Coop update

Reinventing Organizations EU – Todor Kolev on the future of work. Are private companies a thing of the past?

reinventing-organizations

Back in December 2017, during the Reinventing Organizations conference, Todor Kolev was invited to give a talk about his take on the future of work. He presented his journey from starting Obecto to co-founding the Comrade Cooperative. It took a while for the organizers to publish the video, but its here now and it is a great memory of how and why we started the cooperative. Subtitles are included and below is a transcript of the presentation.

“I want to tell you a story which for me started in 2008. Back then I was employed at a regular job as a developer. During that year the financial crisis hit. This is a newspaper from that time, from September 2008 when everything suddenly collapsed. It was very interesting to me why this thing occurred. At this time there were many interesting movies like Zeitgeist. Which sparked my interest for how economies work and the world as a whole, and why did this crisis occur. Where did the problem lay?

For various reasons, I decided to quit my job and start my own company – Obecto. In 2008, when I founded Obecto, my goal was to start a company where people will be more important than profits. I had no clue how to accomplish this. However, I was sure that there is a way for an organization like this to exist.

What I want to talk to you about is my journey, the lessons that I’ve learned, and what is my vision for this organization of the future, where people are more important than profits. Let’s go back 3,3m years ago when people built the first instrument. This is the oldest instrument found made by a human. It was not even made by a human but by species which are about 1m years older than the Homo sapiens.

What we nowadays call technology and this sharp stone from 3,3m years ago are both created for the same reason. To satisfy our desire to achieve more with less. Technology is nothing other than a manifestation of our desire as human beings to achieve more with less. However, technology is an interesting thing. Every time we create a new technology, we then use it in order to create an even better one. This way an accumulation occurs. This process of using old technology to create a new, better one is getting faster and faster. It is continuously accelerating. That is why the process of creating new technologies, the process of improving them is exponential. For comparison, I have also shown the growth of a linear process. This dotted line is a linear process. Our mind has adapted to predict linear processes like this. This is why when we observe a new technology, in the beginning, we are disappointed by it. Because it performs worse than our linear expectations. But in the very next moment, it improves drastically and we can’t explain how did this occur. This mismatch happens because the process behind its growth is exponential.

Here is an example. I started working with computers back in 1996. Back then, if you wanted to achieve 1 gigaflop computing power …meaning 1 billion operations per second… So, if you wanted to have this computing power, and you would buy this huge and very noisy machine. But in 2015 we were able to buy 10 times more computing power for $300. In the form of a wristwatch working with a battery. Technologies allow expensive and complicated things to become cheap and easy. They transform it in an exponential way. Not just linear but exponential.

And if we extend this exponential graphic, we will notice many interesting things. This is a graph by Ray Kurzweil, the Engineering Director at Google, the largest technology company. He made this prediction here back in the 80s. He measured how much computing power we can buy for $1,000 and mapped these dots in time. This is not Moore’s law that we observed on the previous slide. Rather how much we can buy for $1,000, whether in the form of transistors or processors. The graph starts in the beginning of the century when calculations were made by people. The interesting thing with this graph is that it is very smooth. It shows constant growth even during wars and financial crisis. The technology continues to improve no matter what people do. The exponential growth of technology is a process that does not depend on us. Probably it started way before us and we are just a part of this process.

If we extend this exponential curve – it is double exponential because the scale is also exponential – we can observe very interesting things. For example, in 2023 for $1,000 we will be able to buy computing power equivalent to one human brain. It becomes even more interesting in 2045, when for $1,000 we will be able to buy computing power equivalent to all human brains working in perfect sync. But 2023 is in 6 years. The next question is what an Exa-FLOP means, i.e. what one human brain can do. The biggest expectation that scientists have for how much computing power our brain has is one Exa-FLOP. One Exa-FLOP is one Giga-Giga-FLOP or 1 with 18 zeros behind it operations per second. Our brain has something a bit less than this. The biggest expectation is that our brain can perform
that much operations per second.

Last year Microsoft made an experiment, to demonstrate 1 Exa-FLOP of computing power. They created this computer brain. Not like ours, having a personality.
Still this machine managed to translate 3 billion words for 100 milliseconds. And if our brain focused only on translations, then we will be able to translate 3 billion words for 100 milliseconds. If you wonder what an Exa-FLOP looks like, take a look at Google’s processors connected in a cluster. One such cluster has around 10 Petaflops, meaning 100 such machines are equivalent to one human brain. Today we are capable of building such machines. Unfortunately, it still costs more than $1,000. It costs millions of dollars. However, similar to before, technology makes things that used to be expensive and complicated become cheap and easy. So very soon this technology will become far more accessible and applicable in real life.

So far in our history, we’ve had technological, industrial revolutions like this. Where machines substitute mechanic work with machine work. While people continue doing more complicated work, work that requires more intellect. This time, however, the revolution may be different. This time machines are challenging our intellect, not only our hands.

Here comes the interesting question: why are we working at all? Why today we have this concept of employees and employers? We can trace the reason back to 18th century when Adam Smith wrote “Wealth of Nations”. There he speaks about the free market and private property, but also about paid labor. His reasoning why society should transition from slave labor to paid labor is because slave labor is more expensive. When a person works because he is forced to, he does not have the incentive to be creative, does not have a reason to improve, he just works because he has to. This is the idea expressed by Adam Smith and the reason why nowadays we pay salaries, not use whips. Because it is cheaper this way.

