Flux 4.0? Exploring a cooperative approach to capitalism

Some money stuff happened late last year that led to a series of massive conversations between me and Jon. We’re proud of the way that we were able to handle quite a complex situation, especially one that had money at its core.

It’s now been resolved in a smart, fair manner, so we decided to write a short article to share the experience with others.

We’d love to hear from people who have had similar (or totally different) experiences inside small organisations or collectives. Not necessarily only connected to money, but more about what Jon said in this message to me.

The tough human conversations that working together effectively often demands. Conversations that don’t happen enough.

Chapter 1 — October 2017 to November 2018

We started a business together, found a bunch of clients, and started earning money. Some of the work was done together and some was done separately. We decided from very early on that we would split the earnings evenly, aiming for £40k/year each.

We brought in about the same amount of money and both worked exclusively on Flux or Flux-related things. When we worked with partners we tried to be as open as possible about how much they and we were earning. We developed a Fee Calculator that helped to make pricing our services more transparent for clients.

The Feelings

It felt good, great in fact. We were doing our thing, building our business, and both bringing in plenty of cash. We were busy and happy and buzzy.

Chapter 2 — December 2017 to April 2018

Then Jon confused things by moving to Costa Rica with his family 😉 It was awesome for him and we wanted to make sure that the structure we’d started building could support that.

We decided that he should retain his base salary — £917/month — then we’d figure out what he should have as a dividend each month, based on the paid work he did.

He ended up not doing very much paid work, and actually almost left at one point to join a direct democracy startup called MiVote. I thought I was going to have to run this thing alone and part of me was excited by that idea. But MiVote didn’t work out, so in April when Jon was back in Europe, he fully committed to doing Flux together with me.

I brought in about 75% of our income during that period, which roughly corresponds to the amount of money that we were both paid. Jon got some dividend payments to account for the paid work he did, and I kept my standard £917 salary + £2,417 dividend per month.

The Feelings

Loads. There were some ups and downs here. Jon was in and out at different times. I wasn’t sure if I wanted to continue running Flux on my own. I tried to figure out what kind of company it would become with Jon gone. I was bouncing between excited, confused, annoyed, and happy.

But the money felt good. It was nice that we could keep paying Jon a base salary and even nicer that he was able to use that time and money to hang with his family and do lots of writing. For me, continuing to take a regular salary was awesome. The stability + freedom = work happiness equation felt balanced.

Chapter 3 — May 2018 to December 2018

So Jon was back. We were 100% fluxing again. He had a podcast he wanted to get going, I had Com4Com as a side project. We were both back on full salary and dividends, looking forward to a big year with lots of revenue and that old 50:50 vibe that we had before.

But things went a bit wonky (see the latest Financial Transparency post for more on that).

I’d said yes to every piece of work that came along and had a bunch of different side projects on the go. So I was pretty flat out between Jan and September, then had a couple of weeks off (My 3 weeks of #vanlife with (almost) no access to the internet), and hit a few big projects when I got back.

Jon was living in Portugal with his family and was trying to keep the kind of balance that he’d found in Costa Rica: surfing, unschooling with Ivor, reading and researching, and doing the kind of work that felt good and right.

The upshot of this was that our 50:50 revenue generating split became a 36:64 split. We’d both been paid handsomely with salaries and dividends since May, but I had brought in more of the money. This wouldn’t have been a problem if we were feeling fully committed to working for Flux. But we weren’t. We’d drifted into a kind of cooperative model where most of our work was done separately and we pooled the money.

So in short, things felt unfair.

Jon hadn’t done enough paid work to cover the money he’d received, not to mention the company running costs, taxes, and overheads that need to be paid for.

We knew things were a bit off, and Jon had even raised the subject in September. But I hadn’t run the numbers so we didn’t know the extent of the difference.

So it was time for a big chat.

The Big Chat

I thought I’d wait until after Jon’s honeymoon 😉 So as soon as he was back we hopped on a call.

It took several hours of talking through quite a complex spreadsheet that I’d prepared.

We both had to get our heads around what had happened.

Then we both wanted to know what each other thought and felt about it.

In retrospect, I wish I’d recorded the conversation. It was open and loving and respectful and honest in a way that makes me so proud of the funny little company we’ve been running for the last couple of years.

It was clear that the most important thing was for us to be happy with the decision that we made. We could slice the numbers in all sorts of ways that yielded different outcomes, but the chosen outcome had to feel right.

The Solution

It ended up being pretty simple.

