Business-Governance Fit Deep Dive | Hasu, Chris Ahn

Transcript

before we jump into the app quick reminder that nothing on bell curve is financial advice everything is just a meme hope you guys enjoy [Music] all right baby first episode of season two we are back how we feeling back we are pumped we're pumped to talk to uh hasu and Chris this is I am stoked that we got these two on this episode I mean it was very hesitant it was very tough to get people from the season the hustle is like all these questions leading up to us like I don't know doubt yeah I was like yeah I know but it really needed to be these two guys I'll explain why so if you guys haven't listened to the the kickoff and where we kept Jason and I kind of detail our entire thesis for the season I highly recommend that you go do

that but here's the tldr just in case you didn't you know what we're exploring in this in this uh in this season is this idea of like business governance fit right so when what type of organization is is it appropriate to match the Dow governance with right and what are kind of the advantages and disadvantages of doing that uh in episode one where this is the episode where we really dive into this idea and explore some of the Nuance of business governance fit right so many people are familiar with this idea of product this was a this was pioneered by or this was a blog post that was written by address right which is why I was so critical that we got him on for this episode but it's this idea that everyone is very familiar with this idea of product Market fit right which you need to pick

the correct market and then you need to pick the correct product and that's when the magic happens but in reality there's probably one layer especially when it comes to crypto that's deeper than that which is what is the right form of governance for you to pick right uh because you could be a corporation right like what what what block works is or but as soon as you start to build a protocol then you have a dow which is kind of inherently a more decentralized structure and for some types of organizations that's good for some types of organizations your aim or where you're at in your maturity your life cycle is not necessarily super beneficial for being decentralized so we really dig into that in this episode really good app um very excited about it huge shout out to our sponsor Reserve if you don't know

Reserve we're going to talk more about them later in the show but Reserve is the easiest way to design deploy and govern stable coins backed by a diverse set of assets with access to defy yield and insurance super interesting uh very excited to partner with Reserve you'll hear more about them later in the show should we get into it let's get into it all right see you on the other side all right everyone welcome to uh episode one of season two of bell curve uh you got me and Yano obviously uh and then we've got uh croissant and haasu fellas welcome to the show thanks for having us yeah thanks for having us Micah damn it absolutely I'm really excited to do this um so maybe we could kind of uh kick this off but I'd love to just get kind of a a state of the union your high

level thoughts on Dow governance as it stands today um also maybe I can pick on you first you had a great quote I heard that you said that you when you started getting involved with Dow governance you were a skeptic and since being involved it has only made you more skeptical so maybe we could use that skepticism as a jumping off point what's your experience been like uh you know actually contributing to Dallas and what's up with the skepticism um yeah good question I think I was very skeptical because um I don't really believe in kind of very flat organizations where no party has a real incentive to do the work um on behalf of everyone else right it's so it's it's kind of a very obvious um tragedy of the comments in my opinion

and I didn't see any way that you know any of the projects today really address this um and um so I was very skeptical then I did end up joining a Dao that was Mecca Dao um the the oldest arguably most successful and most decentralized Dao there is and I did it for a couple reasons I mean for one I was just really interested in the project I am like a bit of a banking nut I like love finance and Banking and and so on so I just wanted to like see how the sausage was made a little bit but I also thought okay maybe I can you know learn a bit about daos and maybe disprove my own hypothesis but yeah it that it's not

really how it turned out um well you know Chris I think maybe I could call on you here like I think one of the uh you wrote a great piece called business governance fit right and I think hasu to your point I think for those of us who've been involved in organizations with hierarchy obviously too much hierarchy isn't great but I think a lot of us understand why that exists right uh so Chris you had a great analogy kind of of there are different types of organizations out there that produce different sorts of products in addition to product Market fit these new types of organizations now should also be thinking about what is the correct governance structure for them so could you kind of give us an outline of what like give us an outline actually of kind of like uh that post and why you wrote

