Co-op: Evolution of the Idea

The 200 Member Cooperative Plan is an evolving set of ideas.  To get a sense of where it came from and where it is headed, I'll explain how it evolved.  It did not come about from a single Eureka moment, but from several different directions that fit together like pieces of a puzzle.  Now that I am organizing all my notes into a more understandable series of articles I'm offering them up to the world in the hopes that some people will offer a few ideas of their own.  Further evolution is expected.

Over on the right side of my website is a link to the Farmland Fund.  It's an idea I put together a couple years ago after talking with people from all over about getting started in organic farming.  There is plenty of interest in farming but coming up with the money to buy the land is the biggest obstacle new farmers face.  There are plenty of people who's lives could be improved if they just had the chance to get started.  I'm not talking a few people here and there, I'm talking tens of thousands of people.  If there was a way to finance the property, give them a shot at showing what they can do and post their results before the world, it could attract private investment to take on the refinancing of that debt once the risk has been proven acceptable.  Even without private investment capital to refinance the debt, eventually it will be recovered, going back into the fund in order to repeat the process with someone else.

In order to cover my own arse I started looking at ways to improve the success rate of new farms.  Back in college friends would get together to share an apartment.  Roommates are a great way to get the bills paid.  We had 5 people sharing an apartment.  It seems reasonable that a few people could share a farm.  Instead of renting an apartment, rent a house with a few acres of land.  A little bit of land can generate considerable income.  

I bought this house with a downpayment of $5000 plus $500/month for 7 years  I can't rent a place in town for $500/month.  The downpayment on my last house in town was $1600.  There are properties out there that are cheaper to buy than to rent.  $5k is a bit of a stretch for a young kid earning minimum wage part time bagging groceries.  However, 5 people coming up with $1000 each makes the project a whole lot more affordable.  That $500/month mortgage drops to $100/month each.  Even minimum wage can cover the bills, but they have to work together.  The conclusion from all this thinking is that some sort of cooperative enterprise is the direction to pursue.

Around this time I got to thinking about a pizza shop.  There was a pizza joint in town for sale for $45k, the same price I paid for this house.  For the small bits of equipment involved it was way overpriced.   I could open a shop from scratch for less.  Applying the same logic as above, I reasoned that a group of people could get together to open a place.  More people - a smaller investment each.  Let's start with a bunch of people who already spend money on pizza regularly.  If enough of them got together and bought pizza from the same pizza shop, it pays the bills for that pizza shop.  Some back of the envelope math suggested that 200 people spending $25/month on pizza would be enough for that pizza shop to stay open.  It won't make a profit, but the rest of the town is welcome to come on in for a slice.  The pizza shop is an example of a customer owned cooperative.

It's Your pizza shop, you should pitch in.  Come on down for a few hours each month to cut down on labor costs.  There's plenty to be done.  Fold boxes, take out the trash, slice onions, that sort of thing.  We hire a manager who knows how to run a pizza shop, all we have to do is help out and spread the word to everyone we know..."Hey, come get a pizza at Everybody's Pizza Joint".  This is now a worker owned cooperative.  Instead of you going down to help out, what if you sent your high school age kids in your place?  It would give them a chance to turn off the xbox and work for a change.

With a couple hundred people involved, the price per person to open up a pizza shop drops to less than a paycheck.  I did some more math on the back of an envelope, came up with about $30k being enough to open a pizza shop in town.  Figure in 200 customer owners, that works out to $150 each.  If the pizza shop makes a profit, that profit goes to the local owners rather than some corporate office in Chicago to be paid out to pension funds and capital management companies.  We will have relocalized a small part of our economy.  We could do the same thing with and ice cream shop, sandwich shop, restaurant...any sort of food service works well because the product can be produced and consumed locally, and the start up investment is pretty small.

Now I jumped back over to the farm.  What if 200 people got involved in buying a farm.  That $5000 downpayment can be put together for $25 each.  To me, that seems like a really cheap price.  Chip in, buy a farm, same as the pizza shop.  You already buy pizza...you already buy vegetables.  Instead of buying from Domino's, buy your own pizza.  Instead of buying from Winn-Dixie, buy your own vegetables.  The money we already spend on vegetables would pay for the farm.  It's not costing us extra and we get a farm out of the deal.  The cost of groceries is bleeding our towns dry and we need to take it back.  We'd have to work the farm, but as seen with the pizza shop, we can send the kids to work the farm.  They'll love it and they'll grow right along with the vegetables.

