The Co-operative Future of Food (and Everything)
From Bernie Sanders to Amul Dairy, REI to Mondragon to Kickstarter (sort of), participative models have shown that they have what it takes to disrupt the status quo. Not because they have the cash, but because they have the will.
What a fitting day to talk co-ops, on one where a bold Bernie Sanders, the impossible candidate, is going to find out how very near the impossible is. Bernie’s campaign has made a call that would be completely unfamiliar in the startup world, he got financing offers from billionaires, and said, “Nah, I got a guy who’s gonna get me $30.” Except he knew 1.3 million guys. For an impossible candidate, that’s an impressive amount of support. Politics might be a unique field, but with participation in elections falling all the time, perhaps it’s not so different from the rest of our lives.
Bernie’s strategy stands for a lot more than just homegrown politics, it’s a signal of a fundamental shift that’s occurring in how markets work, whether that’s the market for votes, apps, or spacecraft. Apps are an extreme example. With so many of the highest quality/most used apps on the market being free, newcomers can’t compete. So they seek out funding, a millionaire angel that will give them the first burst of money that they will use, inevitably, to buy customers. That’s right, at the first “free app” company I worked with, we spent around $5 per download (probably a low ball figure) and in our incubator, we were celebrated for getting them so cheap. A neighbor company was spending close to $50.
This is all part of the rather convoluted strategy (that admittedly works sometimes) to give their product away until the moment that users become really dependent on it, and then charging for it (or some upgraded version of it). And until the moment comes, investor(s) pay for the product that’s being given away for free, in full.
When you take a step back, it makes for an interesting picture, somewhere in the world a small group of very wealthy people decided that this product (and not thousands of others) was so worthwhile that they are willing to all but guarantee its success. It feels like we, consumers, have a choice in this too, but do we really? The choice is between paying for an app that’s not beholden to investors, or getting a free one that is. And the reality is, there are a lot of really, really good free apps, which means we don’t really have a choice, it would be irrational not to choose the venture-backed ones. The ones that are really, really good because they’re flush with VC cash that they can use to hire the best developers and the best marketers and squash competitors until it is the best, regardless of whether it was or not.
The conclusion is that, when it comes to the latest tech, venture capitalists, a tiny group or ultra-wealthy, tremendously intelligent people are more or less hand-picking the ideas that become the products we use. Where have we heard a critique of a system like this before? When we argue against government subsidies that “pick winners and losers”. So the federal government is a small group with concentrated power that picks winners and losers, and venture capitalists are a small group with concentrated wealth that picks winners and losers.
To me, it sounds like everyone else, the people (or “consumers” if you like to dehumanize them) can’t win for losing.
(It’s also worth mentioning that a lot of VC’s earn their money building venture-backed businesses, thus the picked become the pickers.)
Enter: The Co-op
In my experience, the cooperative model is usually dismissed as hippy-kumbiya nonsense. And first off, I get that. Mob-mentality, group think, mass hysteria, these are real concerns, and I understand the hesitation to put big ideas, big tasks, or big sums of money into the hands of a crowd. Individuals and small teams tend to be more effective at execution, there’s more cohesion, there’s a greater sense of responsibility, there’s more flexibility and better incentives. So how do we make the leap from drum circles to employee- and/or community-owned and operated, highly effective organizations that are not nourished by the artificial additives of VC/government dollars but by the organic mix of enthusiasm and dedication created by employees and users?
There are plenty of organizations that have already achieved it. One of my favorites is Amul Dairy. You might not have heard of these dairy giant from India, so caution, it might blow your mind. This organization was started in 1946 in a village in the Indian state of Gujurat, and today is jointly owned and operated by 3.6 million milk producers. The milk these producers claim from their, on average, less than 5 cattle per household, is aggregated daily at over 11,000 village-level collection centers (where they are paid in cash) and in less than 24 hours, the milk is aggregated, pasteurized, packaged, and shipped to the doorsteps of millions of families across India, netting it’s producers about $4 billion annually. And after all that, they still have time to make some of the cleverest cartoons in the world with their lovable mascot.
Amul is an amazing example of the true power of co-operative organizations, but what about an American example? How about REI? REI, the outdoor equipment company, is owned by 11.6 million employees and customers who receive yearly dividends for their ownership stake and also awesome benefits in the between time. And for the leadership of REI, this is a boon, because when they want to make choices about carrying sustainable products, protecting customers with proper labeling, or even (rather famously) having employees work on holidays, they can say with confidence that even though the right choices won’t net them the biggest bonuses, they are in the best interest of their shareholders.