it yeah happy too um so uh maybe just as a little bit of background because I think it'll be relevant um earlier in my life I became fascinated with the open source movement and in 2015 decided to join GitHub which is the home of Open Source and I helped out I helped to build out some of the business functions there and led the acquisition with Microsoft in 2018 and the reason why that's relevant is because GitHub actually operated like an open source project for a number of years and my job there was to help it kind of scale beyond that model um into into something else um and so that was kind of my role at GitHub for for three years and and I saw uh watching Dallas in 2020 it reminded me of a lot of the issues we grew up with that GitHub and I wanted to share

back a lot of what we had learned and part of what I had learned is that governance is not a one-size-fits-all and it really depends on on what you're trying to optimize for and um in in decentralization I think we've added a new access to the government equip uh to the governance equation um that we don't quite fully understand all of the trade-offs for and I wanted to share a piece that took one stab at defining what those trade-offs were and so the piece outlines what governance is um what trade-offs different governance models bring why certain types of businesses or projects would benefit from certain governance models while for others that exact same governance model may actually be a liability so depending on what you want to build you should

wield governance actually as a competitive advantage and if you actually do it incorrectly it can be a liability that really drags you on for a long time hmm so you know you kind of outlined this very easy to understand like a two by two Matrix right of uh public and private and for-profit versus not-for-profit um maybe another way to understand this in hospital I know you've used this analogy in the past too is to think about the governance structure uh for like countries versus companies right so for companies like maybe public for-profit companies they're it's pretty easy to understand you're trying to maximize shareholder value right like that's the bottom line that you're ultimately serving uh for countries is a little bit different right you're not

maximizing profit you're display a whole school of philosophy we can do a whole podcast on what exactly governments are trying to do for countries but ultimately maybe it's something like serve the citizens right increase the you know um average day-to-day The Beneficial life basically of a citizen or something like that um so you know there's kind of like this blending right sometimes almost ideologically of daos being these openless open permissionless things uh versus companies right that are actually you're trying to create shareholder value you're trying to design a product or service right and there are a bunch of different Dows that exist in the wild today I'm curious like how you guys think about different categories of dows that might exist today and uh maybe

Chris is the author of that piece like you know how do you kind of think about what governance is appropriate for some of the major ones that exist yeah I think there are a couple different vectors that we can use to to think about this one that I'll use is just different layers in the stack from infrastructure to application and uh I think infrastructure and protocols that are kind of at the core base layer have a different set of incentives and things that they're trying to optimize for than things that are much higher up in the stack in application land that are more user-facing and these are generalities and so there's Nuance around every single one of course but I think in general things that are lower in the stack that are infrastructure level tend

to want to optimize more for resiliency and robustness rather than pace of change and actually that pace of change could be a detriment to what it actually is supposed to offer which is that stability for others to build on top of them versus for user-facing applications I think users are more demanding of the of the pace of innovation new features um uh and experimentation they're more lenient on experimentation as well so that's one vector I think that we can use um another one is um understanding whether or not this is um something that's meant to uh continue to drive um

product Innovation or something that's meant to be a little bit more social and and kind of organic without necessarily A Hard kind of for-profit purpose um and and so one thing that we can think about is there are lots of different groups that exist on the internet outside of crypto right we could think about subreddits we could think about Facebook groups Etc and all of those have the potential to actually be down and actually um potentially share some type of a value in addition to just sharing kind of information yeah I think that's I think that's a very important Point like kind of being maybe helpful as well to go over some like examples and at some point uh you know I'd love to like hustle I've heard you kind of talk about

your adventures in layer one governance so specifically ethereum um and maybe that's like in a lot of way that's like the the lowest level of infrastructure right um actually why don't we I would love to get your thoughts on like just a theory because like a lot of you know I think when many people in crypto think about governance right before we even zoom out and go to like what governance really is people think about like voting in forums and making decisions about how to spend funds and grants and that sort of thing I think that's even more well understood on kind of the app layer and maybe there's like the consumer-facing outplayer versus the infrastructure type app layer so maybe that would be like an Ave versus like a dydx or something like that but then there's one layer down right which is the the layer ones and I

