If socialist workplaces actually had all those benefits, they would already be taking over much of the economy. But we don't see very many co-ops in the wild. My personal experience is that unions and co-ops tend to shift compensation to those with seniority and those involved with corporate politics instead of the skilled, productive, and competent ones. This then causes more time and energy to be spent on corporate politics and drives out the most productive employees. 

You're very much underestimating the effects of the top-performers at a business. The market has run the experiment of comparing socialist firms to capitalist ones for more than a century and every result has shown that socialist firms just aren't competitive. Yes, there are benefits to the less productive employees. But the cost of driving out the productives has been shown to be higher in just about every sector. Hence why there aren't very many socialist firms.

You indicated that there was a problem with me doing a spot check on something not directly related to co-ops, so let me instead do a spot check on something directly related to co-ops:

Let's look at what the literature indicates as the benefits of socialist firms:

[...] 3. Workers put in more effort^[11] [LW(p) · GW(p)]

I believe this is the cited study?

I'm confused about this study because the abstract seems to say that conventionally owned firms are better than co-ops:

In our experiments, subjects in conventionally-owned firms exhibited higher productivity, perceived greater fairness in the pay they received and the method used to pay them, reported higher levels of involvement in their tasks, had more positive evaluations of their supervisors, and showed a greater propensity to interact with and provide assistance to their co-workers than did those in employee-owned firms.

However, this seems to contradict table 3, where co-ops did better. So maybe they swapped around the labels in the abstract or something.

I'm also confused about what role the owner/supervisor was supposed to play in the work. It looks like the experimental simulation-company had workers do fairly independent tasks (spellchecking), and that there were not significant coordination or risk-management tasks for the owners to solve.

This is a well thought-out post with many citations and you've addressed a lot of valid points.

There are, however, a few fatal issues that really undermine the long-term viability of this kind of company.

To begin with, the fact that there are so few successful socialist firms is a really big deal that you can't simply hand-wave away. Yes, there might be a handful (dozen?) of co-op firms in the OECD that we can say are moderately 'successful' - but they are certainly the exception rather than the rule. If co-ops have all the advantages you clearly listed, then they will be the dominant form of enterprise.  But they're not. In no particular order:

Co-ops are quite incompatible with firm mobility. Somebody who has just joined the firm does not have the same ability to add-value, nor should they be afforded the same 'voting' right as a more experienced veteran. Very quickly, using any kind of practical measure, you can see that firm mobility and co-op equity quickly breaks down.

Funding becomes the next obvious point. At some point, all companies must raise funds. They have two choices: (1) Debt or (2) Equity. Many firms are capital intensive and simply will never be able to raise the required funds from their own workers to achieve growth. Therefore, they can either raise debt - which does not dilute the voting rights - or raise equity from external parties - which does. But it's important to note that even under equity, this doesn't really impact the day-to-day function of a business. Sure, shareholders will elect the board of directors and that can influence the broad direction of a company - but rarely does this deviate from "achieve as much profit as possible". And if it does, then the company is unlikely to survive anyway.

But the fact that workers don't sink their entire savings into their company's shares (most people are employed by private companies) also demonstrate that most people don't really care about ownership of the company they work for. And why would they? They want to maximise their retirement savings. Being diversified makes sense. You can't be diversified if you've sunk all your money into the company you work for. And what happens if you want to move company?

To a certain extent, all firms are socialist - either implicitly of explicitly. Any publicly listed company can, and does have stock ownership by employees. Many privately listed companies are structured as partnerships (eg: any professional services firms). However, any business in the 21st century will be capital intensive in a manner which is simply beyond the ability. But regardless - the majority of decisions are made by groups, committees, panels of employees at similar ranks. CEO's rarely make decisions in a vaccuum - they make decisions with their c-level executives and boards of directors because they have a comparable level of competence and preparedeness.

The problem is when minimum-wage workers insist on having the same 'voting' right or decision-making capability as a senior person who is far more competent. If this was a superior way to run a firm, it would already be the norm. The fact that it's not is demonstrative that business decisions require competence and firms hire and promote to achieve this level of competence.

It's entirely possible that there is some sort of co-op model out there that is genuine superior to traditional firms. I would like to see it in action before going down the path of trying to implement government incentives to achieve something that we're not even sure is a good idea (and might actually destroy wealth of freedom of employees to move between jobs, or be hired into jobs they like).

It would be good of you as well to summarise the risks or genuine downsides of worker-owned co-ops. Mobility, personal wealth planning, firm decision-making, alignment of incentives to performance are very likely to be impacted.

Oh, come on, the afterword ruined an otherwise great article!

I would love to learn more about co-ops. As far as I know, Mondragon Corporation is probably the biggest one, but there is frustratingly little information to find about them online.

What I heard about co-ops (no idea how generally this applies) is that if they grow, they often change to something else. Like, you have a worker-owned company with 100 workers, and one day they have an opportunity to grow 10× in size. And suddenly the original 100 workers are like: "wait, we spent decades working for this moment to happen, and now the new guys should be our equals? no way!", and the company finds a way to change itself in such way that the new 900 workers are mere workers, but not co-owners. (Perhaps the Mondragon Corporation is exceptional precisely for not doing this. They encourage new people joining their system; they even lend them money to start new branches within the system.)

