The Prophesy of Mondragon

It has been said that every Story is a Prophesy of something even greater that is possible.

In 2018 and 2019, as we searched the world for alternative ways to govern our Selves, we took two week long trips to Mondragon with the leading professor in the US and groups of graduate students to learn from the decades of experience, success, and struggle that resulted in the co-creation of one of the most successful co-operative economies in the world.

The Lionsberg System seeks to honor the wisest principles, values, and examples of what is working well in the Mondragon Experience, while attempting to step beyond it towards a New Human Operating System that could be offered to all 10 billion humans during the 10 Year Grand Strategy.

Here is the Story of Mondragon as a example of what is possible in every bioregion and locality of the world.

The Story

Historically, life in the Mondragon region was dominated by a few rich industrialists, who paid the workers little and provided only minimal basic services.

A priest name Jose Maria Arizmendiarietta began advocating for change.

1936 to 1939 - Civil War. A time of deep strife and division.
In 1943, Arizmendi raised money from the local townspeople to start a school.
Convinced 11 local students to study engineering via correspondence, visiting Arizmendi to take the exams.
Arizmendi spent 10+ years traveling, speaking and giving conferences. People agreed with the ideas, but no one changed. Bad strategy.
Eventually after a decade of trying and failing to convince people to change, he reached the conclusion that it was not possible to transform the Old companies.
Instead, they would need to create our own New companies.
1956 - Convinced 5 guys to quit and start the first Cooperative - ULGOR.
- Arizmendi did not take a position in any of the co-ops
- He encouraged self-government and self-organization - "Organize a group to do something - elect two coordinators, and I'll be back to check on you"
1959 - Discovered that existing financial mechanisms were not suited to the new paradigm, and started their own Bank
Throughout the inception, three primary elements were present:
- Daily sermons from Arizmendi / Religion
- Technical and Vocational Training / Work
- Social, Cultural, and Community Action
  - Free time organizations
  - Music, plays, parades, lotteries to raise money for the poor, debates, football clubs
  - The social activity often engaged the youth, whose parents were fighting and divided
Emergence of a growing blend of for-profit and social organizations
- Cultural responsibility of the economic engine to fund valuable social goods
- Some of the organizations generate economic resources, others generate social and cultural riches so that everyone can live good lives
- Community coordination around resources and philanthropy - if we have $250k available, what are we going to do with it and why?
1976 - Introduced Humanities Department to University
1991 - shifted from regional to industry organization structure
2011 - Introduced Gastronomy Department to University
2016 - Revived Regional organizational structure (in addition to Industry) in order to fuel social innovation
Over time has grown out to:
- 100+ worker owned co-operatives
- 140 subsidiary organizations
- 26 umbrella companies and foundations
- 268 total organizations
- ~70,000+ co-operative members
The local myth of Mondragon (mount of the dragon)...
- Every year the dragon required the sacrifice of a virgin
- As opposed to an individual hero story, the dragon was killed co-operatively to liberate the town

The Importance of a Transformative and Uniting Purpose

To hold a diverse federation of organizations and activities, all purposes and goals must ultimately Stack Up And Align to the Overarching and Uniting Purpose of the Federation.
This requires a way to articulate, organize, and align individual and local Vision and Purpose, with the Highest Uniting Vision and Purpose.
For Mondragon, this is entrepreneurial development, job creation, and the co-operative culture and ethos.
- Partnering with God and One Another to co-create a better world

Continually Refreshing the Mission

Within this uniting Purpose, the Mission is regularly revisited with formal reevaluations every 4 years.

Values in Action

If you just use words, people think it is propaganda and shut it off
Demonstrate it in action, live it out, embody it, then back it up with the principles and concepts
If values are not applied and embodied, we do not really have them
- The often radical separation between the values discussed on Sunday and verbally assented to, and those embodied and lived out during the week
What form of self-governance, economy, and society enables us to translate these Universal Values into work and society and life with integrity?
Applied Universal Values clash with pop-culture values of consumption, leisure, whim, short-term gratification, false ideologies

Transformation From The Bottom Up

The core idea is the transformation of the world from the bottom up.

To do that, you have to create New People.

Transformed People -> Transformed Society.

The primary way to elevate and transform humanity is through meaningful work and enlightening education.

