Venture Capitalism has become the default model of the tech industry. Startups raise money from VCs often before they even have a product, much less revenue. Then they burn that cash to fuel growth because, as the Silicon Valley’s mantra goes, growth solves all the problems. Later, they raise another round, and then another, and another – ballooning their valuation until an exit comes in the form of IPO or an acquisition. If they can’t keep up the pace, they go out of business.
This model brought some companies enormous success. Amazon, Google, Facebook, Salesforce, Netflix – they have all claimed near-monopolies and made their founders, investors, and employees a fortune. But for every success, there is a hundred failures into which billions of dollars have been sunk. And even the stories behind the big winners are not particularly inspiring. On the altar of growth, Amazon sacrificed their workers’ rights, Facebook journalism, and Airbnb housing markets in many cities. Venture Capitalism gave birth to into platform capitalism, where the endgame of growth is complete control over both supply and demand, with no concern about the consequences. And yet, few people in the industry question that model. Maybe it’s time we did?
Platform capitalism is not the only way to innovate. Today, we talk with Trebor Scholz from The New School in New York about an alternative approach – platform cooperativism. Is it possible to succeed in business while moving power and ownership from investors to workers? Let’s find out.
Platform cooperativism is a response to platform capitalism. But what is platform capitalism?
If you want to approach this academically, you first need to define the word platform. A platform is where individuals and groups connect online, in some cases for social reasons, in other cases to find work. Who owns these platforms and how they are organized is the focus of our work.
The first important example of platform capitalism was Amazon Mechanical Turk in 2005 – crowdsourced work for $2 or $3 an hour. It escaped a lot of regulations which would be in place if it wasn’t online. Then, on the heels of the financial crisis in 2008, we had a shift away from direct employment. In the US, every third person is now a freelancer and you have a really disempowered workforce. People are more willing to take low-paid jobs with few protections on Uber, Lyft, TaskRabbit, and Deliveroo. Uber drivers who are on the road full-time are often paid below minimum wages. Many rotate out of the platform in less than 6 months. The model is simply not sustainable for workers.
How does that relate to the idea of sharing economy? Is sharing economy just a moniker for platform capitalism?
The promise at the heart of the sharing economy was a lie to start with. The idea of a genuine sharing economy was central to the narrative of 70’s counterculture. Firms like Uber instrumentalized the narrative of sharing. The Israeli sociologist Eva Illouz talks about how these companies use the language of intimacy to sell commercial services. Think about Apple’s Think Different ads. It’s a similar hijacking of that culture.
They are strictly avoiding the word worker because it would reveal that they are in fact labor companies, not tech firms. It also plays to their claim these are all independent contract workers, not employees.
It’s also interesting how these firms invented a whole repertoire of terms like rabbits (TaskRabbit) to refer to workers. They are strictly avoiding the word worker because it would reveal that they are in fact labor companies, not tech firms. It also plays to their claim these are all independent contract workers, not employees, a claim that is increasingly contested by courts in the EU and California, for instance. It’s complicated though, because some of these workers are indeed independent contractors – the people who work for 3 or 4 hours a week. But drivers who are on the road for Uber for 10 hours a day should be classified as employees.
Some will respond: Hold on. Uber is not all of the gig economy. And it is true, there are small businesses whose operations are more fair than those of Uber. But they hardly represent this economy. They are the proverbial indy-flicks compared to the vast culture of Hollywood.
What alternatives does platform cooperativism offer?
The most obvious way to start is with home care, elder care in particular. The number of people over 80 will triple over the next 20 years worldwide. There is a huge demand but not enough people who want to go into this profession because they’re not fairly paid and the work is not dignified. Cooperative ownership of platforms that organize and structure those markets could change that.
Beyond the existing 240 projects in the platform co-op eco-system, other applications can be imagined. In 2012, I wrote this proposal for a cooperative university, bringing the platform co-op model to higher education. In Switzerland, there is a cooperative called MIDTA that focuses on health data ownership. Patients can define to whom they want to release their data and, if they give it to for-profit institutions, they can donate the proceeds to public research.
Of course, we cannot think of any of this without thinking of the underlying infrastructure. You can’t offer a broad range of services and still rely on Amazon and Google. We have to think about a cooperative cloud, about replacing these very oligarchic and centralized services like Gmail, Facebook, or Twitter. With distributed ownership, internet users could actually own these services.
Is any of this new? Isn’t that just advocating for social ownership of the means of production?
Platform cooperativism is firmly situated within capitalism. People talk a lot about Paul Mason on the British side with his post-capitalism or Kathi Weeks with her proposal of a post-work society. Then of course, we cannot ignore the discussion about Universal Basic Income. These are all important discussions. But they will not become a reality for many workers who are alive today. Certainly in the United States, post-capitalism or Universal Basic Income are not going to happen anytime soon.
