La Bourse / Volume VI / Nº VI.02 / Workbook — the executive

A woman standing at the far end of a glass boardroom table, speaking to the board seated on either side. — Plate VI.02 · Workbook — the executiveThe Thursday Tribunal.The Tribunal de las Aguas has met outside the cathedral in Valencia, on Thursdays, for roughly a thousand years. It keeps no written record of its judgments. It has never needed one, because everybody who matters was standing there.

WORKBOOK — THE CORPORATE EXECUTIVE

Chapter VI.02 · Ostrom, Fully Applied

For the person with a P&L, a signature limit, a board and a quarter. You are already running commons — several of them — and none of them appears on your balance sheet. This workbook finds them, scores them, and gives you the financing structure and the one ratio that decides it.

THE PREMISE, STATED COMMERCIALLY

You have shared resources inside and across the boundary of your firm that nobody owns and everybody draws on. A platform engineering team. A data asset several business units feed and all of them use. A shared testing environment. A supplier that three of your divisions depend on. An industry reference dataset you help fund. A brand that every regional manager can spend and none of them can replenish alone.

Each of those is a common-pool resource in the technical sense: appropriation by one party reduces what is available to another, and provision is chronically under-supplied relative to appropriation. They fail in the specific, well documented way that commons fail — not with a bang, but with a slow drift in which consumption grows, contribution does not, quality degrades, and every individual decision along the way was locally rational.

The economics of this were settled in 1990, tested across 91 studies and 77 cases by 2010, and refined into a configurational account by 2016. You do not need to invent anything. You need to know which of twelve conditions your shared resources satisfy, which they do not, and what the cheapest gap to close is.

And one commercial fact before anything else: a commons is not always the right structure. There is a member count below which bilateral contracts are cheaper, and it is computed in Part Four. Knowing it — and saying it out loud — is what makes the rest of your proposal credible to a finance function.

PART ONE — DISCOVERY

Days 1–30: find the commons you are already running

Exercise 1.1 — The five-place sweep (one week, with your COO and your CTO)

Do not commission a study. Sit for two hours and go looking in five places.

1. The shared platform. Which internal capability do multiple P&Ls consume and none fully fund? Pull its headcount, its run rate, and the list of consuming units. Then ask the question that decides everything downstream: how is the cost allocated, and does the allocation track consumption? If it is a flat overhead recharge, you have a commons with no congruence between appropriation and provision, and you have just found your largest single gap.

2. The shared data asset. Which dataset do several units feed and all of them query? Who validates it? Who pays for that validation? When it was last wrong, who found out and how long did it take?

3. The shared environment. Test capacity, lab time, a manufacturing line running multiple products, a fleet. Look for a booking system. If bookings are informal, look for the queue.

4. The cross-firm resource. Industry data pools, standards bodies, pre-competitive research consortia, shared logistics. You are probably already paying subscriptions to three of these and have never read the governance schedule of any of them.

5. The reputational commons. The brand, the relationship with a regulator, the goodwill with a key customer. Every unit can spend it; replenishing it is somebody's job title at best.

Output: five candidates, one page, with the consuming units and the run rate for each.

Exercise 1.2 — The appreciative board conversation (one session)

Before proposing anything, change one question in one meeting. Replace "where is governance failing?" with:

"Which of our shared resources has held up well for years without anybody having to police it — and what is actually holding it together?"

Record what comes back verbatim. You are collecting evidence that the organisation already knows how to do this, which is a far easier argument than the claim that it must learn.

Exercise 1.3 — Find the hay rule (90 minutes)

For the best of your five, find the rule that nobody wrote down but everybody follows, and find the visible proxy it runs on.

The reference case is Törbel, in the Swiss Alps, charter of 1483: no villager may send more cows to the summer pasture than they can overwinter on hay from their own land. Nobody audits the pasture. Everybody can see the barn.

Your version might be: a team may open as many test environments as it has engineers on call. A unit may query the shared dataset as often as it contributes validated records. The point is the proxy — something already visible, so that monitoring costs nothing.

PART TWO — THE ARITHMETIC

Days 31–60: score it, and price the gaps

Exercise 2.1 — Score the chosen commons (one day, two raters)

Use the twelve-principle rubric from the chapter. Score 0 to 3 on each. Have two people score independently and then compare — the disagreements are where the real diagnosis lives.

