If worker coops are so productive, why aren't they everywhere?
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I mean, there is a standard explanation which is that coops have little incentive to expand.
If you are a capitalist and own 1 McDonalds and you turn it into 2 McDonaldses, you have earned 100% return.
If you are a worker at 1 McCoop and you turn it into 2 McCoops, you earn 0% return because the doubled returns are distributed over twice the workers.
I kind of just think this explanation makes sense?
2Indeed. But it's even trickier than that.
Workers at co-ops are generally not like investors or VCs, in that they long for moonshots and "rocket ships." They're usually regular, risk-averse working- or middle-class people. Expanding the company, even hiring just one new worker, carries an associated risk: that the new worker will be less productive than the median[1] worker already at the firm, making you worse off than if you hadn't hired them.[2]
This creates a huge pressure to not expand in size unless it's absolutely clear it will be great for those who already have a stake in the firm, which very rarely happens.
In a vacuum, that logic seems good.
But, I know of several chain cooperatives that are very large, with lots of shops, etc. I live in the UK if that changes things at all compared to the USA. The ones I know are John Lewis, Waitrose, and Co-Op. (This is sort of double counting as John Lewis owns Waitrose).
So, all but one of the Co-Ops I know about are huge companies, although that comes with an obvious selection bias. (The only small one I know about is a random coffee shop I went to in Bristol that had a sign informing customers that they were helping to support a "radical, collectivist movement" (or something like that), they had 5 types of milk, none of them from animals. This sort of thing is very Bristol.)
Hmm, I don't know anything about those examples. But in Norway two of the biggest coops are Tine (dairy producer) and Coop (grocery store)*[1], and my understanding is that those were created through fusing many already existing local cooperatives. Which makes sense from the argument above, because individual coops still reap benefits from centralization and horizontal integration.
The above argument would predict that you'd see large cooperatives form in industries where you started out with many small and local businesses. (like local farms, local grocery stores).
But if you have a singular cooperative, it itself won't have incentive to expand. It just might have incentive to fuse if there is another similar cooperative already existing.
- ^
This is a consumer-owned coop. Those also have somewhat different dynamics, maybe?
2The Co-Op’s purchase of Somerfield (£1.57b) would seem like an interesting case study - why did they decide to go ahead with this? Did it actually benefit staff in the long run?
Say there’s a startup coop that can turn $10 of investment into $100, but will split that $50 with the workers and $50 with investors. Meanwhile there’s also a traditional capitalist startup that can turn $10 into $90 which goes purely to the investors.
Is this just a blind-spot for people starting coops? I don't see any reason a coop can't have equal voting shares held exclusively by employees while selling non-voting shares to investors. If it's actually the case that tying their hands this way causes higher profits, you'd expect investors to sign up since they're just in it for the money.
I'd expect the bigger problem than profit sharing is profit expectations though. VCs want rocket ships and my impression of coops is that they're usually not designed to grow like that. But slow-growing businesses aren't attractive to VCs in general, and the investors who do invest in slow-growing businesses (banks?) should be more attracted to coops if they're more likely to succeed. Admittedly, both VCs and banks tend to be risk-adverse and prefer businesses that look like what they expect though.
I also imagine coops have a lot of trouble hiring for some positions, like good founders / CEOs, since the market-rate pay package for a good founder is 15% of the value in company.
Ironically, I wonder if a non-voting-VC-funded coop startup full of hardcore libertarians who agree to pay the CEO 1000x more than everyone else would do really well.
Since this is supposed to be a rationalist blog, are you familiar with the concept of not writing your bottom line first? Because I don't get the impression that you are investigating a question impartially, carefully weighting all evidence. Instead, it seems like you have already made your conclusion (coops are the best), and your article is mostly about why we should ignore the evidence to the contrary.
There are a few more suspicious things in the text that a careful reader might notice, for example you mention that "the number of worker coops in the US has tripled in the last decade", but you avoid mentioning approximately what kind of numbers are talking about here. It is a huge differences whether there were thousand coops in 2015 and three thousand coops in 2025... or only one coop in 2015 and three coops in 2025. And the fact that you avoid mentioning this makes me suspect that it's more similar to the latter.
Another suspicious things is that your statements seem too general. The world is usually not like that. I would find it more credible if you said something like "coops are more likely to succeed in industry X, and less likely to succeed in industry Y" -- it would show that you have some actual data, and that you are willing to admit problems. Nothing in your text seems like this.
I am sympathetic to the idea of coops, but it seems to me that your articles are mere propaganda. Is there a reason why a person who actually wants to know the truth whatever it may be should read them?
