This is the first article of the Be More Human series, which explores ideas and issues that define the new economy. This piece was written by Pedro Jardim and edited by Ben Riddle. The article was originally published at Coliga:
“When I was 17, I moved from my birthplace in São Paulo, Brazil to Germany. Since then, I’ve developed a real affinity for the the German culture while living in Berlin. This is a place that history has challenged to reinvent itself and its identity over and over again. As my friend Alexa Clay says: Berlin is a “phoenix city, built on re-invention.” It remains vibrant with a character that challenges the dominant mass consumerist ideology setting it apart from many other global capitals. Much of Berlin is marked by an informal, grassroots culture of civic activism, which liberates the city from the control of formal hierarchies and money-driven capitalism. With its many diverse communities, from the club scene, solidarity networks, coworking spaces, artist collectives and neighbourhood associations Berlin is a perpetual prototype for what a more collaborative, sustainable city could look like.
This article explores the potential of Berlin as a platform for creating new narratives, approaches and models for a thriving society. Rather than following the traditional narrative that accelerates the process of speculation, privatisation and centralisation of wealth, Berlin is positioned to think long-term and keep the barrier of market entry accessible so that regenerative business culture and real-estate development can emerge.
Hey London, Berlin is Calling
Just days after Britain voted in favour of leaving the European Union, a curious white truck ambled through the streets of Westminster. On each side, written in bold yellow font, there was a message: “Dear start-ups, Keep calm and move to Berlin.” Over the last several years, the city has received a large influx of capital investments from VCs to fund emergent tech startups. In 2014 alone, Berlin startups raised over €2 billion in venture capital, and according to Ernst and Young, this grew to €2.4 billion in 2015. Over this short period of time, Berlin has received almost double the number of investments as London.
According to the Berlin Senate, one out of eight new jobs in Berlin is generated in the digital economy. This trend is having a major impact on the stature of our city, and it looks like Berlin is on the road towards becoming a global economic powerhouse. The question that I keep thinking about in this process is this: what does Berlin need to do to preserve its soul as it grows in popularity and influence?
There is a lot of hype around this city becoming a refuge for the startup scene and enthusiasm around copying some iteration of the Silicon Valley model. But Berlin shouldn’t be in a rush to become another tech incubator, and sell out on its collectivist spirit to align with this idealised archetype. Rather than become a mecca for tech Wunderkind, Berlin needs to focus on creating a strong identity around collaborative, human-centered solutions.
The most common reason people want to to move to Berlin is the considerable low cost of living, a young, creative culture and Europe’s best nightlife, making it an ideal place for young founders to set up shop. Indeed, the fact that much more capital is coming to Berlin only adds to the list of reasons for companies to move here. With this said, this new influx of capital is putting the city in risk of losing the components that made it attractive in the first place. The key questions that will define this moment are: how is new capital being channeled into the city, what are the expectations and intentions of those making investments, and how will they enable the city to grow sustainably over the long horizon?
Access over ownership
The Silicon Valley investment model is contributing to a more centralised world where, through speculation and extraction, our economy is losing its ability to serve society and the people who create and exchange value in local communities. Current trends and challenges such as Internet neutrality and the rise of network-based technologies, the growth of the sharing economy and the emergence of monopolies like Amazon, Google and Facebook are a demonstration that alternatives to this model are needed.
As Lisa Gansky entrepreneur and bestselling author from the book The Mesh: Why the Future of Business is Sharing Access argues that a new market paradigm is emerging where “access to goods, services and talent triumphs over ownership.” If this is true, then we should not only be looking into how business are changing our understanding of the world, but also how we might reframe our understanding of the role of business in society and how the ownership structures of businesses are defined.
In order to create a society that reframes our conventional understanding of economic value, which is defined in purely monetary terms, we have to make it easier for companies to innovate and experiment with new models of organizing and structuring their ownership.
The power of purpose
In recent years, a group of social entrepreneurs and changemakers from around the world have come together to form Purpose, a movement to create an economy for the people. Through this effort, we have identified that directly or indirectly most of the negative externalities created in the world emerge from moments where capital dictates the rhythm and direction of the decisions. The idea that profit comes before purpose is ingrained into our global economic paradigm, and our legal frameworks and incentive systems favourite this Modus Operandi.
