Can Coliving do well by doing good?

The track record of companies that successfully integrate an environmental or social purpose into their operations, and manage to draw a direct profit from it, is slim to say the least. Think the Body Shop, Gore-Tex, Herman Miller or Patagonia. #Coliving offers the fascinating prospect of relying on competitive differentiators that are inherently virtuous: the sharing of resources and a #customerexperience built around human relatedness. Could Coliving be part of a new type of purpose-rich, virtuous business practice that does well by doing good?

With Davos just gone by, the cynics are claiming louder than usual that the seeking of profit and the doing of good are irreconcilable. Instead I want to think that, because of the extent of the environmental crisis we face, we have reached an inflection point. That faced with the damage caused by decades of unchallenged shareholder primacy (the breed of corporate governance that holds that shareholder interests should be assigned first priority relative to all other corporate stakeholders), things are actually going to change. That a new kind of businesses is challenging this makeshift concept, that has given licence to managers to not take any (costly) action to protect the environment or the communities they rely on.

And critically, that in the aftermath of the environmental wake-up call we’re experiencing, the full spectrum of business’s responsibilities will start being put under scrutiny. Coliving is ideally positioned to lead the charge in the paradigm shift.

Coliving’s intrinsic goodness

I’d like to think that while Coliving was born mostly out of economic constraints, it is securing it’s traction around the fact that, unlike most models focused on providing space-as-a-service, it chooses to be accountable for more than delivering a profitable service. At the core of the communal thinking that defines coliving, lies the idea that people sharing a living space share resources and decide to become accountable for each other’s well-being. And by extension, that true coliving operators welcome the additional challenge of creating a living environment that optimises resources and promotes an active interest in others, on top of the profitability constraints all space/hospitality providers are subject to.

And that’s usually when the same Davos-bashing cynics have a go, something along the lines of: Coliving operators don’t promote communal thinking as a form of social responsibility but rather because it decreases unit cost and increases stickiness to their rooms — and is therefore driven by profitability.

Well, that’s the point.

There is no trade-off between virtuous motives and profit here. If Coliving operators focus only on transactional experiences, and leave the human and environmental aspect out of their value proposition, they will eventually struggle with retention and brand image. The world now fully understands the idea that we humans need frameworks to best engage with each other and operate in harmony with our environment. Coliving spaces can’t operate without tending to their communities, it’s crux the “middle-man” value that operators bring between landlords and tenants. Failing to address this actively as a business, effectively turns Coliving into standard residential accommodation, a service people will not pay a premium for, nor have any loyalty towards (more on how to do that here). At the same time, in an age plagued by debilitating levels of loneliness in all segments of society, actively putting human relatedness at the centre of business practice, does indeed amount to fulfilling a social responsibility. So does the optimisation of living space. Coliving operators aim to do well, precisely by doing good.

Well is well, but how well?

When it comes to doing well, there is always that questions of how well. To address that issue, best to set the Coliving movement within some context. Given the nascent stage of the industry, I still find coliving best described with an inclusive definition: a form of flexible accommodation structured around shared resources and lifestyles. This broad definition leaves enough room for the three main axis along which operators are playing these days:

• length of stay (transient dwellers vs lifestyle seeking residents)
• degree of privacy (from bunk beds all the way to serviced rooms)
• scale of operations (concentrated site(s) vs decentralised operations)

When it comes to doing well, it’s mostly the last vertical that comes into play (I am consciously restricting the measure of success to conventional metrics here: size of the business and ensuing profitability). As in any industry, scale will naturally bring all sorts of extraneous elements into coliving’s kitchen. From its origins as a movement, it needs to admix with shareholder capitalism; be heavily funded by investors and on-boarded as a globalised trend by big business, be it real estate developers or hospitality players.

So the question morphs now to: can do-good coliving do well to the extent of becoming a global industry? And that question is two-folds: can coliving sustain itself long enough to showcase its alternative universe to the world, and will the “doing good” part be actively sustained once the trend is fully capitalised on?

A business model that can sustain good at scale

Coliving’s special weapon: reducing operating costs while increasing customer experience

Coliving has found in the past the disruptive idea that is making it successful today: community. A form of relatedness between humans so forward thinking, that people who are unrelated will decide, devoid of direct reward, to become accountable for the well-being of each other. Instead of… placing that burden on the operator. This is what gives both the model it’s legs and makes it a force for good. From a business sustainability perspective this offers operators the interesting prospect of sharing, with the interested party, the operational and financial burden of delivering a premium they are willing to pay for. And from a societal perspective, scientific research has now proven, unequivocally, that the antidote to the toll urban lifestyles take on our psyche is genuine human connections. More on how we are suffering from it here.

Critically, the more services offered in a coliving space, the lesser the member experience. Members feeling less accountable for cleaning after themselves or showing up on time at an event, in turn become less engaged in delivering to their fellow members, the intangibles that make coliving such a compelling lifestyle proposition: emotional support, distraction for the daily grind, pack spirit or simply lower levels of self-regulation and ensuing harmony in the space. The convenience (services bought) vs community “trade-off”, is what allows coliving to deliver a sought-after, profitable and virtuous customer experience, without the alternative revenue generation that hospitality enjoys; or the capital gains that real-estate developers can bank on.

