Cooperatives and DAOs

One of the motivating ideas behind the farmer data network is for farmers to own their data.

The idea of collective / community ownership is really powerful and has a rich history, especially in agriculture (Amul Dairy in India, Land-o-Lakes, CHS and Ocean Spray in the US, Zen Noh in Japan, etc.)

The International Cooperative Alliance defines co-ops as an “autonomous association of persons united voluntarily to meet their common economic, social and cultural needs and aspirations through a jointly owned and democratically-controlled enterprise.”

In India, Farmer Producer Organizations in India seek to amend some of the challenges faces by Primary Agricultural Credit Societies (like state interference in governance) and there is a newly formed Ministry of Cooperation whose mandate is to strengthen cooperatives.

In Web3, there is a lot of excitement about Decentralized Autonomous Organizations, or DAOs, which are an interesting analog to cooperatives. DAOs hold potential as an organizing framework for decentralized networks that promote ownership in terms of economics and governance. See this Ownership Economy essay from the Variant fund which invests in DAOs:

As the role of the individual in value creation becomes more commonplace, the next evolutionary step is towards software that is not only built, operated, and funded by individual users—but owned by users too.

Ownership, via employee stock option plans, has been a powerful tool for incentivizing talented people to dedicate their skills to building startups in Silicon Valley. While this model has been extremely successful, it hasn’t been accessible to all, constrained by geography and legacy financial infrastructure, among other factors. One result is that the economic interests of the biggest internet platforms are concentrated and often poorly aligned with their most valuable contributors, their users. Now, new technologies are shifting work and value distribution to be accessible online, resulting in a new generation of platforms that thrive on contributions from a permissionless and global talent pool.

Ownership is a powerful motivator for users to contribute to products in deeper ways, be it with ideas, computing resources, code, or community building. This more cooperative economic model helps ensure better alignment with users over time, resulting in platforms that can be larger, more resilient, and more innovative.  This is the Ownership Economy, and beyond being a positive social endeavor, the platforms building it are able to leverage the strongest form of market incentives to grow network effects.

This is a interesting essay that charts this history of cooperatives til DAOs: Pre-History of DAOs:

Open

(T) Tribes have the societal organizing principle of kinship, clans, and lineages. (I) Institutions have the societal organizing principle of hierarchy. (M) Markets have the societal organizing principle of competitive exchange. (N) Networks have the societal organizing principle of heterarchic collaborative exchange. Heterarchic here denotes organizations that are non-hierarchical, unranked, or possess the ability to be ranked in multiple ways.

There is a related concept, “platform cooperativism” which puts forth a vision for worker owned online platforms like an Uber owned by its drivers rather than an extractive intermediary (see Drivers Cooperative).

Another flavor of this concept is a DisCO or Distributed Cooperative Organizations (examples here)

This is an accessible approach to people working together to create value in ways that are cooperative, commons-oriented and rooted in feminist economics. These values are nourished in small, federated communities. DisCOs harness the utility of tech without being completely tech-centric, emphasizing mutual trust and the need to have not only reliable but also enjoyable collaborative relationships. Distributed Ledger/ Blockchain technologies are only put to use when these values and their resulting human relationships have become strongly rooted.

One of the risks that is especially acute with crypto based communities is how are economic and governance rights established. Blindly relying on tokens financializes transactions and creates risk that users with more capital can dominate a network. We want a model where farmers who contribute content to the network are able to maintain their agency and providers of financial capital or developers cannot hijack the agenda at the detriment of farmers.

There is a rich debate on this topic and an especially good primer comes from Vitalk Buterin (one of the main people behind Ethereum) in this essay where he responds to critiques from Nathan Schneider who is a leading voice on from platform cooperative space.

The main question that Nathan's piece is trying to explore is simple. There is a large body of intellectual work that criticizes a bubble of concepts that they refer to as "economization", "neoliberalism" and similar terms, arguing that they corrode democratic political values and leave many people's needs unmet as a result. The world of cryptocurrency is very economic (lots of tokens flying around everywhere, with lots of functions being assigned to those tokens), very neo (the space is 12 years old!) and very liberal (freedom and voluntary participation are core to the whole thing). Do these critiques also apply to blockchain systems? If so, what conclusions should we draw, and how could blockchain systems be designed to account for these critiques? Nathan's answer: more hybrid approaches combining ideas from both economics and politics. But what will it actually take to achieve that, and will it give the results that we want? My answer: yes, but there's a lot of subtleties involved.

A few important questions to think about in the design of the network (courtesy of Peter Harris)

• Who actually owns the platform? Investors and founders? An elusive foundation that has no governance protocol? If legally based in the real-world, what is the entity, where is it based and what is that region’s definition of cooperative?

• If you’re voting, what are you voting for? Changing minor features in a service or do you and your colleagues have the ability to steer the ship in a different direction?

• If voting via tokens, what is the model? Token-weighted where whales have the ability to override the will of the larger community? (Of note is Ethereum founder Vitalik Buterin recently writing about his doubts about the limitations of token based voting systems.)

• Does the project encode its values in a manner similar to the 7 Cooperative Principles that have been adopted worldwide?