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Christopher Lau
 Nov 21, 06 - 6:47 PM |
co-operative and competitive business strategy
I was thinking about how owners and workers all get along. I started thinking about an ideal situation. Here's the ideal situation: there are no owners that hire workers. Ideally, we are all private contractors and we just operate in a large open economy, where our skills, our time, and our effort are openly traded. Equipment, capital, etc. is collectively owned SOMEHOW and we rent time from it for what we need, or we pool our resources together to jointly own them. What does this all accomplish? Usually, in a capitalist society, the progression goes towards the concentration of capital because the greater the concentration of capital, the greater the competitive advantage (economies of scale in production, marketing, distribution, sales, research and development). And it's not to a country's advantage to put a size limitation on company's - sometimes it's nice to have 2 medium companies in a country rather than 1 large company, but short of introducing protectionist behavious against foreign competition, you might get creamed by a Chinese or an Indian company that is four times your size and charges 4 times less than the domestic company. So the natural capitalist tendency is towards capital in a few hands, and the majority of the population being working class, squeezed to the point of minimum wage. How is my particular utopia different? In my utopia, it would work like this. Say you wanted to enter steel production. In a typical environment, the barriers to entry are really high. You've got to have a multi-million dollar plant, and tons of knowledge etc. In this plant, here's how it would work. You would start off with a few years apprenticing and building up capital. After, say, three years, you would buy a share of the equipment (not the company, not the goodwill, not any of that stuff, just the equipment). Basically now, as a small business owner, your cost to enter the business is, say, $10,000 as opposed to $5 million. But this way you would have to timeshare a small amount. Now this particular steel mill will have a lot of orders. Perhaps it's running at capacity, or running below capacity. In any case, the director of the steel mill (who is employeed by this particular steel mill co-operative) will allocate a few jobs to this individual or maybe if there's a huge order, he's in charge of overseeing production for say 50% of the time, and the end customer will pay him (and the person who completes the other 50% of the job), and he will have to pay a portion of his sales to the co-operative steel mill. Really, it's essentially a co-operative. The co-operative is there to offer you lower cost of entry, and the same benefits of a large organization such as established customer relationships, economies of scale, training, marketing etc. But in this co-operative, your customers don't buy into the organization (unlike grocery or mountain equipment co-ops). Also, when you're a member of the co-operative, you don't just own "shares" of the company as a whole of the company - as a member of the co-operative you own time share of the machine and access to that machine. Right now, this kind of model can be used in taxi cabs, where the taxi cab drivers a lot of the time, are owners of their business (including their car), and they pay a portion of fees to the larger network. It's much easier for taxi cabs because the unit of production is the taxi cab and it's easy to divide that. Machinery is a bit tougher, and if you divide a huge machine into different time slots, then each user can only use it for a small amount of time, and that defeats the purpose of reaping economies of scale, because each user has to set up, and take down. It should be set-up, run for a long long time, and then taken down. So in this co-operative, two or three people can share ONE job, thereby maintaining the cost declines in large scale operation. Let's apply this model to, say, a mall. In a mall, the merchants of each store would be a part owner of the mall itself. If you can't afford to buy that piece of property right away, you would slowly pay it back as you worked. If your business goes under, that's not good, but you would then be responsible for selling your unit. In our current model, a separate group of financiers owns the real estate, and leases the property to the merchants. To make a healthy return on their investment, and justify the risk in putting down the building, they have to reap above-average returns on their investment. The mall tenants themselves are therefore having to make the real estate owners rich, and then their suppliers rich, and THEN them. That's a lot of people. Why not have the money that otherwise goes towards making the real estate investors rich, why not have that money stay within the merchants. |
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Christopher Lau
Nov 21st, 2006 - 6:48 PM |
Re: co-operative and competitive business strategy
(part two) So who, then, will take the effort to build a mall, who would take that risk? A few people - first, the government would (and they would eventually be paid back by the tenants), secondly, a consortium of tentants could, or thirdly, perhaps the mall builds itself slowly, almost like a bazaar, but with more permanence than sticks and a canopy. If the mall makes money, then everyone makes money (which is better than the investors making money and the tenants fighting to break even). If the mall loses money, then each investor loses money, which is okay, as opposed to a few investors losing lots and lots of money each. So we saw how this model can apply to large-scale manufacturing (time sharing, job sharing), to small unit of production services (e.g. taxis, which already use this system), and also through large scale retail (e.g. joint real estate tenant ownership). It can really apply anywhere because in any maturing industry, companies will tend to get bigger as size advantage makes them more competitive. Can you imagine an airline co-operative where the pilots and the hostesses owned one particular plane and they got jobs as needed? They could, of course, also time share with other owners, but you see how this is different than, say, giving your employees shares? Because shares aren't ownership in units of production. It is ownership in any value (and devaluation) of a company's market capitalization including reputation with creditors, customers, etc. which you may or may not have anything to do with and probably don't care for. Or maybe you do, and that's an option for people who want to remain as working class because they're air hostessing as a part time job to get through college or something - share ownership doesn't tie you to production so you can quit at any time without penalty. And maybe you're just trying out a profession and you don't want to necessarily invest. You don't need to be an owner. Some people are happier being in the working class. But owning the units of production, if your unit makes lots of money, you make lots of money. Share ownership - if you make lots of money, everyone takes a small bit of it. You're not directly rewarded. Anyways, that's a lot to think about and I know that most of you didn't even read this, but for those of you who did, you're awesome. But you can really come up with how this co-operative network can make many many businesses profitable and competitive, while directly rewarding owners for hard work and finally having as small a working class as possible. Well, some industries will actually rarely be under siege by the giant capitalists because beyond a certain size, the benefits of having a really large organization diminish quickly, and might actually decrease the value of the company because some business thrive on artistic talent, local connections/networks, and sharing of production capacity won't add cost declines. For example, architectural firms, music studios, graphics designs, small restaurants, hair salons... these kinds of things will continue to be owned by individuals, and in this economy, these are good places to go if you're looking to be an owner. But try going being a small playing in the video rental business and you'll get creamed I guarantee because scale matters big time. Could you possibly ever offer the "no late fee" or "guaranteed in stock"? Many of these are actually conscious moves to keep out small family businesses that can otherwise outcompete Rogers and Blockbuster in price because they don't require above-average returns, but now with these guarantees, they can't. Can a video co-operative compete with Blockbuster. Absolutely. I bet you can even figure out how the whole thing would operate. Can you? |
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Tyler Durden
Dec 11th, 2006 - 11:07 AM |
Re: co-operative and competitive business strategy
I like to pick my nose and eat the yellow part of the snot ball. |
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