An integrated paradigm of Economic, Social, and Personal development in service to humanity.

Mondragon is not a religious organization, however Arizmendi was a priest and placed a spiritual foundation underneath all that was built.

Self Governing, Self Sustaining, Self Replicating Groups and Teams

As transformed people begin to collaborate to transform their lives and their world, the basic principle emerges of Self-Governing, Self-Sustaining, and Self-Replicating groups and teams, in a blended ecosystem of for-profit and non-profit organizations.

Community Based Sense Making

Who Are We?
Where Are We?
How Did We Get Here?
Where Are We Going? / Where Do We Want To Go?
Why?
What Tools and Resources Do We Need?
What Do We Discern The Issues, Challenges, and Roadblocks Are?

Co-Operative Structure and Federation as a Tool / Process / Pattern

A co-operative is merely a tool
To accomplish the goal of what?
- Human and social development
- Self-Governing, Self-Sustaining, and Self-Replicating groups and teams
- Co-operating with God and One Another to build a better society and finish our world.
The federation is merely a tool...
- So that each self-governing co-operative does not have to reinvent the wheel and struggle in isolation
- We are stronger together.
Solidarity

Co-Operative Entrepreneurial Spirit

The co-operative ethos revolves around the Spirit of Team Based Intrapreneurship
- They do not celebrate individual hero entrepreneurs, but rather Intrapreneurial teams that co-create new federated co-operatives
The Critical Path is prepare Teams of Intrapreneurs to tackle meaningful challenges and quests that make the world a better place
"We don't teach them, we help them learn"
Key questions:
- What is the right reward for entrepreneurs in a society?
- Who "owns" the ideas, work, and good fortune that rises on top of such a society?

Core Enterprise / Headquarters - Powerful Help, With No Guarantees

The "federal" headquarters / core enterprise that serves 268 organizations and ~70,000 members (MCC) is intentionally kept as small as possible, with only about 60 members.
It's functions are limited to core services, communications, and coordination
This tiny size is made possible by the fact that all cooperatives in the system are Self Governing and Independent of the federation.
MCC serves, helps, and supports the federation, but guarantees nothing among the independent co-ops
The basic model is: sovereign, autonomous co-ops with no central guarantees
Very important both culturally and legally that there is no perceived claim on the Whole
- For example, the largest co-op went bankrupt. Individual parts have to be able to be born, mature, and pass away without affecting the federation
- Ensure that the relationships between the Core Enterprise and the distributed network of Self-Governing, Self-Sustaining, and Self-Replicating Teams is arms length to protect against inevitable failures / attacks taking down The Whole
If a co-op gets into trouble, MCC will often help with restructuring out of Solidarity, but has no obligation to do so
The priest said: Ask not what Society can do for you, but what you can do for Society.
- No entitlements, no welfare state, no central dependencies

Self Governance, Sovereignty, Autonomy, Responsibility

With every training we must reinforce - that each individual is the responsible first agent.
All teams are Self Governing, Self Sustaining, and Independent of the Federation
Every co-op is self governing and responsible for its own sustainability and success
If we believe in democracy and self-governance, shouldn't that also be applied to economics?
You are the first agent. No one is here to save you.
The "boss" is not responsible. You are.
The "federation" is not responsible. You are.
The federation and the elected leaders are there to serve and coordinate the Autonomy and Responsibility of the distributed network
Like a federation of City States
At the Team / Local Level
- Empowering those experiencing Issues...
- ...to propose and implement Shared Solutions...
- ...that lift up the Team...
- ...and therefore the Co-Operative
- ...and therefore the Whole
Escaping dependency and paternalism
- Previously, life and work in the community was dominated by rich industrialists
Blame
- If the problem is ever outside the Conscious Agent, you will never improve
- Zero Blame Environment
- If something goes wrong, it is Us that must transform and improve
- If something is not clear or effective, it is because we were not persuasive, passionate, convincing, etc.

