DAOs are hot! It seems a few trends are colliding to create the perfect fertile soil for Decentralised Autonomous Organisations to take off and for their numbers to grow exponentially.
As a result there are many well funded DAOs sprouting up attracting a lot of motivated people wanting to build wonderful products, communities, investment/finance vehicles, UBI structures and DAO infrastructure solutions amongst other things.
After having been part of a few of these experiments and observing a few others I concluded that DAOs don’t work. Hence the title of this article. I mean that literally. As in: DAOs don’t do the work, people do.
I think DAOs have tremendous potential and have a very important role to play. I think however that in many experiments today they are being overused or under defined. To explore this let’s take a moment to explore what makes up a DAO.
There are many different DAOs out there but roughly all of them share a few characteristics:
That’s roughly all there is to a DAO. In that sense a DAO might be the wrong name as the ‘O’, Organisation, is overpromising. The sum of these 4 characteristics do not make up an organisation. It does not answer how to organise your culture, your onboarding, your operational decision making, strategy and priority setting, conflict resolution or feedback mechanisms (to name a few).
Many DAOs are using their own voting tools to answer these questions as well. They are simply not the right tool for the job. Where voting can be a great tool to surface a collective perspective on asset allocation or correct abusive members by evicting them, it is a poor tool to get work done. When we want to get something done we should rely on experts in their field to autonomously and transparently decide and act. Voting suggests that everyone knows everything about everything, which we don’t. We could however, use voting as a back-stop in case someone abuses their autonomy in a way that does not serve the DAO.
Conventional organisations rely on hierarchies that are enforced through shareholders, boards, executives and managers with power 'over’ those lower in the hierarchy. This power is wielded through the tools of shareholdership, employment and compensation.
DAOs offer us the tools to eliminate all three of these tools that so often lead to power abuse. With that we ‘could’ create a safe environment where we are all invited to show up and lead our work in pursuit of the DAOs purpose.
The good news is that there have been people experimenting with the decentralisation of organisations for decades. There are some ready made solutions out there (eg. Sociocracy and Holacracy) that you can simply plug into your DAO and adapt to your specific needs. This will instantly give your DAO a couple of features that today are missing from most:
Currently I see many DAOs struggling as they either stick to a decentralised operation resulting in frustratingly slow progress or they revert to an implicit or explicit hierarchy inviting back all the challenges of our current day painful organisations.
Let us use DAOs for what they are good at: new ways of accounting for equity and compensation and membership back-stops in case of power abuse, and lean on self-organisation systems to allow for effective purpose manifestation. Together these two can flourish and allow us decentralised coordination without power abuse while serving our collective good.