This article appears here as part of our focus on Platform Co-ops and the forthcoming open2017 conference.
Technology is disrupting outmoded industries at an unprecedented rate. As the gyroscopic effects of the neoliberal model wobble out of control Paul Mason suggests the end of capitalism has begun and even the IMF is questioning whether their capitalist agenda was a 30 year long mistake. This article analyses how platform businesses disrupt industries and suggests how emerging technologies and ownership models are ushering in a fundamentally new, truly democratic economy.
The rise of disruptive platforms
Uber has become the most valuable startup ever and has completely disrupted the taxi industry in every country it has targeted. Similarly, Airbnb has disrupted the hotel and bed and breakfast markets, making massive profits by syphoning fees from customers and suppliers without producing any tangible goods or owning any physical infrastructure. So what are the key ingredients of their successes?
Ripe for disruption: The UK treasury, by Carlos Delgado, creative commons.
To disrupt an industry you can't just launch an app, you have to remove pain, improve service or simply better the traditional process of transaction and both Uber and Airbnb have done this in spades. Uber have not only improved the traditional cab booking process but have relocated the payment process from the physical to the digital world. Gone are the days of struggling to find a local cab number, wondering if or when it’ll ever arrive and then fumbling to find the right change whilst you manhandle your luggage. With an Uber you just say thanks and walk away.
Similarly, renting a flat or a room was always tarnished by the payment process. No matter how much people trust others there’s something 'dirty' about asking people to pay you. With Airbnb payment happens upfront online so your host can simply drop their keys in your hand confident in the knowledge that payment has already been made.
People like simplicity. These new, disruptive startups have simplified peoples' lives by utilising technology, which has helped them grow exponentially.
So disruption works. And works particularly well when the target industry is well established, but a bit 'stuffy'. A bit 'long in the tooth' and populated by people that won’t realise what's going on until it's too late; by the time the new solution is well on it's way to usurping the old.
Which makes me think of Whitehall.
Where else can you find such a superb group of 'stuffy', old fashioned, single-minded capitalists, who are a bit 'long in the tooth'? Where else can you find an 'industry' that is operating on completely outmoded, outdated and outrageously ineffective processes that would benefit from a little disruption?
Capitalism has subsumed democracy and made it an industry
We don't really live in a democracy. People argue that we do, but there's no way it can be true. If we lived in a democracy, we would have a say in at least some of the decisions by which we are affected. But we don't, not really, not like we should in a democratic society. No matter how hard I try. No matter how much I get involved. No matter how many times I write to my MP, or tweet at him, my opinion does not make any difference to the harsh reality on the ground. The social paradigm we live in is dominated by the interests of big business. Capitalism has subsumed democracy.
Let me give you an example. How, in a democracy, would something like TTIP be possible? For those of you that have been living under a rock for the last two years, TTIP is the best example of rapacious neoliberalism doing its best to gain even more power over the entire planet. The idea is to further empower giant corporates by letting them sue national governments for loss of profits caused by changes in legislation. The fact that this "idea", which will affect everyone since it aims to gain the power to overthrow any environmental legislation which stands in the way of "free trade", is being debated behind closed doors by the global elite, illustrates how undemocratic things have become. What happened to our vote? What happened to the voices of the millions and billions of people this legislation will affect? The people's voices are not welcome in a debate 'owned' by big business.
To illustrate how far we have come down this road, let's look at how big business plays dirty. Big business will use any means at its disposal to get what it wants and lobbying is one of its favourite tools. Neal Gorenflo describes how "death star platforms" like Uber and AirBnb combine lobbying with other influencing strategies to bend the market to their will:
"Uber’s David Plouffe, formerly President Obama’s campaign manager, literally besieged Portland’s mayor, ultimately forcing him to create a favorable policy. Bloomberg’s “This is How Uber Takes Over a City” gives an eye opening account Uber's strong arm tactics. As of this writing this, Airbnb is running an $8.3 million campaign to defeat a San Francisco voter proposition (Prop F) designed to limit Airbnb’s negative impact on the city's skyrocketing housing costs. This lobbying activity is just the tip of the iceberg. Uber and Airbnb are using a good bit of their $10 billion+ collective war chest to hire a global army of lobbyists. In their language, they’ve put “boots on the ground in hundreds of cities."
The modern world of unfettered neoliberal capitalism is a far cry from the village market that once was… Gorenflo describes the new wave of "professionals" applying their collective aptitude to creating startups as "shock and awe entrepreneurship" in which the rules are being bent, broken and re-written for capitalism’s own benefit!
"It’s like 1+1=10. The more money Death Star platforms raise, the more press and customers they get. The more they break the rules, the more press and customers they get, which enables them to raise even more money. Taxi drivers strike? Jackpot! And the cycle repeats. It’s a blitzkrieg. It’s shock and awe entrepreneurship. It’s the sound of a new hegemonic bloc coming to power."
Democracy may not be a traditional 'industry', but with campaign contributions at record highs, it's more like one now than ever before. Democracy as it was and should still be defined, is no longer working as it was supposed to. It is no longer "government of the people, by the people, for the people" it's more like "government of the people, by the elites, for big business", with a token 'vote' to placate the electorate once every five years, and that is something we can disrupt.