So now we've got parents coming up with the money to buy a farm, and some kids to help work it.  We'll have a bunch of people out there working away.  Sooner or later, someone is going to need to use the bathroom.  They are going to get muddy and want to wash their hands.  We'll need water to irrigate when it's been dry.  Rain will come, they'll need to take shelter while it blows over.  From time to time they'll want to take a break and sit down to get out of the heat.  We need systems and a structure.  Instead of a bare field, we need a property with a house.  It comes with a well, a bathroom, running water, electricity so we can run some tools.  We can make good use of a house.  My place came with a garage and a livestock shelter.   This gives me a workshop with power and lights and a place out back to store tools when not in use.  With a house we've got all the systems in place and can use the rooms for offices and storage.  Its a sure bet we'll have some paperwork, we'll be needing an office. 

If I was working there some morning, it's a pretty fair bet that I'll be looking for a cup of coffee.  Before I get into the coffee I want to digress into a story that contributes a piece of the puzzle...

I recently retired after working for years for an industrial contractor.  We did refractory work in power plants, chemical plants, concrete plants, and paper mills.  Long days, good money, everything weighs a ton.  We kept our tools in a semi trailer which was hauled from one plant to the next.  Everything we need is right there in the same place every time.  On one particular job at Polk Power I was assigned to be the tool room guy.  Let me tell you, this is a cush gig.  While the guys are lugging chromium bricks back and forth I had to stay with the trailer so nobody walked off with our stuff.  I kept the place neat, kept track of where tools are, cleaned them up and kept the coffee pots full.  If  tool was needed, I'd snatch it up and take it up the elevator.  It was brutally cold on the night shift and the wind was howling on the top of the tower the guys were working on.  The coffee was greatly appreciated.

After a couple of nights we had used up most of the cups.  Being somewhat new on the job I asked the superintendent in the morning where I could get more cups.  He explained the cups were not his damn problem and if the men wanted damn coffee they have to get their own damn cups because this is a damn construction company not a damn coffee shop.  Billy was a colorful character.

I got this.

I hit the supermarket, picked up some coffee, filters, cups, spoons and threw some Cup-O-Noodle soup and twinkies in the basket for good measure.  We had our coffee.  The guys paid for the soup and twinkies.  I took the money, picked up more soup and snacks to keep the little store going.  After a month on the job we left behind more coffee and cups than we started with and I had an extra 40 bucks in my pocket for all the trouble.

Back to the farm...

I'll be wanting that cup of coffee in the morning when I come in to help on the farm.  I have a spare machine in the garage that has been to many job sites.  Put out some coffee, creamer, sugar, ONE spoon stored in a clean cup.  Anyone who wants coffee can toss a quarter in the can.  Doing the math, 25¢ for a cup of coffee, 10 cups of coffee each day, 360 days a year, we've got $900.  Add in some doughnuts and twinkies, it starts to add up.  Paying for the coffee is no problem.  We've got that kitchen over there, seems to me we could make our own snacks.  Instead of a twinkie costing 45¢ leaving a net of 5¢ in the can we can make cinnamon rolls for 10¢ each, save ourselves some money and still leave more in the can.  

We've got a bunch of people working out on the farm, they'll need to take a break and have lunch.  It would be pretty easy to chip in, send someone to the store for some sandwiches.  We've got that kitchen over there, seems to me we could make our own sandwiches.  Whip up a pot of spaghetti or some burgers on the grill.  Chip in, we can put together a pretty good spread for a couple bucks each.  We'll probably want someone in the house to keep it tidy, answer the phones, help with the paperwork, and make coffee.  It doesn't take much to put together a pot of spaghetti and warm up some sauce.  A couple of bucks for lunch is a whole lot cheaper than sending someone for burgers and fries, and we put a little more in the can.