In the United States, with a government that is out to destroy workers’ rights, cooperatives can be a way to shield them economically. I don’t know how important platform cooperativism will become but I’m quite confident that it will persist. This model will not destroy Google or Amazon. The research shows that co-ops do not ruin corporations and vice-versa, corporations have not destroyed cooperatives. Instead, they co-exist.
But if co-ops need to exist in a capitalist landscape, they must compete with companies with millions in VC backing that can afford to go years without profit. How?
It’s important to consider in which sector to start these projects. I think social care is a smart sector to go into because there’s hardly any competition. Workers are constantly in demand. Platform co-ops offer a more fair and sustainable solution for that sector.
Platform co-ops offer a more fair and sustainable solution.
Stocksy United, a platform-based stock photography site, has another approach to the question of competition. It’s a stock photography co-op of roughly a 1,000 photographers. In their industry, they are offering a particular niche service. They offer only a small number of highly curated photos of very high quality. They also have a particular brand – hip and young, sort of hipster punk rock feel. They’re also reasonably priced and it’s very successful. They made almost 11 million dollars last year.
And then there are areas that are quite competitive and people still go into them – like home cleaning. In New York you have a group that is comprised of three groups of low-income immigrant women who formed these cooperatives and are now offering services through a platform. It’s slightly more expensive than competition but they’re banking on the hope that wealthier people with an ethical streak in their bones will support them in a similar way that people buy fair trade coffee.
Can you share more examples of successful co-ops?
Sure! SMart is inspiring. It’s a mutual risk cooperative that helps freelancers in some European countries. For the time of the gig, people become employees of SMart and for this short moment they are protected. SMart is also paying 7 days after the work is done, addressing the biggest issue for freelancers – anxiety to get paid and find the next job.
There are platform co-ops for artists, like Aarhus Makers in Denmark, that allow them to put their art out there. Stocksy, the stock photography one I mentioned, makes the most money as far as I’m aware. Resonate is a music streaming co-op. Musicians on their service are paid better than on Spotify. They also have this blockchain-driven technology that counts how many times you listen to a song and after a certain number you own the song.
Fairbnb launches in five countries this October or November to organize communities to create an alternative to Airbnb. That’s definitely one to watch.
Savvy is very interesting, too. It focuses on diversifying access of patients with chronic diseases to recent pharmaceutical studies. It’s a well-known fact that those studies are mostly conducted among white women. Jennifer Horonjeff was a medical student at Columbia and was constantly asked to take part in these research studies, so she realized there is a possibility for giving patients with chronic diseases – just like herself – an opportunity to access these studies and to diversify the pool of subjects as well.
And there are of course taxi alternatives. There are platform coops like Green Taxi in Denver or Cotabo in Italy. There’s child care – the Platform Co-op Consortium is working with 3,000 child care professionals in Illinois. This week I’m going to meet a group of refugee women in Germany to think about building a child care platform co-op. We’re working with garbage pickers in Brazil. There’s a cooperative Amazon called Fairmondo. If you want to look at this in terms of GDP – which I think you shouldn’t – this economy is small but it’s important not to fall for the tyranny of the measurable. The peer value is hard to measure.
Can you envision a globally successful co-op, operating on the scale of Uber or Airbnb?
Sometimes we fall prey to this Venture Capital logic that it has to be a global domination. In some areas that would be desirable. With taxis or with Fairbnb. But in some areas, it’s not needed. If you look for example at Up & Go, a home cleaning co-op, there’s no need for them to go beyond New York City. There could be other groups replicating the same thing in their cities – you have quite a similar service in San Francisco and similar services emerging in other places.
Are you optimistic about the future of platform cooperativism? Where do you see the model being adopted the fastest?
People are starting to realize this has a lot of power. In Brussels, a delivery service went bankrupt and the drivers took it over and kept on running it. Citizens tried to buy the electric grid of Berlin. They didn’t have quite enough money but it was very close. In the United States, baby boomers are retiring. Between 1 and 2 million businesses will be sold in the next five years. If there is awareness of the distributed ownership models, some of these businesses will turn into platform co-ops.
Slowly, there are also resources coming in. There is also a lot of interest on the side of policymakers. I gave a talk at the G7 and talked to ministers of these countries. Jeremy Corbyn has made platform cooperativism one of his points for the future of the internet. In two weeks I’m talking to Andrea Nahles, the leader of the SPD in Germany. Am I optimistic? Yeah.
Trebor Scholz is an Associate Professor for Culture & Media at The New School in New York City. He’s also an activist for the Platform Co-op Consortium, spreading awareness about platform cooperativism and helping develop new initiatives. He published books and articles about labor market and the future of work. To keep up with Professor Scholtz, follow him on Twitter or visit Platform Cooperative.
Wojtek Borowicz is a freelance writer and a Polish immigrant living in Dublin. He’s the author of Does Work Work – and what would we do without it? – a collection of interviews about the role of work in society.