Surviving in Times of Uncertainty
“Heroism and the respect it commands is a form of compensation by society for those who take risks for others. And entrepreneurship is a risky and heroic activity, necessary for growth or even the mere survival of the economy.
“It is also necessarily collective on epistemological grounds—to facilitate the development of expertise. Someone who did not find something is providing others with knowledge, the best knowledge, that of absence (what does not work)...
“In order to progress, modern society should be treating ruined entrepreneurs in the same way we honor dead soldiers, perhaps not with as much honor, but using exactly the same logic...”
~Nassim Nicholas Taleb, from Antifragile: Things That Gain From Disorder
Taking One for the Team
Starting a worker co-op, or becoming an owner in a co-op conversion, are risky and heroic acts, and they are acts that benefit more than just the co-op members involved. All of us in the larger co-op movement and economy benefit whenever a group of workers successfully adds another business to our ranks. Our movement grows, our networks expand, and awareness of our model increases in the public consciousness. But not only that: we also benefit when a group of workers fails to successfully add another business to our ranks. Knowledge of what doesn’t work, as Taleb points out, is valuable (and hard won) knowledge.
Even in good economic times (which these are not), some percentage of new co-ops are bound to fail, not necessarily because of any failings on the part of the members, but simply because we live in the real world where “s**t happens.” Information about markets and expenses is imperfect, and sometimes a great prospectus on paper just doesn’t pan out in reality. But those members of failed worker co-ops, besides being brave (and probably broke), have also provided all of us with useful information: here’s something that doesn’t work. Unfortunately, many new worker co-op members don’t come into their role as business co-owners with much, if any, financial cushion – which means that the individuals taking the risks that benefit us all, and who personally bear the hardship incurred when those risks don’t pay-off, are often among those least able to do so.
If we want the worker co-op movement to be truly equitable, if we want it to be characterized by real solidarity, and if we want it to thrive in the uncertain future we are all facing, we need to take account of these facts, and use them to make our movement “antifragile” – that is, to make it one that can not only withstand disruptions and disorder, but which can gain from that disorder and come out on the other side stronger than before. The good news is we can do this by expanding on the strengths we already have.
Worker co-ops tend to have fewer job losses than traditional businesses during economic recessions because members tend to opt for taking shared pay cuts rather than laying off workers, for obvious reasons. This bias towards sharing the pain rather than putting it all on a few also has the effect of making co-ops well prepared to resume business quickly as economic conditions recover. Businesses that laid off employees during the slump, on the other hand, have to spend time and money to hire and train people before they can get back to their previous level of output. This ability to better withstand crises makes worker co-ops antifragile, as it conveys positive side benefits from economic volatility, by way of this competitive advantage over businesses who treat people like expenses. We need to expand on this practice if we want to become antifragile as a movement.
Co-op lenders – like Shared Capital, The Working World, and all the members of Seed Commons – that have adopted non-extractive financing methods are leading the way here, in terms of philosophy and practice. If your co-op isn’t profitable, you don’t have to pay back the loan. The fund will take the hit: everyone suffers a little, so no one has to suffer a lot. However, there are more risks that worker-owners are exposed to beyond those of financial debt, and we need to do better making sure individuals do not have to bear them in their entirety. Even if they don’t have to worry about debt, worker-owners of struggling co-ops still have to pay the rent and put food on the table. We need to be sharing these burdens too. This was true before the coronavirus, and it’s even more the case now.
Not Risky, Uncertain
We are living in uncertain times.
One of the things my economics advisor drummed into me in college, was that uncertainty is different from risk. With risk, you don’t know what the outcome will be, but you can calculate the odds. You can figure out the expected value and the standard deviation and decide whether to take the gamble or not, knowing how big of a gamble you’re taking. With uncertainty, on the other hand, you don’t know what the outcome will be and you can’t calculate the odds. With uncertainty, you don’t even know what the possible outcomes are. This is the kind of uncertainty that we’re facing now.
In normal times, a small business with a dedicated staff, a friendly owner, and a history of successful operations would make an ideal, low-risk worker co-op conversion. Shared Capital or another co-op lender could finance the buy-out confident that the likelihood of default was low, and the new member-owners could be confident that the odds of their new co-op being successful were high. In normal times there would be some risk associated with a conversion like this, but we’d know with pretty high certainty what those risks were and how to minimize them. But we are living in highly uncertain times, not in normal times. We can’t really know the risks of failure because the economic landscape we’re looking at now looks so different from everything we’ve known before. What worked before might not work anymore.
No one who wasn’t alive during the Great Depression has seen unemployment on the scale that we have it now. What the long term effects of this massive spike in joblessness will be are...uncertain. There is no guarantee that businesses that have been closed for over two months will be able to simply restart operations on the same level as before the crisis, meaning that many of those laid-off workers will not be coming back to work, even if their employers reopen. Barring a vaccine (or at least a sure-fire treatment) in the relatively near future, people will certainly be more cautious than before, both about entering stores in general, and about how much they spend once inside. Recent bouts of unemployment have a way of curtailing unnecessary spending, especially if you’re worried that another round of it might be in your future.
Given this situation, I think we should be putting a whole lot of thought into making sure that the risks being incurred by people starting worker co-ops, or converting existing businesses, is not born by them alone. As I mentioned, the non-extractive finance model is a start, but we need to expand this concept further if we’re serious about pulling as many of our co-ops through this thing as possible.
A Solidarity Fund
One thought I’ve had is that we could create a fund specifically to support worker-owners in co-ops that don’t make it. We’ve been fortunate to be able to brag about the longevity of co-ops compared to traditional business in the past, and we hope it will be that way in the future, but it seems likely that failure rates for both traditional and cooperative businesses are going to increase (and quite possibly increase drastically) in the near future. We need to make sure that we’re not leaving our wounded cooperators lying on the battlefield to fend for themselves, to extend Taleb’s metaphor, and I think a solidarity fund to provide aid to those members whose co-ops don’t work out would be one relatively straight-forward way to do that.
Such a fund could also be used to shore up our co-op lenders should they experience a spike in defaults or long-term repayment delays, which will hinder their ability to provide capital to other co-ops going forward. We need to make sure we protect not just the worker-owners and their co-ops, but also the invaluable financial and organizational infrastructure that has been so painstakingly built over the years. Our CDFIs are facing uncertain times just like everybody else, and a “co-op failure fund” could help hedge against cascading negative outcomes.
We also need to be thinking beyond merely financial solutions. Sharing resources — like spare rooms, unused tools, or babysitting capacity — is another, even more direct, way that we can practice solidarity with each other, and make sure that, whatever pain there may be, we’re spreading it as wide and as thin as possible.
For these kinds of things to work, though, we will need to step up our selflessness and our solidarity. Let’s be real, this is no time to be saving up for a vacation or thinking about that kitchen remodel. I would hope that anyone who has been supported by the worker co-op movement, whether as a member, a developer, a service provider, or an academic, and who has the resources to spare, would be willing to contribute to a solidarity fund, or share something through a mutual aid network.
We’ve had some ad hoc efforts to redistribute the recent stimulus checks from those who don’t need them to people and organizations who do, and the USFWC was quick to create a platform for worker co-ops to share their needs and offers, which is all a good start, but I think we can do it even better for our beloved worker cooperatives. This crisis isn’t going away anytime soon, so I think it’s advisable for us to be making some long-term contingency plans now.
Josh Davis (2020). Making Worker Co-ops "Antifragile": Surviving in Times of Uncertainty. Grassroots Economic Organizing (GEO). https://geo.coop/articles/making-worker-co-ops-antifragile