Blending the Best of Hierarchies and Networks: An Organizing Structure for DAOs with David

Transcript

It's early in the morning. My name is David Erlickman. I'm going to be talking about structure without capture. How we can actually get things done in decentralized organizations. Dows could be amazing. They could be, but they're falling short of their potential. Why? One of the biggest reasons I see is that Dows like all non- hierarchical organizations struggle to delegate roles and authorities in a revocable way. And this presentation is not working. Let me try this again.

Aha. All right. To repeat, Dows could be amazing, but they're falling short of their potential. And why? One of the biggest reasons is this. Dows, like all non- hierarchical organizations, don't have a good way of delegating and revoking roles, responsibilities, and authorities to get things done. There's been a lot of talk in this space about the importance of voting delegation with respect to good DAO governance. giving your votes to delegates to vote on your behalf for Dowo governance proposals.

What I'm talking about here is operational delegation, giving individuals and groups the ability to take action on behalf of the DAO to get things done efficiently. Right now only hierarchical structures are good at this and so Dows and other non- hierarchical structures struggle with this. It's big reason why so many Dows are either laring as decentralized networks but really they're just controlled by a small group or they really are decentralized and struggle to get things done with any kind of consistency and cohesiveness. They're chaotic and messy. And this is one of the biggest problems in the space today as I see it. And I'm going to give a

framework in this talk for how we can think about this problem and how we can solve it. The good news, maybe the bad news also is that this problem is not unique to Dows. It's been something that I've been seeing come up over and over again in my work over the past 12 years, building over 50 different impact networks. These coalitions of multiple organizations who work together to address big complex issues like stewarding a large landscape or protecting migrant rights across borders. Over the past two years, I've been focused pretty much exclusively on Dows, trying to blend the socialware, the social layer of technology that allows us to build high trust

communities and organizations. And then trustwware the the technological capabilities that allow us to coordinate at larger scales even when we don't know or trust one another so that we can coordinate to address our biggest challenges while without reinforcing or without recreating the entrenched and extractive power structures that we see today. And over and over again in these collaborative efforts, there's so much promise and often they do a lot of cool and make some real impact, but something is getting in the way that's keeping them from fulfilling their full potential. What is that? It can be framed as the tragedy of the responsibility commons with a hat tip to my hats co-founder Spencer Graham for

coining this term. So what is the responsibility commons? When people coordinate to do something, a lot of things come up that need to happen. Sometimes it's unclear who's responsible for those particular things and so those things fall into a responsibility commons. Hierarchical organizations usually have very clear roles and responsibilities and so that responsibility commons can stay small and manageable or there's somebody higher in the hierarchy who can explicitly delegate a responsibility to individuals and then hold them accountable to getting things done. So they don't really have a big issue with this. But in Dows, in networks of agents where people are coming together as

equals, when people don't have explicit power over anybody else, a lot of things come up that need to get done and they don't have a good way to delegate those responsibilities or for people to claim those responsibilities or to ensure the right people are claiming those responsibilities and even if somebody does claim them to ensure people are actually following through on those responsibilities. So a lot of things come up they need to get done and they either go unclaimed or unddelegated or they're claimed by the wrong person or they're claimed by somebody and they don't actually follow through. This is the tragedy of the responsibility commons and it's a big reason why Dows are unable largely to be as effective and as efficient as traditional

organizations today. Now how can we overcome this tragedy? there is a way forward and I'll share that with you. First, we need to look a little bit more deeply at how we're organizing and what's getting in the way. So, we're going to look at the pros and cons of hierarchies, then the pros and cons of networks, then how we can actually solve the tragedy of the responsibility commons and examples of the solution in practice. Which brings us to part one, pros and cons of hierarchies.