think that is the layer of governance so frankly I'm the least well attuned to I don't really understand how that works a lot of time also I knew you were involved with eip1559 like you would just walk us through like how does governance work on kind of like the layer one level yeah so I I guess people don't really equate governance to layer one networks um but when you give a bunch of examples then I think people they tend to see the parallels and I think the example that everybody is most familiar with is probably the the rift that eventually lead to really let Bitcoin cash to split from Bitcoin right so um that was a debate over how I mean sort of it was sparked by a debate like

how One Core protocol parameter really a technical parameter should be changed but it turned out that that parameter was a proxy for how people thought about the future of Bitcoin on sort of a more strategic um slash ideological level basically for for how how the the project should grow and scale and so on in the future what kind of approach it should take and what users it should Target and so that really incriminated in this in this one debate um and then ethereum is kind of a bit of a different piece so it has a much faster what I would call heartbeat than Bitcoin so Bitcoin really upgrades the protocol at an extremely infrequent pace so maybe

one soft Fork every like two to three years nowadays um for ethereum it's more I think we have around two sometimes three hard Forks per year where a bunch of updates are kind of accumulated um and then they are sort of bundled together and drawed out to the network and then everybody upgrades their software at the same time um and so the way that this is determined I would say really is by a technocracy I think is probably the closest word so there is um a process that we would cause a rough there's like a bit of like rough Community consensus and what features would be viable to have but really most is kind of decided

by a group a very loose group like no one appointed it's just like people who are kind of are interested in one way in and have sort of built up the technical credibility um to evaluate these features um and yeah really by sort of very rough consensus from protocol developers uh is is kind of what's needed that for for a feature to get added to this new bundle and then eventually make it into into the protocol it's kind of the high level process there's also I mean this is sort of it's a bit more formalized than it sounds so there's like a process that's called the EIP process and EIP is an ethereum improvement proposal and there's a format that it has to follow and it needs to go through several

rounds of tests say like review and then testing and then for like bigger projects there's actually like a lot of testing so for the merge we had um something that we call Shadow Fox of ethereum so we actually Fork the ethereum main net I think over 10 times just to simulate how the merge would be and for other projects we sort of commissioned academic research so for erp1559 we commissioned um not we but sort of someone I don't know what organization it was exactly but commissioned um sort of an economic study from um Professor Tim rough garden and his group to to see if the mechanism that they wanted to put into the protocol was

economically sound and so on so all of these things I would say they all increase the chance that um your proposal can eventually make it into the protocol so Bitcoin ethereum obviously started as these very centralized teams right where you have like two or three or four or five people working on the protocol and then eventually they expand now they're kind of the you know you could say Bitcoin is like the money of the of the of the crypto world and and uh and eth is kind of this like the backbone L1 of of the world that we're living in today they're they've both become very decentralized and that's probably and things move pretty slowly actually and that's like a feature not a bug you could say because you want to have like slow governance and slow product

decisions at this infrastructure layer when you look at the lessons that we've learned and taken and applied from like Ethan bitcoin's governance and how we've applied those to maybe Lido's governance or uniswap or Ave or maker or some of these like what I'd call tier one D5 protocols uh hustle what do you think are some of the lessons that have gone that we've learned maybe incorrectly from how governance in Bitcoin and ethereum work and like how do those how should those maybe function the protocols say like maybe function different differently than have these 10 000 pfps why because crypto punks like we have Supply caps and tokens why because Bitcoin Cap supplies at 21 million so I'm curious what you what lessons you think about here Chris yeah

I think it's a really important point because I think there are a few kind of Milestones that we have reached with governance that were novel experimentations at the time and I think people tend to to copy them and I think part of the reason is because um when you're already a project that is at some level of maturity I think it's really hard to change governance processes in the same way that for any Corporation it's really hard to change culture overnight it's a very very similar Dynamic and so it takes a long time to change culture how decisions are made and how decisions ultimately end up getting executed and then for startups I think it's really risky to actually experiment on governance and the reason is because that that is fundamentally

one of the defining things that that will determine your your success in the long term and so we're kind of caught in this weird dilemma where I think we would welcome more experimentation on governance but in reality I think it's really hard for anyone to do so because of the incentives that are that are there one that I think is actually quite interesting that's very novel is in the world of nfts with nouns Builders where you know I was actually having dinner with Jacob at Zora last week and uh and they're very big proponents of nouns and very involved in that community and one of the lessons there that I thought was was really interesting was the reason why nouns are different are number one it's organically created from from the

