Ownership Matters|Issue 8
Detroit’s Coop Fund; Equal Exchange’s Wild Ride; Felipe Witchger on Investing
- Felipe Witchger: My Investing Journey
- Fund Profile: Detroit Community Wealth Fund with Margo Dalal
- Break Room: Rob Everts on Equal Exchange’s Wild Ride
- The EO Podcast
- Ownership Model Canvas
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share this segment by right‑clicking icon to copy linkMy Investing Journey (Part One)
An earlier version of this two-part article appeared in June as a post on Ownership Matters publisher Felipe Witchger’s personal blog.
I’m an accidental investor. I didn’t start out with an interest in investments or finance. But I did start out with a belief that things could be better. Now that I’ve spent the past 13 years in and around business — I’ve realized why I need to become a much more thoughtful and involved investor.
Primarily, I’m a dad trying to be faithful to the work of providing and building a better future for my kids. For me, to help my kids, and to help them have a chance at a better future for their kids, I’ve realized more of us need to think differently about where we put our money. Let me take you back to where it started for me when I was 22.
I was working on my senior thesis and trying to make sense of what I had learned in college. My advisor had opened up various schools of thought in “political economy” to deepen my analysis and encouraged me to use them.
My short version was that most of our environmental, human rights, and social justice challenges could largely be boiled down to problems with multi-national corporations. Their power was completely outsized compared to almost any other actor — governments included.
Perhaps I was overly influenced by the film The Corporation. In my distillation at the time, workers rights and basic human dignity, disease spread, droughts and floods leading to famine and hunger, refugee camps, problems with migration, destruction of the rainforest, pollution of water sources — could be directly attributed to a large publicly traded corporations or whole industries that used their power to slow responses to the human suffering in each of these situations. Perhaps I was also enamored with a hope that there were alternatives. This hope emerged from watching The Take, about the unemployed Argentinian auto-parts workers who return to their idle factory, refuse to leave, and restart the business themselves. And reading about Mondragon — the 100,000+ worker cooperative network originating from the Basque region in Spain.
Four months later, however, I found myself working for an elite energy research and consulting firm in Boston. It was the kind of place where the top executives got the corner offices with the best views of the Charles River and the young associates got the cubicles next to the noisy printers and farthest from any window.
To give you a sense of this world, I remember a couple weeks into the job when a colleague caught me looking at a set of powerpoint slides that had just come off the printer. “You know,” my colleague told me, “Dan’s getting paid $1 million to present those slides at the ExxonMobil Board meeting next week.”
Another awakening I had while in this new corporate environment: Our 200-person privately-held “insight” business had been purchased by a larger 2,000 person publicly-traded “data” business that wanted to become the leading purveyor of analysis to inform energy and related business decision-making. That included a 10% reduction in the workforce, which included many people whom I thought were more insightful (but not cheaper to employ) than me.
My investing turmoil began that year. It started when I realized I was complicit in the firing of those colleagues because I was a shareholder.
Shareholders — in aggregate — want one thing: a singular focus on returns, both now and in the future. The job of the Board of Directors is to oversee the executive and allocate capital to achieve investor returns. I’ve come to refer to this singular pursuit of “returns” or “profit” or “shareholder value” as Capital Supremacy.
share this segment by right‑clicking icon to copy linkFund Profile: Detroit Community Wealth Fund
Thanks for letting us hear about your work in Detroit. Are you a native Detroiter, by the way?
No, I grew up in Northern Virginia. I've been here for a little over seven years, seven and a half years.
And what led you to relocate to Detroit?
I was on a bike tour in the summer of 2013, looking at co-ops. That was the year that Detroit filed for bankruptcy, and we biked through Detroit and I remember it was a very kind of surreal experience. The downtown was quiet. It really inspired me to learn about the history of Detroit, and I was so infatuated with the city I moved here, three months later.
