The Economics of Community

cross-posted with permission from Communities Magazine

Intentional communities sort broadly into two kinds: those where members share income (roughly 10-12 percent of the North American field today), and those where they don’t (the vast majority).

In the case of the former, the community takes primary responsibility for the economic welfare of its members. In consequence, most such communities roll up their sleeves and develop community-owned businesses, and take advantage of collective purchasing power to leverage economies of scale to make ends meet. In addition to the day-to-day, this kind of community also provides for member vacations, health care, and retirement. It’s cradle to grave coverage. Members put everything they earn (though not necessarily everything they own) into the pot. In return, the group picks up the tab for all expenses—within whatever boundaries the community sets.

For non-income-sharing communities, however, the collective tends to leave the economics of member households untouched. This is a huge difference.

As someone who lived in an income-sharing community for four decades (1974-2014) and was a delegate to the Federation of Egalitarian Communities for two (1980-2001), I have deep familiarity with how the collective can partner with individual members to address economic imperatives. In addition, as FIC administrator for 28 years and as a group process consultant for three decades I have visited and worked with more than 100 non-income-sharing communities and thus have first-hand knowledge of the economic realities in that milieu as well.

Both because most intentional communities don’t share income and because the potential there is less explored, the primary focus of this examination will be the economic relationship between the collective and the individual in non-income-sharing groups. I’m going to first describe what’s extant, and then attempt to make the case for shifting it to something else.

The Community Lens

For the community, it’s much simpler if its financial focus is narrowly defined: the group will manage the collective assets and liabilities (such as property taxes, infrastructure, and common facilities) and member households will manage themselves. Not only does this protect individual privacy (getting the right balance between group and individual can be tricky) but it’s less work. Members may do a fair bit of expense-sharing and collective purchasing, but the group’s interest in member finances tends to be limited to whether the checks for HOA dues clear and members don’t default on their mortgages.

To be sure, if a member gets into financial trouble, the group may rally around them—either collectively or as neighbors—but it isn’t obliged to.

The Individual Household Lens

For the member this hands-off policy cuts two ways. On the one hand it means that information about their financial reality (beyond whether they qualify for a loan if one is needed to buy or build their unit) and their household budget is entirely their business, just as in the mainstream culture.

On the other hand it typically means forgoing one of the principal advantages of shared living: the active assistance from others in figuring things out.

On the expense side, there is considerable room for sharing expenses in non-income-sharing communities, and a good bit of this happens. Perhaps the community has an internal food-buying club or has a link with a nearby CSA (community supported agriculture). Maybe the community owns a single pickup truck or wood splitter that is shared among all members. The group may build a swimming pool, a workshop, or an exercise facility—all of which are likely to be larger and better equipped than what members would build on their own.

But what about the income side? This part of the equation is largely unexplored.

My good friend Terry O’Keefe and I have been trying to bring a lantern into this cavernous, dark room. We think non-income-sharing communities are mostly missing an important opportunity to partner with their members, bringing community assets to bear. Our point is not that communities must do this, but that it is a possibility that is largely missed. Often communities are located in places where jobs are poor (which is the obverse of the cheap land coin). If prospective members had help solving their economic challenges it could make a substantial difference in community accessibility.

When Terry and I conducted a workshop bearing the same title as this article to a packed room at the 2015 National Cohousing Conference (in Durham NC), these questions bubbled up in the audience:

1. When does it make more sense for the community to own a business, and when does it make more sense for individual members to own it?