Five Big Ideas

Dignity and Worth of Every Human Person
Solidarity
Work
- Meaningful Work is the positive Way we develop our Selves and our Society.
- In Mondragon, the elders say "We are helping God finish our world."
- Work is not a curse, but a primary source of Community, Purpose and Meaning.
Education
- Arizmendi believed that education, along with meaningful work, were the core elements that transformed human beings.
- In Mondragon, Sirimiri is a Word Tool they use to point to a light little rain. Arizmendi used this as a metaphor for teaching, and would give little Fireside Chats. A little rain, a little enlightenment at a time, recognizing that the seeds of Wisdom and Knowledge take many years to grow.
- Future proofing workers through meta skills training
- "We don't teach them, we help them learn"
Self Governance, Responsibility, and Authority
- Every individual and co-operative is responsible for their own self-governance, self-learning and success

Aiming Towards The Ideal

We are continuously improving our understanding of The Ideal we are aiming towards
Foundations and other entities that are not technically organized as cooperatives still Act As If they were, to maintain the culture and values

The Gap Between Who We Are and The Ideal

There is ALWAYS a gap between Who We Are / Where We Are and the Ideal / Principles / Values we uphold and aspire to.
"There is always a gap, but at least there is a standard, and we hope there is less of a gap than with other organizations"
Striving to Co-Create practical Realities that conform ever more closely to the Foundational Ideal / Principles / Values
Evolution and bottom up transformation towards the Ideal - as opposed to revolution from the top down that leaves the social fabric of humanity fundamentally unchanged
It is not perfect. It is not a utopia. It is not a finished model.
- It is PROCESS for RISING towards unachievable perfection
- Aided by the Grace of God
It is not heaven. It is not utopia. We are human, we are trying to figure it out, and therefore it is imperfect.
- But we are striving to make it more perfect by getting a little better every day
Identifying And Solving Issues - Proposing solutions, implementing, learning, and continuously improving

Local Governance Structure

Every co-operative is self-governing
1 member = 1 vote (at local and federal levels)
Individual Co-Ops have equal access to shared services and support, but no obligation to use them
Solidarity
- There are no unions vs. management - instead, full self-governance and self-ownership from the bottom up based on cooperation rather than factions and divisions
Salaries
- We are all Worker / Owner / Stewards, therefore there is nno "them" to guarantee Salaries
- Salaries are viewed as Advance Payments pending Final Accounting
- If what we pay our selves results in a loss, it comes out of our Capital Accounts
- Minimum wage is generally about 1.5x what the governance mandates
- Ratio of Lowest Paid to Highest Paid member is about 1:7
  - Each level has decimals.
  - Each position has a range written in the handbook, for instance 1.9 to 2.1
  - Compared to Spanish IBEX companies ~ 1:00
  - Compared to United States ~ 1:330
Hiring and Onboarding (Intern -> Temp -> Member)
- Everyone goes through internship, training and onboarding
- If they demonstrate that they are a hard worker and good cultural fit, they are given a 90 day trial
- If they succeed in the 90 day trial, they are awarded a 2-3 year temp contract
- After 3 years, either membership is offered, or the contract is terminated to make room for someone who can develop into a good long term member.
- Lesson Learned - this facilitates the churn that is needed to create space for those who truly have the heart and desire to become contributing members of the Society.
Member / Temp Ratio
- At any given time, roughly 85% worker / member / owners, 15% temp contracts
Performance Management
- Reviews every 1 to 2 years
- Very rare to fire

Federal Governance Structure

One Member One Vote
Every Member has the Right To Elect, and the Right To Be Elected.
General Assembly
- Elected by Members
- Most important annual decisions
- 4 year terms
- 2 representatives from the smallest co-op, then graduated up according to size
- Standing Committee - including a President
Governing Council
- Elected by General Assembly
- Given training on Management
- 3 year terms
- Responsible for appointing the General Manager
General Manager
- Nominates the Management Council
- Every 2 years, Governing Council "renews trust" in GM
Management Council
- Includes a Director for each Functional Department
Social Council
- Communication Body
- 1 to 2 year terms
- At all fractal levels down to every department
- Have 2 meetings per month
  - One meeting with Management Council and General Manager
  - One meeting with their department
    - Explain to their colleagues the Internal Context and External Context of the organization
    - Discover questions, problems, needs, opportunities
    - Relay answers to inquiries from previous month
- Mandatory to serve if you are elected, no additional compensation for the extra service
Decision Making and Consent
- Key decisions must be unanimous.
- Slow down and wait for the higher order solution to emerge, which reconciles all the apparently competing concerns
- If you vote and it is 5-4, or 8-1, maybe that minority is sensing something that is genuinely wrong and will block progress
No Campaigning
- If you say "vote for me", you are essentially automatically excluded from the contest
1/2 the General Assembly ballot renewed every 2 years
- Governing Council proposes candidates to members
- Or - members select and unify around candidates
Co-operate internally, compete externally
- Strong culture of internal cooperation and mutual aid, not competition