So there’s the core of the city — which has experienced a kind of comeback — and then there’s the outer ring of the donut, right?
Yeah, and while the downtown is really expensive to live in, there’s also lots of wonderful free public spaces.
But yes, there are also the driving forces of neoliberalism, projects that repeatedly fall short of their intentions, even from back in the 1980s. The M-1 rail line, for example, now called the QLine. It was meant to be a connector from the downtown to the suburbs. But it’s only three miles long, just a little people-mover trolley that runs slower than any other form of transportation. So it’s severely underused, just a total failure.
Then there’s the Little Caesars arena, where the Pistons play now. It was supposed to create new neighborhood districts but it’s just empty surface parking lots. These projects that claim to be big game changers for Detroit — they usually fall short.
On the other hand, there are some really creative projects happening. And this is where worker co-ops and more worker ownership comes in.
For a long time, the city of Detroit did not have a centralized department looking at good neighborhood development. So in that absence, we had the rise of a lot of strong neighborhood groups, including community development corporations (CDCs), each focusing on a specific corridor.
These are the folks that we at the DCWF are working with. The idea is to incorporate co-op business development with place-based needs, especially in these areas which used to be really lively for Black-owned businesses. Places like the Avenue of Fashion, back before malls existed.
So what we’re saying is: let’s make sure that the older businesses which have somehow made it through to this point can keep going while we introduce co-op ownership to the new businesses as well.
To start with, give us a sense for the co-op scene in Detroit. Is it still fairly small?
Definitely small. I think C2BE (the Center for Community-Based Enterprise) is our best-known co-op group. They also do ESOP work and I think sometimes work outside of Michigan. And there are a couple of smaller groups, including Grace In Action, a community organization working on a model similar to the Center for Family Life in Brooklyn. In terms of co-op activists, you could probably get us all around one big table — 10 people, maybe 15.
But until DCWF showed up, there wasn’t a good option for financing — so that’s been a game changer.
The Break Room: Informal Conversations about Work
share this segment by right‑clicking icon to copy linkRob Everts on Equal Exchange’s Wild Ride
Rob Everts served for 20 years as Co-President and CEO of Equal Exchange, Inc. (E.E.), helping grow the worker cooperative from $5m to $70m in revenues, and from a team of 20 to 130. Prior to E.E., he worked as a political and union organizer with the United Farm Workers and UNITE HERE, the Hotel & Restaurant Workers Union. He is currently an advisor to the Main Street Phoenix Project.
The career of Equal Exchange since the founding in 1986 has to be one of the more remarkable stories about the roots of the social economy emerging today.
For those readers who don’t know about how Jonathan Rosenthal, Michael Rozyne, and Rink Dickinson built such a transformative organization, you can find a recounting on the company site. So we’ll be coming back to various moments in that history, especially where you think there are some lessons learned.
Tell us little about how Equal Exchange looked to you when you first arrived there.
Sure, I did a kind of cameo visit with them for six months in 1992, and then came back full-time in early 1997. These three guys came out of the New England co-op world, the food warehouse scene, when they launched — and note this — on May Day, 1986. [Laughs.] They felt that workers in these food businesses didn’t have a voice so they hallucinated this radical model that probably none of them thought would actually succeed. But they just decided to shoot for the moon, with what was then the most radical capital model ever.
There’s another important background to this time in U.S. history — the mid-1980s and the Reagan Administration’s secret Contra war in Central America. I read that the E.E. founders wanted to demonstrate solidarity with the fledgling people’s movement in Nicaragua. So they picked Nicaraguan coffee — which they called Café Nica — as their first Equal Exchange product.
Absolutely. We trace our May 1, 1986 founding to the day U.S. Customs finalized released our first shipment of coffee from Nicaragua, using a loophole in Reagan’s embargo.
