Book Launch: The Network Firm, Rethinking Capital Allocation in the Age of Blockchain & AI

Transcript

Welcome to a new season of the Green Pill podcast. We are exploring how we can use technology, community, and new forms of coordination to build, fund, and accelerate what matters in the 21st century. This season, I'm talking with builders, thinkers, and innovators who are pushing the edges of what's possible. From onchain capital allocation to Ethereum to AI alignment to reimagining markets and governance. Together, we'll uncover how these ideas move us closer to a world that's improving every week, month, or quarter. what we call protopia, a realistic, preferable future that is constantly improving through small incremental changes over time. If you want to learn more, you can visit our website at greenpill.network where you can download the Greenpill books for free, play with some of our ecosystem projects, or join the Telegram and participate in the network. All right, the episode today is

a book release day. I am working with uh R&D, Daniel Stringer, and Daniel Ospina on a new book called The Network Firm. Uh the full title is the network firm how capital allocation changes in the age of blockchain and AI and basically we are revisiting the traditional text the theory of the firm and talking about how the 20th century firm is dissolving and being replaced with networks that allocate capital in a more networkbased way. So uh this is something that Daniel and Daniel and a group of us have been cooking for the last month or so and I'm really excited to get into the work that we did on the network firm and I think that the research here really

complements some empirical examples that we're seeing in the web 3 space. So without further ado, I bring you the worked firm. >> Hey gentlemen, how's it going? >> Pretty good. Great. Great. >> Well, excited to get into the book that we've been working on together, but maybe we'll start with an introduction of yourselves and of Rendal. Daniel O, I'll go to you first. >> Sure. Thanks. So, I'm been an organization designer for 10 plus years, also an entrepreneur, had a couple of companies and so on, but really my passion has been the future of work. And well as you were saying the the last three almost four years now have been

dedicated to building Arenda which is a product ecosystem and venture studio focus on the future of work. So also in the book there will be quite a few things of related to the research and the work we've been doing over the last few years. >> Cool. Didn't you ask you want to give us a quick intro? >> Sure. My background is as a user researcher. I'm fascinated with all things human computer interaction and have been doing that for over 15 years and more recently have been become very interested in topics around collaboration and how technology fits into that and also how we can make sure we get uh better opinions from more people about our collective future through technology. So, we've been working on this book together for the

last six months or so. It feels like since February, and um it's really exciting to to ship this piece together. I'm wondering if Daniel S or or Daniel O um actually maybe this would be one for Daniel O. I'm wondering if Daniel O if you can introduce the book that we're releasing today. >> Yeah, sure. So it's gone through quite a few twists and turns but the the core idea that end up emerging is about how the the fundamental conditions that are changing in the in the world in terms of global instability but also new technological capabilities like blockchain and AI primarily are leading to really change the

dynamics that have created firms that have led to organizations existing in the way we have known them and we become accustomed to them. And so now as those fundamentals are changing, we start to see the emergence of a new type of organization uh that we have titled the the network firm and it's a bit of an umbrella term. We'll see many different forms of organization emerge there. But fundamentally we're saying that organizations will become a lot more open network fluid and that is due to the the transaction costs that made bureaucracies and large hierarchies make

sense in the past dropping radically uh thanks to these new technologies. >> Daniel S, anything to add there? >> I think Daniel did a great job of covering it. Yeah. So the new book is the network firm capital allocation in the age of blockchain and AI. And basically what we wanted to do is look at how networks enable a new type of capital allocation with fundamentally lower transaction costs than have ever been possible before. And um you know I think we're kind of in some ways revisiting slashpaying homage to uh course's work the theory of the firm which I think is almost a century old at this point. So um really interesting thought matter to think at a high level about the how transaction costs and why

firms exists are going to be evolving with new technologies like blockchain and AI and I think that uh one of the things I really loved about working with our you guys here was how you could take sort of these highle theories that I I feel like I've been swimming in for a while and we can go really into high resolution of examples of them and and really refine the the thesis behind them. So, um, I wonder if you could just take us a little bit deeper into the book and the ideas behind it and and, uh, let's pull some strings of of what we put into the book and, uh, and put them out in front of the audience. So, maybe Daniel Espino, I'll go to you first.