Hierarchies are and have been a dominant organizing structure for thousands of years because they're really good at what they do best. They're really good at engaging in complicated domains where it's clear what needs to be done and we can go forth and plan and execute. They're good at this because people generally are clear on their responsibilities or they can be delegated those responsibilities. And these structures are pretty reliable and stable so they can scale well. But hierarchies are challenged when engaging in complex and multiaceted issues where it's not clear what needs to be done and how to do it. In these in the face of complexity, the structure creates

bottlenecks. And though the structure is reliable and stable, it's also relatively inflexible. So it's slow to adapt. Meanwhile, the high concentration of power in hierarchies means that certain groups and individuals at the top have entrenched structural advantages over others and they're rewarded far more handsomely than others lower in the hierarchy. Another way of saying this is that the structure the system is captured. That there are certain individuals and groups who are capturing more resources from the system than the value that they're providing. The distribution of power in the system is out of balance. Right? They're like

black holes sucking resources and value out of the system. This is a big reason why we're seeing this shift, this widespread shift from these entrenched power structures to more collective ways of working. I've never seen more attention and interest in alternative organizing structures than I do today and cooperatives and purpose trusts and Dows. Each of them are taking more of a network approach to coordination. Which brings us to part two, the pros and cons of networks. networks are actually pretty good at engaging those complex issues because they're good at combining diverse perspectives. They're resilient and adaptive and they're much more captures

than hierarchies. And that's why networks are really better suited than hierarchical structures for doing things like governing and stewarding shared resources and public goods, which is why Dows have taken this approach and why Dows favor more collective forms of decision-making over unilateral control. But Dows as they grow larger and more diffuse like all networks, they struggle in those complicated domains or we know what needs to get done, we just need to go execute it. What happens is there ends up being of a lack of role clarity. Who's responsible for what? There's so much going on. We don't know who's responsible for what. There aren't clear roles and responsibilities.

Largely ineffective at holding people accountable to their commitments because people don't have power over others to hold them accountable. and relatively unclear about how we can delegate and revoke authority when we're coming together as a network of peers. This again all points to this tragedy of the responsibility commons. It's what's holding us back. So how can we overcome this tragedy? How can we solve this problem? Three main ways. Number one, we need to be able to explicitly delegate roles and responsibilities in a nuanced way down to the level of the individual, not just the group.

And we need to be able to delegate and revoke the necessary authorities to fulfill those roles and responsibilities. And we need accountability mechanisms to make sure people are actually following through on their commitments. are good at this. So in non- hierarchical organizations we need ways of delegating roles and authorities while still reinforcing the decentralization of power. Another way of saying this is we need structure without capture. We need structure where the ultimate authority is held not by an individual but by the collective. We need a way of giving

structure its place within the self-organizing organism of a DAO. We need to give people power to do things without creating entrenched power over structures across the whole organization. Another way of saying this, hat tip to Brennan Mulligan, is we need to create finite hierarchical structures within a collectively governed whole. I'll repeat that. We need to create finite hierarchical structures within a collectively governed whole. Hierarchy is really good at addressing those complicated issues where we know what needs to get done and we can go execute.

Network's good at those complex arenas where we don't know what needs to get done but we can bring people together and figure out. So we need to blend the best of networks and hierarchies so that we get the agility and the resilience and the capture resistance of networks with the execution and implementation chops of hierarchies. So how would this actually work in practice? Let's take three examples of how we can create these fitforpurpose hierarchical structures within this collectively governed whole. First example, let's say a DAO wanted to run a grants program. So it realized it needs some structure to do that. So it delegates the authority to make decisions about what things are resourced to grants committee. Great first step. But the grants committee

realizes it needs to delegate responsibility further. They identify that they want specific individuals, which they call champions, which is why they have the little muscle there, to oversee the grants and support grantees and making sure that they're actually following through on their commitments and they have the authorities that they need. Maybe those authorities are access to a certain communication channel or documents or GitHub admin rights, whatever it is. So, as you can see, here is a structure, but it's a fitfor-purpose structure. Right? It arises when it's needed and it will dissolve when it's no longer needed.

You can see roles and responsibilities are clearly delegated. Authorities are delegated as well. But there's not an individual at the root of the authority tree. It's the collective. It's the DAO at the root of the authority tree. And so it's capture resistant. And at any point those authorities could be revoked if somebody was not following through on their grant or if the champions weren't following through on their commitments. And if the grants program wasn't working at all, the DAO could revoke that authority given to the grants committee.