Program Management

It takes strong community leadership and program management to coordinate:
- Schools
- Universities
- Community Organizations
- Non-Profit Organizations
- Cooperatives
- Resourcing Organizations
- Volunteers / Retirees

Government Relations

Over time they have successfully lobbied government repeatedly to change laws to allow for easier operations and compliance

Corporate Structure

1st Degree Cooperatives -
- 102 Cooperatives
- Divided into 14 Divisions
2nd Degree Cooperatives - "Co-Ops of Co-Ops"
- Grouped by Industry Areas
- Divisions are like 2nd degree cooperatives
- The General Manager of the 2nd Degree Co-Op is VP of Division
- Every few years, the divisions rebalance

Federated Finances

Step 1: Restructuring Results

Recognizing that every individual co-op will at times struggle or have a bad year...
In a spirit of solidarity 15% to 40% of results are spread between the divisions...
So that everyone "feels" gains and losses across the Whole

Step 2: Capital Allocation - Profitable Co-Ops

14% to MCC
- 10% to expand the System and create new jobs (Via Management Co)
  - ~80% to infrastructure and technology improvements, job creation
  - ~ 20% goes towards subsidies and the big bets / moonshots
    - Pooling central capital and de-risking / incentivizing moonshot projects that may provide a future for citizens
- 2% to help struggling co-ops (Via Foundations and subsidies)
- 2% to help non-profit co-ops (Via Foundations and subsidies)

Step 3: Taxes

Step 4: Net Profits and Allocation of Capital

In general, most co-ops follow a model similar to:
- 10% - Minimum 10% for lifting up society, education
- 30% - worker profit sharing
  - We share 30% of profits among us
  - If you are a temp worker, it is cash
  - If you are a member, it is Capital
  - Profit sharing is often an additional 3 to 6 weeks of pay on average
- 60% - Capital Reserves and growth

Capital Accounts

Capital is viewed as a subordinate tool, to be used to:
- Improve our selves
- Improve our Society
- Help God finish our world
Everyone buys into The System- ~$15,000 Euros
- Loans are available from the bank so there is no barrier to entry
- 20% is a fee to join The System
- 80% is your Initial Capital
- Skin in the game is critical, but should not be a barrier to entry. Resource ladders in place so that everyone has access
Capital is not available for withdraw until you retire, so that it is stays in Flow in The System
- If you so choose, you can leave Capital in when you Retire
The General Assembly decides if they will pay interest each year, and at what rate
- Range from 0% to 7%

Inter-Cooperative Loans

Co-ops often lend to one another to solve short term cash issues
Low interest rates
Inter-Cooperative loans are backed by the Mondragon federation (up to a point)

Reporting, Audits, Checks and Balances

Regular reporting to MCC Headquarters
Annual audits - Trust and Verify!
Checks and Balances
Close Attention and Disciplined Management

Financial Crises and Lessons learned

Example: Bankruptcy of Fagor - largest co-op
Lenders and social security system made whole first, worker / member / owners last.
Lessons:
- Stop losses sooner (hope is often the last thing we lose)
- Face the harshest realities early and often

