. I think in some cases, it’s too late already. For example I’m not sure it’s possible to build a platform ride-hailing co-op in London. If we want to combat Über, we might have to start outside London.

The giant platforms are very poor global citizens – they avoid tax, shift risk onto drivers and service providers, exploit and extract and kill competition and any concept of a free market. These problems are mitigated or removed entirely by the co-operative model.

So back to the history. You mentioned Nathan Schneider.

So people were desperate to find alternatives. Nathan Schneider wrote an article for the Rosa Luxemburg Foundation – a German foundation that do some interesting stuff[Editor’s note: Nathan Schneider informed us this is in fact an article not by him but by his colleague Trebor Scholz which is available to read here]. It was about how merging the notion of co-operative values with the power of platforms can help develop a more just economy and society. The theory was spot on – what was less clear back then was what was needed to make that vision a reality.

I think one of the things needed is to get the unions onside. the US examples that have proven successful – taxis, cleaning, nursing – have all been successful when the unions work together with workers to help create entities that respect them, and their rights, long-term, and give them real power. It seems obvious that unions should support entities that are in opposition to platforms that exploit workers. This is something that UK unions haven’t really got to grips with yet. They fight the platforms for the rights of workers, but they’re not looking at helping set up alternatives. Fighting the platforms is important, to help level the playing field. For example, Über records all of its income in Luxembourg, so pays no VAT. Any competitors are immediately at a 20% disadvantage. My company will be UK-based, paying taxes properly, being a good citizen, but it won’t be a level playing field.

It’s amazing that that’s legal.

Well, a side-benefit of Brexit may be that some of these loopholes are closed. We’ll have to wait and see.

Is the platform co-op movemeng growing?

The first-ever accelerator programme for platform co-ops was run by Co-ops UK and Stir Magazine. They took 8 nascent platform co-ops in the UK (of which mine – Faircab – was one), and took them through a 12-week programme. The co-ops involved encompassed food, media, social care, transport and more. People are really trying to work out how to make platform co-ops work. So there’s a growing amount of interest, but we’re going to need to see some successes soon.

Is anything looking likely in the UK?

The one I’m most positive about is social care. Users and workers are looking for something new. But maybe it will be my ridehail co-op in Brighton. We need to raise about £3-400,000, which sounds like a lot but I think it’s doable.

There’s Resonate, that I’m a member of – based in Berlin, battling against Spotify / Apple Music etc. They’re multi-stakeholder, so listeners can become members, along with musicians and labels. It’s a whole music ecosystem under a totally different model. For example, Spotify and Apple Music have a completely opaque pricing mechanism, with almost no relationship between the number of listens you get and the amount you get paid. Resonate have used blockchain technology to make all of their rules / listens transparent, so that any artist at any time can question a public ledger and verify that they’re being paid the right amount.

So are there platform co-ops outside the UK that UK-based people can use?

People in the UK can of course use Resonate. And there’s a global directory. The exciting thing is that new things are emerging all the time.

 

Highlights

  1. Regulators are not pro-corporate, or against the co-operative sector. “I get the feeling that they really want to encourage the kinds of things that we’re working on. But they get to talk with corporate representatives much more than they talk with people like us. Give them the right arguments, and I really believe that they do get it, and would like things to be different, but they’re so overworked that we really need to hold their hands. The corporate sector has the money to pay people to hold their hands, so it’s harder for us to find the time and energy to do it.”
  2. The giant platforms are very poor global citizens – they avoid tax, shift risk onto drivers and service providers, exploit and extract and kill competition and any concept of a free market. These problems are mitigated or removed entirely by the co-operative model.
  3. Fighting the platforms is important, to help level the playing field. For example, Über records all of its income in Luxembourg, so pays no VAT. Any competitors are immediately at a 20% disadvantage.

Edited Tuesday 11 December to correct attribution of this article on the Rosa Luxemburg Foundation website to Trebor Scholz, rather than Nathan Schneider as previously stated.