  0  absent
  1  present in form only
  2  present and operating
  3  present, operating, and measurable from outside without permission

Write the evidence beside every score, in one line, naming the document or the number it rests on. A score with no evidence line is an opinion in a table.

Exercise 2.2 — Weight the core (30 minutes)

Report three figures, never one:

  full score              sum of twelve       out of 36
  core score              1B 2A 2B 4B 5 6     out of 18
  non-core score          the other six       out of 18

The core is the set the empirical record found load-bearing: Baggio and colleagues found 1B, 2B, 4B and 6 necessary-but-not-sufficient in most successful configurations, and the absence of 2A, 2B, 4B and 5 most associated with failure.

The chapter's worked case — English Wikipedia — scored 29 of 36 (80.6 %) overall, 16 of 18 (88.9 %) on the core, and 13 of 18 (72.2 %) outside it. The core read higher than the whole. A single total would have hidden that, and it is exactly the information a board needs.

Exercise 2.3 — Price each gap (one week, with your controller)

For every principle scoring below 2, write three lines: what closing it would cost in the first year, what it would cost annually thereafter, and what the first observable change would be.

You will find, reliably, that the gaps sort into two very different classes.

Cheap gaps: the ones where monitoring is already a byproduct. If your systems already log who consumed what, principles 4A and 4B cost you a report, not a department. The scale of this advantage is worth internalising. Wikipedia's entire enforcement record — every edit anyone has ever made, with the diff showing exactly what changed — comes to:

  edits, lifetime                    1,370,633,170
  at 500 bytes per revision delta            685.3   GB
  at $0.023 per GB per month                $189.15   / yr
  per edit per year                        $1.38e-07

The evidentiary base of the largest commons ever assembled, held for about the price of one dinner a year. If your logs already exist, your principle 4 is approximately free and you should close that gap this quarter.

Expensive gaps: congruence, and the right to organise. 2B — making appropriation proportional to provision — usually means changing a recharge model, and recharge models are political. 7 — the right of the community to make its own rules — usually means asking a sponsor to contract away a power it currently holds informally. Both are worth doing and neither is quick.

Exercise 2.4 — Say what the score does not license (30 minutes)

Write this paragraph before the board sees the score, because somebody will ask and the answer must not be improvised.

The score is a diagnosis, not a forecast. Converting points into a probability of survival requires a likelihood ratio — how much more often each principle is present in shared resources that endure than in ones that die — and no such ratio has been published, because measuring it requires the failures and almost nobody has counted them.

The size of the gap, for a score of 29 out of 36, prior odds 0.4658:

  LR = 1.2        2.54 bits       posterior  73.08 %
  LR = 2.0        9.67 bits       posterior  99.74 %
  LR = 4.0       19.33 bits       posterior  99.9997 %

The same score supports anything from "probably" to "practically certain", and the quantity that decides it is unmeasured. Present the diagnosis. Refuse the forecast. An executive who declines to over-claim on a number is believed on the next one.

PART THREE — DESIGN

Days 61–90: build the four that carry the load

Build in this order, because each one makes the next cheaper.

2B — make appropriation proportional to provision. This is the recharge model, and it is the hardest political conversation in the list. The commercial form: consuming units' contribution scales with measured consumption, with a published formula, reviewed annually. The moment this lands, most of your other problems become smaller, because self-interest starts pointing the right way.

2A — fit the rules to the conditions. Tier them. A single access policy applied with equal force to a quiet dataset and a contested one is wrong in both places. Three tiers is usually enough and two is usually not.

4B — make the monitors answerable to the monitored. A central compliance team auditing consuming units satisfies the paraphrase of principle 4 and fails the principle. Either rotate the monitoring role among the consuming units, or — better — make the monitoring a byproduct, so that consumption generates the record automatically and everybody is everybody else's monitor.

5 — publish the sanction ladder. Not because you will use it. A published ladder deters on rungs nobody ever climbs, and an unpublished one is indistinguishable from arbitrary power, which is the thing that kills cooperation. Graduate by context as well as seriousness — Ostrom's wording is precise on this and the precision earns its place: the same breach in a crisis week is not the same breach.

Then the two nobody builds:

6 — put a service level on conflict. First response inside a stated window, a decision inside a stated window, a capped cost to the complainant, and publish the median resolution time. A dispute mechanism whose median is unpublished is one nobody can trust before they need it, and untrusted mechanisms do not get used until it is too late.