With this said, there are a number of emerging alternatives to this paradigm. For example, in the movement started by Nathan Schneider and Trebor Scholz, Platform Coop fosters conversations about new ways to navigate ownership and governance in the internet age. To bring the ideas generated in these conversations to life, we also need frameworks that allow companies to put purpose above profit maximisation.
In Germany, successful experiments in the case of Zeiss, Bosch and Rolex demonstrate that different types of ownership structures can create sustainable, successful and efficient companies that do not extract unlimited private value from the economy. Learning from these examples, we have identified two different points that can be changed in traditional corporate ownership structures to create a different interpretation of the purpose of companies.
We have decided to implement this ownership structure in Coliga, since we strongly believe that our customers and employees should be able to help build a company that can stay true to its purpose and mission over the long term. This new ownership structure is called “Purpose Ownership” (self-ownership), which hacks traditional business ownership structures to give companies the benefits of traditional cooperatives without the being bound to a pre-determined, inflexible governance structure.
By separating capital from the power to make decisions on behalf of the company, Purpose Ownership makes it easier for companies to live out their values without compromise. This change to ownership structures prevents capital from being primarily used to optimise its own multiplication, and uses the Purpose Foundation to hold a veto right that negates any changes to the following 2 substantial points in a company’s constitution:
1. Ownership = Entrepreneurship
Voting rights always belong to those who lead the company and are responsible for it. If a founder leaves the company, they must transfer their control rights (ownership) to a successor, who is committed to the purpose and the idea of the company.
2 Profit = Means, not an end in itself
Voting rights (company ownership) are not connected to dividend rights. Investors receive fair dividend rights (or fair interest rates) but no voting rights. Purpose companies understand profits as seeds for the future development of the company.
New models for community development
Another example of an organisation that has been redefining the concept of ownership is The Edith Maryon Stiftung -a foundation that leases properties to projects for a small percentage of the price of the property on a long-term building lease basis. Through their efforts, properties are taken off the speculative market and made more accessible to causes that would otherwise be unable to access land. The Foundation has purchased more than 100 properties in Europe since 1990. Owning a larger number of properties allows it to leverage their financial resources to benefit community-based projects like Agora which generally do not make high profitability as a first priority.
In this community-land trust model, we find an adaptable framework that has great potential for eco-villages, maker labs, coop-apartments, co-working spaces, many of which are searching for alternative ways to finance their projects. This allows them to focus on creating services, solutions and content that is not motivated by profit alone Each of these projects contribute to the development of a society where value is not only defined by financial capital, but extended to encompass the social, cultural and reputational value that exists in communities.
We in Coliga are committed and excited to contribute to the creation of new frameworks, tools and infrastructures that set the stage for a community-based economic paradigm, which we believe the world will collaboratively shift towards in the years to come. We invite you to join us.”
This article was informed by conversations with Trebor Scholz, Nathan Schneider, Jorge Vega Matos, Benjamin, James Riddle, Alexa Clay, Armin Steuernagel, Marcelo Da Veiga, Antonin Léonard, Tomás de Lara, Germano Dushá, Michel Bauwens, David Bollier, Andrea Bauer, Genevieve Parkes, Derek Razo, Chelsea Matilda Robinson, Anton Chernikov, Jonathan Imme, Rupert Hoffschmidt, Rus Vorobïeff, Francesca Pick, Bianca Pick, Chelsea Rustrum, Gaby Hundertmark, Tainá Moreno, Marcela Donato, Caique Tizzi, Christoph Langscheid, Alice Audrey Grindhammer, Simon Stegemann, Claudia Brückner, Andreas Gebhard, Andreas Giesen, Anhmaka Plasticien, Dmitry Paranyushkin, Alexander Kühl, Mikael Brain, Tia Kansara, Joao Meirelles, Guga Korte, John Kellden, Thomas Dönnebrink, Mike Catman, Mike Zuckerman, Paula Schwarz, Carsten Foertsch, Ricardo Anderáos, Maté Gwozdz, Danny Holtschke, Melda Akbas and Philipp Skribanowitz, and Asmaa Guedira.