>> Yeah, sure. So maybe to to take a little bit from from the beginning where where we started was collecting a lot of case studies and maybe I'll pass it to Daniel S to later on talk more about the the primary user research and the the data that we gather and what that means. But when we started to to then look at these case studies and try to make sense of them, we we end up coming back to these foundational theory, the cos theory of the firm that was saying that the reason we create these firms is because simply transacting in an open market is very expensive. Like we need to go and search for the right person to hire uh or to work with. Then we need to negotiate the

contract. we need to agree on esco because there isn't necessarily a lot of trust or we don't really know this person if they're like a freelancer that we just encounter in the wild maybe in a networking event or something like we're like are they good are they are they not are they going to deliver so then we create all of these mechanisms to protect ourselves like very clear deliverables scope uh milestones different stages of payment so then we need to go and monitor all of those deliverables is it actually what we agreed in the first place that is being delivered and so on so anyway way. All of these things create a lot of costs that make it very expensive to just work in more fluid patterns. And so as a result, we end up hiring people into employees. We end up putting managers

who are going to oversee them. We create all kind of HR policies and so on that help us create some sort of safety and in a way reduce the cost of collaborating and and working together. But the the downside of doing all of that is that we also become slower and and then it's harder to change. It's harder to adapt. Uh this happens for example if we take a a grant program is one of the things that I criticize a lot in the practice that some blockchain ecosystems wanted to deploy capital to grow their to grow their ecosystem to grow their network. uh but then you agreed on all of these milestones up front and then if the startup that

you're trying to incubate discover something new and wants to change halfway through well you would have to renegotiate the whole contract and that's scary and risky. So people end up not doing it and then sometimes you end up building a lot of technology that is not needed and well blockchain ecosystems do this but corporations do this all the time with projects that everyone knows is going to be a failure and they still keep spending money and keep doing and so on. So anyway, we end up coming back to to this foundational theory that we're we have aggregated into these large bureaucracies. But when we look at the case studies, we're like, "Oh, wait a second. Actually, a lot of the new things that are emerging allows us to drop this cost very radically. And

we already have not only this possibility of working in a more collaborative way and more fluid manners and like what a few years ago was this kind of nice vision that some people predicted but now is it's really starting to become a reality and we see seeds of it and different case studies and examples starting to take hold in in many different places and when we look at the details of that is is really exciting and super I don't know it's kind of mind-blowing and amazing the the speed at which is happening and how radical these new ways of collaborating can be and what they can really do to to improve the way we work together and hopefully address a lot of the foundational challenges that we have as

a species because at the end it's it's all about collaboration as you you're saying is always has been. >> Thanks Daniel Stringer. Anything to add there? >> Yeah, I'll just throw in there. I think that we start the book talking a little bit about the theory of the firm. Um, and we get into why do organizations like this exist, so forth and so on. Um, but I think a lot of us potentially hear in this conversation, a lot of people listening have probably had their own personal experiences that they can really connect to some of the themes.

Personally, I've both worked as a freelancer and I've worked in larger companies, organizations, and sometimes larger organizations. I like our capacity to get things done, but I might not personally have as much flexibility to do the types of projects that I want. But when I've gone off and worked on my own as a freelancer, then I run into these situations where it's like I have to find clients and I have to negotiate specific terms with them and I have to figure out the nuances of payment deliverables on milestones. Right? So in the book we talk about some of these things that I've just listed that I have to do my on my own as a freelancer as coordination cost. Right? And as anyone

who has tried to work on their own knows, those things start to add up. Um, so even though we ground the book in this this theory of the past, what we're really looking forward to is is this bright future where a combination of AI's ability to do cognition at scale and streamline things in blockchain's ability to kind of hold a permanent ledger where those two things combined to actually help reduce those cost. Right? So when we want to do projects, maybe we're working on our own, maybe we're working with um a collaborative partner, maybe we're a freelancer working with a larger organization, we can spend more of our time and energy actually doing the work and less of the time trying to coordinate the work. Um

so there's this way in which we really ground the book in theory, but we end up uh addressing theu issue that a lot of people can probably uh relate to. Um, and one of the great ways that that we further ground not just the potential, but the the little seeds of of this future type of work we're seeing is is through the case studies uh that Daniel mentioned. >> That feels like an obvious next place to go. So, I think we've covered the the updated theory of the firm that we're working on, uh, which is lower transaction costs, more legibility of vendors in the marketplace. Uh, we've covered the a priority parts of that, but I'm wondering if we can get really empirical here. So, you know, could we go through a case study of what a

neworked firm looks like and and maybe compare and contrast what the old world versus versus the new world looks like here? Uh, what's a good relatable case study to start with and to to play this forward through? >> Um, I can jump into that. So, one of the case studies we looked at was a um conservation organization, right, that distributes funds all over the world uh to people who do various conservation efforts called Gainforest, right? Um and when it comes to talking about quoteunquote what a network firm looks like, I think we're still predicting, you know, the future of what these things will actually be. And so what we did in the case studies was take maybe