We've got people coming in all week to help out.  Instead of buying a couple of pounds of spaghetti, we'd do well to get a 25 pound case.  It's cheaper, we'll go through it.  Same with the coffee.  Instead of a small can of coffee, send someone to Sam's Club to pick up some of the Giant cans, and the spaghetti, and the sugar to go with the coffee.  Get that 50 pound sack and a container to store it.  I go through a lot of coffee at home.  I'd love to chip in for a Giant can of coffee and an extra sack of sugar for my own use.  It's not like sugar will go bad.  I've got storage containers.  As long as we are making the trip, see who else wants a Giant can of coffee.  Fill the truck.  We can save ourselves some money.  

This is the birth of the Buyers Group.  That giant sack of sugar is so much cheaper than a 5 pound package at the local supermarket that we could send someone to go get it, buy bags to put it in and break that giant sack into smaller packages.  We could do this, save people some money and still make a little bit of profit for the can.  Instead of just coffee, sugar, and spaghetti, we could do this with all sorts of items.  200 people...make that 200 families, consume a massive volume of groceries and supplies.  We got together to start a farm so we can put our vegetable purchases to work for us.  All we are doing is applying that same line of reasoning to a wider selection of items which we are already buying.  

Seems to me we could put that kitchen to work for a whole lot more items than a spaghetti lunch.  We've got room to serve dinner.  Chip in, bring the whole family.  Friday is meatloaf and mashed potato night.  It's a chance to meet some of the hundreds of parents and kids.  Teach the kids to bake pies for dessert and fresh bread.  There is limited room so reserve a spot.  As long as we know how much to make, we are not wasting food.  People know when they are coming out to the farm, let us know if you want a couple loaves of fresh baked bread.  When the truck comes in from a Sam's Club run, a bunch of people will stop in to pick up their goods.  We could move some bread.

We've got an army of peopley buying their coffee, bring those coffee grounds back.  We'll add it to the compost.  And your kitchen scraps, bring those in.  And your yard debris, leaves and grass.  Makes no sense to buy soil amendents for a farm when we can make compost for free.  Bring in anything we can use that you are not using.  A farm can put all sorts of stuff to work.  Bring in cans, scrap lumber, whatever you've got.  This line of thinking became the scavenging project and Cans for College.

Time for another story...

My first job was washing dishes in an ice cream joint.  $3.40 an hour.  My paycheck for the week was something like a hundred bucks.  The rent was $30/week andd included utilities.  I had plenty left to buy beer.  It was a good summer.  Washing dishes was pretty easy, I mastered it in no time and the boss asked me if I would help with some prep work.  Nothing difficult, slice tomatoes for the hamburgers, shred some lettuce, dice some onions.  Nothing to it, the menu was pretty simple.  I even helped the cook when he got busy, then took over when he needed a night off.  Now that I've got some cooking experience I looked around, found a job working in the kitchen of a bigger restuarant making SIX AN HOUR!  This was pretty good money.

In this kitchen they did things a little different.  They made most of their food from scratch rather than unloading the company truck loaded with cases of hamburger patties, and battered frozen fish.  This place bought beef, roasted it themselves, then sliced it for their sandwiches.  They bought turkey breasts, baked them right there and sliced it thin for sandwiches, thicker for turkey dinner.  The rest of the carcass was picked clean, chopped up, blended with mayonaisse and celery to make turkey salad sandwiches.  Sometimes it would go into soup.  They did their cheese the same way.

Steaks came in cases of 20, 30, 40 pound chunks.  The chef carved them into steaks.  A top round become london broil for the early bird and top sirloin for dinner.  He's take a strip loin, remove much of the fat, and slice New York Strip steaks.  A whole rib was sliced into ribeye steaks.  He took me under his wing, showed me what he was doing, and set me loose on the London Broil part.  It was not long before I was also carving the rest of the round into top sirloin steaks.  If I cut one too big, I cut a piece off to make it the right size.  That piece went to make beef kabobs.  If the London Broil was not selling as much, he put it on the meat slicer, shaving it real thin, and ran a steak sandwich as a lunch special.  With what I learned from that one job I could go anywhere and always find work.

