It’s unfortunate how infrequently we’re given the opportunity to really wrestle with the question:
What’s the work you most want to do?
Given your best analysis of the world and what it needs, as well as your gifts and the change you most want to make, what would you spend 3 years doing if you got paid to go invest in that most important change-making work?
I just got out of an interview where I was given the chance to try to articulate the work I most want to do. The questions were roughly:
- What’s the specific innovative idea you are pursuing
- What would success would look like 3-5 years down the road
- What are the key steps to achieving that success
- What’s your experience as a leader who makes things happen, does the hard stuff, and executes on your plans
I’m writing my answers here in hopes that I can turn back to them and in hopes that you might ask me about my progress from time to time. I hope that as I learn more, build more relationships, a more focused path will emerge at the intersection of the work I most love doing and the work the world most needs from me.
1. What’s the big idea & breakthrough innovation?
The Big Idea: Investing in co-ops and employee-owned businesses becomes a “gold standard” in Impact Investing.
The vision is that investors of all sizes (from $10k to $10M to $10B) can find an easy place to write their check and have their capital be deployed into a non-extractive relationship with cooperatives, employee owned firms, or perpetual purpose trust.
What is non-extractive mean? The “non-extractive” relationship means that the person/entity receiving the investment (equity or debt) will not become worse off because of the investment. (For example, the way most of conventional finance is structured today, there are personal guarantees, super high interest rates, homes being taken if the debt isn’t repaid). If the co-op does well and makes profits, it serves it’s primary stakeholders first and the capital stakeholders right alongside it. It means that at a governance level, the stakeholder with the most control over the firm isn’t the capital stakeholder, but rather the customers, users, producers, workers, environment or community. As the co-op enterprise grows and flourishes, the invested capital will be paid back alongside the on-going flourishing of the co-op. (Note: going forward in this piece, I’m going to use co-op as a catch-all to include employee owned and steward-owned Perpetual Purpose Trusts.) If the co-op has hard years and doesn’t make profits, then capital doesn’t get repayments in those years. In other words a reciprocal relationship is formed between the capital interests and the other stakeholders guiding and leading the firm.
New Instruments and Notes
The vision is that we have new capital instruments and notes that have been systematically de-risked with IRS Private Letter Rulings or SEC Rule Changes that encourage early movement towards these non-extractive financial relationships.
Broad Awareness that Co-op Investing is not only Non-extractive, it’s Regenerative
The vision is that we have widespread consciousness among social justice oriented philanthropy, impact investors, businesses, and individuals that their capital can do serious good if they invest it in co-ops. They’ve read enough in alternative schools of thought in economics or ethics or accompaniment of the poor to realize that when capital’s interest aren’t driving the bus, and the producers/workers/users are structurally centered in governance — we’ve structurally shifted power to facilitate mutual flourishing and mutual liberation. In other words, we’ve created a pathway for non-extractive financial relationships to lead the way to a regenerative economy.
Easy to Move Your Money Into Co-ops
The vision is that it’s easy to move your money to co-ops. If and when you’re ready, there are easy ways for you to invest in co-ops immediately. For example, you can go to your financial institution, investment broker, retirement account, financial advisor, financial planner and they will know what you’re talking about. With a few clicks online you’ll be able to re-allocate a meaningful % of your portfolio to these types of investments/funds. This process would be just as easy as going in and saying I want to switch to ESG funds.)
2. What does success look like 3-5 years down the road?
For me, success starts with co-op entrepreneurs finding it easy to raise capital because of how much social good they’re doing because of the structural way they’ve re-oriented capital to be directly connected to greater human flourishing. Specifically, it looks like Phil Reeves, Molly Hemstreet, Hays Witt, Paul Bradley, Joseph Cureton, Mara Zepeda, Astrid Scholtz, Brendan Martin, Blake Jones, Marqui Rose, Isabel Lopez, Bianca Vazquez, being able to tell me that they had a clear set of options for where to go to find capital, they worked hard for a few months, built a set of relationships and ultimately raised the capital they needed.
(For context, the situation right now for these folks is along these lines: everybody says we’re awesome. They love talking to us, but nobody is willing to be the first one to write the check. They say we’re too new. We’re pioneering and they’re excited to see us succeed, but to come back in a little while. Or that those terms don’t match our capital’s needs because of the co-operative or employee ownership structure. They’re intrigued by the cooperative ownership structure, but they’re not familiar enough to be comfortable investing. Their advisors/CFOs don’t know how to do due diligence given that the investment is subordinate to other interests like the customers’, workers’, producers’ well-being.)
A Flourishing Ecosystem
Success in 3 years looks like a flourishing ecosystem with lots of thriving entities, networks, and cultures. If you ask your friend about cooperatives, or raising money — or if you go to your local community foundation, they immediately have ideas for you or they have a specific program / process / set of offerings if you’re cooperatively owned. I can see groups like Zebras Unite being not just a co-op of a few thousand entrepreneurs but a network of a few hundred thousand entrepreneurs. Their gatherings regularly convene thousands of people.