If we continue this train of thought if at some point machine labor becomes cheaper than humans’, then why would we work? The word ‘work’ can change its meaning over the next few years. People are actually not good at working. Repetitive work is something that strains us and we are really not good at it. We are good at other things. We are good at dreaming. We are good at setting goals, in building connections with one another. But not particularly at work. Maybe it won’t be that bad if we left something else to do our work. Even though we still haven’t reached that moment when machines will fully replace us at work, it is very important to ask ourselves this question: If you don’t have to do anything, what will you do? I think the answer to this question is our true purpose – why we are here on Earth. The answer is not to work.

The answer is within “What would we do if we don’t have to do anything?” So if we don’t have to work For each other, what would we do? Well, we can work With each other. One person can contribute an idea, someone else will come and contribute with skills, a third person may provide capital. But in the end, it is not necessary for one of them to own this common thing. This common thing belongs to all of them. Someone may leave, another one will come but the common thing remains. The interesting thing is that such organizations do exist. Organizations which are structured in this way, in which the ownership is common.They are called cooperatives.

When we discuss this topic about motivation, we are talking about companies which have employees. We, as bosses, are wondering how to motivate these employees. But these employees do not have ownership of what we build together. What they build, is not their own mission, it is not their own goal. It is the goal of the boss. This is why employees don’t feel engaged with it. In order for someone to be engaged with a goal, he has to have ownership in it,
he has to have a responsibility towards this goal. This is the cooperative.

Cooperatives actually never ceased to exist. They are just not that talked about. There are 128 million cooperative members in Europe. Meaning that every fifth Europe citizen is a member of a cooperative. Cooperatives have 4 million employees and have around 1 trillion turnover in the EU alone. The problem with cooperatives is that since they are commonly owned they have to serve many interests. Meaning they are very slow when taking decisions. Cooperatives are difficult to manage because there are many interests that should be taken into account.

We already talked about democracy being a great idea but in reality, it is also something very slow. This is where centralized companies have an advantage. They have a centralized interest. There is a small group of people who want this company to be successful. They manage it in a centralized and authoritarian manner. And there is nothing wrong with that. At the end of the day, they are efficient. But can we reach the same efficiency with a cooperative? With an organization that is decentralized by nature. And this is where technologies can help. As I mentioned, technologies make things that are expensive and complicated to become cheap and easy. So the expensive and complicated thing of managing a large organization, thanks to technology, may become cheap and easy.

I found Obecto in November 2008, the crisis was in September 2008 and in October 2008 this thing came out – an anonymous message in a mail list from an anonymous person or a group of people named Satoshi Nakamoto. The message said this person came up with something he calls ‘blockchain’ which allows computers to reach a consensus together without any of those computers being the main one.

In reality, blockchain is very much like a ledger. A magical ledger in which every block represents a sheet of paper. And there are transactions written down in this ledger. Who sent money to whom and so on. However, this ledger is a magical one. The magical thing is that when we add new pages everyone is informed about the new page and everyone agrees on the way we add this page and the way we write down the transactions. This ledger is then distributed among all participants in the network but none of them has an absolute control over the ledger.

If someone says that a given transaction does not exist but everyone else agrees that it exists they will just exclude this person or computer from the network. Meaning blockchain allows us to reach a consensus in a decentralized manner what the ledger contains. This is blockchain.

The interesting thing is if we expand this idea further. These computers agreed on the rules of writing in these pages and these rules can be executed in the form of an algorithm. These algorithms are called ‘Smart contracts’. Why “Smart”? Because in reality they describe a procedure or a set of rules but in the form of a code. This code is being executed on the blockchain and in reality, defines the rules of writing in the ledger. This whole system works autonomously. No one is controlling it.

If we go even further, we can create the so-called ‘Autonomous Wallet’. We can put money in it but money can be withdrawn only according the rules of the Smart contract. No single person can decide if the money will be withdrawn. If by any chance the system is locked down, this money will never get out of it. This has already happened with different blockchain projects. Last time $300m has been locked because of a bug in a similar wallet. However, if the money is locked, it does not have a way to get out. It is impossible. It is possible only according to the rules of the contract.

What can we do, if we go even further? Well, we can create a whole autonomous reward system. We can create something similar to a board game. We can set the rules, set the rewards in it. When money flows into this system, it goes in this smart wallet, and it flows out only according to the rules. What are the rules? We can set rules for how we reward each other. We can set rules how to locate the money in each budget. We can set rules how we make decisions. It is not necessary all of these rules to be based on voting. We can create interesting microeconomics based on special currencies valid only for this game, only for this system.

At the end of the day, this is what I actually did. Together with my friends and colleagues from Obecto, we created the Comrade Cooperative. This is a digital cooperative which we will establish on the 1st of December which will be managed by an autonomous, smart, blockchain contract. This is a new type of an organization. The ownership of the company is common. It is not managed by one person or a group but by an autonomous system. It is a game with its own rules and it works autonomously.

Our system is a tool which later will be available to other organizations as well. It is not necessary for such an organization to be a cooperative. This system can be implemented in a regular company. Part of the decisions that are usually made by an authoritarian boss can now be managed in a group. I hope that soon we will have interesting results. This is what we are working on.

Thank you!”

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