Right for us meant that nobody would lose any money, and I would get some more money as a bonus for all the work I did.

So we took salaries out of the equation because that’s the bare minimum that either of us should expect to be paid as Flux employees (and it’s what we did with Jon in Costa Rica).

Then we looked at the dividends and calculated how much higher mine would be with the 36:64 ratio applied to what we had both already received.

So that was my bonus. We had decided that we would both like to keep our comfy £40,000/year, but that extra income should be rewarded.

We don’t quite have enough money to do that. So I’m getting a £10,000 cash bonus, then we’re reducing Jon’s dividend slightly and raising mine by the same amount.

After 3 months of this, at the current rate of what paid work we’re both doing combined with these new ratios, we’ll be rebalanced in a way that feels fair and right for both of us.

In the Future

We haven’t discussed our model from now onwards, but I’m working on a proposal that is inspired by the experience we’ve just had. I want to figure out a way of splitting our money that is smart and fair and will help us to live great lives, with some responsibility to the collective pot, and a nice reward for extra hustle.

One of the reasons for creating Flux was to help avoid the instability of freelance life. Something like this could be an awesome way of achieving both freedom and stability.

Notes from Jon

The fuzzy human part

Friends owning businesses 50/50 can famously lead to plenty of resentment and problems if things go sour. This situation was the perfect context for exactly that to happen. But it didn’t. We had our finance rebalancing meeting and the first thing we did in that meeting was to check how each other felt. How we felt about the money, about each other. We listened to each other and didn’t interrupt. There were many feelings: fear, anger, resentment, frustration, guilt… The bad ones. But we listened. And so what could have been a perfect context for falling out, became the perfect context for hearing each other. This isn’t something I’m particularly skilled at as a human being, but this situation felt critical and we treated it with respect. As Jim said, I’m really proud of how we behaved towards each other. And I’m really proud of myself. One of my goals this year was to be a better listener in all of my relationships, a quality I can really lack in. And perhaps this little critical experience was a test. I’d give myself a: “B+ Has shown improvement. Has potential. Must continue working hard and will see the reward.”

Principles

Then we went through the principles that would lead to us both feeling happy with the situation. We discussed fairness, merit, safety… Not money, but the underlying needs or rather values that we… well… value. I recall saying something like: “For you Jim, the ideal is that you get paid back as fast as possible. For me, the ideal is that I pay you back as slowly as possible. How do we do somehow achieve both?” And so we figured that if Jim got a bonus and an increased dividend per month and I slightly reduced my dividend within the scope of what would keep me living well and happy, we could rebalance things pretty well pretty fast. And we’re on track we think.

Dealing with our feelings triggered by money

As I briefly said in our Financial Transparency document, money can trigger really strong feelings. I know people who are constantly scared to not have enough or who are regularly anxious, or who feel trapped. Needs like safety, freedom, the need to matter, the need to be seen… These are the bits of us that are often triggered by money. If we feel insecure with who we are, or if we’re concerned about being enough in the eyes of others, or if we don’t trust ourselves to be strong when it’s needed, then money can be the strings that pull our puppet all over the place. For me, these strings are probably about safety, about self-worth, perhaps about being loved by others. We all have them. Past me would have been driven crazy by this situation. But 2018 me, didn’t. I felt stuff for sure! I felt frustration, fear, anxiety, insecurity, guilt. But I didn’t react to them this time. I noticed I felt those feelings and then somehow managed to remain balanced. In this sense, this particular situation with money was like a mindfulness exercise, one where I notice my feelings and simply observe them. This for somebody who has suffered from anxiety in the past feels like a huge test that I passed and grew from. I’m proud of myself here too.

The future & cooperativism

I’m not 100% clear what our exact formula will be in the future but I know that I believe in cooperativism. Because of our approach here, we’ll look back in just 2 months time and say “We both earned exactly what we deserved, and neither of us experienced a financial drop.” In other words, the volatility has been taken out but the reward hasn’t. This means that as self-employed people we can both have the best of both worlds. My recent podcast guest Richard Bartlett (Richard D. Bartlett) talks about this a lot and it’s something that I’d like us to really build our craft in. Who knows, perhaps other freelancers could join us so that our risk is further spread and together we can all mitigate for the cold winters and not just rely on fields of wheat that could get all get destroyed in one go. This is what resilience is all about I guess. For now, things feel good again and who knows where they will go.

Note: Our pal Tom Nixon talks about this stuff all the time. I’d recommend reading some of his stuff.