Richard E. Bauer Blog: Appropriate collusion (organizing the weaker side)

Businesses with power are prohibited from colluding with one another to set prices or other policies. For good reason. Public officials and economists realize that it’s quite tempting for an oligopoly to work to artificially create scarcity or cooperate--it creates significant short term profits and hurts those without the power to do something about it.

(but that doesn’t mean that organizations don’t continually try anyway).

Organizations with power now use data mining and software licenses to gain ever more one-sided relationships with those they used to serve. They trade data about your credit and your surfing habits, among a thousand other things.

But what about the opposite? What about the power shift that could result from the disconnected masses working together to push organizations to make change or to limit their upsides? By banding together and coordinating information, they can prevent asymmetrical information and leverage from causing as much harm. What would happen if 10,000 Wells Fargo customers had found each other years ago?

Years ago, twenty of AOL’s largest content providers got together (I think it was in a hot tub) at an event AOL was running. We exchanged information about our contracts, our advances and our royalty rates. As a result of the shared information, everyone who participated got a better deal the next time around. Coordination led to a shift in market power.

Kickstarter gives a small hint of this. A creator says to disconnected people--if enough of you get together and indicate an interest, we’ll do this thing. This is also in the spirit of Fred Wilson's Union 2.0. Organization creates market power.

But the internet can let us take this much further. It can create enforceable group dynamics and help people find one another. And once found, they can insist on policies and offerings that the powerful organization would never have proposed. And it turns out that this more equal engagement can help both sides in the long run.

This is particularly effective in high-value business to business settings, where a company might sell a very expensive service to 20 or 30 companies. Knowledge about the best deal and coordination of desired features can make a huge difference for all concerned. That's why computer user groups were so important back in the day.

What would happen if the 1,000 top high school football prospects all agreed not to play a few games unless colleges paid them for engaging in the health-endangering sport that makes these non-profits so much money they can afford to pay their coaches millions of dollars?

What would happen if the fifty cities in the running for Amazon’s second HQ established a binding agreement on what they wouldn’t do with taxpayer money? By creating a mutually shared line in the sand, they’ve ensured that the flow of capital won’t bankrupt any of them. The auction will still happen, but not in a destructive way.

They could make a similar deal about future sports stadiums or Olympic bids, a sucker bet in which the winner almost always loses.

Creating “I will if you will” contingent agreements is significantly easier once we use the blockchain and the real-time coordinating power of the net. A conceptual example (hard to do with four weeks notice, though): The fifty cities agree that if all fifty cities agree, any tax break from a city or state to Amazon must be matched by that city or state with a 5x amount invested in their public schools. If the mutual agreement doesn’t reach the critical number, no deal happens. If it does, then every mayor and every governor has a great reason to use other less costly incentives to win the ‘auction’ without violating the mutual agreement (or invest in schools, which is okay too).

The alternative is that we’ll continue to see large, powerful corporations and institutions peel away individual players (people or cities), one by one, without the famed free market there to ensure equity. You probably have more in common with your neighbors than you think. If only you could coordinate the discussion...