I imagine Start.coop not just with one cohort of 6-8 co-ops in their accelerator each year but as a collection of 10 accelerators each with 8 co-ops. Local co-op academies aren’t just in forward-thinking cities like New York, Oakland, Cincinnati, Detroit but are in 200+ cities and regions across the country and organizations like SCORE where volunteer consultants, mentors help other aspiring entrepreneurs advance their enterprising ideas and ventures.
Governments Have Helped De-Risk Co-op Investments
Meaningful SEC rule changes, government no-loss guarantees on co-op investments, or through IRS Private Letter Rulings, we see regulatory and policy changes that systematically de-risk co-op investments because of the public good they offer. Co-op Funds are large enough (and recognized by leading Government, Educational, and Business leaders) that government regulators allow and make it easy for pension funds and tax-advantaged retirement funds to be put into Co-op Funds.
Co-ops as A New Asset Class
Investments in co-ops become a gold standard in impact investing. The way investments are structured in co-ops they’re able to be aggregated and syndicated. The social, community, and environmental benefits make them so attractive and demonstrably better for “ESG” investors and other environmentally focused investors that they become a primary offering of all major investment shops. All retirement plans where employees get to choose now have a Co-op Fund offering right alongside a Vanguard S&P 500 Index Fund or a Bond Fund. The widespread demand leads to widespread availability. We cross the threshold where $1 Trillion has been shifted from public equities into Co-op Funds.
Financial Advisors Turn to Co-ops
Financial advisors and financial planners everywhere have begun to see the importance of differentiating themselves (for their faith, values-first, and socially responsible investors) by the interesting mix of Co-op Funds they offer. They advice being part of co-ops and encourage integrating other parts of their economic lives into the co-ops that include buying clubs, local contracting organizations, and other networks that allow one’s retirement savings to be directly connected to enterprises that help one build networked relationships in the community and throughout the country and world that bring about greater health and resiliency for a community, but more integrated networks and ties with a broader based of people that have a larger stake in a more inclusive, sustainable, and equitable future.
3. What are the key steps to achieving that success?
Build the Co-op + Capital Ecosystem such that it becomes a landscape that better sees and understands itself. We’re beginning with a newsletter called “Ownership Matters” to track the co-op funds, the investments in leading co-ops, and begin to build a database of key movers and shapers of the ecosystem.
New instruments that lead to greater capital formation will be another major milestone. Leading practitioners like Seed Commons have developed their non-extractive investment notes. Groups of others adopt leading notes.
Support the leading funds with raising the capital they need (for example Apis & Heritage Capital Partners, Kachuwa Impact Fund, Seed Commons).
Investor education that goes deep and helps investors understand the economic theory, ethics, ecological realities, and theoretical frameworks to make more significantly different decisions than they have been making.
Build communities of investors through workshops, investor clubs, deal sharing groups that help many make sense of the evolving landscape. (i.e. Investing in Livable Futures workshop)
Funds of funds emerge and other infrastructure organizations support by providing common legal frameworks, not structures, that allow for syndication and investments from larger investors with larger ticket sizes.
Massive training programs (Towards Aware and No Harm Investing on Money Quotient) help financial advisors and financial planners make sense of the emerging landscape and help their clients shift their capital.
What’s been tried already? What’s the new direction you’re proposing?
I recently was talking to Adam Schwartz who told me he tried to work with the stewards of the rural electric cooperatives’ retirement and pension money. Apparently, they have a mandate to try to put 10% of their retirement money into other co-ops, but they haven’t over the years, so 100% of the billions of dollars is in conventional investments. Adam got flustered: “It’s crazy… they actually invest in the investor-owned utilities who are their direct competitors in many cases.”
I am sure Adam’s efforts are one of many efforts that have been tried. What’s different now, is the circumstances. I believe we’re living in a different moment. I believe the cultural awakening is getting to the point where people realize that it’s really about ownership. As they look to shift ownership, they’re going to find a dearth of options and cooperatives and employee ownership as some of the best, most promising existing models we have with some infrastructure around them.
The new direction I’m proposing is to work to catalyze organizers on many levels. From building small investor circles, connecting up financial advisors, building support infrastructure for the growing numbers of people that know they want to be part of the movement that shifts ownership. Once we get hundreds and thousands of angels supporting co-ops everywhere to see each other, then I think we’ll begin to open the floodgates on the larger impact investors. Then once the dozen existing co-op funds today will multiply into hundreds and thousands of funds. These funds will pave the way for the infrastructure that will allow larger flows of capital to really begin to move the needle.
I really believe it’s possible.
One sign of hope is this simple video
MoneyTransforms – Watch the 3-min video:
I’m so grateful for the opportunity to dream. I realize what a privilege it is even to entertain these questions. I’m excited to dig in over the upcoming year, see what relationships and networks and communities we can activate to lead this work.
Let me know if you’d like to join in and contribute.