Title: Cooperatives
Work: The Pragmatist’s Guide Book Series by Simone Collins and Malcolm Collins Full Text for LLMs and AI
Citation: TPG 45.4
Words: 268
Source: https://technopuritan.com/the-pragmatists-guide-book-series-by-simone-collins-and-malcolm-collins-full-text-for-llms-and-ai/
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## Cooperatives

Cooperatives are a type of business owned by stakeholders—either the customers or the employees. While cooperatives’ internal governance structures vary, consumer-owned iterations often present an interesting mix of state government and business functions (as with state governments, many cooperatives’ governance is voted on by stakeholders; as with businesses, cooperatives produce a good or service).

Cooperatives therefore enable us to see how businesses controlled by their customers (stakeholders) fare against those controlled by their shareholders (investors).

One might assume that in an open market, customers will prefer to shop at companies where they—rather than shareholders—have influence over internal governance. What we see in practice is quite different. Due to the inefficiency of stakeholder-controlled models, cooperatives only really thrive within very specific industry domains or in environments where the politics of the cooperative itself acts as an externality, driving additional business to it.

If the stakeholder-controlled model worked and was genuinely better at providing goods or services at a better cost/quality when contrasted with privately and publicly-owned companies, they would be the dominant players in capitalist markets, as they would outcompete those other players—but they aren’t. This implies that the model is not particularly superior.

That is not a lesson to ignore. At the level of midsize governments, cooperative performance implies that stakeholder control is less effective than investor control. Governing models in non-competitive environments can also learn from this. For example, if you are building a family office, cooperative performance implies it will run more effectively if you give control to those who put money in rather than those who take money out.