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Monday, February 18, 2013

A Telling Quote About Co-ops

“There seemed little room for entrepreneurial creativity; virtually every decision was politicized.  The most politically active members controlled the co-op with the own personal agendas, and much more energy was focused on deciding which companies to boycott than on how to improve the quality of products and services for customers.  I thought I could create a better store than any of the co-ops I belonged to, and decided to become an entrepreneur to prove it.”
This  quote is from Whole Foods CEO John Mckey. The quote is from his recent book Conscious Capitalism and Forbes has run an article about John and his book, which I found interesting.

John was a hippy in the 60s and 70s and was involved in a commune and various food co-ops.

It appears he became disillusioned with the co-ops and started his own natural food store which grew to be the now famous Whole Foods Market.

The quote made me think of New Zealand's most famous Co-op, Fonterra. 
“There seemed little room for entrepreneurial creativity; virtually every decision was politicized.  The most politically active members controlled the co-op with their own personal agendas"
Those words jumped out at me and I thought of Trading Among Farmers, which took Fonterra about 5 years to get through.

It highlights the major disadvantage of the co-op structure. Any "entrepreneurial creativity" has to be scrutinised by the members of the co-op and voted on.

Entrepreneurial creativity with the potential to produce high margins  by its very nature is risky, untested and unknown. For this reason it often does not get implemented.

Even if the managers of the co-op are able to try a few different things, they are voted out by the co-op members if the decisions are not popular.

For this reason, co-ops tend to be low risk low margin commodity businesses.

It's probably best they stay that way too.

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