The Slow Demise of Loconomics

This interview first appeared in the Spring 2021 issue of STIR Magazine.

Loconomics, a startup that offered shared services to freelancers, became a darling of academics and allies interested in platform cooperativism. But while academics secured grants, Loconomics struggled to gain traction. Appearances at conference panels and in magazine features never translated to enough funding or users to scale. So, after six years of bootstrapping, product pivots, and one big break that didn’t pan out, Loconomics came to an end in 2020. In this interview, I talked with Loconomics co-founder Joshua Danielson about his journey.

Let’s start at the beginning. What can you tell me about the origin and vision for Loconomics?

The original idea was to create a sharing economy platform that put the workers first. We started out by incorporating as one of California’s first benefit corporations. But we didn’t feel like “people, planet, profit” went far enough. Sure, I had no guilt in making a market salary — but I didn’t want to be a millionaire off the backs of labourers. But for service professionals, there was nothing that strong to say that we were offering anything vastly different than say TaskRabbit, other than maybe commissions would have been less. So I went back to the drawing board. I’d known about co-operatives, but not how it would apply to a technology platform, so I went to a free legal clinic put on by Janelle Orsi who founded the Sustainable Economies Law Center. She and I hit it off and brainstormed how that would look. We wanted to do something the other platforms weren’t doing — giving ownership to the workers and have that written into its bylaws. We revised the articles of incorporation to become, what I think, was the US’s first technology platform co-operative in June of 2014.

Over the years you’ve had a lot of collaborators and you did a lot to coordinate it and sustain it all. Putting yourself in the centre for a second, how did you do it? Where did you find the encouragement to keep going?

Certainly early on Janelle Orsi was a great supporter and cheerleader. I was part of the LGBT and San Francisco startup scene and found many people who said “Wow, that’s a really great idea” but didn’t understand the business model very well. I also went to many events in Oakland that were much more impact-oriented at the local level. Their mission statements were much clearer and more tangible, but they heard my idea for Loconomics and said “Wow, why doesn’t that exist?” Somehow, though, I or Loconomics didn’t quite fit in.

Maybe six months after we converted to a co-op, Nathan Schneider started writing about Loconomics and then we got a lot of attention from academics — most of the attention was from academics, people in the social impact space, and some entrepreneurs that respected what I was doing. They all tried to help in their own way. And no one told me it was a dumb idea.

I validated that there was a need for Loconomics, for sure, but coordinating a ton of people that are interested in it and not having the funding to actually hire anybody — I think that was the toughest part. It’s great having volunteer help but pulling it all together into a tangible product, that was really hard. I don’t know who possesses that expertise but I didn’t. It’s still everything I believe in politically, socially, and philosophically, and I hope someone figures it out.

Your business idea was very comprehensive and had a lot of moving parts to it. Out of all of that, what was the most promising feature or offering that Loconomics developed?

If I had to do it all over again, I would not market the co-operative model as a primary feature, as it confused professionals. “No two co-ops are alike” is something I heard over and over and having to explain membership and dividends over platform features got lost on people. Another mistake I made was that I started with a marketplace but didn’t have the funding or ability to generate demand on both sides, even though it seemed like if we got the marketing right it could happen. A marketplace isn’t really viable unless you have a ton of money to throw at it. So I pivoted towards offering service professionals tools they can use, like scheduling and client management software. Had I done that originally, I think that Loconomics could have been one of the top ten scheduling tools, and by doing so it would have built the nodes for a marketplace, but the co-op message got muddled. There are a lot of misconceptions about what a co-op actually is. I think that had I started out with tools for a monthly membership fee we would have gotten much further.

I remember seeing Loconomics at pitch events, conference talks, and magazine articles, so lots of people learned about Loconomics, myself included. Who were the biggest fans? Who responded the most enthusiastically?

It was mostly academics and people in Janelle’s circle, in sustainable economics, and there were tons of fans who saw the need for Loconomics as a solution to the perils of the gig economy — but it was not the workers, the service professionals. I think the platform co-op movement wouldn’t have started without an example like Loconomics, and I got so many interviews and so much fanfare from it, but it needed to be the people who were actually going to use the platform. I think on paper it’s the perfect solution, but it’s a little bit more complicated for the workers who actually power the platform to understand how they benefit, which is what really matters, and it was harder to reach those people as they weren’t going to the conferences or reading whatever publications we were in.

I think the other big challenge is that the vast majority of available funding went to research. I can’t count how many things I applied to, or went to apply to grants and found that it was only for 501(c)(3)s, even though their aim was to promote co-operatives. That was really frustrating. So many researchers got funding, but there was no bucket we fit into. I did receive $30,000 from Rainbow Grocery, which was incredibly generous, $4,000 from the Institute for the Future, and a contract with California Community Colleges which brought in some great revenue. I spoke to a socially-responsible VC who told me, “We could help you if you had more traction” — which is exactly why I needed the money. The Workers Lab was close to providing Loconomics a loan, but then Trump was elected, everything just turned, and when I went to apply to a grant contest they put out, some other organization was trying to do the same thing, a nonprofit that told them that they were further along than they were, was a finalist and we weren’t.