start so there was no funding that went into the project and so you you start with a a set of believers who really want to actually use this for some type of value generation and then number two inflation is built into the system from day one which means that it should trigger a fight or flight for whomever is part of it or whoever wants to join right so you know that if we don't do anything that value is going to decrease because there's inflation built into the system forever and so any proposal or anyone who wants to join knows exactly what that Target kind of Roi hurdle rate is for for any proposal or anything that they want to do so there are some experiments that are that are happening but we're kind of caught in this weird

dilemma where it's just incredibly hard for anybody to truly innovate on governance I mean definitely something that everybody copies I mean ethereum is kind of it has you know its fixed Supply it does expand but it's kind of it's not like anyone can print more of it in Bitcoin the same and I think something that everybody copied is all of these tokens initially were like the issue I was not really clear whether this is like I mean a security not in the legal sense but in the sense that it like securitizes some kind of like voting rights in the system and plus like a claim on future cash flows or if this is meant to be a monetary unit um and so I think a lot of projects they launched their tokens without really

understanding uh how they relate to like what's kind of the right mental model for issuing and and using them um and then sort of they can't make any more of them and worst like worse they just give all of them away at the start so you end up with projects like sushi swap for example and they they just um they just give away like 95 of their of their tokens and if you like draw apparel to a traditional company just it means they just gave away 95 of their cap table without having any like without it getting them to any like semblance of product Market fit or like a competitive mode and I mean a project

like that it's just completely dead it's there's no way to recover from that it's just a like a mistake that sort of kills you out right and so I think it comes from this misunderstanding that I mean your token distribution is is kind of same as your captivity design and your captivity design can make or break your business and if you would waste all of your Firepower within your first year and it doesn't get you anywhere then you best scrap things and start over yeah that's what I was gonna say is uh I really like the way you frame that hasu is like if you're thinking about your your token as a monetary unit or Equity because uh I I was gonna say like the the biggest thing that doesn't make sense carrying over from Bitcoin is the hard cap on a lot of these token

projects because that's not the way the early stage Equity works right you have like uh first of all you have a cap table that's totally assigned but then the question isn't like oh this is the only Equity that I'm ever going to issue it's like if I can do if I can produce a higher return on whatever I use the equity for like an acquisition or something like that then it makes sense for me to do that uh whereas on something like Bitcoin which is a monetary unit or something like a digital gold it actually does make sense to have that hard cap and I think a lot of people just saw well this is the way that that Bitcoin kind of did it so we're going to borrow this for for our own governance where if you like really thought about it it just didn't make

much sense at all yeah everybody just borrowed a lot from like as you say from sort of the projects that were already there in crypto thinking that crypto is this kind of isolated area where everything is kind of new and magical when the real examples where they should have been looking is kind of what organizations exist in the real world that are not tied to crypto and why have things evolved the way they did um and for what reasons right because I think you can sort of reverse engineer exactly why we arrived like why companies work the way that they do why the company is sort of the the main form you know where Innovation happens in the world and where so we organize labor and you know um

cabinet formation and so on and and I think yeah um like more borrowing and sort of less yeah it's a more looking outside of crypto less looking inside of crypto I think would be kind of what what I have been doing and what I would advise of us to do when you look outside of crypto the three hardest things to change in a company cap table governance like internal governance like how decisions are made inside the company and culture um possibly when I think about your involvement in crypto it's primarily three organizations it's maker Lido and flashbots come to mind I'm sure you are involved in other ones so two of those Lido and maker are like Dows I would say in the traditional sense of like a Dao

the other one is flashbots and when I look at who's had I mean lighters have a lot of success over the last year as well but like flashbots has just been on an absolute tear the last nine months and I do wonder if like some of that is because they've just said look we're not going to be a Dao we don't want to have a token we just want extreme like we're just gonna ship products incredibly quickly and have like strong conviction and be able to ship I just want to get your take costume on on your experience working like on the Dow side of things and then with more of like a centralized company like flashbots why you think flashbots has had so much success success and maybe if you could touch on that for a little bit yeah sure so I think in terms of how

