Graham Mitchell: co-operativising the tech sector one step at a time

The barriers to growing the co-operative economy: Graham Mitchell of CoTech, part 2

This is part 2 of our interview with Graham Mitchell, who works in the co-operative tech sector. Here we’re talking about how we might grow the co-operative, non-extractive sector, and what barriers we might face. Part 1 is here.

What are the biggest obstacles you face – you personally, or generally in the co-op tech world?

I think the biggest single issue is finance. If you take platform co-ops, as a response to the so-called sharing economy – when people realise that it’s not at all about sharing, but that it’s hyper-extractive and very damaging.

Not everybody sees that though, do they?

Perhaps not, but the platform co-op movement is a kick-back against it. Why don’t we have co-operatively-owned platforms instead? Well, there are high costs involved in setting them up. And it’s not just about the technology, it’s also about reaching the market. If you’re trying to compete against Uber, say, they’re losing billions of dollars per year. They’re burning money to grow their business. The same with Amazon. It’s gone years without making a profit.

                     

Well you’ve got to spend lots of money putting the competition out of business first.

That’s right. You’ve got this capitalist model which isn’t about making profit in the short term, it’s about market dominance. You keep pouring money in, because the venture capitalists have almost limitless supplies of capital to build market dominance and share price, so that they have a good exit strategy. They can make a killing. It doesn’t matter that the business isn’t making a profit, as long as it’s steam-rollering everything in its path and killing all opposition, after which it can charge what it likes.

What’s the best thing that individuals can do to help change this situation?

Collectivise. I’m a big fan of Douglas Rushkoff. Something he talked about was ‘finding the others’. This is where the strength of the co-operative model really lies. The Fair Trade / ethical consumption movement has been effective in raising the issues, but in terms of changing the structure of the market, it hasn’t had much impact. That’s debatable I guess, and it may be that in some sectors, it’s been a major force. But overall, it hasn’t changed the game. By ‘finding the others’ we can build enterprises that are much more powerful, and can create real change.

So how do we finance this change?

It’s difficult. Within the UK co-operative economy, we’re not innovating enough on that level. There’s the community share or crowdfunding model, which can be effective, or the debt model. There’s nothing to compete with venture capitalism (VC). VC is essentially gambling. They have a big pile of cash, which they’ll split, and invest in 10 start-ups (say). They hope that one of them will succeed and give them a return many times more than their investment. The rest will be lost. They’re not particularly expert in how they gamble. Their odds don’t improve over time, particularly. They’re as clueless as the rest of us as to whether a particular business idea is going to succeed or not. But the problem with this model is that it’s all-consuming. If you’re a small business, and you go the VC route, then that’s the end of your control. The moment you do a deal with a VC, they’re in control.

That’s why co-ops can’t use that model. We need a system of ‘patient capital’ that respects the sovereignty of the co-op members and looks for a return that’s more equitable. There’s the FairShares model, that allows an investor class to be accommodated within a co-operative model. There are some different kinds of organisations, for example Purpose Capital, based in Switzerland, who invest, but their return is based on a share of the profit, for a longer term, and they don’t take control.

I try to stay optimistic. I say that capitalism itself grew in the cracks in feudalism, and was ultimately successful, and now the new economy is growing in the cracks in capitalism, and will ultimately be successful too.

I think it’s doable. We’re just trying to accelerate that process. We’ve made some big mistakes in the co-op movement. For example, going back 100 years, the big solution was seen to be consumer co-operativism, and support for worker co-ops was almost swept aside. We saw a huge rise in consumer co-ops, most of which are now struggling. They’ve gone through an era of consolidation, so that now you have a small handful of giant consumer co-ops that are becoming less and less co-operative.

So you think scale is an issue? Do you think we need to keep organisations small and federated?

Yes, small and federated, but also complicated and hard to be subsumed. Power corrupts, so if you get too big, it becomes hard to maintain the human level of co-operation. That’s why I worry about blockchain. The idea of autonomous organisations operating through a technology platform doesn’t feel as though it’s a good fit with co-operation. Enabling co-operation at scale is something that technology could help with. I’m doing some work on that front with a group called the Digital Life Collective.

What do they do?