There are so many examples globally, domestically, and even locally of effective co-operative models that are making money, staying competitive, and turning happy customers into full-fledged brand-vangelists. These companies weren’t picked by wealthy capitalists or powerful policy-makers, they were picked by one person at a time, until they caught on. This phenomenon can’t truly be synthesized, there’s only one way to make your clients and employees feel like they truly have a stake in your idea, and that’s by giving them one.
So many of the specific problems that we face when it comes to food, at every level, from growers to processors to retailers, can be tracked back to the impulse to pursue yield and profits above all. It makes sense for startups and the established crowd, they’re struggling to prove to investors that they have a viable product or legally beholden to maximize dividends. For farmers too, in a high-risk industry like agriculture, in a good year you invest in more land and more technology hoping to create a buffer of profits to protect you from going bust in a bad one. It makes me wonder, what would a Monsanto look like if it was legally beholden to 11.6 million American consumers? What would McDonalds or Walmart look like if they got their produce from 32,000 American farmers every day? How different would our food system look if instead of looking to the king-makers of Silicon Valley or the USDA to fund or regulate us to a wholesome and nutritious food system, we sent our best ideas straight to the people, co-op style?
My first thought when I got to this conclusion was, the solution exists, Kickstarter. But I tread this way cautiously. Though Kickstarter is an enormous step in the right direction, its an incremental improvement on the old model, the VC model, not a disruptive change. Kickstarter is a great place for cutting edge tech and design to show off to an audience of early adopters who have the money to pay $500 for a cool prototype that won’t be built, tested, or shipped for 2 years. Kickstarter isn’t about skin in the game, it’s just an Etsy for yet-to-build tech and and a great way for startups to prove to investors that there’s interest in what they’ve dreamed up. Valuable? Yes. What we need for the future of food? Not yet.
One of my favorite of Michael Pollan’s Food Rules is, Pay more for less. That is a phenomenally hard sell in the grocery store (unless you’re Whole Foods). American shoppers are savvy and smart (Yes, Mom, I have been comparing unit prices when buying pulses), and labeling continues to be an ambiguous question for the American food system (i.e. what’s the difference between Organic, All Natural, Natural?). Brand loyalty to the big names like Campbell‘s’ and Heinz and Land O’ Lakes are being diminished by distrust of Big Food and Big Ag.
This is the ideal moment for bold ideas and bold people to transform the sentence, “this is my brand” from meaning “this is the brand I usually buy” to “this is the brand I own.”
In 2015, I read a fascinating article by Bernie Sanders (see what I did there? #Fullcircle) about the inherent problem of organizations like the Gates Foundation and the Clinton Foundation. First, these organizations and their ilk do phenomenal work, they’ve certainly changed the world for the better and are absolutely, no question, led by some of the best and brightest out there. But these people are not elected, they are not publicly reviewed and accountable only to their organizations, and all of the really meaningful projects have to be reviewed and personally approved by their respective name (be the Bill or Melinda Gates or Bill or Hillary Clinton).
There’s a temptation to say, “It’s their money, they can do what they want with it, and good on them for giving it to charity,” but does it matter that the sum total of these foundations have access to the somewhere near same amount of resources (if not more) as many world governments? How do we feel about there being small kingdoms within US borders that are choosing what diseases get cured, what countries receive food aid, and what science get funded? The alternative, in Bernie Sanders’ eyes, is that these people should hand over the majority of their wealth to the American people in the form of taxes, and we’ll all decide together how that money should be spent. I don’t know that that’s the right avenue either, but it’s definitely something interesting to think about as primary results role in tonight and over the next few weeks.
As I write this, the Sanders campaign may very likely be experiencing the beginning of the end. But what Bernie has championed is only the emergence of a fundamentally new way of doing business. This election cycle has proved that the status quo will no longer stand, people are looking up, looking around, and looking for something better. And together, they’ll find it.
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An interesting aside on the magic of co-ops is, unlike businesses that are backed by investors or who have to seek outside funding, co-ops don’t have to be singularly obsessed with growth. As the global population approaches stagnation (at around 9 billion in 2050) and our resources on the planet diminish (or as the CEO of IKEA describes, we reach peak stuff), economic growth broadly can only come from technological advances and further damaging marginal resources. In that future reality, 3% yearly growth (the expected average of the economy) might not be possible. For companies trying to please profit-hungry investors, this could be catastrophic, but for companies who serve their customers and employees first because those are their investors, growth isn’t necessarily an essential ingredient.
