Introduction
One of the questions we’ll be wrestling with consistently, from basically now on will be, “how are DAOs different?”
The reality is, that DAOs can be run in basically any way that people want them to, but in my view they have a native equilibrium state that is different to that of a conventional organisation.
They exist more implicitly at the edge of chaos.
This article is about what this means and why that’s interesting. Let’s contemplate the difference between two archetypal work scenarios.
Normcore Inc
Imagine you’re sat at a typical desk, in a typical office.
There’s five other desks in the room. You’re watching Clive eat his lunch. Like you do every day.
As you try to ignore the smell of Clive’s “Bombay Bad Boy” pot noodle, you look over at your other office mates Alice, Bob, Rita and Sue. They’re also eating their lunch and so are you.
Suddenly, Eric your line manager pops in with a “problem” and he wants you all to sort it out. An urgent thing needs to be processed, so you spring into action.
It lands on your desk first, it’s an invoice that needs processing for immediate payment. You push your cheese sandwich to one side and begin tapping in the details from the paper invoice into your purpose built database system. You’ve done this so many times it’s basically automatic.
Within a few minutes you’ve done your bit and you pop the invoice on Alice’s desk and give Clive a non-verbal nod, who slurps the last of his noodles and springs into clickity-clack action on his keyboard.
It isn’t long before the document has cycled through the office and Rita is on the phone to Eric to alert him that the invoice has been processed and the supplier should have their money close of play.
Done. Efficient, centralised bliss.
metathingDAO
It’s Monday evening, your fella is watching the footy and you’re bored so you decide to drop into the Discord to see what’s happening.
It looks like a few hundred more people have joined and are asking questions about a forthcoming airdrop. The usual crew are in there dropping memes and filling in the n00bs on what’s expected to happen next week.
You’ve been contributing for ages and your Gold NFT DAO pass earns you a seat at the high table aka the “DAO Leaders” channel. There’s about two dozen of you in there now, but about half of the people there don’t talk all that much.
There’s a dedicated core though, the “senior DAO leaders” and they’re coordinating the airdrop launch. They’re deep in a conversation about the droplist and think they’ve discovered some sybils. There’s a heated debate about the best way to deal with it without rugging some honest users. You’ve recently seen an approach to sybil detection the gitcoin crew have been working on so you drop the link and leave them to it.
You pop back in a few days later and there’s a new airdrop list a, few new DAO leaders (one who apparently is a data scientist that’s working on the sybil thing at gitcoin) and now everyone’s busying away at some new thing you can’t even understand. Too many messages under the bridge. You’ll pick up what’s happens at the next community call and you drop off.
A Tale of Two Orgs
Hopefully, from the illustration above you can see the difference of in two modes of organisation.
At Normcore Inc, your day-to-day is ultra routine, your workmates are fixed to the point that you know their eating habits, you have well-defined fixed processes that are so settled they’ve been coded into your software.
When it comes down to actioning “the thing” that you do, you’re ultra efficient, to the point it barely needs any communication.
There’s managers who are operating at some other layer of the game that turn up and provide instructions, it’s in your job description to do what they say.
You get paid on a rolling salary that increments slowly through a highly structured grading and role system mediated by a Human Resources department. If you don’t action your job description it’s time for a disciplinary and eventually a cardboard box if you don’t up your game.
At metathingDAO the organisation is open, there’s people wondering into your metaverse office all the time. People are transient, the population of the org is in constant flux.
“Problems” are massively divergent, radically novel and delivered by context rather than a line manager. There’s no authority chains, but there is segmentation by gated groups.
The goals of the org are derived through social consensus, most likely through a coin voting system. Those at the core of the DAO might be getting some consistent payment, but most are engaging because they’ve bought the tokens and want the project to succeed. If the DAO is successful the tokens moon and everyone gets exposure to potentially uncapped asymmetric gains.
From Order to Chaos
You can conceptualise almost everything on a continuum from order to chaos.
Over on the most ordered, of ordered things you have things like the diamond crystal. So ordered at the atomic level it has exceptional hardness properties. With a diamond tipped blade you can cut through steel.
At the other end of the spectrum you have total disorder. Something like a gas particles in a box is a good example of this, whizzing round bumping into each other in truly random motion.