decentralized they are definitely Mecca is the most decentralized and then lidoor somewhere in the middle so Dido has a maintainer company and it's like it's it's it's in the process of decentralizing its governance right now also with some of the proposals that we're working on Dual governance proposal and then flash Parts on the other hand is is just a regular centralized company uh it's organized as a company but in terms of as companies go I would say it's very flat and sort of non-hierarchical so it's it's it's actually like closer to that but I have also in the in the past worked in like startups and and as a as a solo entrepreneur so um so I I feel like I know it's like how

the more hierarchical side of things look although I've never worked in like a traditional Corporation or anything um and I would say I mean from like seeing all of them definitely so flashbots is sort of much faster moving than maker for example because I mean it's it is it is much more hierarchical sort of there's like clearer sort of goal setting there's a strategy that we pursue and sort of people know um how what they do like Rafi fits within the strategy of the of the organization um they're sort of more management I would say um and and information especially sort

of disseminates much faster I think this is something that I found I found this to be the most unnerving about makeup about working in maker and it's kind of like I don't want to work in a dial again because everything being public is like so like this is actually like terrorizing I totally agree with that yeah totally yeah yeah so it's it's just a very very bad experience if like you force people to live in sort of this kind of extreme transparency where make ours to the point where like people have private conversations like you get shamed for that because it's not

decentralized like it's not decentralized enough it's kind of and I I get why like people are really scared about you know making mkr like the security because there's any kind of information asymmetry and so the response is well let's put sort of all of the information into the open and force everyone to have only uh sort of open conversations um but yeah it just you have no idea how much that slows down the like flow and dissemination of information in an organization um there's so many like kind of even though we are a remote only company in flashbots there's just so much creativity and like ideas and a collaboration that happens just because

like you have people kind of in a private select Channel together or like on a private call or um stuff like this and um I think this is I don't know how other dials Do It um but this is a big problem I think so like the kind of the like a Dao being a public space I think just puts it an enormous disadvantage over a traditional company even if you hold the other things the same have you guys ever uh do any of you watch the office have you ever seen that show do you know do you know the episode it's a joke where Michael uh finds out that you know every if Toby's the HR guy at the office and everyone has been writing complaints and Toby just puts those complaints you know he calls it

his file in New York but he really is just a box under his desk and Michael has this speech about how many of you went and complained to Toby and you thought you were being listened to it maybe just did anything happen or did you just had a kind of year to listen to and then maybe you forgot about your problems everyone's like kind of just had a kind word to listen he's like that is horrible and he unearths it and creates this whole thing this whole episode but it's like a joke but it really did resonate with me like people we're emotional human beings like it tries you might right we're never gonna you know dice uh you know put ourselves down into into perfect code right like uh business and working in companies is a very emotional experience a lot of the time um and I just don't think any

amount of infrastructure on chain is going to change that and I remember there was a instant specific typically with maker where an ex contributor to maker basically wrote this really long post on the makerdale Forum and roon responded and it was just airing Dirty Laundry it was just you know you get this expression that you're just reading disagreements in between colleagues and it was getting kind of nasty and in the details and I was like this is negative this is not this is not a positive thing to have to have happen um I mean it begs the question Chris Chris I'd throw this to you when you are hearing about like when you hear hasu talk about flashbots versus Lido versus

maker and you look out at the state of like Dao's today and you look at I keep mentioning some of these like what I'd call the tier ones like the uniswaps and aves and makers and lighters of the world do you think that some of these protocols when like they went down too early they should have just and and let's let's actually remove the regulatory side of things for a second because obviously I think some of them went down because of the maybe the regulatory Arbitrage there but if you if you remove that just think about governance and building good products do you think that they went down too early I think it's a good question um I think the answer probably depends on what type of protocol it is to be honest with you so in a scenario like Lido for example I think