The dotted line here is you can see the grants committee and the champions are members of the DAO and the grantees are external to the DAO. So we can create these structures that span both internally and externally to Dows both within and outside the system. So again this is this is a structure to get something done to add a new capability to a DAO but it's capture Let's take a second example. Let's say a DAO wanted to run an event here at ETH Denver. And so they organize a project team to get that done and they give the project team the authority to manage the budget for the event by making them signers on the multi-IG.

That's great, but we need to go further. We need to delegate responsibility further, not just at the team level, but down to the level of the individual because even teams need structure and clarity on who's responsible for what. One of the roles that the team identifies they need is a facilitator. somebody who can be the point person for all that's going on. And they give that person the authority to have a discretionary budget for small kind of point in time expenses and the responsibility and authority of posting to Twitter or casting on Warp Cer and also the responsibility of overseeing the caterer and logistics person for the event and the ability to give them the authorities they need to do their work.

In this case, access to a Dow's communication channel. And again here the project team and that facilitator they're members of the DAO. The caterer and logistics person they're external to the DAO. So these structures work both within and outside whatever system you're working with. As before we have a clear structure here. And while the facilitator has been given certain powers to do their job and take action on behalf of the organization they don't have power over the group. It's actually quite the opposite. It's the team who has the ability to revoke the authorities and powers delegated to that facilitator if they're not following through. Or they could even attach those authorities to

specific eligibility criteria or certain accountability metrics to make sure that they're actually following through. And if the DAO didn't like the way that the event was unfolding, they could revoke the authority given to the project team as well. It's a fitfor-purpose structure. Get something done. totally capture resistant. The collective is at the root of the authority tree, right? It's not an entrenched power structure, but we have structure to get things done. One more example. Let's say a DAO had a bunch of different arguments and they needed a way to resolve those disputes, moderation or arbitration process. In one such argument, there is a green hat who's for the argument and a red hat who's against the argument and they

can't figure it out on their own. So, they need to go through this arbitration process. to hold them accountable. They have to stake as part of a staking contract that opens up the case and gets them access to this communication channel. And the DAO is delegated the authority to make decisions on this and other cases to a group of arbitrators. Those arbitrators are also held accountable by staking through a contract that gets them access to the communication channel as well and gets them verified voting rights to make decisions on behalf of this case. So, a very different structure in this case, but another capture resistance structure to get things done. These are just three of many, many different examples that you can imagine. What we're calling

structure Legos, the ability to add structure onto your DAO to create new capabilities. We looked at a grants program, but you can also imagine that similar structure could be used in a bounties program or an investment committee, project team or working group or work stream, dispute arbitration or moderation process, but many more. You can imagine guild structures, holocratic or sociocratic circles, stewardship council or core team, recognized delegates, authorized representatives, and so many more. So imagine the ability to attach a fitfor-purpose structure to your DAO to add a new capability. A way to give structure its place within this self-organizing organism of a DAO. This

is what I mean by structure without capture. We need structure to get things done while reinforcing decentralization of power and capture resistance. This is what I believe will solve the tragedy of the responsibility commons and what will enable Dows to take the next leap to be able to work and get things done at the same level or greater level of efficiency and effectiveness as traditional organizations today. As you can see, this is what I'm really excited about and spending all my time thinking about and doing with my team at Hats Protocol. If you're excited about this too and keen to learn more, check out Hats Protocol.xyz XYZ and get involved there. So just a quick recap, we talked about the tragedy of the

responsibility commons and our inability to have structures to get things done within non- hierarchical context and decentralized power. So then we looked at the pros and cons of hierarchies, the pros and cons of networks, how we can solve the tragedy of the responsibility commons by delegating roles and responsibilities in a nuanced way by delegating and revoking the necessary authorities or attaching them to specific accountabilities and providing accountability criteria to do that. And then we saw examples of the solution in practice, different structural templates or structural legos that you could use to attach to your own DAO.

I hope this talk was interesting and sparked some new insight for you and I look forward to co-creating a future with you where Dows have the optimal structure to govern shared resources and get things done at same or greater level of effectiveness that we see today in organizations. Thank you. [Music]