They’re trying to build tools to help co-ops that are geographically diverse – in different time zones where there’s a lot of asynchronous stuff happening. The whole concept of the ‘firm’ is breaking down. There are much looser coalitions of people coming together to do stuff, often just for a short time, before drifting apart. How do you manage that? They’re trying to develop simple tools that people can use, whilst still maintaining the open, democratic principles that co-ops are all about.

On CoTech’s website, it says that you’d like to increase market share for democratic businesses. That’s exactly what we want to achieve with NonCorporate.org – not just for tech businesses, but for all sectors. People often say that the co-op / solidarity sector is only ever going to be marginal, but my response is to ask when they’d like to see it stop growing. If there isn’t a point that they’d like it to stop growing, then surely it’s geared to take over eventually?

It’s a good point. It’s probably a bit to do with psychology. There’s a mindset that likes to be the underdog, the rebel, and expecting not to succeed. ‘Winning’ changes the nature of the game, and would make some people uncomfortable.

So tech is a creative industry, and starting a co-op or moving to the co-op sector and getting together with other people is a creative thing to do – much more so than working for a multinational corporation, which always suggests a lack of imagination to me. Maybe the co-op tech sector has the most creative people, so you’d get a better product from them?

There’s evidence to show that when people have a stake in what they’re doing, they’re more productive and innovative. There’s also evidence to show that large organisations struggle to innovate and are risk averse. In the tech sector, what I see is that people see the benefits of collaboration, whereas for others, they struggle in a co-operative setting, because they’re looking to be told what to do.

It’s our big advantage, isn’t it? There’s a feeling of solidarity that doesn’t exist in the corporate sector. The corporate sector has lots of other advantages – scale, money, it owns the media, it talks to politicians and gives them money and jobs, it avoids tax – etc. But our team has a feeling of solidarity that they can never have.

Well, they try to manufacture it, don’t they?

They do, but it’s not really manufacturable. It has to come from the heart.

Yes, I think that’s very attractive to people. People like it. Sometimes they’ll make decisions that aren’t in their favour in order to secure that sense of solidarity. People often work their way up the corporate ladder, then realise that it’s just rubbish and leave to work in a job that has solidarity, but much less money.

Yes, it brings them money but not satisfaction.

Yes.

There’s a bit of a common theme amongst the people I’ve interviewed recently. I don’t know if you’d agree. But the theme is that a crash is coming, and they’re trying to build networks to catch people when it happens.

I think we’re in the midst of a long, slow crash. I think it started some time ago. Maybe the financial crash 10 years ago was the first big indicator. The process of decline has continued I think. You hear a lot that capitalism is adaptive and flexible, but I think we’ve seen so much financialisation of everything over the last decade or so that so much wealth has been sucked out of the real economy to feed this stratospheric, financial layer, that the real economy is now on its knees. There’s massive poverty, even in Western countries, which seems to be getting worse.

You mentioned Douglas Rushkoff earlier. He says that currency speculation and the derivatives market – gambling basically, totally unproductive – are ten times the size of the real economy, but are parasitic on the back of it.

Absolutely. That was the cause of the financial crash. So much speculation and gambling, especially the collateralised debt obligations, that had no foundation, and so the whole thing imploded. Those lessons haven’t been learnt. Those gamblers, hoovering value out of the real economy, mean that ordinary people haven’t seen any real improvement in their quality of life for several decades now. Real wage growth in the States stalled some time in the 1970s, at which point, people started borrowing, and the credit card boom took off.

Here’s a specific question for you – do you use Loomio?

Yes.

How do you find it? Is it difficult?

No, it’s quite useful. The folks who run it have secured some funding recently, so I’m hoping that there will be more developments.

It’s a decision-making tool, isn’t it? What’s special about it?

It’s based on real democracy, using ideas from sociocracy, to facilitate the decision-making and deliberation. Plus the company behind it is a co-op – in New Zealand – called the Enspiral network, which is an interesting group.

Some people I’ve spoken to are looking for ‘it’ – the special thing, the catalyst that will help to turn the tide. What do you think it might be?

I don’t think there’s a silver bullet. In terms of the new economy, there’s a lot of fragmentation. If you look at the political aspect, groups looking at alternatives are splintered. There seems to be a challenge there to find common ground, to work effectively together to make progress. I think it’s down to the processes of co-operation, and creating real economic power through that process. There’s nothing magical required. If we can create economic power, we can make substantial change to the game.

