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From prosumers to pro-owners: on shared value and governance

The importance of the roles of producers and consumers is indisputable in sharing economy ventures. It is time that these people get a higher share of the value created and, above all, participate in the governance of the companies set up around them. It is not just a fairness issue, but it will help building more innovative and resilient networked organizations.

Networked society tends to create sharing economy models focused on collaborative funding, production and consumption. In fact, the latter two are frequently melted together into exchange networks, prompting the raise of prosumer models, where individuals can participate as producers or consumers interchangeably.

On the other side, shared ownership schemes have remained stand-alone. Crowdfunding initiatives have been very successful in lowering barriers of access to capital, but the role of crowdfunders remains most of the times purely financial: people are not taking an active role in the actual production of the good or service funded.

In the meantime, production costs have been substantially lowered. It has never been easier to set up new ventures. Capital and human effort needed to build Minimum Viable Products are marginal, tending to zero as Jeremy Rifkin argues in his work. Instead, value creation relies on the contribution of the users to the service. The sale of Whatsapp is very illustrative in this regard. A company built with the effort of 32 engineers was sold to facebook for $22bn. There are no arguments to defend that each engineer created in a matter of months a value of $700 million each. Most of that value created is explained by the collaboration of its 450 million people that were using the service.

There are no arguments to defend that each engineer created in a matter of months a value of $700 million each. Most of that value created is explained by the collaboration of its 450 million people that were using the service

As Lisa Gansky has recently pointed out, it is therefore fair for some companies to share the value created with their users. It can be done in multiple ways, not necessarily by giving away ownership. In the UK, Community of Interest Companies (somehow equivalent to US B-Corps) are forced to revert the value created to the society via the use of profits and assets for the public good. Still this a midway solution. Most of the value created by emerging companies resides in their capital, not in their profits or assets. It is locked in: their value is only untapped if there is a sell-off event, and in that case the surplus usually go to the shareholders, not to the users.

Beyond enlightened despotism

But besides this issue, there is another one that CICs do not fix either. In networked business models, not only the value should be shared among participants, but the governance as well. If not, social enterprises could be perceived as a kind of enlightened despotism initiatives where decisions are taken for the common good without letting beneficiaries participate in the decision process.

Networks cannot be governed hierarchically. It is simply unnatural

Networked business models should go much further in terms of governance. Networks cannot be governed hierarchically. It is simply unnatural. Networks require a much more horizontal or democratic governance systems. A heterarchy.

The best way to guarantee these two objectives -value sharing and governance- is by linking company ownership to the production of a given service. In fact those models have been there for centuries. Labor and producers co-operatives have enabled those actors to build entities fully aligned with their interests when processing and trading the result of their work or production.

Who owns your personal data?

This parallelism is particularly applicable to the personal data economy. Data is a factor of production, the same way that earth, labour or capital are. It emanates from people and therefore should be owned by them. Thus it is fair that the major part of value created from data, reverts to their owners. Not only that, but being data part of our digital self, its producers/owners should take part on the decisions made around its manipulation and trade to ensure that they are taken in their own interest only. Ownership is the best mean to secure data owners interests.

Data is a factor of production, the same way that earth, labour or capital are

This is what led us to set TheGoodData as a data co-op. We wanted a company that would help us -producers and owners of our personal data- to harvest, secure, process and eventually trade our data on our behalf. A co-op where those producers can become the owners of a company that aim to represent them in front of big corporations that very often use our data without our permission or under unfair terms.

Being a co-op, all value created remains in hands of the producers, not just via asset allocation or profit sharing, but by ownership of any untapped surplus. Being owners, gives them governance of the company as well, ensuring that decisions about data are not made in their detriment. We could say that instead of prosumers these co-ops will enable the raise of a new set of data pro-owners.

Towards new cooperative models

But I am convinced that this is only a first step. After data co-ops, other types of companies should follow. It has been probably easier dealing with data because:

(1) data production and harvesting costs are marginal using open source technologies,

(2) data is a valuable asset that can be easily traded through standardised markets built around the programmatic advertising industry

(3) data value and liquidity can be used to crowdfund the co-op itself (it is not only an unused asset, but a source of funding).

But still this may not be the perfect solution. In any venture there are three interests to combine: those of the users, the entrepreneurs and the financial investors. The three are needed and have to be rewarded accordingly. Some cooperative forms like the Industrial and Provident Societies allow the existence of two types of shares to differentiate between users/members and investors. However, the complexity of registering and managing a company like that is much higher than setting-up a normal Limited Company.

The complexity of registering and managing a company like that is much higher than setting-up a normal Limited Company. At this point it is in the hands of regulators to facilitate the arisal of these kind of entities

At this point it is in the hands of regulators to facilitate the arisal of these kind of entities. The country that does it will have a competitive advantage and attract a new set of companies, the most natural evolution of many sharing economy ventures.

Guest post written by Marcos Menendez

Entrepreneur and personal data activist. Founder of TheGoodData.