Let’s DAO It: Co-ops, DAOs, and the Way Forward for Collectives
Austin Robey, founder at Metalabel, Ampled, and Unnamed Fund, joined Crypto, Culture, & Society to talk about both the opportunities and challenges inherent to building better collectively-owned-and-operated organizations.
As founding member of the three pioneering organizations listed below, Austin Robey is a key member of teams that are reimagining shared ownership and democratic governance for the digital era.
- Ampled, a Patreon-like platform for musicians owned by its artists and workers
- Unnamed Fund, a community led, cooperatively controlled creative ecosystem fund
- Metalabel, a collectively-owned community network that creates knowledge, resources, and tools that inspire collective cultural output
In a talk last week at CCS, Austin highlighted what he’s learned while building in both the DAO and co-op space, as well as some things to consider as web3 moves forward.
Cooperatives: the Original Collective Enterprises
Cooperatives (co-ops) are businesses that are collectively owned by their workers, customers, or some combination of both parties. They operate on a one-member, one-vote (each member gets equal representation in voting) basis. Dating back to the 18th century, cooperatives are enterprises that exist to bring benefit to their members, not for financial maximization. In cooperatives, members = owners.
Cooperatives are jointly owned, democratically controlled enterprises that advance the economic, social , and cultural interests of their members. They often emerge during moments of crisis, putting people in charge of workplaces, credit unions, grocery stores, healthcare, and utilities they depend on.
- Nathan Schneider
While co-ops may not be the most widely talked about form of governance, Austin pointed out that they’re surprisingly common. More than 12% of humans are members of one of the three million cooperatives that exist around the world. Additionally, one in three Americans is a member of a cooperative.
The Solidarity Economy
Cooperatives exist within the larger context of The Solidarity Economy, a global movement to build a just and sustainable economy that prioritizes people and planet over profit and growth.
It’s important to understand that many of these types of organizations — worker collectives and cooperatives, barter clubs, solidarity markets, etc. — were often started for self-sufficiency, survival, or as a response to market failures.
"If no one will build it for us, we'll build it for ourselves."
Trebor Schulz coined the term “platform cooperativism” in 2014 (perhaps not coincidentally, a year before Ethereum launched). As a movement, platform cooperativism is exploring ways we can shift the structures of the Internet so that all participants are fairly rewarded for their labor. It is in some ways a reaction to the rise of the gig economy, which has reversed the rights and protections for workers that historical labor movements had fought for years to obtain.
Schulz, who co-edited a collection of essays called Ours to Hack and Own: The Rise of Platform Cooperativism, A New Vision for the Future of Work and a Fairer Internet, has said that platform cooperativism “puts workers, owners, communities, and cities in a kind of solidarity that leads to political power.”
What Can DAOs Learn from Co-ops?
Austin recently wrote a piece for Friends with Benefits about what he’s learned from his work in both the platform cooperativism movement and the DAO space that you can read here. The figure below illustrates the basic differences between co-ops and DAOs.
Austin pointed out that differences between DAOs and co-ops mostly boil down to governance, but this is largely attributable to culture rather than structure. Participants must agree on a shared definition of ownership.
Some examples of definitions of ownership include:
- Financial power: Profits (dividends/share buybacks), equity/ book value, financial access and transparency.
- Decision-making power: Input into strategy, hiring, budgeting, board representation, accountability for leadership.
The ownership economy doesn’t always mean a literal distribution of tokens, stock options, or equity. Rather, it means that ownership — which may manifest in the form of novel economic rewards, platform governance, or new forms of social capital — can be a new keystone of user experiences, with plenty of design space to explore.
- Jesse Walden, Variant Fund
A sense of ownership is like a sense of dinner.
- Cory Rosen, Director for the National Center for Employee Ownership
Austin suggested that DAOs have an opportunity to be much more ambitious about defining what constitutes ownership. He pointed out that there is a danger in saying that novel economic rewards on a platform is ownership because it ignores some of the key tenets of decision-making power, which could end up diluting actual ownership in some way.
In a recent post for Forefront, Ways to Improve the Ownership Economy, Austin articulates some ideas for how DAOs can better capture and convey the intangible value of community. He expressed the need for bidirectional accountability, namely the idea that leaders must also be accountable to members, which subverts the traditional hierarchical structures that emphasize that members must be accountable to leaders.