I agree. So I’m not saying that the mutual credit idea is a silver bullet, but I think it’s a really interesting idea, that could be a type of catalyst to make interesting things happen.

Something like that is a real enabler, isn’t it? If we can make that work – and there’s no reason it couldn’t work – then it could accelerate the development of lots of organisations and help them get things done. But it’s only going to work through trust. It can’t work any other way. So building that trust is crucial.

So we’re going to try to build a UK mutual credit network. Do you think that working with CoTech could help accelerate the process?

CoTech must be over 40 organisations now, with a turnover in the millions, so they could possibly develop an internal mutual credit network, and that could be a base point you could build out from. I think the UK network needs to be a collective of federated collectives. Relatively small schemes in which people know and trust each other, federated together to scale up.

It would be great to get some of the big co-ops like the Phone Co-op, Co-op Energy or Suma involved too, so that members always had somewhere to spend their credits. Everyone needs telephony, energy and food. That’s more of a national thing.

I guess those will come in time. You need to start out small, prove the concept, establish credibility. After scaling up a bit, maybe the Phone Co-op could be persuaded to allow people to pay, say, 10% of their phone bill in mutual credit rather than cash – so that they’re not over-exposed. So yes, I think mutual credit is a key part of the jigsaw. I don’t think it’s the only part though. My own sense over time is that in a lot of different areas, like mutual credit, I get a sense that using a co-op as the business model doesn’t really figure too highly on their list of priorities. But if you’re going to do something collectively, I think you have to do it using the co-operative model. Not only is it effective, it is in itself a game-changer. Not just a means to an end, but also an end in itself.

That’s certainly going to be our model. But if we’re going to be a network, then we might have to partner with lots of organisations that aren’t co-ops. But it seems to me that if the mutual credit idea ever grows, it squeezes money out of the picture anyway, so there’s nothing there to extract. You can’t extract the credits – there are credit and debit limits.

Yes, it builds in resilience.

And capitalist firms that try to get involved with it are actually sowing the seeds of their own destruction ultimately, because it’s pushing out money.

The other thing is that, if we’re talking about networks of networks, federation and complexity, then we need some expertise in how we do that. And technology can help. Where that might come from is the ‘viable system model’ (VSM) stuff – Stafford Beer. That’s a model that’s used in the private sector. I think we need to learn a lot more about it in the co-operative sector.

Can you give us an overview?

It’s essentially how you can model organisations and networks using ideas and principles taken from nature. Small operating units that are autonomous, and working out what the feedback / communication loops are, and what the information strategies are in terms of how these units work together, and how they can work with higher-level strategic functions that are trying to co-ordinate and look outwards into the environment to understand opportunities and threats. One of the problems is that there aren’t any accessible texts on how to do it. My mate John Walker, formerly of Suma, is an expert in VSM, and has written on how to apply it to co-ops. But as far as I know, that’s the only text that exists, and I keep badgering him to produce a ‘dummies’ guide’, because I think it’s a key part of the mix we’re struggling with how to use if effectively. But I think it provides a really good approach to designing these complex networks and federations. The risk is that if it’s done badly, it could fall apart, or just suck too much out of the wealth creation part of the sector.

It’s the ‘joined-up-ness’ that makes it really strong and resilient.

So going back to a catalyst that could make a real difference, then VSM is certainly on the list. Everyone says that we’ll have these networks and federations, but once you start to dig into that, you see that there isn’t a known way to do this without soaking up everyone’s time and energy.

Do you know a place where people can go online to get more information about VSM?

Yes, here.

[NB: here is our interview with Trevor Hilder, a VSM specialist.]

And where can people keep up to date with what you’re up to?

There’s a forum at community.coops.tech. Anyone can sign up for an account and join in the conversation. Plus the other sites I’ve mentioned above.

 

Highlights

  1. It’s down to the processes of co-operation, and creating real economic power through that process. There’s nothing magical required. If we can create economic power, we can make substantial change to the game.
  2. Some things may help to catalyse the process of co-operation, like Stafford Beer’s viable system model, for building the complex federations and networks that are needed to build a large enough co-operative sector to challenge the corporate sector.

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