The product was embargoed unless it was roasted in another country — in this case, Holland, thanks to a Dutch fair-trade partner — so that’s how Equal Exchange expected to get hold of it. With lots of legal battles. By 1991, they reached an ambitious milestone of $1 million in sales, bolstered by a growing number of outside investors, including the Adrian Dominican Sisters, and enlightened customers, including food cooperatives. In 1996, Lutheran World Relief became a partner.
Right. I was very aware of this work because of my work with a national grassroots political organization called Neighbor to Neighbor, working to change U.S. policy in Central America, to stop the aid to the Contra militias, and shut off the U.S. gravy train to the butchers in El Salvador. A passionate Central American movement was going on at that time. I was working on the policy side while E.E. was trying to launch a business which benefited from this purposeful start, challenging the embargo.
I want to come back to the impact having this kind of mission had on the company. But in addition to the global justice wave, E.E. caught some waves of changing consumer taste.
Correct. Starbucks had launched back in 1971 and that led to a renaissance of specialty coffee — people really would pay up a bit for better quality. This was ironically very helpful for us, being in a fast-growing niche. It means you have more room for mistakes, given the healthy margins.
Would it be too much to say that E.E. really created the Fair Trade movement in this country?
I think that for commodity foods, that’s right. I mean, we were years ahead of everybody else. And at that time, fair trade was not yet an idea whose time had come. Even the notion of free trade had not fully entered the American dialogue in the late 1980s, early 1990s.
share this segment by right‑clicking icon to copy linkOne of the Best: The EO Podcast
If you don’t already follow the EO Podcast, nicely produced by Bret Keisling, you should check out their rich archive of episodes (almost 150) on both ESOPs and employee ownership more broadly. The podcasts are searchable by topic so it’s easy to see everything on valuations or co-ops or succession planning, etc.
They also create shorter mini-cast episodes (about 5 minutes) for quick takes on a variety of topics. Their most recent was an interview with veteran co-op developer Rodney North describing the launch of two new co-ops (White Electric Coffee Co-op and The Driver’s Co-op). Both have great stories.
This episode also offered a few hints about Rodney’s new podcast, Why Worker Co-ops?, slated to launch in a few weeks as part of the EO Podcast Network.
share this segment by right‑clicking icon to copy linkGetting It Right from the Get-Go: the Ownership Model Canvas
Starting a business oftens feels like a chaotic process just barely under control but we can’t overlook the essential decision around ownership design. This is the moment when we define the business purpose of the enterprise — including whether it will operate in a generative or extractive way.
The conventional path — the one that nice company Amazon, say, is happily treading at the moment — is captured in the famous Business Model Canvas, used by millions of startups. It creates successful businesses with no mention of ownership questions whatsoever. Thus we need a new tool.
Enter the Ownership Model Canvas (OMC), created by a team that includes the Start.coop folks and numerous other co-op-savvy individuals. In a Medium post about the OMC, co-authors Danny Spitzberg and Greg Brodsky point out: “We created the OMC for co-ops and especially for would-be co-ops to move faster with lower chances of failure.” The tool offers startup folks a way to save time on legal expenses, get early clarity on key operating questions, and start testing out ideas with potential member-owners.
The OMC team is offering a free consultation to the first dozen people who send their draft ownership model to firstname.lastname@example.org. They also suggest watching Module 5 of the free Lean Co-op course. Coming next: an online space for sharing and discussing models.
Editor’s note: The version of our interview with CFNE’s Micha Josephy published with the previous issue was an unreviewed draft containing several errors and published mistakenly. The current article is the corrected final version. We regret the error.
Coming in Issue 9, August 24
- A Conversation with NPQ's Steve Dubb
- Review: On Common Ground — on Community Land Trusts
- Daniel London Picks the Best Doc Films on Co-ops
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- Elias Crim, Editor
- Zoe Crim, Editorial Assistant
- Leo Sammallahti, Europe Correspondent
- Paul Bowman, Design Mgr. / Content Mgr.
- Felipe Witchger, Publisher
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