How can we disrupt capitalist democracy?
As we have seen from the Uber and AirBnb examples, successful disruption requires fundamental changes to both the underlying agreements (the T&Cs you don't read but agree to before using their platforms) and the processes and transactions (what you can do on the app and what happens in the physical world) of an industry.
Our entire economy, in fact the very concept of money itself, is nothing more than an agreement. The words "I promise to pay the bearer on demand the sum of…" which are still printed on UK Pounds Sterling encapsulate the basic "agreement" upon which our entire economy is based. Don't get me started about how banks have run away with that idea but the basic point remains: money is an agreement. If we want a new monetary system we need to found new forms of agreement like Bitcoin, for example.
Similarly, companies are founded on agreements and, since 1976, Public Limited Companies' agreements include a key objective to 'maximise profits for shareholders', which is the main problem with that agreement. It is one cause of the corporate psychosis which manifests as environmental destruction and exploitation whilst driving up inequality.
To disrupt capitalist democracy we need to create new agreements which usurp the present economic and business ownership models AND improve the processes by which ‘the people’ interact with these systems, to make them more attractive, more responsive and more user friendly than what’s on offer today.
When people can obtain the majority of goods or services they need from democratically owned and managed organisations, through decentralised crypto-currencies or other means, more easily than they can through the present system, capitalism will become a thing of the past. Enter the co-operative and it's digital big brother, the platform co-op.
What's a platform co-op?
Co-ops are organisations based on the well established Rochdale principles, which are by their very nature open, inclusive and democratically controlled by their members. They can take many forms, and be set up in different ways but the one essential feature that distinguishes them completely from 'normal' companies is the member-owned governance structure. Multi-stakeholder co-ops can be structured to be governed by various groups of stakeholders, ensuring that everyone who has a relationship with the organisation (for example, workers, customers, suppliers and investors) has a genuine say in how the organisation operates.
Platform co-ops are online organisations, normally involving a virtual market or meeting place which, just like co-ops, are owned and managed by their members.
Co-ops are not particularly revolutionary, they've been around since the 1800s, but what is new is the interest in the co-operative model and how it can be applied to online platforms. We've seen how well open source software has usurped proprietary alternatives and now the platform co-op model, which is itself open-source, is spawning a range of new, online, member owned and democratically controlled organisations who aim to usurp the corporate ‘Death Star’ platforms.
How can platform co-ops disrupt capitalist democracy?
The key word here is "ownership". As Marjorie Kelly points out in Owning our future “Ownership is the gravitational field that holds our economy in orbit". Traditional, extractive, publicly traded organisations represent 80% of global industrial output, but are controlled by the wealthiest 10% of society. The elite own the organisations which make up our economy and this setup allows them to extract wealth from us to them by design.
Platform co-ops on the other hand, which must always be democratically owned, are the building blocks of an ownership revolution in which power is transferred from the few to the many. Platform co-ops have a natural source of funding through the crowds which make up their networks, they are generative by design, incorporating shared values. Their purpose is to benefit their communities.
All members get a say in how platform co-ops are run and therefore, the things the co-ops do which affect them. Imagine that your local school, shop and pub or restaurant are all co-ops and you own part of each of them. You would be able to influence the things that affect your daily life in ways that are currently impossible through our existing 'democracy'. You wouldn't need to write to your MP in the vague hopes that you would get a reply. You would be able to propose ideas, debate others' ideas and vote directly on matters that concerned you, making real changes in your local community and to your quality of life.
Co-ops also encourage the development of commons, by transferring knowledge from private to public ownership. Look at how Wikipedia has killed Encyclopaedia Britannica and how WikiHouse has enabled open source housing, or how WikiSpeed is working towards producing open source cars. These changes are fundamental to the structure of our economy, knowledge can never be re-appropriated into private hands once it is open source. This is the first element of a commons-based economy, the mutualisation of knowledge and ideas.
Only by redesigning the ownership models of the organisations we buy from, work for and rely upon we will start to disrupt the traditional capitalist model. As Mason notes:
“The logical focus for supporters of postcapitalism is to build alternatives within the system; to use governmental power in a radical and disruptive way; and to direct all actions towards the transition – not the defence of random elements of the old system. We have to learn what’s urgent, and what’s important...”
Changing ownership models alone will not be enough
As with the Uber and Airbnb examples, disruption requires a combination of new agreements and changes to the processes and transactions of an industry. The co-operative ownership model presents a viable alternative to the 'agreements' on which the majority of businesses are founded, but new agreements alone will not disrupt much. To truly disrupt an industry, especially one as complex and insidious at capitalist democracy, we also need to change how business is conducted, to make the co-op model the default instead of the exception.
For disruption to really work, founding and running co-ops has got to become much easier. Technology can and is being applied but there's still much work to be done to deliver an Uber-esque experience which encourages the swarm to defect from limited companies and make co-ops the prevalent organisational form.
