Programmable Companies

The DAO represents the first digital-only company

First published May 2016.

New Technologies Require Fresh Thinking

Much has already been written about The DAO and what it means for the future. We’ve had accounting, legal and corporate structure hottakes — and those guys will have to start figuring this out first. But what has been less discussed about The DAO is the potential political implications. This ‘investment’ club has raised just over $152 million at time of writing and technically allows anybody in the world to invest regardless of wealth, geography or connections. That reduces the friction of becoming a capital owner to almost zero. The DAO isn’t ready for the mainstream public yet, the technical barriers are too high. But The DAO importantly breaks down some assumptions around business structures and capital ownership which could lead to genuine political change. I stress could because The DAO could fail. It could fall foul of financial regulation rendering it impossible to hire contractors. Or it may be forced to only accept digital projects to reduce legal complexities. Such compromises would severely limit the impact of DAOs and prevent the technology from reaching even early adopters, let alone the early majority.

Left versus Right. Market versus State. Adversarial politics makes politics seem pretty clear cut. But politics is played in the middle. Markets and businesses are more nuanced than state ownership versus market ownership. There is always a balance between state involvement, incentivising decisions for the collective good, and market participation, driving competition and economic growth. However, with global inequality, climate change, and the growth of digital globally mobile meta-corporates like Facebook and Google that are more powerful than nation states, there’s a strong argument that the balance has swung too far towards the market, at the expense of everything else.

I’m not here to argue that we need more state intervention because the market is inherently evil, rather that the arrival of new technologies allows us to challenge previous assumptions. Technologies like the Internet, blockchains, smart contracts, artificial intelligence and DAOs force us to examine the premise that the corporation with owners, management and employees is the best organising principle for capital and labour. Automation technologies such as artificial intelligence, smart contracts and oracles or networks of oracles, can automate much of what constitutes management today. With DAOs, employees and owners can be the same.

A New Form of Community Ownership

A DAO 2.0 can provide a third way between state ownership and market ownership of production — community ownership. A communal model is not a new idea, cooperatives, mutuals, building societies and credit unions have been around for some time. But these organisations were limited in their scale and so were organised around job or location. The Internet, blockchain, smart contracts and DAOs mean cooperatives can have members from anywhere in the world who can communicate, lend, borrow, and vote on how to allocate shared resources. These resources can extend beyond funds to include intellectual resources which could make a DAO 2.0 into a sort of community-owned business. Colony, a start-up, is already building something like this. We could see hundreds of Colony’s based on collective shared interests and values. Like Facebook Groups or subreddits with a structure that allows for shared ownership and labour.

A DAO 2.0 as a global cooperative organised around values would stand in contrast to a nation-state organised around where you happened to be born, or a trade union organised around a specific job. Platform cooperatives can take advantage of the global scale of the Internet and blockchains. There could be Digital Nomad DAO, or a Minecraft DAO, or a Greenpeace DAO. They can be as big or small as the community needs. Members lend, borrow, and collaborate fluidly with projects and businesses. Individuals are both owners and labour. The owners, management, and employee divisions can be broken down to better serve society as a whole. If there is no work for a particular worker one week, then they still receive a dividend from the DAO.

The current structure of a DAO is unlikely to be viable and is certainly not a panacea for all of our social and economic issues. But instead of persisting with corporate structures and divisions of labour that worked in the past, why don’t we take a step back and see if there is a better way. Digital platform cooperatives and DAOs have the potential to be a new organising principle for economic and social activity. We should at the very least be treating this opportunity seriously.

The First and Second Industrial Revolutions ushered in new intellectual and political paradigms centred around capitalism and socialism. It would be arrogant of us to believe that today is different and that we live in the final intellectual and political paradigm. The decentralisation trends of the Internet, blockchains, the internet of things and artificial intelligence will result in new social, political and economic structures. At the moment, we lack a framework through which to see all of these trends. I think The DAO is the first experiment in testing a new organising principle. It is unclear if we can Lean Startup our way to a new organising structure, the stakes may be too high to MVP a political system. But it’s not as if any of the previous revolutions were adopted willingly by everyone with a nice and neat handover. They were called revolutions for a reason.