First: Apologies for hijacking the title of this excellent article by Robin Chase and for hubristically hoping to improve it by adding an old, old but, for most people, a very new perspective. Ms. Chase, herself the founder of Zipcar and Buzzcar, obviously knows whereof she speaks in writing about the new cooperative capitalism:
The Internet, smart phones, electronic payments, GPS, online ratings, and social media have transformed the way we can build businesses, the way we can use assets, and who we can collaborate with. Uber and Airbnb, along with Skype, oDesk, elance, TaskRabbit, Blablacar, GetAround, Lyft, Skype, WhatsApp, MeetUp, Etsy, YouTube, Facebook, DuoLingo, Quirky, TopCoder, Enigma.io — this list could go on for paragraphs — are building companies very efficiently, and differently, than in the past.
Fully in line with Schumpeter’s well-known concept of the creative destruction endemic to capitalism — for what it’s worth, a fundamentally Marxian concept — Chase extols how the “new ideas and new ways of doing things” are impacting, indeed revolutionizing, our “far from perfect” status quo. She concludes with the hope that we can “figure out how we can move to a more cooperative, sustainable, and equitable form of capitalism.”
To which I would add, we should simultaneously look to the very old but also “more cooperative, sustainable, and equitable form of capitalism” known as mutuality. This form of organization, best instantiated in the form of life and property/casualty insurance companies, actually stems from the pre-capitalist days of the Dark Age, during which the principles of mutual insurance were developed in Europe by the feudal guilds. In the modern age, we can point to Benjamin Franklin’s Philadelphia Contributionship for the Insurance of Houses from the Loss by Fire in 1752 and, almost a century later, The Mutual Life Insurance Company of New York, “chartered as the first American company to operate as a mutual society, issuing 4,000 policies during its first five years of existence.”
Today, as the above-cited Wikipedia article succinctly puts it, a “mutual insurance company is an insurance company owned entirely by its policyholders. Any profits earned… are rebated to policyholders in the form of dividend distributions or reduced future premiums. In contrast, a stock insurance company is owned by investors who have purchased company stock; any profits generated by a stock insurance company are distributed to the investors without necessarily benefiting the policyholders.” While accurate, this is nonetheless an unfortunate description in that it defines mutuality essentially by what it is not: a publicly-owned stock insurance company. (Even the largest mutual insurance company in the U.S., New York Life, sadly chooses to define itself in this unnecessarily negative, narrow and, therefore, distorted way. See another example of this weak understanding of mutuality.)
What is so sadly lost here is the very essence of mutuality, its social aspect, its grounding in reciprocity and collaboration. No one has more keenly registered this than Maria Ferrante-Schepis, formerly Maria Umbach, in an article first published in 2011 titled The New Mutuality:
Back when insurance was an innovation, the working class understood it as a way to pool money to help those in need. That is after all, how the word “mutual” became associated with insurance companies. Everyone participated to each other’s mutual benefit. Ms. Ferrante-Schepis goes on to explicitly note how this concept of mutuality has been distorted over the years: Its definition in spirit is about reciprocity. She then asks, very much along the lines of Ms. Chase quoted above, is it possible to bring back reciprocity in a world that is all about me?
The answer, of course, is Yes; this is indeed the essence of our current “cooperative capitalism,” which appears to be, to the dismay of our “far from perfect” status quo, unstoppable.
What seems clear, however, is that it probably won’t be our few remaining mutual insurance companies, with their narrow fiscal view of mutuality, that will “bring back reciprocity.” Maybe, though, just maybe, it will be social networking; maybe it will be Facebook! Let me therefore conclude this post with a nod to another piece by Ms. Ferrante-Schepis, “Will Mark Zuckerberg Reinvent The Insurance Industry? – A 2011 Prediction.” Okay, so we know her 2011 prediction hasn’t panned out — yet. But, given the cooperative capitalism of Uber, Airbnb, and so many others, are we willing to gainsay that Facebook has the opportunity to cover the risks handled by the insurance industry today?