approaches to work or workflows that would be reflective of things that would happen in a network firm uh and explore them in depth. We anticipate the rise of these network firms in the future, but there might not been anything out there right now that looks exactly like a fullyfledged network firm, right? Um so with Gainforest some of the things that they were doing that reflects kind of this network firm concept uh is first of all uh taking activities that represent a streamlined verification cost right um so one of the things that we saw with gainforest is that they need some sort of way when they want to um monitor conservation activity uh to see that that

conservation activity is actually happening, right? So, if they want to give rewards for people that are saving parts of the rainforest, they need some way of doing that that scales. Uh, and they use a combination of of AI and image systems to verify that when somebody says, "Oh, I've actually consumed this number of acres of rainforest that they've actually died." Um, so that's one approach uh that they take. They also have a really innovative approach of granting money uh through blockchainbased protocols uh that ensure that people in various different countries are able to actually get the confirmation money um that they were supposed to be awarded. They shared a

example with us um when we spoke with them of wanting to transfer monies from a Swiss bank to a bank in South America and it wasn't even that much money but because of the way that the traditional finance banking system is set up there were blockers put in place right so they managed to streamline the distribution of the funds in addition to the verification of the work that's actually actually happening through a combination of AI and blockchain >> so it feels like the distribution of the verification work is where we're able to really lower transaction costs. So, we're able to do it cheaper because networks give us access to a lot of empirical data points and then AIs give us a really way to transform extract transform into intelligence those data points. That might be too reductionist,

but when I play back the story, it feels like that's that's that's what's going on. And any reaction to that? Is is that directionally correct? >> Yep, that's exactly right. >> Great. Well, um I think we've covered the a priority uh updates that we want to make to the theory of the firm and the worked age and then we've covered an empirical example here. You know, I'm wondering what other threads are worth pulling from the book that the audience should know about and um you know, maybe this is a point to just shill the book. The call to action is download the book. You can get it at alloc.metalabel.com and there's going to be a link in the show notes. So, so check out the uh the book if you want to start learning yourself. But uh what other strings should we pull? What other interesting

threads came out of the research that we want listeners to know about? >> Yeah. So for for me something that is is quite interesting is how we have already in the the previous generation of technology like the the web two platforms. Some examples of dropping coordination costs um like we have Uber plat Uber as a platform that allows >> the gig economy. >> Exactly. the the whole gig economy allows for faster discovery uh in between suppliers and and providers. When we compare the the magnitude of change like the huge impact that that has had uh but then with the new technologies it really makes me feel

that that whole previous wave of change is going to pale in comparison to what is happening now. uh because that was one cost, maybe two costs, but he was doing it in very closed ecosystems like you were only bound to this platform. And the fundamentals that we have here is that with blockchain and AI specifically, we can make these things a lot more composable. um like blockchain gives us these immutable data records that in some ways a universal backend that many applications can access very easily that they can trust that the data is legitimate and with AI we can very

effectively transform that data into new different formats and constructed and reconstructed aggregated etc like we're scaling cognition in a way talking about the the new possibilities here But we were already starting to see how uh we can combine now crossplatform and that was something that for example uh ELISA or originally as they were AI6 said one of the organizations we look at they do where they're looking at the contributions that someone is making on GitHub and instead of putting filters for those contributions they're simply analyzing the impact of

them. Um and then in a separate platform you have all the communication and the coordination happening around what is sort of meaningful and so on but is enabling it in a way that you're not creating the boundaries like before with Upwork or something like that you needed to first log into the platform then access the data etc and here you're talking more about people who are engaging across multiple platforms kind of like just hanging out in a way viving together is very organic very fluid you start to remove a lot of these small barriers And these many small changes aggregate to a really really foundational different behavior, different way of collaborating that is as you remove the the barriers, the collaboration starts

to feel a lot more human and organic and natural and vivey, which also means it's less entrapped in the traditional constructions of work that we have. and the the force formalism of a fixed number of hours, fixed schedules, all that coordination things and that enables what I hope is we have currently about three trillion hours wasted scrolling through content. If we can reduce the the level of difficulty and the cognitive challenges and the barriers etc to collaborate and do meaningful work together then we're not simply sharing memes but we can be creating things um in real time with other people on the side of our workers.