um having some type of decentralized governance is a is a signal for for wanting to have credible neutrality um and I think that's very very important for Lido in a way that maybe it's less relevant for some other protocols so I think the answer depends a little bit depending on which protocol it is but I think the the overarching thing for almost all protocols I think that are considering decentralized governance is actually something that also you touched on even with flashbots it's not even necessarily that it's centralized or or decentralized from a company formation perspective I'll just call it that um it's actually more around how the decisions get made and I think the the

thing that people get wrong most of the time is that they equate decentralized governance with no leadership and total flat hierarchy and I think that's challenging I think leadership is is somewhat biological and um you know even like lobsters have hierarchy and in in in the absence of formal hierarchy I think what you end up getting is Shadow hierarchy and that makes it actually ironically even harder to participate because people don't know where to go or what channels exist for them to to actually be able to participate and so they kind of have to work around kind of unspoken centers of power in order to actually contribute and actually think that's

ironically counterproductive to having decentralized governance and so I think we need to split apart this idea of leadership and and decentralization because I think they're two different topics all right everyone brief break in the show here to talk about our newest sponsor Reserve so you know it's looking pretty bleak out there it's not looking that great but you know what the one thing there's no bear Market stable coin Stables babies Stables we love those stable Coins app which is why we're excited to partner with Reserve protocol so let's just start with the basics what is reserve it's a self-service platform to build deploy and govern asset-backed stable coins uh which can be integrated with defy or within the real economy so the cool thing about Reserve is basically anyone out there permissionlessly can take any set of erc20 tokens and use them to

collateralize their own stable coin so the long-term goal of the reserve protocol is to create a non-inflationary currency that is stable on a month-to-month basis but also a century to Century basis in the meantime though their open sourcing design decisions for stable coins which is just super super cool I think one of the benefits that you get there is diversification you hear it all the time in finance 101 no such thing as a free lunch except for diversification that's what you're getting with Reserve protocol yeah I've known the team for a long time I spoke on a panel at SF blockchain week with Nevin uh with Joe Carlson and Alex gladstein really impressive uh growth that they've been able to have so far right the premier stable coin is RSV it is backed by three other Stables it's already used by over half a million

people transacting over 300 million dollars a month right now like Mike was talking about anyone can go create a custom bespoke stable coin using the reserve protocol you can back it by maybe specific USD Staples or you can get uh creative and you know maybe build something more complex like inversely correlated assets The Branding governance and composition are completely up to you and lastly if there are any Builders who are listening and you aren't interested in issuing your own stablecoin what you can do is you can stake reserve's governance token against your favorite stable strategies so what you're doing there is you're providing backstop Insurance to stablecoin holders not riskless right not Financial advice there's definitely some risk in doing that but it does allow you to earn yield especially now in crypto when there are so few ways to

do that it's definitely worth checking out so at the very least you should click the link at the bottom of this episode go check out the reserve website see all the cool stuff they're up to most importantly though click this link gotta give Jason me some credit here some love baby give us a love all right now back to the show let's get into it I just listened I've been listening to this podcast by this guy David sinra called Founders and he basically just dives into different companies so just he'll dive into like Vans or Dunkin Donuts and share the stories of like all these great companies Bloomberg was another one I just listened to and uh it reminded me of the what's the theory the great man theory of leadership or the great man theory of History where it's like you know you basically have these

like great men or women throughout history who are born and then like most of history is created by like what you know if you look at all all the big moments in history like or the big centuries or the big time periods like they're usually uh one or two or three people have these like massively outsized impacts on it and I think there's there's this belief in crypto that uh that's not how things happen and that's not how like impact is made but really like when you look at from listening to this podcast thinking about that theory like usually outsized impacts are created by one or two people um and I think what you're going to end up seeing is Dao's in the in the next cycle or maybe even like soon is Dow's actually electing CEOs

um I have a feeling that's going to start happening you just saw with um with Rook which is also in the Mev space I don't know if hostile you can consider them like a competitor with flashbots but um uh they elected this this guy Hazard to be their CEO so it's like it is a Dao but they elected a CEO and I think it's like every six months or every year they're going to elect a new CEO um and I think you're going to start seeing that more and more I had a I had a maybe like framing that uh just building on what Jason was saying there um and I wanted to connect to Chris with an idea that you brought up earlier in the uh on this program which is there are there's a different type of governance structure that maybe um you know corresponds to Dows that are