The degree of order in a system determines its properties. You’re not cutting through much steel with gas particles. As useful and pretty as diamond is, it doesn’t do much over time, it’s as static as static gets. The gas particles however, are always on the move and do so in such a perfectly random way that there’s nothing that interesting about it. So much going on that nothing is interesting. Total chaos.
The bit that’s interesting, is the bit that’s in-between. That’s where the magic happens.
As it happens, it turns out that there’s a really interesting spot. The edge of chaos.
It’s bit like orbiting a black hole. Right next to where things get super insane and it all goes to everything and nothing, you get a special thing; emergence.
Emergence is when something new arises that’s greater than the sum of its parts. A serendipitous amalgamation of things (antecedent conditions) that creates something radically novel. Order arises out of chaos.
The ancient Chinese were on to this with the yin yang symbol. The two sides of the symbol represent order and chaos (alongside any other duality you would like to throw at it) and the dots leading into either side represent this process of order arising from chaos, and visa versa. Ancient wisdom.
The Zone of Complexity
Complexity is that whole special space at the boundary between order and chaos and is an incredibly important idea, which honestly I find completely under utilised in most narratives of governance and a whole load of other places too.
The idea arises out of chaos theory. You might have heard the phrase the “Butterfly Effect,” mentioned in reference to chaos theory. This is the hypothetical idea that a butterfly flapping its wings in some location somewhere in the world can cause a tornado somewhere else.
This is because chaotic systems demonstrate extreme sensitivity to initial conditions. This was discovered in weather systems by Edward Lorentz, who when modelling weather systems realised that a tiny change in the model several decimal places deep, could change the output of the whole system.
In other words, mad shit happens and you don’t know why. Even trying to understand can send you barmy. It also means that thing you did last time doesn’t necessarily mean it will work this time. The more complex your system, the more wicked your problems get.
Moving on from chaos theory, you start to get into complexity theory, which is the idea that the spontaneous order you get out of systems that are next to chaos (at the edge) behave in certain ways. In fact, the crazy thing is there’s patterns in complex systems that you see in things like cellular automata systems like Conway’s Game of Life, chemical reactions like the Belousov-Zhabotinsky reaction, biological interactions at surfaces (where I discovered complexity theory during my PhD - we emerged out of the primordial soup) and all the way up to human systems like organisations, even at the civilisational level. Pretty wild.
The organisations bit is obviously the bit I now find the most interesting and is super relevant to DAOs.
From an organisational perspective, being closer to chaos means you get more unpredictable outcomes. The greater the unpredictability, the more uncertainty. The more uncertainty, the less likely you’re hitting deadlines and getting exactly the thing you set out for. But! You get more emergence, and in the technological space that means more innovation.
This is well captured by the “Stacey Matrix”, which plots the kinds of decision making you see in organisations that plot the order → chaos continuum. Over on the ordered side you have the zone of “technical rational decision-making” the further you get out to chaos the more you’re in the “intuition”, “brain-storming” and making it up as you go along territory. Those of you participating in DAOs will find this sounding familiar.
Our example at metathingDAO earlier, demonstrated our DAO leader fren carrying out “garbage-can decision making”. All she did was dump in some random thing she’d seen on Twitter and low and behold it solved the problem by leading to a serendipitous connection to the right data scientist.
Innovation at the edge of chaos.
Diversity, Inter-connectivity and inter-dependence.
So why are DAOs more implicitly out here in the chaotic space?
The drivers of complexity are:
Diversity: difference generally; diverse perspectives, cultural nuance, radically changing context. DAOs have this in spades. Their openness and radically international nature means that we get new ideas, new people, new technologies, new tools, new everything, on almost a daily basis.
Inter-connectivity: because DAOs are implicitly a digital phenomenon we have greater degrees of networked connectivity. By joining a closed group we are bonded by a shared space, connected by our twitter accounts, discord servers and pfps. Every bored ape for example is connected, they have a shared “mental model” the infamous monkey JPEG to organise around.