7 — write down the right to make the rules. If a parent company, a sponsor, a platform or a foundation holds the infrastructure, the marks or the terms, then the community's rule-making authority exists at that party's pleasure. On 10 June 2019 the largest digital commons in the world found out what it had not written down, and lost administrators, bureaucrats and years of goodwill over it. The clause is short: the holder's power to override is limited to enumerated grounds, exercisable on stated notice, with a written reason, appealable to the conflict panel.

PART FOUR — OPERATIONALIZE

The instrument, and the one ratio that decides it

The structure: a shared-infrastructure consortium under a governance deed with an annual attestation and a fee ratchet.

A company limited by guarantee holding the shared resource. Members admitted by class. A published rulebook. And a governance schedule drafted as twelve numbered covenants, one per principle, each with a named measurable.

Balance sheet. The resource sits in the vehicle. Members hold a right of access, not an equity interest; contributions are an operating subscription, expensed as incurred. Where a member has control or joint control, do the joint-arrangement analysis properly and do it at drafting, not at year end.

Attestation. An independent practitioner reports annually under a recognised assurance standard — ISAE 3000 is the usual home for a non-financial subject matter — scoring the twelve on the stated rubric, with the scope and the denominator on the front page.

The fee ratchet. Subscriptions carry a surcharge proportional to the attested gap on the four core covenants, hypothecated to closing that specific gap. This is what turns an attestation from a certificate into a mechanism.

The number that decides it, and it goes on the front page of the board paper:

        annual governance cost                 the same ratio for the
   -----------------------------------   <    bilateral alternative
     annual value appropriated

Worked, on a nine-member consortium sharing a reference dataset — an illustrative scenario; only the arithmetic on it is computed:

  members                                                  9
  value appropriated per year                     £4,500,000
  ------------------------------------------------------------
  attestation                                        £45,000
  secretariat                                       £180,000
  conflict panel reserve                             £30,000
  governance cost                                   £255,000        5.67 %
  ------------------------------------------------------------
  bilateral alternative: n(n-1)/2 = 36 pairs
  at £12,000 each                                   £432,000        9.60 %
  ------------------------------------------------------------
  saving                                            £177,000        41.0 %
  advantage at nine members                            1.69 x

And the crossover, which is the number to take into the room: eight members.

  n = 7     21 pairs     £252,000   <  £255,000     bilateral still wins
  n = 8     28 pairs     £336,000   >  £255,000     the rulebook wins

Bilateral agreements grow as n². A rulebook grows as n. Below eight members a commons is an expensive way to do something a few contracts would do better.

Say that out loud in the meeting. An executive who names the condition under which their own proposal is wrong is believed about the condition under which it is right, and a board that has been handed the crossover will ask you for it again on the next three proposals.

The first ninety days on a page.

Day	Action	Artifact
1–15	Five-place sweep; count the members; run the crossover	The one-page ratio
16–30	Choose one commons; find its hay rule	Candidate memo
31–45	Score the twelve, two raters, evidence per line	The scored twelve, dated
46–60	Price each gap below 2; sort cheap from expensive	The gap schedule
61–75	Draft covenants 2B, 2A, 4B and 5; negotiate covenant 7	The governance deed
76–90	Commission the first attestation; publish the baseline	The attested score, dated

The published baseline score is the irreversible commitment. It cannot be quietly walked back, and next year's will be compared to it by people you have not met.

WHERE YOUR OWN NUMBERS ALREADY SUPPORT THIS

Three places, and you can check all three this week.

The recharge model. Pull the allocation basis for your largest shared platform. If it is a flat overhead, the units that consume least are subsidising the units that consume most, and the subsidy is invisible in every unit's P&L. Publishing consumption by unit — before changing any allocation — usually changes behaviour on its own, which is principle 4A arriving free.

The logs you already keep. Almost every shared internal resource is already instrumented for capacity planning. The same data answers principle 4. The cost of closing that gap is a report, and you have already paid for the data.

The bilateral agreements you are already maintaining. Count them. If several of your units hold separate agreements with the same set of counterparties, run n(n-1)/2 against the cost of one rulebook. Above eight parties the arithmetic is usually decisive, and it has been sitting in your legal spend the whole time.