Today I finished reading Marjorie Kelly's book Owning Our Future (2102) which I first blogged about last October. My first blog was more concerned with highlighting the idea that there was another type of design that we should be concerned with, ownership design, and that startups and businesses might do well to consider this aspect of design when setting up and managing their business. In this blog I want to summarize the main message from the book which is to contrast two types of ownership design - extractive and generative. Most of our economy is governed by an extractive ownership design but there are examples of successful generative ownership designs as well. Her book involves rooting out generative companies and telling their story and why they are examples of generative ownership design.

We can differentiate these 2 types of ownership design on the basis of 5 contrasting patterns that typify extractive versus generative designs.

In extractive ownership designs we have (p. 18):

• Financial Purpose: maximizing profits in the short term
• Absentee Membership: ownership disconnected from life of enterprise
• Governance By Markets: control by capital markets on autopilot
• Casino Finance: capital as master
• Commodity Networks: trading focused solely on price and profits

By contrast, in generative ownership designs we have (p. 18):

• Living Purpose: creating the conditions for life over the long term
• Rooted Membership: ownership in human hands
• Mission-Controlled Governance: control by those dedicated to social mission
• Stakeholder Finance: capital as friend
• Ethical Networks: collective support for ecological and social norms

It would be difficult for me to elaborate further upon these differences in this blog as the purpose of the book as a whole was to provide case studies that elaborated upon these differences. I recommend buying the book if you want to know more details.

One impressive generative company discussed in the book is the John Lewis Partnership which operates retail and grocery shops in the UK. Their financial performance is quite good (from Wikipedia):

The employees are "partners" who have ownership in the company. The most significant manifestation of this is the yearly bonuses they receive which are based on 50% of the net profits of the company. On good years this can be up to 20% of their yearly wage (see the 2007-2008 financial year). The company has elaborate policies, structures and people in place to ensure that the idea of the company as a partnership is kept alive and well.

The company came to be owned by employees when the original owner, John Spedan Lewis, decided to sell his interest in his company to employees as he neared his retirement (this is a simplification of the process as it involved setting up a trust with a fair shares charter at the core of the future business). On his death he ceded his property over to the company as well.

Marjorie points out that our current demographic situation means that many baby boomer business owners are reaching retirement age and one choice they may opt for in order to maintain their legacy is to sell their business to their employees rather than to the highest bidder who might run it according to an extractive ownership design which often leaves no legacy or not the legacy the owners wanted to leave to the workers that helped him/her succeed. Marjorie's book is a useful resource for those interested in making the move towards a generative ownership design - what it means and examples of how it might be done.