Functional Areas and Shared Services

"Social Management" - there are no Human Resources
- Social security for workers
- Job placements services between co-ops as various industries and organizations fluctuate in size
- If you are moved to another co-op, placed back on temporary contract for ~1 year while remaining a member of the old co-op for a year.
- If it is a good fit, you become a member in the new co-op and your capital moves
  - If the old co-op is bankrupt, Mondragon puts in the 15k euros to restart your capital account with the new co-op
General Purchasing Department
- Can join if you want, no obligation
- In all areas, protecting ability of Self Governing co-ops to do what is wise and right locally
Incubators and Labs
- Saiolan - business incubator for tech
- Incubates 16 companies / year
- Issue:
  - Most incubated businesses are not co-operatives because entrepreneurs don't want to give away (wrong understanding / cultural breakdown)
- Some university teachers work a few hours a month for Saiolan incubator
Central R&D to partner with each Co-Op
Central service units also service outside organizations, not just Mondragon organizations
No obligation to use internal service units
- Culturally encouraged, but no obligation. Internal service units have to perform.
- Small and medium co-ops tend to use more
- Larger co-ops tend to develop their own
Social Safety Nets
- Private Social Security
  - Up to 2 years if not working
R&D and other central services are also independent co-ops
- Must market, contract, and ask for projects internally and externally
- Generate revenue internally and externally
Elkar-Lan
- 2nd degree cooperative whose mission is to promote cooperative employment
- Mostly very small coops of 2 to 4 people
Mondragon central looking to create co-ops that can employ 100s
Laboral Kutxa (which might be the bank)? has 20 person service to create companies
Gaztenpresa foundation
- in 2017 402 companies, only 700 employees
- Cultivating the entrepreneurial gene

Innovation and Cross-Pollination

There is a central R&D co-op to partner with all businesses and cross-pollinate solutions
- The best processes, practices, and technologies cross-pollinated and cross-innovated among a variety of co-ops
M4 Future Innovation Model - on web page
"The R&D department of each co-op is the most important"
- Each co-op has an innovation and technology center
Innovation is in our DNA, starting with our cooperative structure
Long term innovative ethos: Renew facilities, buy new machines, never rest or become complacent or arrogant
Executives go on missions to other industries and other parts of the world to see what they are doing, learn, cross-pollinate
There is always one more step to be done. The moment you become satisfied, it is the beginning of the end

AI, Robotics, Automation

Even by 2018, Mondragon was beginning to sense a shift to where most available jobs where reserved for those with advanced vocational training or better
- Anticipating that by 2030 to 2035 most of the low to mid skill jobs gone
Anticipating the advent of disruptive technology that could cause 40% plus of jobs to disappear
Estimating that without major changes, 40% of the population would be unable to participate in the economy
What is the next wave of Meaningful Work for students and blue collar workers with the coming wave of AI, automation, and robotics?
How can we deal with increasing globalization and the dramatic wage and production disparities?
- "Can't pay 25x the wages of other countries and still be competitive"
Innovation and Education are the key
Transforming towards smart cities
Manufacturing 4.0
- Automated, and moved back in-country / on-shore
- Bioregional manufacturing hubs
- Automation, Additive Manufacturing, Just In Time supply chains
Artificial Intelligence, Robotics, Automation
Big Data
Raw Materials - Doing more with less

Food Systems

Local gastronomic societies
Co-operatively run dinner clubs
Local, organic, regenerative agriculture

Misc Learnings and Sayings

Education takes time - Sirimiri - Fireside Chats - daily sermons
- Over time, the community "got wet" in the ideas (Sirimiri)
Don't waste too much time trying to transform the Old - Co-Create the New
A New regenerative paradigm requires New financing and insurance mechanisms
- The rapid recognition of the need for an internal bank
The Mondragon Experience - not the Mondragon Model
- It is not perfect. It is not utopia. We are wrestling with the ideas, trying to learn and figure it out.
Solidarity and internal co-operation, not competition
Education is the foundation of Mondragon - transforming and enlightening individuals from the bottom up
Community organizing, social organizing, educating both children and adults
"Organize a group to do something - elect two coordinators, and I'll be back to check on you" ~ Arizmendi (approx)
Basque - the premier linguistic mystery. Not discernibly related to any other language.
"We are going to help God finish our world"
Worker = Member = Owner
"What is on our minds is The Mission - A Better Society (through empowered work, education, and co-operation)"
If we believe in democracy and self-governance, shouldn't that also be applied to economics?
We are living and working for God and humanity
Requires a complete paradigm of personal development and individual formation
Communications system
Respect - letters are addressed "Esteemed Friend"
Constant training on cleanliness, order, quality, production... have to stay after it!
Think Tank - the wisest minds translating times wisdom, principles, values, laws of nature into a new operating system for humanity, that can co-operate across all fractal levels of analysis, organization, and integration.