Historical Context is Important
Austin noted that beyond ensuring better decision making, the knowledge of historical context for DAOs is helpful. There are many examples of ways to collectively organize and coordinate in history that we can draw from. This is notable because there is a tendency in the tech world to view things as tech problems that need tech solutions, when in reality they go far beyond that.
For instance, some examples include:
- Economic Coordination: Mutual aid societies, solidarity networks, barter networks
- Collective Ownership: Cooperatives, steward ownership, community trusts Collective
- Decision Making & Group Culture: Cooperative bylaws, mutual aid operations, group decision making pedagogies
- Community & Local Currencies: Ithaca Hours, Berkshares, Brixton Pounds
Austin recommended the book Collective Courage by Jessica Gordon Nembhard, which examines the history of Black cooperatives and their place in the movement for both civil rights and economic equality.
Less Memeing, More Meaning
Cooperative culture was largely formed as a way to help oppressed or financially disadvantaged people meet each other's basic needs. This is worth noting because there’s a disconnect between the historical roots of the cooperative movement and the way it’s showing up in the tech world at the moment, with whimsical projects like Constitution DAO getting a lot of attention.
It’s important to keep in mind that the types of coordination platforms and mechanisms we’re building have the power to meaningfully change peoples’ lives for the better.
Addressing Common Criticisms of Co-ops
Austin noted that contrary to popular understanding, co-ops do not mean all members have a say in all decisions. Co-ops typically have frameworks they use to guide decision making, and cited Ample's as an example. A common criticism of co-ops is that they’re slow-moving because of the need for building consensus, but that’s not always the case. With mutually agreed upon processes and frameworks in place, decision making can happen as quickly as in traditional hierarchical organizations.
It’s also worth noting that the history of co-ops is perhaps underexplored because of their historical association with anti-capitalist enterprises. For example, literature about co-ops is lacking, and curriculum in business schools about collective organizing and ownership is practically nonexistent.
One reason to be optimistic about the potential for co-ops to proliferate is that the mechanics of the internet make the knowledge required to build and operate them more accessible, and for their benefits to more easily spread and evangelized.
What Co-ops Can Learn from DAOs
Starting a co-op involves all the same risks associated with traditional startup, but without the financial upside. Challenges include:
- Hard to raise funding
- Difficult to bootstrap because of the effort required
- Large information gap about how they operate
- Lack of professional resources and services to support them
- Unclear financial incentives
The challenge for co-ops is to ensure that the often pluralist values of their members are accurately represented and upheld, while also preserving operational efficiency. Many successful cooperatives have therefore combined formal management hierarchies with thoughtful permissioning by members (as opposed to flat, direct democracies).
- Jesse Walden in Past, Present, Future: From Co-ops to Cryptonetworks
However, Austin pushed back on the idea that top-down hierarchies are needed to build great products or efficiently run organizations, pointing out that this could be a perception problem. We have few cultural data points currently on the performance of co-ops and DAOs, but that will change in time.
One example of rapid iteration from a collective was from PartyDAO, which was able to quickly fund the creation of PartyBid, a collectively owned product that lets people pool their capital together to purchase NFTs as a team.
Another example of a promising development in collective organizations is the Exit to Community movement, “an effort to develop alternatives to the standard model of the startup ‘exit.’ Rather than simply aiming for an acquisition by a more established company or a public stock offering, could startups aim to mature into ownership by their community of stakeholders?”
Airdrops like the one from ENS are an example of Exit to Community, as all participants in the network were rewarded for the value they brought to the enterprise.
One critical aspect of developing great collectives moving forward is making people believe better ways of organizing are possible. There are a lot of bad myths about co-ops that will need to be dispelled if we’re to see wide adoption.
The Future: A Blend of Co-op and DAO Models
While new models for collective organizing will continue to emerge and evolve, it’s likely that the most successful among them will include some combination of the following: one-member one-vote governance, tokens as ownership, community investment, liquidity for contributors, and bootstrapping through on-chain contributions.
By learning what we can from the past, and looking forward to the future, we can create communities that embody the best of both worlds: effective, principled, well-resourced organizations working to build a more equitable, democratic, and collectively-owned future.