We suggest looking closely at two sub-questions:

a) What structure gives you the best chance of manifesting the management energy needed? Keep in mind that possessing a great commercial concept is not the same as possessing great management skills, and neither is the same as business savvy (though there is definitely overlap). Thus, people with sound business ideas often need help (whether they know it or not) with:

—Developing a viable business plan

—Securing start-up money

—Finding a qualified manager or management team

—Creating a marketing plan

—Identifying personnel needs (how many and with what skills)

b) To what extent are you open to fellow community members as a potential labor force? This question excites us a lot because of the potential for entrepreneurs (the ones who cook up business ideas) to partner with their non-entrepreneurial neighbors (who are looking to supplement their income but are reluctant to start a business). These two segments coexist in almost all groups and are often at odds with each other, because of the strong tendency for entrepreneurs to be risk tolerant while non-entrepreneurs are risk averse. Here they can make common cause.

2. What advantages might communities businesses have in the marketplace?

—In communities of size there typically exists an amazing pool of skilled, motivated people available on site to help you with most aspects of business development. It’s an untapped gold mine.

—Building (or at least enhancing) community can be an explicit byproduct of doing the work. Given that your people value the community (and the connections) this significantly boosts job satisfaction and morale (which translates directly to better attention to detail, fewer mistakes, less absenteeism, more pride in the work, less turnover).

—If the business is owned by the community (and members are the workers) there will tend to be enhanced motivation and satisfaction from that fact alone. (There are any number of jobs I would gracefully do for my community that I would never do for wages.)

—Healthy communities tend to have superior skills at communicating and working constructively with conflict. This can make all the difference in terms of job satisfaction and can be readily parlayed into superior customer service.

—Communities tend to be more collaborative (and less hierarchic). To the extent that this obtains, problem-solving becomes an all-skate activity (not just something management tackles). In addition to enhancing morale, it leads to more creative ideas and better problem-solving.

—Community-based businesses can often be more fluid about part-time work, flex hours, day care on the job, costuming, and working at home.

—You’ll tend to get more people who will volunteer, because of the values you represent and how it helps the community.

—There will also be an opportunity advantage among customers who value cooperation. Potential customers within your service area who value community will preferentially give you their business. While there will be limits to how much they will be willing to pay a premium for your product or service, they will at least prefer you when price and quality are comparable.

—Your labor pool itself may give you an advantage. For example, my long-time community (Sandhill Farm) produces sorghum syrup. While our neighbors could grow sorghum just as easily as we, they didn’t have the labor to do the work and couldn’t afford to hire it. Thus there was virtually no local competition for our product and we’d get the business from all who prefer to buy locally (which is a growing market share). Not stopping there we pressed this advantage by inviting friends to join us for the labor-intensive three-week harvest each fall. Our numbers temporarily swell to three times their normal size and it’s a madhouse harvest festival (a form of temporary community that we know how to manage). We’re no more efficient working this way, but all the incoming labor is volunteered—guest campesinos are compensated with wonderful food and camaraderie.

—To some extent people can substitute for capital and property. If people are a major resource, think about how to leverage that. Let me give another Sandhill example for how we applied this principle. Just like most of our northeast Missouri neighbors, we grew soybeans. If we sold them as a raw product (as our neighbors do) we wouldn’t have any advantage. However, we added value to our soybeans by making them into tempeh, and selling that instead. While it wasn’t a get rich scheme (we made about $10/hour on tempeh), there were several advantages to this approach:

• We could make tempeh year-’round and work when we wanted (when you’re dealing with raw agricultural products you must work when the weather is right, not when it fits your schedule).

• We set the price for local, organic tempeh. When you’re selling raw products, you mostly have to sell for what buyers will pay.

• We were selling a product that aligned well with our value for healthy living. Soy-based protein is easier on the land than meat-based protein and there’s no cholesterol.

• We could produce the same income from one acre of soybeans converted into tempeh that our neighbors could generate from selling 25 acres of raw soybeans. That allowed us to make the income we needed while farming far less land, which meant our operation needed far less capitalization.

—Often communities develop expertise in an area to meet their own needs, and that knowledge can have commercial application in ways that home-scale experiences may not.