I was able to bootstrap, but that only took me so far. My student loan debt almost doubled the amount of the balance in interest. I hosted on Airbnb the entire time, which paid my rent and allowed me to live frugally, and I was very creative with zero-interest credit cards. However, I was willing to take the risk knowing the worst that would happen is that I’d have to go back into the corporate world and pay it back, which I recognized as a privilege. But I was strongly opposed, maybe naively, to any type of investors that would take ownership or equity. There was no equity when I converted Loconomics to a co-op. I converted the time I invested into loans to the co-op so I might get paid back at a very reasonable rate, but it wasn’t as if I owned a 51% stake; it was solely based upon the membership. If you were an employee, you’d get patronage based on how many hours you’ve worked, and if you were a service professional it was based on how much you paid in subscriber fees.

I remember hearing Sasha Constanza-Shock at MIT had their students do prototyping and user testing to help Loconomics find product market fit and build a user base. That seemed promising as one of a few collaborations. How did that go?

They did give me some feedback in 2016: “We’re going to assess the cost of the video to communicate what the co-operative is all about. You pointed out some important post-signup issues we can address right away. Your prototype is great, apologies for the test bookings not working — sadly they actually do work but I felt it was too complicated to add to the mix. You pointed out some great adjustments to the dashboard that we can add.” I don’t know what happened afterwards. There were so many people who offered to help.

What I really needed was someone who could organize actual workers, the service professional community. Organizing would have been the key. Because I tried to offer tools to everybody, and I tried to narrow it down, but there’s not really a community of dog walkers. The relationships that Uber and TaskRabbit have with their professionals is very siloed and independent. People came from all different professions and had a network but it wasn’t what we think of: they want to be independent freelancers for a reason, and organizing them was not as easy as it sounded. Finding people that want to be part of a community and are willing to put in effort is hard.

Between the unions and foundations I had conversations with at various conferences, I got this funny feeling that they didn’t want workers to have ownership. They’re totally willing to give grants and money to push the status quo a little, but to redesign the structure didn’t seem of interest to them.

When you say ownership, can you break that down a bit?

Co-operatives should be the main thing for anyone fighting for worker rights. We are not going to change wealth inequality with just a higher minimum wage. Again, I’m not an expert, but if foundations or unions really want to fight wealth inequality, it’s co-ops, plain as day. If I had the funding to get users or subscribers of Loconomics who didn’t know it was a co-op, and then they received a dividend, then they would see the benefits.

So, give the users a positive experience, and then a dividend on top of it.

I think if I won the lottery I told myself I could spend $2 million and attempt to make it actually work.

You said finding financial resources is really difficult, but you eventually generated revenue by partnering with the California Community College system. How did that go? And what was the experience for students in that partnership?

In mid-2017 Nathan introduced me to someone in a California Community College program called “Self-Employment Pathways in the Gig Economy” and by the end of 2017 I had a signed contract. They wanted a platform for students to get their feet wet in the gig economy and give them the tools and knowledge to create their own businesses rather than be exploited. Upwork fell out at the last minute, so I thought, I can do this. I worked like crazy and made it accessible to people with disabilities to get the contract, which was the right thing to do anyway, and it was a good usability refresh. Other partners included Samaschool. I partnered with one to add badges, reporting for professors to log in and see what students did, and other features. The contract was $80,000 with plans for a second part and an additional $80,000, and we successfully completed everything, a bit late but all within their timelines.

But their program didn’t move the needle as far as they or we wanted. Just 29 or 30 of 113 community colleges signed up to be a part of it. We expected a few thousand users and got only a few hundred. I didn’t have the resources to hand-hold much. Samaschool had similar issues. There was no second part of the contract for Loconomics or other partners, and by then, my student loans had been deferred for seven or eight years, and it was just time.

I left it open just to see if anything changed in terms of funding but nothing did as far as I know. So I made sure that I was ready and shut everything down; the bylaws are still public, and the code is also, but code changes so quickly that we’d have to rewrite the whole thing anyway.

You still have the vision, and some relationships that are still warm, some assets are still valuable. Is there anything else you’d say about your effort to wrap up Loconomics?

I couldn’t do it alone, and I couldn’t do it with just volunteer help and fanfare. I needed to hire a full team who were better at what I couldn’t do well, I didn’t have the funding to do that. Being an entrepreneur is kind of a privilege if you can figure out how to fund yourself, and that’s it more than anything. Also, timing is part of it. I think people saw the perils but I don’t think they saw a co-op as the answer. I’m proud of the fact that there is a movement, and I’m incredibly happy that it’s still going.

Now, I’m working for an enterprise accounting software company, and I’m learning machine learning and AI. I think in five years if I can afford it, maybe I’ll do something co-op-y that has AI in it. I don’t consider I lost anything in those years, and I don’t regret anything. I feel like my journey will come full circle.