The difficult part about starting a co-op is in my opinion simply the fact that people who have the skills necessary to start a co-op, can usually use the same skills to start a company that is fully owned by them.

Calling co-ops "socialist" means introducing a culture war needlessly. I grew up in socialism, and we had lots of companies that were definitely not owned by their workers, workers did not put in much effort, and the only reason they didn't fail was the government endlessly bailing them out. On the other hand, there are co-ops in capitalist countries. So please do not use "socialist" and "co-op" as synonyms!

Given the recent discussion [EA · GW] surrounding the structuring and transparency of EA organizations, perhaps the community could consider turning their EA organizations into socialist firms.

Not sure if you are aware of the irony, but notice that you are proposing to convert a "non-socialist" firm into a "socialist" one, instead of creating a new "socialist" firm from scratch. Which shows that even you do not see a creation of a "socialist" firm as a realistic goal. Perhaps it is much easier for your tribe to take over an existing successful organization than create a new one, but shouldn't your opponents be making this point?

Try figuring out a way to start co-ops without taking over existing firms, and you may find much less resistance. (Yes, it is possible, the Mondragon Corporation did it.) You might find that very difficult, but then you will be addressing the real problem.

Notice that if you cannot solve the problem of starting new co-ops, then even if thanks to some revolution the co-ops would take over the world, it wouldn't work in long term, because sometimes the existing ones would deteriorate and there would be no new ones to replace them.

You make a number of causal claims that seem to be empirically based. It would be nice if your post could expand on some details of how the causal inference was performed. For instance here:

This is not only terrible for the workers but also for the economy, since businesses with engaged workers have 23% higher profit, while employees who are not engaged cost the world $7.8 trillion in lost productivity, equal to 11% of global GDP.

What data and model are these estimates of the causal effects of it based on?

Another thing that confuses me is why socialist firms need special support and don't naturally come to dominate the economy. You seem to attribute this to owners extracting value, but that seems short-sighted; presumably if you have an economy with a mixture of socialist and non-socialist firms, and the socialist firms are much more productive, they would grow quicker and become dominant over time.

Apologies if I misunderstood your argument.

1. You open your argument with saying, in essence, that people hate their jobs and are miserable at their jobs.
2. You then argue that socialist firms are better for employees.
3. The logical inference here would be that socialist firms make for happier employees.

Is this a reasonable summary?

However, in the "Are socialist firms good for employees?" section, you do not give much evidence that workers in socialist firms are significantly happier. Instead, the paragraph says things like:

Giving employees stock in a company seems to boost their performance.^[33] [LW(p) · GW(p)] Research has shown that employees getting more ownership of the company is associated with higher trust, perception of fairness, information sharing and cooperation.^[34] [LW(p) · GW(p)] There seems to be a small increase in companywide productivity^[33] [LW(p) · GW(p)], while employee retention is boosted.^[35] [LW(p) · GW(p)] Perhaps capitalist firms could slowly be eased into becoming socialist firms by first giving the employees more stakes in the company and then expanding their participation rights.

These things, while maybe valuable, does not give that much overall evidence for life satisfaction or happiness.

Overall I am not sold that your argument-as-stated is sound, even if every individual piece of evidence is true.

I was about to just downvote and move on, but there are enough comments and votes that it seemed worth figuring out why I object.

I think I don't object to the concept.  Go for it!  Make whatever form or organizational governance you like.  Presuming you don't try to force others to use these mechanisms, it's a fine thing.  If it's actually better, it will grow and become more common.

I am curious what you think is the reason that it isn't very common (or exists at all) in successful organizations - whether for-profit, non-profit, or social, all of the ones I know are hierarchically organized.  Many have procedures for changing the leadership, but I know of no successful organizations that are socialist in behavior or decision-making.

Which brings me to my primary objections to socialism generally - it always seems to start by claiming/nationalizing/taking a bunch of stuff from people who don't necessarily want it.  Without that problem, I'm perfectly fine with it.  Oh, and as long as exit is easy - the other commonality with socialist regimes (AFAIK) is how hard it is to leave, and to be capitalist if you want.

My guess is that the main application area this should be investigated for is promotion / facilitation in developing countries. [I don't see an obviously good way to shift US/European policy to promote this, and would rather limited reform effort be spent towards something like land use / permitting / voting reform. EA organizations are generally either non-profits (where making them 'co-op's seems unlikely to have large effects) or for-profits where limiting the upside to owners is probably undesirable (since the for-profit's EA value is typically earning to give / it being easy to hire non-EA workers for a company with EA owners).]

