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Comment by the_af | Hacker News Reader

The pizza restaurant (gourmet pizza, not crap) around the corner where I live is workers owned. The previous owner went bankrupt and left his employees hanging out to dry, so they took ownership of the place. Not sure about the legal situation (e.g. whether they bought the restaurant from the owner or what) but it's been workers owned for the past few years and doing well, judging by how full it always is. I eat and take out from there and it's pretty good quality.

This is not the first decent workers owned restaurant I've known, so I'm going to answer: yes, it can work.

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In this example, someone else had to get it off the ground.

The sibling commenter's example of Zachary's is similarly the product of entrepreneurs who got it started https://zacharys.com/about-us/our-story/

> someone else had to get it off the ground

implying what? that "workers" can't start something? Even if we imagine there's a category of people that are suited to be "starters" or "entrepreneurs" that category is still plenty numerous, easily 10-35% of the population, if not more.

Please be kind in your interpretation. Build and run are two very different phases. You need lots of capital for the former, mostly hands for the latter. Capital formation is probably harder for a group of workers because it leads to messy questions about residual earnings.

I think this is the issue. Starting a company is a lot riskier than working at one. To do that you usually need capital and/or someone who is willing to work their ass off for peanuts for a couple of years. The only reason people will take risks is for outsized returns.

Yes that is the implication. Starting something requires raising money and organizing things. Generally, at the start, only a small number of people care to do this work. And once they do it, why would they give their ownership stake away to their employees when they could just keep it for themselves?

Boredom.

(You have to be insane to whip something up and get it moving. Some thrive doing just that, but suffer under steady state stagnation.)

Practically anyone already wanting to work at such a place would care to do it with the proper resources. Imagine if you could easily get a government grant to start such a co-op...

Even if we're imaging a scenario with free government money, I'm not sure a co-op makes sense because of the financial incentives at the heart of capitalism. Imagine you could get government money to start a co-op or take private investment and maintain a large ownership stake in the business? Isn't the upside way higher for you if you go the private investment route?

Of course, the government could subsidize co-ops to the degree that financial incentives of starting a co-op outweigh the financial incentives from starting a traditional business, and maybe they should do that, but it's not how our curent market is structured.

This assumes all founders act as rational economic actors. Yes, it's hard to pivot from a traditional corporation to a co-op because of capitalism, but there are plenty of people who love the idea of a co-op but either don't have the capital or where the available capital is not evenly distributed among those interested to found the co-op with them. Amazingly, most humans do not do primarily what has the biggest economic advantages for them but what they think aligns best with who they think they are or want to be.

Speaking from personal experience, as a founder who does not come from wealth the biggest reasons not to pivot to a co-op are that you're giving up control over something you created, you have a lot of money caught up in it that could have instead gone towards your personal life and that someone you hired as an employee is not necessarily interested in becoming a co-owner (e.g. if your country has workers rights they might be losing access to certain guarantees and benefits by doing so).

Your wording is also needlessly abrasive. The government subsidies a large part of the economy like agriculture and fossil fuels (this is true in Germany and also seems to be the case in the US). Calling subsidies "free government money" suggests this is unheard of and unrealistic. If we want to go full utopia, the government could not simply subsidize co-ops, it could mandate them, e.g. by enacting a law that requires non-publicly traded businesses above a certain size to be worker-owned (with all liabilities to the founders being converted to standard loans) and prohibiting natural persons from holding more than a given percentage of any publicly traded company to shut down the potential loophole of just going public. It's the government. It's what allows corporations to exist so it could also restrict them.

I don’t think my words were abrasive. I was just pointing out that there exists financial incentives that disfavor co-op formation. If my argument, which is opposed to your argument, assumes “founders act as rational market participants” doesn’t that imply your argument assumes market participants act irrationally? Of course people act irrationally all the time, but what seems more likely on the whole, especially in regard to money?

Friend, I have worked in advertising. The entire industry hinges on humans acting irrationally in regard to money. Humans are irrational actors. The rational homo economicus is an abstraction to give economists something to work with.

Corporations act somewhat rationally in aggregate only because the people in charge of them are bound to do so by law. And even this breaks down when the corporation is directly run by one person who also owns it.