Out-evolving such a well established system is not going to be easy and such a multitude of challenges require numerous technical innovations. Enter "the open app ecosystem", a suite of interoperable open source apps designed to facilitate distributed collaboration. The open app ecosystem does not exist entirely yet, but Sandstorm is a good example of current progress and several of the other apps required to run cooperative organisations online already exist elsewhere. Take Loomio for example, the decision making app developed by Enspiral, a co-op from New Zealand, which lets hundreds and thousands of people make collective decisions collaboratively online through a simple web based interface. It's just one of a suite of apps which we need to run platform co-ops. Combine Loomio with similarly 'open' project management software, task management, accounting and fundraising software, websites, shopping carts, and donation systems and the process of running a co-op would be much more Uber-esque. But it still won’t disrupt the norm.
Loomio for communities voting on decisions.
For co-ops and platform co-ops to become ubiquitous, and the default model for startups worldwide, we need to strip out the bureaucracy and legal barriers and make founding co-ops as easy as catching a cab. The biggest barrier to the formation of collaborative partnerships is nearly always the agreement process. How many times have you seen a good idea between friends, or between small businesses, develop only to see the potential collaboration stall at the 'partnership agreement', or 'joint venture’ agreement stage? We need a process for converting new ideas into real collaborative projects which explicitly avoids ownership issues and allocation of profits, which tend to be the biggest barriers to co-operation. For this to work we need to combine the idea behind One Click Co-ops, with a range of versatile, off-the-peg, and easily understandable organisational options. Ultimately, there are only a few models for sharing profits; by splitting them between stakeholders, according to time and/or resources invested, so cookie-cutter models should work for most new organisations in the first instance. Open value Networks present another viable model for profit sharing in which a 'value accounting system' computes equity in proportion to contributions automatically, removing the pain from the profit sharing process.
To disrupt capitalist democracy, founding and running a co-op needs to be as easy as:
Logging on to a web service or app and defining who your stakeholder groups and founding members will be
Defining if you will want to make profits, raise share capital or perform other financial transactions
Picking a model from suggested 'cookie-cutter' legal forms, depending on your location and objectives
Naming your organisation
Picking your required web apps from the Open App Ecosystem
Customising and setting up your apps (website, fundraising / payment, project / task / people management / decision making / rewards systems etc) to enable your new organisation
The above process should probably be free too. The above might seem like a fanciful wish list but, with a concerted effort from the open source community, and/or a suitable sponsor, it could probably be delivered a lot quicker than we imagine.
So, say we have the tech, which enables us to found and run new organisations based on new agreements, how is this really going to disrupt capitalist democracy? There are a few simple elements to this vision, which platform co-ops create.
Decentralised distributed currencies (much like the internal currencies used by multi-nationals to transfer funds between companies and across borders to avoid paying duties and taxes) will change the way our economy works by re-routing flows of capital. For example, if I could earn "co-op coins" in one co-op and spend them in the next, as a co-op member I would be incentivised to do so, since I also receive a share of the profits.
The creation of commons will encourage the shift from scarcity to abundance. Access to information is becoming cheaper, if not free, which is changing the nature of our society, but platform co-ops also enable the development of material (shared ‘stuff’) and economic commons (shared ‘access to finance’). For example, if trade in co-op coins was taxed (at a democratically agreed rate) to form a ‘commons fund’ to which co-op members could apply, we would have a democratically controlled source of funding for new co-operative service.
Liquid democracy will change how communities are governed, from the local to the global.
Since members of co-ops and platform co-ops get to vote on everything and anything by which they are affected, a society populated by a multitude of co-ops would provide an alternative system of governance. Imagine having the option to vote, digitally, on what you liked when you liked according to the voting schedule of the co-ops of which you are a member. This would create a radically different community of interaction and feedback to the 'one vote every five years' idea of 'democracy' we have today. If you don't like voting, don't have time or don't know about the issue/s, no problem, just delegate your vote to someone else you trust or to someone else who has a good reputation on the subject which is being debated.
A co-op of co-ops could perform organisational duties at any scale whilst ensuring democratic governance by pushing decisions down to the lowest possible levels. If organisations like this existed it is hard to imagine why we would need our current ‘representatives’ and if it was easier to have, and see the result of, your say by voting through the co-operative system why would we need the existing system at all?
To top it off, co-ops are not driven by the extractive, profit making motive, making them less prone to boom and bust. Instead they are normally designed to benefit communities with the long term objectives of sustaining life and increasing well-being through the emerging values of sustainability and fairness which allow life to flourish.
This vision is the simple application of existing technology to an outdated industry which is ripe for disruption. But the only way it will happen is if we the people stop arguing, complaining and campaigning against the present system and get on with designing and building the technology, the agreements, the processes and the ownership models of the generative economy in a concerted and collaborative way.
If you are interested in finding out more about the platform co-ops movement and how you can get involved, please register for the Open 2017: Platform cooperatives conference.
Open Democracy is a media partner for Open 2017 – a two day conference on Platform Cooperatives being organised in conjunction with Goldsmiths University on 16 - 17 February 2017. Get your ticket with our 10% partner discount here→