#Opencoop: Could platform co-ops break up tech monopolies?

'A lot of developers are considering questions of empowerment, transparency and privacy'

Delegates at the Open 2018: Platform co-operatives conference in London looked at how collaborative technology can offer alternatives to the powerful tech giants.

The two-day event, which looked at technology and the co-operative economy, included input from Duncan McCann, researcher at the New Economics Foundation. He said that many tech platforms fail to engage the workers providing the service – and, while regulation exists in different states to protect these workers, it is not sufficiently enforced.

Efforts have been made to constrain the disproportionate power of the tech monopolies: the European Union has levied fines against some companies, while other countries have made attempts at nationalisation.

“We are trying to suggest opening up data as they grow to start-ups and social good enterprises,” said Mr McCann.

One alternative would be to design infrastructure that is resilient to monopolies. Jaya Klara Brekke, researcher on decentralised systems and architectures, said regulation could be a tricky solution, because customers sometimes benefit from using these platforms and support them.

But she is optimistic about the future of Blockchain, a peer-to-peer rooted technology created to tackle issues around power, although it has not yet overcome them.

“A lot of developers are considering questions of empowerment, transparency and privacy,” she said.

Nathan Schneider, assistant professor of media studies at the University of Boulder Colorado, insisted that platform co-ops need self-regulatory mechanisms – such as common standards, and checks and balances of power.

“It’s interesting to see how new political theories are finally entering the space that has been so dominated by other approaches,” he said. “Protocols are power.”

The capital conundrum

When setting up, platform co-operatives face the challenge of investing upfront in a project that may or may not work.

Other enterprises can take huge risks, but this approach is not compatible with the values and principles of co-ops, which put members’ interests above profit.

During a conference workshop, Vivian Woodell from the Phone Co-op’s Foundation for Co-operative Innovation pointed out that Amazon had consistently lost money for its first several years as a public company before becoming profitable.

“The founders poured money for 10 years into the business to get that monopoly position,” he said. “If we look back at the history of co-ops, this is not a new problem.

“In the 19th century, when co-ops were getting started, railways were the equivalent of today’s tech businesses. They were high-risk and many of them failed. Co-ops stayed away from railways and stuck to more predictable things like retailing.. Our competitors do things we can’t do, taking huge risks – sometimes on the basis that one in a hundred succeeds. It’s hard to imagine co-op members wanting to take that kind of risk.” He also pointed out that private providers of capital for tech start-ups generally looked to get a return through “exit” i.e. by selling their stake in the business, often long before the business was generating any profits. Such a mechanism wasn’t available to co-ops. He suggested new mechanisms could be created – for example creating the right to future streams of income such as royalties or a share of turnover or profit, which could be sold. He said a debate would be needed as to whether this was at odds with co-operative values and principles.

To illustrate what was possible in terms of innovation in capital raising for technology start-ups, Mr Woodell pointed to the example of Fairphone. The social enterprise had asked 25,000 customers to pay €325 each in advance for the world’s first ethical smartphone, which they were ready to do, even though it was a new-start that had never built a phone before. The initiative raised €8m and turned a profit after releasing the first handset, which enabled it to produce a second, larger batch the following year, and eventually to develop Fairphone 2.

“We need to find a way to match or replicate these collaborations that is consistent with co-op values,” said Mr Woodell. He explained that co-ops are less risky by nature, partly because they have a culture of volunteering, collaboration, and open-source – and present less moral hazard.

“We are innovators and if we have the right projects, there may be possibility of state support,” he added.

Conference delegates also explored potential mechanisms to raise the start-up capital to develop platforms without compromising co-operative values. One suggestion was to issue tokens: people could buy them in advance, contributing to the co-op’s start-up capital. The enterprise would then issue tax credits and attach these to a digital system when the member is using the service provided by the co-op.

Another idea was to was pay profits in a digital currency that could then be reinvested in the co-op or other co-ops.

Simon Borkin, programme development lead at Co-operatives UK, recommended federated decentralised solutions and creating local co-op markets where people want to use capital locally.

Delegates agreed that while having one central entity managing a global platform was not the best option, more collaboration within the sector was needed for platform co-operative projects.

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