protocols that are closer to the infrastructure level and Dows that are closer closer to the app level that's a that's a very interesting thought because you don't really see that analog in corporations right like you're not like oh it's a gas company so it should have different uh corporate structure than an internet company right it's like all the same uh for for every single one um is that true though yeah I mean no if you go if you go back far enough I mean so like a T for example was granted a Government monopoly but they had to um follow very strict rules about what prices they were allowed to charge and and the kind of patents they had to

license to competitors and and what kind of amount of money there to like contribute to public research and whatnot so I think you have you definitely and I think in especially in energy this is still a big thing today where there's a lot of government granted monopolies um that are sort of the government almost like hands out any license itself is also like a government-granted monopoly right so um I think the government does control it um you know who gets to do business and the supply of like producers in a given industry um in return for you know them following certain certain rules and so I think uh yeah I mean this is

definitely a thing so that's actually a really interesting point I guess like utilities are probably maybe almost what you're describing in a way because utilities are natural monopolies in most cases I think the way that this ties to like what Chris said and what you said I think it makes a whole lot of sense for a protocol like Lido that is basically a utility in ethereum um to be you know decentralized and it would make a lot of sense for sort of if ethereum were the government then to give light a very concrete rules that they have to follow um but unless like this is very hard to do and so it makes sense for like Lido to replicate this as much as possible by

using completely like trustless smart contracts and I mean if possibly like having no governance at all right so there are some protocols for it for who governance is sort of um an asset because they still they need to be sort of uh you know they're destined to drive product Innovation they know they need to go to like two three four product Cycles before they can get to uh like a competitive Advantage but then you have products like Lido lighter would like not really have to do much anymore and they can just um sort of provide an excellent product for the users just based on the network effect and sort of their scale economies and just based on sort of the the great user experience that they already have today

so they would really be interested in making like a governance three completely trust this product but it's like not yet possible for for technical reasons that are related to sort of the ethereum layer one architecture that's still changing underneath them and so for a project like lidoor it makes a ton of sense to um it makes it makes a ton of sense to sort of be as decentralized as possible and then for other applications it really doesn't make a whole lot of sense so I think like the framework that that Chris laid out I think is wonderful for that I think like if you're sort of a if you have to drive product Innovation if you're a pro like if your application sort of needs active management Etc and you're sort of already a Dow today

you're already decentralized today almost certainly so if you decentralized too early uh because you will massively sort of impede your ability to do that um yeah but I think it would get really interesting when we sort of get to talk about regulation and how it interfaces with all of this later done yeah Michael maybe uh I feel like where your question was going maybe was um why haven't we seen kind of more variance and governance for existing companies that we know about outside of crypto um and I think part of it is actually from a technological perspective so I think it's really hard for I mean what we have in a blockchain is is

effectively shared State and the simple way to understand it is kind of a shared database that that everybody can access read and write and we haven't had anything like that in the past which means that you have to build a little bit more vertically than than maybe what we're able to do in in crypto more broadly and so I think it's possible to have kind of this vision of a more Lego blocks type of Stack that does one thing extremely well but is hyper connected uh and versus you know for for um some uh kind of Prior business models once you give those away then you've actually given away everything and so like we see this with AI companies today

they have to build vertically because once you give away the model you've given away everything and so you're going to end up having you know uh people who build these models and algorithms have to build services on top in order to actually generate value and what you end up getting is how can we create this platform with multiple products on top of it that that kind of all utilizes and leverages that one model or that one data kind of advantage that you have but I think in in crypto that data Advantage is very very different and I think the advantage that you end up getting is if you serve one thing extremely well and you become hyper connected into the ecosystem such that you almost become the point of reference or the Oracle for for that specific thing I think that's an alternative way about creating value

rather than having this massive multi-product platform that we've seen in the past remember and that's also like a I mean the lens that I kind of look at that as well right outside of just the architecture of crypto it's kind of like a Capital allocation question in companies and you know you you kind of saw there were these it was very invoked or these large industrial conglomerates right around the time of kind of like GE um and then there's also kind of like arguably internet conglomerates right now not necessarily even in the US but in like China for instance and uh you know and I think in a lot of ways that's because the almost the core part of the business works so well that you have this like funny problem right of like what do I do with the rest of this uh