It is a huge differences whether there were thousand coops in 2015 and three thousand coops in 2025
It looks like it's ~1300 now: link, employing ~7000 people and generating ~$550 million in annual revenue.
That's "worker coops" excluding agricultural coops, of which the USDA said in 2023 that there were about 30,000.
Thanks! This is the kind of specific data I would like to see. Exact numbers, split by industry.
(Also, for a fair comparison, how did the number of non-coops change in the last decade? I mean, in theory it is possible that the number of all kinds of companies have tripled.)
1300 coops employing 7000 people, that's like 5 or 6 people per coop. So it can simultaneously be "over thousand coops operating in USA" and "you don't know anyone who works in a coop, and neither does anyone in your bubble".
I know that large coops are possible. I mean, there is Mondragon... and... uhm, I am not sure if there is any other. That would be another interesting data point. And the question is, do other coops fail to grow because they don't want to, or because there is a problem they can't solve (in which case, what is the specific lesson they should learn from Mondragon)? EDIT: After reading other comments, I suspect the problem is "don't know how to scale".
I am a bit tired of the excuse "it is difficult because the capitalists hate you", because that's what I kept hearing in my childhood every time there was a shortage of toilet paper. And now I think the actual cause of the problems was the ignorance of the basic laws of economics, rather than foreign spies. And I get similar vibes from this article: a lot of excuses, no critical self-reflection.
What about scale?
There are many things in human societies that work very well when "everyone knows everyone personally", but start to come apart at seams beyond that point.
I have no direct evidence of that being the case for worker co-ops, but the reliance on "workers monitoring productivity of fellow workers" sure hints at the possibility.
I also can't help but notice that tech startups seem to fit the groove of "worker co-op" reasonably well in early stages - they start out as small crews of (hopefully) high performing employees that own equity in their own business and are involved in decision-making. They do, however, transition away from that as they scale up.
Do co-ops scale? I would guess they may not. If many firms are larger than the size that co-ops effectively scale to, then we would see more traditional firms than co-ops.
Yeah. I'd guess that investors get less upside, founders get less upside and therefore take less risk, the best employees and managers are tempted to find opportunities elsewhere, there's less profit to reinvest so the firm can't grow as fast, and so on.
You might be asking yourself: won't workers become lazy since the profit is shared with their colleagues, which means they only get a small proportion of the fruits of their individual labor?
In traditional corporations, don't workers have even less stake in the company than in coops?
My first thought was that many startups kind of start as coops - at least in the limiting case of just founders. Maybe the reason we don't see more coops can be explained why not more startups stay that way:
- External capital need.
- For some reason each round of hires gets less and less shares.
You start by talking about democratic governance, but then switch to firm ownership. Employee ownership is easy to measure, but does it actually result in information flows? Some people insist that there is a big difference.
To see the difference between merely giving stock and letting workers shape their destiny, look at the airline industry. In return for lower wages in 1994, United Airlines pilots and mechanics got more than half the company’s stock. But life inside the cockpit and at loading ramps barely changed. By contrast, Southwest Airlines employees own only about 11% of the company’s stock, but the company works to encourage and implement workers’ suggestions, in part through town hall-style forums with top management. While there are other important differences between the carriers, workplace culture is a big reason United posted record losses last year while Southwest made a healthy profit–as it has for 29 years.
Southwest had good governance. Did this have any connection to distributed equity? How?
Anyhow, from a theoretical perspective, owning 1/1000 of the firm while having 1/1000 of the responsibility is pretty big free rider problem. If you can make your small part of the firm more efficient, it won't show up in your equity. But just being an employee is theoretically a big incentive to keep the firm surviving. The 1/1000 of the equity seems negligible compared to that.
No, ownership is not the same, I explicitly said so in a previous post: https://www.lesswrong.com/posts/7bqzFLqEoz44y6C6o/why-giving-workers-stocks-isn-t-enough-and-what-co-ops-get
You had a lot of sources in this post. Half of them are only about ownership, because that's easy to measure. Do you believe them? If not, why cite them? If so, then why not talk about mere ownership?
But the other half are even less believable because control isn't measureable. Good governance is good. But how can you even classify governance as democratic? Are the Southwest town halls democratic? Or are they classified as democratic because the writer like the company?
Your previous post mentioned a lot of pitfalls, but I don't think the United example fell into any of them. And I don't think they are important. Most employee stock is voting shares, but there are so few votes it hardly matters. What is important the large number of small decisions.
