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The Co-operative Model

The Future is Co-operative

Since its inception, polypoly has both continued a long business tradition and blazed the trail for new co-operatives in the digital world.

If you have a polyPod, you have the option to become a co-owner of the distributed infrastructure. This is because polypoly was established as a co-operative. Co-operatives are a different way of doing business, in that they are organi­sations formed to meet the needs and wants of their members, rather than delivering profits to shareholders. They are owned by the communities that created them, and governed democratically rather than according to who holds a majority of shares.

The co-operative model has been time-tested in a number of different industries. At the very base of Maslow’s hierarchy of needs, housing and utility co-ops provide a roof over the heads of the communities that own them, as well as clean water, district heating, and electricity. In food production and consumption, farming and retail co-ops are a way for farmers to take home more of the profits of their produce, while consumers pay reasonable prices for daily sustenance. The banking and insurance sector also has examples of co-ops serving economic needs. In fact, during the financial crisis of 2007–08, co-operatively managed banks fared better and suffered far fewer losses than commercial banks.

While examples of co-operative-like organisations go back further in time, the first co-operatives as we know them today date back to the middle of the 19th century in Rochdale, England. Here, a group of craftspeople faced with individual poverty decided to pool what resources they had, and collectively purchase goods to meet their basic needs at a volume discount. At the same time in Germany, the first co-operative credit unions emerged, and the model has since spread to the rest of the world, gaining a foothold in a variety of sectors.

According to the International Co-operative Alliance, more than 12% of the global population is part of one of no less than three million co-operatives around the world, providing jobs to 10% of the global workforce.

Building Europe’s largest Co-operative 

From the very beginning, it was the grand ambition for polypoly to build the largest European co-operative, allowing people from across the continent to participate in the economic and democratic success of a self-determined digital future. “The largest co-operative we had in Europe at the time was rather small in comparison to what we wanted to achieve,” says Thorsten Dittmar,

Founder and CEO of polypoly. When polypoly launched, the French credit union, Crédit Agricole, was the largest co-operative by turnover, andcounted more than seven million local banking member.

“Our aim was to reach 100 to 300 million users, so of course classical governance mechanisms used by co-operatives were not suitable anymore,”Thorsten continues. The co-operative aspirations of polypoly were realised in the form of a ‘Societas cooperativa Europaea’ (SCE), or European co-operative society — a trans­national company structure which requires that the entity is formed by residents in more than one EU country. The legal structure was established in 2006 with the aim of strengthening cross-border co-operatives in the EU, either by making it easier to found new ones, or enable mergers of existing ones across EU countries.

“We made the decision to use the SCE co-operative legal body for two reasons. One is that it is a pan-European company structure based on EU law and not on national laws. This was important for us because we were not building software for Germany, we were building software for Europe. The second important reason was that as an organisatio­nal structure it has a lot of flexibility.”

Besides a handful of very basic requirements, like the number of founding members and minimum capital requirements, there are few constraints for creating an SCE. The normal rules of a co-operative apply, like the need to have a yearly general assembly and decisions made on a ‘one member, one vote’ simple majority basis.

Starting and running a co-operative presents its own set of organisational challenges not faced by traditional companies. Because of the flexibility of the SCE model, polypoly needed to build internal governance structures that matched the ambitious scale and scope of the project. These needed to be established quickly, while at the same time remaining open enough for new participants to feel empowered. And these early decisions still have a big impact years later.

For users, by users

To started with, polypoly had to resolve the fundamental contradiction between establishing long-lasting governance structures, and making sure that the new organisation was inclusive, and made it possible for new members to have a meaningful influence on collective decision-making processes. “After these decisions were made during the founding process, it’s relatively difficult to change things. We had to decide up-front, and then organise everything accordingly — or at least assume what it would look like. After that, the barriers to changing these fundamental structures were quite high,” says Thorsten.

All the democratic processes inside the company ended up organised in loosely hierarchical sub-organisations — much in the way that traditional, community-developed open-source software projects are governed. “

We had quite a lot of freedom to build internal organisational structures. For example, there’s a software governance group, and a group of people monitoring encryption. But for all these different aspects, users are taking care of it. At the end of the day, the users can influence everything in the co-operative. They can decide what will happen with the money, and with the code. We had to make sure from the beginning that it would work properly and not harm the co-operative,” says Thorsten.

Making these decisions early also meant inviting users into the conference room early. For Thorsten, this meant giving up quite a lot of the control you usually have as a founder. “It had to be driven by the users more than by anybody else. What that exactly would look like, I didn’t know, and I didn’t want to define it at that moment. I wanted to have the first users on board, then make the decisions together with them,” Thorsten adds.

For a proper digital market to function, it is not only necessary for small players to be able to compete with giant companies so users have a choice between service providers, but there must also be transparency, so that choice is an informed one. Part of polypoly’s initial success was establishing this transparency, not only in its open-source code but also in its business goals. The slow-moving co-operative model made sure that whatever the initial users signed up for, the structure would not suddenly shift under them like an earthquake, but rather slowly like tectonic drift. “

They were able to look at what we had created and make a sound decision on whether to join or not. They could rely on the fact that this would be the case in ten years, twenty years and beyond. By definition or by purpose, it’s not fast — it’s slow. And that’s a good thing. Because when it comes to data privacy, speed is not the most important factor,” says Thorsten.

Half a decade into the digital co-op revolution

Co-operatives in the digital world were not unheard of before polypoly. Platform co-operatives had already shown that a lot of precarious gig economy labour could be organised in an equitable fashion.

Companies like the Green Taxi Co-operative in Denver, Colorado proved that co-operatives could compete effectively with ride-sharing gig economy corporations like Uber and Lyft. Fairbnb based in Bologna, Italy developed an ethical tourism alternative to Airbnb. Since polypoly blazed the path and provided a solution where users could monetise their own data instead of big companies making a profit off them, a forest of pan-European digital co-operatives has sprouted. Some of these use the polyPod infrastructure, some have built their own from scratch.

For example, AliBay, the collective online shopping co-operative, has al­ready taken a huge bite out of the sales from overseas services like eBay and Alibaba. Instead of buying cheap manufactured goods, AliBay has al­lowed European consumers to easily trade and exchange the useless objects that would otherwise get shipped from faraway places where they were built with underpaid labour.

The Babysitters and Dogwalkers Alliance has shown that it is possible to both empower gig economy workers by organising their labour in a co-operative, and build a continent-wide network of trust. Powered by the polyPod, its rating and recommendation system has been copied by a variety of companies, co-operative and otherwise. Under the slogan “Eat recycled food!”, the food sharing co-operative Re:Heat now feeds millions of people who, for whichever reason, are not able to cook for themselves.