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.
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.
The 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?
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?
Indeed. 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.
edit: Vaniver points out correctly that it should be the mean.
Which makes sense, at least in the short-run: it takes time to get acclimated to the working standards at the firm and to learn the ropes, so to say.
Isn’t it actually the mean instead of the median, which is an even harder target to hit?
I think you’re right.
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?
The 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?