Reflections From Executives On What is Not Working

Arizmendi spent 10 years speaking and giving conferences. People agreed with the ideas, but no one changed. Bad strategy.
- Therefore, he had to convince a small group of individuals to start the first co-op, and begin assembling the federation.
- The Old is difficult to transform
- New Wine requires New Wineskins
One of the largest Co-Ops broke the code and sold
- Barcelona co-op sold out to a great offer from Cemex...
- Everyone walked away with millions locally, while damaging the federation.
- The temptation of short term local gain at the expense of the Whole
The largest Co-Op went bankrupt
- After Fagor backruptcy, 1,900 employees demonstrated against Mondragon and sued
- Break in training, culture, values, understanding
Culture
- Something went wrong in the training that allowed for this.
- Need to rethink, and reinforce with every speech that YOU are responsible first.
- You are the first agent
- Zero Blame Environment
- No central dependencies or guarantees
Welfare State
- In the beginning, there was no welfare state
- The Priest said: Ask not what Society can do for you , but what you can do for Society
- Now, we are starting to live in an entitled welfare state
Lack of coordinated strategy and reporting for how non-profit $ is spent
Training must begin from youth, and be hit hard and immediately when a worker begins
- Year zero / onboarding
- Year one
- Year two
- Year three
- Then ongoing maintenance
- It takes 2-3 years for a worker to truly feel connected, empowered, and part of the culture and process
General Assembly Meetings have become very short
- There are many people, and debate is unusual
- When they ask if there are any issues or objections, usually silence
- Are issues and minority vote going unseen?
Blame
- If the problem is ever outside the Conscious Agent, you will never improve...
- If something goes wrong, it is us that must transform
- If something is not clear, it is because we were not persuasive, passionate, convincing, etc.

Misc. Notes

Education

The Pedagogy of Trust

Mendiberri
Learning to learn
Active, student centered, problem, project, and group based learning
Cooperative content
Cooperative citizens values
Ability to work together in community, manage conflict, know how to find resources and knowledge, assemble and present plans, debate, persuade

Learning to Think

Thinking
In Scales And Probabilities, not Black And White, yes or no
Triangulating To The Wise Right Answer

Symbols

Symbols: Symbolic language that is easy to understand internationally, and for youth.
- Flags, pins, etc.

Mondragon University

Applied Focus: Students spend 1/3 of credits in live businesses
Jr. Co-op for students
Learn by starting to do business
Learn by teaching one another
Coaches guide
Profits used to pay learning journies to silicon valley, finland, india, china, etc.
Tuition 6k to 9 k / year - 41% of budget
40% of budget from tuition
20% of budget - knowledge transfer to businesses
- Not just thesis - applied knowledge generation and transfer
Mondragon University is a 2nd Degree Co-Op
- Each School is a 1st degree co-op
  - Each School Has 3 constituencies on General Assembly
    - 1/3 Students
    - 1/3 Faculty
    - 1/3 Collaborating Members (MCC, City Hall, Businesses, etc.
    - Cross pollinates students, with MCC, with businesses etc. great opportunity
- Each Co-op general assembly appoints their Dean...
  - and must approve their choices for key staff
Break the waste of the University Industry
- Online learning
- Project based leaning
- Coaching
- Vocational Training
- Learning Support - Tutoring, peer coaching, on the job training
- Assuring that learning is real and applied
- Universal access to high speed internet to facilitate distributed wisdom and knowledge sharing, problem solving, and coordination
- Research separated from teaching
  - Often skills of learning facilitator and researcher do not overlap
- Active Work...
  - with off-hours distance learning
  - active coaching, mentoring, tutoring
  - peer coaching / co-operative learning
Ideal
- Technical degree + management degree
- A well suited vocational skill, and the ability to cooperatively organize the world around you
Lane Labs
- Classroom / laboratory to work on a business
- 5 teams competing to solve real issues
Leveraging external resources such as Udemy

Developing Countries

Mondragon has made an effort to disseminate its model to developing countries through its Mundukide program.
Mondragon provides opportunities be paid to work on projects in developing countries
Long term commitments 10 years plus to facilitate true learning, relationship, and transformation
- Everything done on the basis of Micro Finance
  - Start small and learn
- Need someone on the ground to truly learn, understand, and match General Solutions to local aspirations and needs
Efforts to spread the system have often struggled:
- Example: Mozambique
  - co-op idea didn't work
  - Farmers had other Needs
  - Like a roadway. Basic infrastructure. Basic security.

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