It is an option, but it only allows for relatively slow growth, and only for businesses that aren’t capital-intensive. So it’s a good option for something like consulting firms or law firms, where there aren’t really any up-front costs that need to be paid off over time.
But imagine you invent a new type of power plant. Many plants benefit from economies of scale, and also take 10-20 years to pay off their up-front construction costs. How could a co-op finance building even a single plant? Similar arguments apply to most forms of manufacturing, or really anything that can be mass-produced.
Even in the case where organic growth is sustainable, it’ll usually have to compete with much faster inorganic, financed growth.
A sufficiently large co-op could raise lot of money. For example, if you have 10 000 employees, and they democratically decide to invest $100 per person into a new project, you have $1M. Not enough for a power plant, but perhaps for something smaller. I think Mondragon Corporation does similar things.
But this probably wouldn’t feel sufficiently pure (ideologically) to many people. Imagine that you have a system of mutually connected co-ops with 1M employees total, and they decide to invest $1000 per person, and build an actual power plant. On one hand, you have a co-op-owned power plant, yay! On the other hand, the power plant itself is not actually owned (exclusively) by its own workers; it is mostly owned by co-op employees working in other businesses. Many people would feel that this is a mockery of their ideas; that the people working at the power plant do not have the true co-op-ness.
Fast growth for growth sake expectations comes from jackpot seekers. I can see how loans are a justified way to get over that “first unit” hump. But if you have even a few actors like Uber that grow to big size fast and run at a loss, actors that prove their economic viability step by step can’t really exist. Consumers end up having the product cheaper than it can be produced and loaners (or whoever ends up being the sucker in stock poker) end up paying for it.
It seems very worrying if the “Does it make money?” is so fundamentally skippable that it is not worth considering. A worker that has found an activity they feel is meaningful and pays for their living is not in a big hurry to transmute it to another kind of activity, althought an attitude that a craft picked up should be developed exists.
The nice thing about loaners losing money on unprofitable businesses is that it’s a self-correcting problem to some degree—those loaners can only lose all their money once! And if consumers get part of that money, it’s effectively a charity.
Sometimes it seems like investors might not even consider whether their investments will make money, but most of the ones who last very long do care.
Why is not the income from the business activity of the firm an option for the growth?
It is an option, but it only allows for relatively slow growth, and only for businesses that aren’t capital-intensive. So it’s a good option for something like consulting firms or law firms, where there aren’t really any up-front costs that need to be paid off over time.
But imagine you invent a new type of power plant. Many plants benefit from economies of scale, and also take 10-20 years to pay off their up-front construction costs. How could a co-op finance building even a single plant? Similar arguments apply to most forms of manufacturing, or really anything that can be mass-produced.
Even in the case where organic growth is sustainable, it’ll usually have to compete with much faster inorganic, financed growth.
A sufficiently large co-op could raise lot of money. For example, if you have 10 000 employees, and they democratically decide to invest $100 per person into a new project, you have $1M. Not enough for a power plant, but perhaps for something smaller. I think Mondragon Corporation does similar things.
But this probably wouldn’t feel sufficiently pure (ideologically) to many people. Imagine that you have a system of mutually connected co-ops with 1M employees total, and they decide to invest $1000 per person, and build an actual power plant. On one hand, you have a co-op-owned power plant, yay! On the other hand, the power plant itself is not actually owned (exclusively) by its own workers; it is mostly owned by co-op employees working in other businesses. Many people would feel that this is a mockery of their ideas; that the people working at the power plant do not have the true co-op-ness.
They could incrementally buy it back for “purity”. Ends up being a kind of crowdsourcing.
Fast growth for growth sake expectations comes from jackpot seekers. I can see how loans are a justified way to get over that “first unit” hump. But if you have even a few actors like Uber that grow to big size fast and run at a loss, actors that prove their economic viability step by step can’t really exist. Consumers end up having the product cheaper than it can be produced and loaners (or whoever ends up being the sucker in stock poker) end up paying for it.
It seems very worrying if the “Does it make money?” is so fundamentally skippable that it is not worth considering. A worker that has found an activity they feel is meaningful and pays for their living is not in a big hurry to transmute it to another kind of activity, althought an attitude that a craft picked up should be developed exists.
The nice thing about loaners losing money on unprofitable businesses is that it’s a self-correcting problem to some degree—those loaners can only lose all their money once! And if consumers get part of that money, it’s effectively a charity.
Sometimes it seems like investors might not even consider whether their investments will make money, but most of the ones who last very long do care.