Capitalist Co-ops

Stakeholder financing with 'Capitalist Co-ops'
Attached below is "Capitalist Co-ops.pdf", which presents a vision for a superannuation (or pension fund) industry based on “stakeholder investment” principles - linking superannuation investments & business governance to the present, daily lives of the people that invest in super, who are also customers and employees of the companies invested in.
developed these ideas around 1998 (eventually written in the current form by 2005), building on the somewhat vaguer concepts of a "stakeholder society" (championed by the likes of Will HuttonJohn Plender and the 1980s management consulting guru Charles Handy) or the "third way" approach to politics & economics articulated by the UK Prime Minister Tony Blair.  To my surprise, given the aim was to challenge the problems of modern free-market economies & capitalism, I concluded the answer could simply lie in better, less restrictive governance of sharemarkets and superannuation funds (subject to a sufficiently fair redistribution of wealth through the tax & welfare system).

Customer Stakeholders & Crowd-Funding

Applying the concept to superannuation investors would involve formally recognising that many of these super fund members are already also customers of the businesses they indirectly own shares in, and then allowing these customer shareholders to receive investment returns through ongoing product discounts instead of conventional dividends.  This would be conceptually similar to loyalty pricing such as Coles supermarkets' previously popular shareholder discount scheme (but with block-chain technology reducing admin costs), and also to "access pricing" structures commonly applied to utility bills (based on "Ramsey pricing" theory, which is especially useful for industries with relatively high fixed costs and low marginal costs, as is increasingly the case for technology companies).  An advantage of customer shareholding via super funds is that instead of asking people to commit spare cash to shares (rather than on alternative consumption), the choice offered is simply whether to invest in shares with customer discounts or shares with less controllable and risky dividends.  

If applied to specific new products, the concept of customer shareholders is similar to internet-based "crowdfunding", which gives price discounts to customers who pre-pay before manufacturing starts - most recently and dramatically demonstrated by 232,000 Tesla Model 3 orders & deposits being taken within 24 hours (about double initial estimates) of the car's launch on 31 March 2016 (& a total of over 325,000 within a week, worth potentially US$14bn), almost two years before production and first deliveries planned for late 2017.  One key advantage of this approach over conventional equity financing is that customers who know they want the product face less risk on their "return" than 3rd-party investors (& therefore demand lower returns).  The reduced business risk created by these mass pre-orders also then reduces the cost of any supplementary financing required.  In turn, early-bird customers are rewarded with lower prices in return for supporting the early production risk that will eventually, through economies-of-scale, lead to lower costs and prices for later customers.

  • Customer share ownership through Capitalist Co-ops would aim to combine the opportunities of crowdfunding's mass, low-cost micro-finance (tapping into many small but enthusiastic investors, enabled by the internet) with conventional equity investor structures, to offer a variety of new models for business ownership/governance and customer/employee loyalty schemes, depending on the business needs and market opportunities.

By linking investment to consumption, customer share-ownership could make superannuation products more "present" and attractive to ordinary people (a marketing advantage for the super fund), whilst simultaneously reducing investment risk and offering lower-cost finance to businesses (thus supporting economic growth).  The greater long-term loyalty that could be expected from stakeholder investors also offers the prospect of reduced share-price volatility (in addition, & perhaps counter-intuitively, volatility could also be reduced by the expansion of on-line gambling to the stock market).

Community Stakeholders

Extending the concept from customers to "community stakeholders", stakeholder ownership would help to ensure companies operate in the interests of society in general, rather than financial investors exploiting people's ignorance to maximise profits.
For example:

  • Sydney Renewable Power Company raises low-cost finance from stakeholder investors who care about the environmental benefits of solar power (& also benefits from emissions trading).  This approach can also exploit the expected benefits of lower future production costs as economies-of-scale are achieved (see attached PV finance paper).
  • News / media organisations owned by customers/stakeholders (similar to The Guardian) could promote a return of journalism that aims to inform readers, rather than pander to their prejudices and push the misleading and self-serving propaganda of unethical owners like Murdoch, who are such a blight on democracy.  Despite current concerns, co-op networks led by the likes of Google & Facebook (see below also) are well-suited to fund & collate news personalised towards readers interests.
  • Football or other major sporting clubs owned by supporters, instead of by private owners that currently exploit dedicated fans with effectively monopoly rents.
  • Stakeholder ownership could also help promote trust in "private" companies delivering "public" human services such as health & social housing.