Inter-dependence: the impact of one person’s actions impacts that of another. This is where I think we see a really interesting phenomenon with digital assets. If we’re all holding the same token, or NFT, then we are inter-dependent on each other’s actions in some truly novel ways. The decisions we make in DAOs via vote impact everyone (this is why social consensus technologies are important). Also, if the token goes up in value, we all win (or lose) together. That alone is a degree of interdependence that we don’t see across all stakeholders in conventional orgs.
DAOs as Outposts at the Edge of Chaos
DAOs dial all these up to the max and consequently drive us right to the edge of chaos. In fact, I believe that as organisations they exist far out in the world of the zone of complexity in ways that conventional orgs don’t get close to. And that’s what makes them interesting.
The result of this is much more emergence, much more contextual nuance, much more unpredictability, more mess, but more creativity.
This is a good thing. In fact, I think it’s what’s required for problem solving in crypto, probably the most radically changing contextual technological space on the planet.
In crypto, it’s innovate or die.
Consequently, I believe that we’ll see some of the most innovative ideas in the world come from DAOs in the coming years. They will be hubs of creativity, precisely because of their messiness.
DAOs bring a new design space for organisation by acting as outposts at the edge of chaos.
What they’re good at, and what they aren’t
It’s not all good though, because all good is not something you get out in the zone of complexity.
In fact, it’s very possible to go right off the edge of chaos and just end up with plain old chaos, which burns everyone out and the unpredictability just drives everyone nuts.
I’ve seen all aspects of this over the last couple of years working in finance.vote, which has morphed into an even more interesting beast in FactoryDAO.
Throughout my career I’ve worked in a finance department (the inspiration for Normcore Inc), a physics department, (order central, physicists generally don’t like too much chaos), a mid-sized liberal arts university (pretty messy), through to a huge Arts university (tens of thousands of artists, I’ll leave it to your imagination).
And now, DAOs and trust me on this one. It’s a whole new game of complexity.
I’ll dive into this more in future posts, but because we run without authority chains, with deeper connection to transient community populations, by living radical openness, by using social consensus tools and just by being in the context of crypto. It’s been the most radically chaotic, creative and exciting experience of my career.
Throughout that time, we’ve created seven (yes seven, all on mainnet with users) different products including everything from a best in class NFT minting suite, to play-to-earn dog money (really).
We’ve navigated the use case space of crypto in a hugely broad manner, hacking together apps, building them with user feedback, rapidly iterating and generally responding to the context of the space in a radically agile and responsive ways.
Creativity is not something we’re short of.
However, as expected, hitting deadlines is hard, building a highly regimented marketing and content production pipelines even harder. Knowing what’s gonna happen in a few weeks time is basically impossible.
I think for now, this kind of unpredictability is not going to be beat in DAOs (until governance and tooling radically improves anyway). I don’t think board of director like structures is a good solution either, certainly not for DAOs that need capture resistance. I do think going the other way and moving into fractal structures with subDAO’s will help dramatically however.
So, I propose we let DAOs be DAOs and push the technical rational decision making into where it’s supposed to be, a classic organisation.
Consequently, we’re developing a hybrid decentralised organisation model for FactoryDAO, which will seek to build a synergistic relationship between a company and a DAO. Much more on this in the near future.
Summary
As I mentioned at the beginning of this piece, there will be people who set up DAOs and run them like a Kim Jong-un wet dream of hyper authoritarian top down control. But in my mind they won’t really be DAOs, because they’re pushing out the thing that is super crucial, local autonomy and personal sovereignty.
In fact, they would be forcing them into a place that would be rather unnatural and losing out on the thing that centralised organisations will struggle to do, operate on the fringes of the edge of chaos.
I firmly believe this is a big deal when it comes to new and innovative kinds of organisational design. What we lose in predictability, we gain in innovation power and most importantly personal freedom. This new dynamic of transient work, if we can capture it, could drive a revolution in online coordination and the world of work.
This is new though and innovation capture is going to be the name of the game. The further towards the edge of chaos we get, the harder it is for an organisation to incorporate the new and interesting ideas that are happening all the time. It’s like capturing lightning in a bottle, but in DAOs lightning will strike more often and that’s what makes them exciting places to be.
Beautifully insights! Really helped me to frame, better understand, and appreciate more my own experience working for a DAO ;)