"Market participants" is not what we're talking about. "Market participants" includes corporations and other forms of organizations that impose strict controls on their own behavior. We're talking about humans. And humans are very irrational. They're just also very good at rationalizing their irrational behavior and prefer doing things they can rationalize.

The problem isn't the number of people willing to risk someone else's money to start a company but their own.

We could turn the government into a giant VC. I'm not bullish on the results.

If that's true (I doubt it) the reverse has to be true too: that those great at starting (a restaurant) are bad at sustaining it.

If there are distinct phases, and certain people or topologies are good at just one of those phases, then it follows that people starting restaurants must be bad at running them once they've established.

That doesn’t follow at all. There’s no reason you can’t be good at both.

Yes. Which is why the comment I replied to is nonsense.

No it’s not. You haven’t refuted the claim that starting a restaurant requires momey. You just said having money makes you bad at running a restaurant. Which is silly.

It strikes me that an argument against that is that it is too expensive to setup a business

As I recall, Arizmendi spun out of Cheeseboard... So, yes, we also have examples where worker coops beget other worker coops.

http://www.arizmendi.coop/about-arizmendi-association.html

IMO, the reason you don't see more is that us financing is quite conservative and unwilling to risk "unusual" business models.

(Similarly, finding a mortgage for shared housing requires a lot of extra work, because the mortgage brokers only like nuclear families... Even when you show up with four incomes and no kids, it's still considered risky because unusual.)

Which is to say... The smallish number of worker coops in the US has nothing to do with the rarity of magical founder people... I'll say that the folks I've known in housing and worker coops have a much higher rates creativity, grit, and organizational chops than anyone I've met from a business school. And, indeed, many of them are now run their own businesses in a wide range of endeavours.

implying what? that "workers" can't start something?

Technically if there's no company yet there is nowhere to work and thus no workers. You need "founders" to get the company started for there even to be workers. Now those people have to decide if they want to never hire anybody new, 'give away' a a piece of 'their' company each time they hire, or give up on the worker-owned idea all together.

Of course most "founders" used to be "workers" and often become "workers" again after the company is founded, but the act of founding a company is fundamentally different from the act of working at a company

As someone who founded a company and had employees: it's not all that different, though the specifics depend on the kind of business. The biggest difference is that in order to found a company you need capital and workers generally don't have enough capital to found a company (and if they do and do found a company, as you said they become founders themselves).

There is of course different work to be done at every stage of development of a company and this means that founding a company may require skills running it may not or vice versa but there is no reason someone who is good at founding companies should continue to call the shots or pocket most of the revenue once the company is fully operational. That's an expectation tied to the return on investment primarily and our system being set up in such a way that founders are owners and workers coming in later are not.

A bit of a long read, but the co-operative sector does have some ideas about how to offer "founder incentives" in workers cooperatives.

https://jrwiener.com/cooperatives-and-founder-incentives/

The idea is that cooperatives don't have to treat everyone exactly the same. You can have different "classes" of members. You can have ordinary worker members, but also "founder" members. For example, for an agreed number of years "founder" members can get to elect a certain amount of board seats and get a higher share of profits.

Sure, it moves away from "one-person one-vote" democracy and full equality, but only for a temporary period, and it still gives ordinary workers a much greater say in their workplace than they get in standard companies.

Pretty much like the big law firms work?

Possibly. My impression, purely from popular media, is that only partners have any say in the running of a law firm, and becoming a partner involves cash buy-in of some sort, which might be a little different from co-operatives, where usually all permanent non-probationary workers have some sort of vote. But as I say, my knowledge of law firms is mostly from watching The Good Wife, so....

You can become partner if you bring good clients with no cash buy in required. I think there are also different levels of partnership(i.e not all of them get their name in the office name).

I have a reliable source on this: Suits

Thank you for sharing this, great resource and inspiring

In the case of a bankruptcy, the property will pass to a curator who has to try and settle debts as much as possible; I'm sure the staff and the curator struck a deal there.

Zachary's? https://zacharys.com/

I live in South America, so no :)

https://cheeseboardcollective.coop/pizza/ and https://www.arizmendibakery.com are coops.

Also good pizza! And there's more than one location.

I believe I read that Nick's, up north, is also heading worker-owned.

And of course worker-owned doesn't just mean pizza in Oakland.

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