Employee Stakeholders

A key difference from traditional co-ops, which are typically focussed on a single industry,  would be that superannuation-based Capitalist Co-ops would be formed from a diverse network of businessesprimarily in order to diversify investment risk, but also to promote synergistic co-operation between businesses within the network.

Superannuation funds that manage these Capitalist Co-ops, particularly Australia's union-linked “industry funds (with associated loyalty shopping programs), could encourage indirect employee share-ownership with investment risk diversified throughout the Co-op network's businesses, and to complement this they could also provide competitive union services, representing employee interests in corporate governance whilst also helping employees with value-enhancing business change through employment-agency services.  As shareholder representatives, these unions would be represented on company boards, subject to exceeding a certain threshold (which would also ensure employee representation is not divided amongst too many unions to make it impractical to have any influence).  Thus, companies would exhibit a kind of "inverted management" (as management would be accountable to the board and ultimately through super funds to employees), because in an age where value increasingly resides in the knowledge & skills of workers, the role of management is to provide these skilled workers with a service to make the most of their employment (as I discuss in my paper on "Supporting Employment & Reforming Welfare").

Besides the improvement in economic productivity, there is also evidence that co-operative management helps to improve employee's mental health (i.e. be less depressed / more happy).

Consistent with this theme, superannuation funds are already showing increased activism to ensure the businesses they invest in treat their employees appropriately (partly to manage financial and legal risks, as well as doing the right thing by workers).


International Co-op Networks

In a world of global trade, Capitalist Co-op networks would also be global, and would have loosely-connected & dynamic corporate membership, with the stock market continuing to provide external scrutiny and performance pressure on the value of superannuation funds and their constituent network businesses.  Organisations that are well-placed to develop in this way include the likes of the Virgin Group (anchored by Virgin Money), Google, Facebook and Apple (if Elon Musk takes charge of Apple to restore its innovative drive and give it a better social mission), thanks to their existing networks and sheer capital scale allowing them to quickly expand into new industries (but not the tax-dodging Amazon, which mistreats & poorly pays its workers, as its CEO, Jeff Bezos, with personal wealth of $US167bn, has no community/philanthropic spirit and instead spends his fortune on big-boy space toys because he thinks, "there is not enough philanthropic need on earth for him to spend his billions on").

Conceptually, a strong loyalty pricing scheme operating across a network of businesses has some similarities to a network-specific currency, and in time this may eventuate within Capitalist Co-ops (and perhaps provide the stimulation to economic growth claimed of Modern Monetary Theory).  Such network currencies could potentially replace the struggling Euro, with the Euro becoming a common underlying 'base currency' for multiple competing Co-ops across Europe, & indeed globally - see The Euro & international economic networks post 'Brexit'.  This scenario is not so far-fetched:  It's supported by the IMF's ChiefIndia is moving aggressively towards a cashless, digital societynumber of African countries are already introducing block-chain digital currencies and many others, including China & Singapore, are considering it.

Ultimately people will be able to choose which global economic community network they wish to join, whichever country they live in, and, as I argue in the attached entry to the 2017-18 Global Governance Challenge competition, the concept of the nation state will further disappear (which is already outdated as a concept of an integrated, stand-alone economic entity, given the global nature of most supply-chains).

Although this vision is primarily about business strategy, there are undoubtedly various tax and legal/regulatory barriers that need to be addressed to facilitate such an industry transformation (I recommend a detailed review to consider this).

Here's some relevant links within the general 'vibe' of co-ops, mutuals and stakeholder/social/community/ethical investment:



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David Thorp,
12 Mar 2016, 21:09
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David Thorp,
22 May 2017, 02:50
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David Thorp,
12 Mar 2018, 23:23
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David Thorp,
30 Jul 2018, 06:09
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