We've got an army of customers and workers already built in.  Any product we can grow, buy, bake, make, or otherwise process and add value to is going to sell, and in a pretty good volume.  Every product is another opportunity to learn another skill.  We are putting together a company which will develop a wide range of skills from simple production to customer service to leadership.  In a few years, those young people will be striking out on their own.  They'll have these skills in their back pocket to give them a head start in the world.  They'll have experience, ability, and self-confidence to move past entry level positions.  Having participated in diverse areas of operation they'll be more capable of creatively solving problems and organizing people within their workplace and outside in their communities.  Our product is not a tray of steaks or baked goods.  Our best product is our people. 

Story Time.

I was working as a dining room manager in a restuarant.  It had been open 2 years and had become qute the happening place.  The owner was making some pretty good money.  Place was packed all the time.  The landlord saw this.  When the lease came up for renewal the guy bumped the rent up by $5000/month.

As ideas keep on rolling, it became clear from my perspective that the potential for this little co-op can be much more than a few people saving 25¢ on a sack of sugar.  When it does, if there is a big investor or landlord, he's going to reach into our pockets and help himself.  We can't have someone with a controlling interest.  We've got to own the land or we're going to get stung, and the land has to be separate from the co-op business.  We need a land company.  Same sort of idea as the Farmland Fund, but with lots of people investing with loans.  You like the idea, you have a big sack of cash?  Loan it to us.  Loan as much as you like.  Anyone can get involved in this.  It might not be the highest interest, but it's a whole lpt better than you would get from a bank.  This is an opportunity for anyone, anywhere.  We'll offer up our plan publicly, share our progress.  We'll be able to raise some from the people involved, maybe all of it.  The co-op makes money, it pays the mortage.  The profits are shared by the people doing the work, and nobody has a higher percentage than someone else.  The big investment is for the land.  We need the money to finance a property not to finance the business.  Those investors deserve a return on their investment but they can have no claim on the success of the company.  We earned it, not you.

I had to look at how this works from the vantage point of the guy doing the work and make it fair for one guy to work half as much as someone else.  The Sharecropper idea arose from the need for balance of control combined with reward for greater effort.  Put in twice the work, you make twice as much.  It's a business, not a job.  Everyone gets the same rate for the time put in, but the time can vary.  I don't care if you are handling steaks and the other guy is handling garbage.  You dont get more unless you bring the business. 

I looked at different ways we can get started.  Start with a pizza shop we need ingredients.  We can expand from pizza to includes subs and sandwiches.  Offer lasagna and entrees as well as pizza.  We've got the ingredients already, we can get into the buyers group.  How does a store fit in with a pizza shop?  Open a place next door for the store, bake goods and make goods in the kitchen , move them though the store.  Paying for twice the space we'd be better off to get a place of our own.  If we get a place of our own, some land along with it gets vegetables grown and with a kitchen/store/deli we've got more even demand for the farm produce.  I started with a deli, then a diner, every idea led to a property of our own and land along with it.  No matter what direction I took I ended with the same conclusions: Property so can grow vegetables, a kitchen to process those vegetables along with a long list of other items, and a store to sell them from.

I took a step back to look at the idea of a worker-customer owned cooperative business in terms of what can be done, what should be done, how to do it, and how do we get from where we are to where we need to be.  We need the big money for the property, but not connected to the business: the land company.  We need the people, but as independent contractors rather than employees: sharecroppers.  We need a business to handle our affairs: the co-op.

The Co-op company is a framework, kind like the steel beams of a building.  People can be connected to that framework in whatever manner works best for them.  Big investment, small investment, no investment.  Lots of time, a little time, no time.  Anyone can get involved with any combination of money and time.  Projects and ideas people come up with can be attached to that framework.  A project can generate sales and income for the co-op.  It can offer advantage to the group with our without income.  It can serve the needs of only the person with the idea. The evolution of the idea is to establish a framework with 3 primary components: a farm, a kitchen, and a store. 

We are already spending the money.  This plan takes back what is ours and does some good with it.  We create jobs and opportunity, keep that money in our local economy, and create a more resilient community.  We improve the lives of people involved, helping them make money and save money, and allow them to come and go as they please.  We set up our young people for success.  We use our trash to send people to college.  We work collectively but maintain our independence and have measures in place to reward performance.  We make it easier for people to start their own business.

We've got nothing to lose and everything to gain.

 

 

Cooperative Enterprise, Plan Outline