So we can repurpose those three trillion hours away from mindless consumption to co-creation. It feels like that's the dream. And what's popping up in my head is just sort of the difference between the dream of the the network firm and and the hope for positive outcomes and and the sort of dystopic undertones of the gig economy that we've seen so far. And you know, maybe the way that I build that bridge between those two things is that, you know, before we could distribute the searching and the matching costs to the network, but the upside wasn't really shared by the network. And now with blockchain and AI, um there's an easier way to route the

actual upside of these networks that we're creating to the actual people that have been uh that have been working in them. But I'm not sure that yeah, it's not a guarantee that that's the direction things are going to break in. And uh you know I'll be curious to see what happens over the next 10 or 15 years and whether giving ownership of your network to the people who work in it is going to be uh more commonplace thing that you have to do to compete you know like uh when Uber drivers are building the network in the beginning and taking a risk in order to build the network do they get actual ownership and piece of the network by doing so um that would be the bridge between the two that that I would like to see. Yeah, I I think the real potential that we see

there is, you know, when certain costs decrease that we're talking about to allow work across different formations, could, you know, the revenue generated from that be more equally distributed among all the people that are that are working in the system? I think that is that's the hope that we have uh and the promise for what we're pointing towards. >> Yeah. And maybe building upon that, we are we're trying to paint a picture of what these positive future can look like, but it is by no means guaranteed.

Um, even in the book itself, we kind of come down to that conclusion. is like okay there is these really powerful forces that are that are being unleashed uh these huge transformation that is happening and how much of that end up being utopia or dystopia depends on how we're building all of these new technologies and firms and the what we end up setting up as established practice and what's morally acceptable and what we cheer people for in society and so on will end up dictating which shape these firms take uh that they are happening feels very much inevitable at this point but which shape specifically and the consequences of them is still

very much the let's say the the call to arms of what we can shape >> well I think that we're running towards the bottom of the hour so I'll move into final questions um is there anything that I didn't ask that you want to say and maybe Daniel Stringer will go to you first >> yeah I would just follow up on what Daniel Spina just said um which is that while the colleague action for for this podcast is to invite people to check the book out. The call to action for the book itself is really to invite people um to participate in the creation of these new forms of organizations. And one of the things that's really exciting about the book is it gives this nice framework a coordination cost that can act as a thinking guide for folks to be

thinking about, you know, what ways might I participate in making the discovery of new clients or new collaborators more easy and how might people benefit from that? What are some solutions I can come up with in this area? Um, so for me the big the big takeaway from the book is is kind of these various different sub invitations to think about ways that people can actively participate in the creation of new organizational forms in providing value and solutions in new ways. Uh so that's what's really exciting uh for me about the book.

>> All right, same question to you Daniel Ospina. Is there anything I didn't ask that you want to say? maybe something about the the there an important trade-off between legitimacy and and speed that we're talking about here. And and this also comes down to the the privacy question, something that's becoming quite relevant right now. And that is to say that we'll have this foundational tension uh in in every time we're designing one of these systems. Do we optimize it to be the most efficient at capturing value?

Do we optimize it to be the most legitimate at representing the needs of all the different stakeholders? Uh but the really powerful things come when the we encounter a solution that allows us to deliver a little bit better on both things. It's also partially kind of like a word of caution for anyone designing these mechanisms. It's like whenever you encounter the first solution, don't necessarily rush to go and launch it at scale. Um, spend a little bit of time thinking about the the order effects. Uh, because if you dig a little bit deeper, you might encounter a better solution. So, it's it's a complex topic. I think the the only way we can make these things work is also through collaborating in these

open networks. Like the more we embody these forms of collaboration themselves of being open, sharing with other people, trying to operate more like a network rather than close rigid bureaucracies, uh the better we can resolve the the fundamental tradeoffs that we need to make um to evolve these things. So I guess it's a call for coherence as we work through it. >> Great. Well, the call to action is download the book or purchase a physical copy. the the physical copy is worth picking up because put a lot of time and thought into the design of this and I think it just it pops really in uh in person. So alo capitalap.mmetalabel.com is where you can get a copy of the book

and while you're checking that out be sure to follow Daniel and Daniel on X and um yeah we'll see you out there. Happy book release day y'all. >> Thank you all. >> Thanks so much everybody. >> See you all. Bye >> bye. >> All righty. We just heard from Daniel Stringer and Daniel Ospina, my co-authors on the network firm. If this resonated with you, get a copy of the book today at alo capitalap.mmetalabel.com. If you value what we're doing, please also subscribe, rate, and review the podcast. That helps other people find the movement that we are building. Until next time, keep building, keep experimenting, keep coordinating. Peace and love.