For example, Twin Oaks (Louisa VA) was a well-established community of about 90 adults that grew a significant fraction of its own food in extensive community gardens. When neighboring Acorn (Mineral VA) acquired Southern Exposure Seed Exchange (an heirloom garden seed business) in 1999, it was an easy adjustment for Twin Oaks to become a major seed grower for Acorn, thereby boosting income for both communities.

—Communities frequently control land or have commonly held buildings that are underutilized. (Have you ever noticed how often the lights are out at the common house?)

3. How tricky is it to navigate the dynamic where members are both peer/peer and employer/employee?

The hardest part is likely to occur when the employer gives the employee critical feedback about their performance as an employee—and these two are at the same time neighbors. This can be dicey, and a lot will depend on how well the culture of the community supports the expression of critical feedback and clean communication. If the community struggles to work through tensions among members then this does not bode well. Going the other way, where roles are clear and skills are sharp, it’s just another of life’s unexpected pleasures.

4. How can we encourage non-income-sharing communities to develop their potential as an economic engine?

We suggest groups think about this in two ways:

a) What can communities do to foster and support business development among entrepreneurial members? [See the replies to Questions 1a and 2 above.] If the collective skills of community members are seen as a pool, it’s quite likely that there is expertise within the pool that can cover most of the needs for business expertise—especially at the advising or consulting level (as opposed to the regular job level)—without going outside the group. Canvass the group and put that skill to work! Not only will you be strengthening the economics of the community, you’ll be strengthening relationships into the bargain.

Beyond that, the community may be a huge help with capitalization, perhaps through borrowing against capital reserves or by organizing a loan pool funded by members with deep pockets.

b) What can groups do to help new businesses create jobs for non-entrepreneurial members? We touched on this above, and think the community’s role in this may be crucial. Often small business owners are content to remain a one-person or single household operation. The owner may not be strong in social skills or is otherwise leery of the dynamics of hiring and firing neighbors. Thus, remaining a ma-and-pa outfit eliminates potential personnel headaches, and owners may not be that ambitious about growing the business.

However, the savvy community will know that a majority of its members are non-entrepreneurial, some fraction of which may well be eager for local work that has a good values match. By getting involved at an early stage, the community can be in a position to offer the carrot of helping to identify business assistance in exchange for job creation—including the offer to troubleshoot personnel concerns, on an as-needed basis. There can be a lot of good in this. The principle is simple: the more people you have eagerly hunting in the clover field, the more you’re going to turn up specimens with four leaves.

To be clear, access to the community’s “Chamber of Commerce” would be strictly voluntary; no one would be required to use this group, or to heed its advice.

5. To what extent is a focus on business development just buying into the (failed) paradigm that growth solves everything, and to what extent is it sensible to use traditional business tools to support alternative economies?

While I think there’s a lot that can be done to dial down demand (and live happily on less), it nonetheless makes sense to be smart about analyzing prospects for new business ideas with time-tested traditional queries. For example:

—What’s the market for your product or service?

—What’s the competition?

—What do you do better than anyone else?

—What are you passionate about doing?

—Can you profitably produce or deliver your product or service at a price people are willing to pay?

—How is your business an expression of who you want to be in the world?

—How will you manifest the start-up capital you need to make a go of this business?

—How will you service debt and not go belly up?

6. How do you handle the tension between the non-entrepreneur (who tends to be risk averse) and the entrepreneur (who tends to be risk tolerant)?

Let’s be real. This tension exists already, whether you have community businesses or not. Isn’t it a better strategy to learn to deal constructively with the full breadth of attitudes among your membership than to attempt to eliminate or shy away from opportunities for those differences to manifest?

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Can communities afford to not explore their economic potential? I don’t think so.

I’m not looking for Trump’s jawboning to bring back the manufacturing jobs that were lost to outsourcing. I’m not looking for governments to bail us out at all. I’m looking at what we can do for ourselves, working together in values-aligned cooperative groups—the same kind of entities that impressed Margaret Mead so much for their potential to effect world change.

 

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