A technology supported mission…

Another competitive advantage that Coliving has relied on and must continue to, is the technology used for the sourcing of real-estate, sales, services and engagement of members. The boom in cheap, user-ready tech we have undergone in the last 5–10 years has provided Coliving operators with the perfect storm they needed to gain competitive advantage over incumbents (traditional landlords, service apartment provider, informal flat-shares etc). Today it helps bolster their value-adding partnerships in real-estate (yield maximisation), space design (space utilisation tracking, user-led procurement) or 3rd party service providers (via integrated member engagement apps).

If Coliving players are able to maintain this edge and dedicate more of their resources to developing their proptech or even “communitech”, they should be able to command the margin they need to deliver on their promise of putting humans at the centre of what they do.

… drawing talent

The last element coliving can rely on to sustain its model of doing well by doing good, is the talent its mission draws. While baby boomers and gen X mostly “divorced” their professional lives from personal and civic areas, millennials have blurred the live between personal development and personal self-expression. They actively seek to reconcile their personal values and desire to be useful to the world, with their professional setting. Coliving provides an environment where the fundamentals of well-being are not only acknowledged but serve as the bedrock of the experience design: positive emotions, engagement, relationships, meaning and achievement; a place where both member and staff can flourish.

Unlike Coworking that deals with people in their professional capacities, Coliving operates on a much more intimate level. Operators are entrusted with the mission of providing homes for people: places where masks come off, reciprocity is by default and where members can find the sense of belonging and identification that each one of us need to function properly as members of society.

Coliving’s vivid mission provides employees with opportunities to develop a very personal narrative about how they affect the lives of others. And this in turn, leads to outstanding member experience. Customer service cannot be learnt by rote, people have to aspire to give that service and be equipped with the framework of trust and guidance that enables them to do so in their own way. Coliving is ideally positioned to sustain this at scale.

Provided its operators can entrench and maintain the integrity of the mission as they scale, they should enjoy tremendous workforce productivity benefits over those players who narrow their models to maximising shareholder profit only.

David vs Goliath? Can the Coliving movement co-exist with shareholder capitalism?

Turning now to the second question, I am torn between head and heart: what I think will happen and what I want to happen.

There is some evidence that shows that virtuous business practices have been successful (the founder-led Levis, Johnson & Johnson and Unilever; or today, the John-Lewis partnership, the Body Shop, Gore-Tex, Herman Miller, Patagonia). However, for the majority of virtue-led industry pioneers, becoming subject to the expectations of investors or large diversified groups has made things very tricky.

The tension makes sense. #Businessphilosophy has been dominated for last 50 years by the influence of disciples of the likes of Milton Friedman. And they believed that the sole purpose of a company is to make profit; the very concept of a company’s social responsibility being simply wrongheaded. That Adam Smith’s “invisible hand” would take care of things. This was buttressed by business schools finance professors who taught generation after generation of aspiring professionals that executives were paid “agents” of the shareholders of a company. And that managers who used corporate funds to benefit customers, employees, communities, or the natural environment are in effect, appropriating their employers’ capital. Turning them into potentially chargeable civil offenders…

Will coliving be able to sustain, in that context and over time, the argument that there is no trade-off between virtuous practice and profit?

With a business model based on it’s ability to sustain a community, we can expect a contradiction in terms between the duty to serve investors and their demands for high returns and the egalitarian spirit that underpins the value proposition.

Consistently, those in other industries who have succeeded at championing broad responsibilities for business, have done so relying on the same tools: a clear mission statement interlocking the virtuous purpose and the success metrics of the company. Strict, vocal and sustained adherence to the company’s guiding principles by all stakeholders. A sense of ownership in setting the course of the business nurtured in employees. And incentivising behaviours that turn each staffer into missionaries, defending the business’ moral purpose as their own. Not an easy feat. And what’s for sure is that their job became much harder trying to do good than for those who didn’t.

So… where do we stand? Are Coliving’s virtuous practices compatible with shareholder capitalism? I do think that Coliving is in a rare and promising position, where in order to carve out its market against existing solutions, it will have to rely on it’s intrinsically “do good” model. It risks being the cut-out middle man if it doesn’t. Surely that should be pressure enough to hold steadfast; that being said, one shouldn’t never underestimate the allure of money to justify cutting corners. So instead of an answer, I think I’d rather turn to philosopher Garrison Keillor who said “You get old and you realise there are no answers, just stories”; and urge all of us in the Coliving industry, no matter our capacity, to simply try to write as beautiful life stories as possible, for our members and ourselves, for as long as possible.

For more reading:

• The Enlightened Capitalists — James O’Toole
• The Future of Capitalism — Paul Collier
• Entrusted — Boon Hwee Ong & Mark Goyder