Some scattered thoughts as trailheads:

• Most of the evidence base is probably in developed countries, and so it makes sense to run more experiments / figure out which conditions favor co-ops. [The traditional 'family firm' / 'corporate family' is, in many ways, a co-op, just with a much higher barrier to entry.]
• Legal agreements are harder to execute and trust, especially at lower levels of wealth. [See The Mystery of Capital for more.] Having boilerplate co-op formation agreements (or administrative support for forming co-ops) for various countries will probably touch one of the main pain points for creating them.
• Management consulting firms tend to be more effective in developing countries than developed ones (as they're more likely to be able to point out a 'basic' principle or practice that the managers would have picked up in business school in the developed world, but is not common practice in the developing country). It might be possible to find (or found) such a firm focused on doing consulting in developing countries, and have them push formation as a co-op. [My guess is it's easier to get entrepreneurs to form new businesses in a new format than reform existing businesses as them, but this is an empirical question that's worth checking.] This might also be a good laboratory for random assignment (noting that you can only randomize whether you advise they become a co-op, not whether they actually do, and places where it's a worse idea might be more resistant).
• Relatedly, one of the big transitions is from 'owner as whip-cracker' to 'owner as optimizer' (see here [LW(p) · GW(p)] for more); it may be that co-ops have an easier time with this than traditional firms, and this gives them a more substantial edge in places where that transition is incomplete. [Given that this is both a cultural and a financial change, my guess is this edge is actually not that large; Taylor is pretty clear on incentives needing to be individual to have the largest effect.]
• It might be possible to set up a microlending program that focuses on creating co-ops, or partially buying out existing owners to donate stake to the workers. [I imagine a core challenge here is that workers are not going to be excited about the risk associated with being in a co-op, and it takes some external energy source to get over the activation barrier here.]

Sorry guys. I woke up to another giant batch of new comments and I just don't have the time or energy to respond to them all with the quality that I would want. My comments were already getting shorter and shorter while my longer, more nuanced comments were getting sniped before I could post them. I'm sure some of you made some excellent points.

re: whether socialist firms work, I think the main problem is going to be managers making worse decisions because they're more blended with the interests of labor. For example, a firm where decisions are made by the workers-as-a-whole probably wants to pay workers according to their average product instead of their marginal product, but this means they'll hire too few workers (as average product is larger than marginal product, and so the 'last workers' are more expensive in the average-product firm).

Why don’t you cross post to the EA forum, by the way?

I've not read much in this area and have not even tried to follow through on the references provided in the OP. I'm open to being told I should have as some directly address my comment.

I think the big question to ask here, if one is advocating expanding the "socialist firm" (quotes since that can refer to a number of somewhat different structures) is conditions in which those forms are superior to the normal corporate structure. In other words, given all these forms exist in the current economic landscape the claim seems to be that we're out of equilibrium and marginal adjustments will produce a better equilibrium position.

One issue that arises with starting a socialist firms is acquiring initial investing. This is probably because co-ops want to maximize income (wages), not profits. They pursue the interests of their members rather than investors and may sometimes opt to increase wages instead of profits. Capitalist firms on the other hand are explicitly investor owned so investor interests will take priority.

This does not explain e.g. why we do not have more software development co-ops. The costs of starting a new software company are not that high, and a group of experienced software developers should have decent savings. They already own the means of production, i.e. their brains and notebooks, and they can rent the other necessary resources from Amazon. Thanks to remote work, they do not even have to live in the same city.

By the way, you seem to suggest that a capitalist investor is able to prioritize long-term wealth over immediate consumption, but the co-op employees are not. Not even when all the benefits of working at a co-op are at stake, and they know that if the co-op fails, they will have to return to their previous open spaces and agile meetings. Why is that so?

I highly recommend this video for those wanting a more detailed analysis of the pros and cons of worker co-ops

My first thought: there’s a sliding scale between worker ownership and investor ownership and it might be much more tractable to increase the share of worker ownership than to increase the number of 100% worker owned firms.

My second thought: if the benefits of worker ownership are due to superior governance, maybe increasing worker ownership should go along with weighing interests of different agents via geometric expectation maximisation [? · GW]

I'm impressed how modern EAs manage to spin any cause into being supposedly EA.

There's just no way that things like this are remotely as effective as say GiveWell causes (though it wouldn't even meet a much lower bar) and it barely even has longtermist points for it that can make me see why there's at least a chance it could be worth it.

EA's whlole brand is massively diluted by all these causes and I don't think they are remotely as effective as other places where your money can go, nor that they help the general message.

It's like people get into EA, realize it's a good idea but then want to participate in the community and not just donate so everyone tries to come up with new clearly ineffective (compared to alternatives) causes and spin them as EA.

This is not a place for politics. It is especially not a place for politics that have consistently led to catastrophe. The uncharitable reading of this post is that it is simply ignoring the harms of socialism, which is a trivial error of rationality. The charitable reading is that it is proposing a new take on socialism which could actually be beneficial. However, explaining such a point and answering the inevitable objections requires a long political discussion on a board that was explicitly created to avoid such things, due to their tendency to make rationality much harder.

If the charitable reading is correct, this might be an interesting debate, and even perhaps one where we could all learn something. But this simply isn’t the forum for it.