What is a Tech Cooperative - A Short Introduction
Tags: startup, management, cooperative, business
Published: 2023-08-30 17:41:44

> The most tragic form of loss isn’t the loss of security; it’s the loss of the capacity to imagine that things could be different.
>
&mdash; <cite>Ernest Bloch, The Principle of Hope</cite>

# What's a Cooperative?

You might be familiar with corporations that are owned by shareholders. Workers of that company may possibly own some shares but not nearly enough compared to the CEO and other executives even if they work just as much. They do not have voting shares to actually participate in executive decisions for the company they work for. In this context, it is not truly worker-owned.

A cooperative (co-op) deviates from the traditional model in two ways:
1. Owned by workers of the business
2. Controlled democratically by the workers

The degree to which these conditions are met do vary and there isn't a single correct way to make a co-op.

Generally though, in a worker co-op, the workers own the business equally. This often means everyone has a say in how the business is run and profit is shared in an equitable way. This does not mean that voting rights are always uniform nor does it mean everyone gets the same amount of money &mdash; salaries could be different and the number of hours worked could be different so there may be a collective agreement as to how profit is distributed.

If Apple were organized as a cooperative, <a href="https://www.forbes.com/sites/cameronkeng/2014/12/18/if-apple-was-a-worker-cooperative-each-employee-would-earn-at-least-403k/?sh=7b194ba22dee" alt="Forbes article citation" target="_blank">all workers would earn $400K yearly <em>on top of their salary</em></a>.

Essentially, while traditional businesses scale vertically and form stricter hierarchies, cooperative businesses typically scale horizontally and remain democratic. Leaders work for the workers rather than the reverse.

# How Do Cooperatives Make Decisions?

If every worker owns the business, how then are decisions made? It would certainly be cumbersome to vote on every company decision especially as it grows larger.

Co-ops are flexible though and each one may practice different types of methods. Smaller co-ops may have workers making decisions together through frameworks like <a href="https://youtu.be/DYKwn9jzjXs" alt="Dean Spade: Basic Steps in Consensus Decision Making" target="_blank">consensus-decision making</a>. Other co-ops may see benefits in electing leaders including electing the CEO with term limits and veto power.

The Mondragon Corporation in Spain is the <a href="https://www.newyorker.com/business/currency/how-mondragon-became-the-worlds-largest-co-op" alt="How Mondragon Became the World’s Largest Co-Op" target="_blank">world's largest co-op</a>. It is a federation of worker-owned cooperatives with over 80,000 workers across multiple industries. Workers elect a governing council who then elect the CEO. It's been around since 1956.

# Why Don't More Cooperatives Exist in the US?

Cooperatives are a popular business model in many other countries, with some famous examples like Mondragon in Spain, John Lewis Partnership in the UK, and Coop in Italy which have been around for a long time. However, in the United States, cooperatives are not as widespread.


Several reasons contribute to this: First, there is limited guidance available on how to start a co-op because the US has traditionally favored investor-owned businesses over cooperatives. The cooperatives that do exist in the US are primarily in the agricultural industry. Second, the legal and regulatory environment in the US has not always been supportive of cooperative businesses. Finally, the tech industry's startup culture, which is dominant in the US, tends to prioritize fast growth and exit strategies over long-term sustainability and community-focused values that many cooperatives hold.

Despite these challenges, there are still successful cooperatives operating in the US, including some in the tech industry. Check out this <a href="https://github.com/hng/tech-coops#coops-namerica" alt="List of tech cooperatives" target="_blank">repository</a> for a list of some tech cooperatives

# Why Do Tech Need Cooperatives?

A software engineer may be content with their six-figure salary today, but consider how the software that they write (which the company uses to sell for profit) earns millions. Yet the millions of dollars are not distributed to the ones who created the software but is instead given to the executives of the company. The engineer probably is only given a "bonus" at the end of the year for their hard work. Given that the average engineer makes more than the average American, this is seen as equitable. This doesn’t change the fact that the model as it exists today is opposed to democracy.


If Facebook were a cooperative, would Cambridge Analytica have been able to use the data of 87 million users without their consent? As workers control the company, they would have a say in the ethics of the company rather than a small few executives.


While the traditional business model may seem equitable for individual engineers, it ultimately concentrates wealth and power in the hands of a few executives. By contrast, cooperatives are democratic, worker-owned businesses that give employees a say in the company's decisions and distribute profits more equitably. This proven and viable alternative has already shown success in other parts of the world. With the rise of tech co-ops and their potential for forming alliances and spreading to other industries, the working class can benefit from a more horizontal and cooperative business model. By embracing cooperatives, the US tech industry can help build a more just and sustainable future.