the rest of all these funds that are coming in and you kind of end up Empire Building uh and in many cases like you usually people kind of look at that and say yeah this doesn't actually make a whole lot of sense and then it ends up getting divested like big parts of the business end up getting divested like in GE um I I did want to though direct the conversation to like Chris maybe I could ask you a question here because I again I thought your the framework that you kind of laid out for governance as it pertains to Dallas day was very uh it's like simple but comprehensive um but one thing that I would love to get your opinion on is like timing and maturity of each of these organizations right because even if you look at something like corporate governance you

know corporate governance and the PRI everything every company starts as a private company then it becomes public right and the governance throughout the course of a the life cycle life cycle of a company changes quite a bit right and I think in many ways sometimes when I look at Dows it's like maybe as an end State governance this is actually the correct right or it's more directionally correct what you're trying to do today but as a young organization it doesn't seem to make a lot of sense I'd love to get your thoughts on kind of maturity of these organizations and and how that connects with governance yeah I um the short answer I think I don't actually know the answer to this and I think it's an experiment that's actually being played out in real time um and the reason I'll present kind of

two counterpoints that are kind of butting up against each other on the one hand I think what we end up having is uh this idea of progressive decentralization that I think has become popular where um you kind of innovate very quickly on the product side under a private umbrella of some sort where you don't have the noise you don't have the scrutiny that you might get from the outside world and you kind of have your own space to be able to build towards a vision that you believe and that's pretty core to what a startup is right you're actually trying to change the status quo and by definition it means that a lot of people won't agree with what you're building and so that's very very core to the idea of building something new

on the other hand I think we've come the the thing that pushes Us in the other direction which is to become liquid more quickly is that over time if we end up building towards immense value and then becoming liquid later then you actually forego some of this uh uh building with the community where then it's kind of like if I were to go to Jeff Bezos now and ask him to be my friend when he's already very rich and powerful and popular it's kind of like you question like are you do you really want to be my friend or do you want it for different you know for a different reason and and I think it's somewhat similar if if something becomes very popular already and you end up getting a

lot of people that are in it solely to to make money and that becomes all the noise then then actually becomes counterproductive to building a community around you that that actually want to contribute back and so those are the two kind of counter forces that I see and and I don't really know what the net of that should be um but but it's something that I that is top of mind for me yeah I think it's it's it's tough right um it's because even from a founder incentive standpoint right you kind of hear this the classic lore of Silicon Valley right like people building something in a garage you don't know if it's going to be worth anything all these trials and tribulation that ends up being Apple uh and you know that all sounds very well and good when it works

out um that's you know one in a million and there's probably an enormous amount of mental health and stress and probably needless right like and that's why you've started to see this trend of Founders getting like some small amount of liquidity earlier and I think there's probably we you know people love to make arguments and binaries when maybe the truth is like somewhere in between and there's some amount of early stage liquidity that's appropriate um and good and motivating for a team and I think on crypto we've swung that way too far and it's I I think I don't think anyone on this call would probably advocate for the idea that you can found a protocol and be worth 100 million dollars overnight and somehow that's going to motivate you to do your best

work I just it's really hard for me to see The Logical sleep yeah and maybe it add-ons that just very quickly it's if you look at the some of the most successful projects in crypto let's you know put Bitcoin there as the example basically being liquid from the very start was a massive Advantage for them because it created the effect of having a hundred Founders who were there on day one right it creates this effect where more people feel a lot of ownership over the success of this project in a way that it's harder to achieve when the product is already worth 100 billion dollars and so I think that's kind of the the effect of that is this Paul is that is this possible to

achieve anymore in crypto because I'm seeing all these funding announcements and like you have you have protocols that should hypothetically become Dows one day but there's so much Venture money in crypto now that you the valuations are so high I I don't think it's even I don't think it's possible to have that anymore now it's gonna be the counter example and they're early days but they started entirely as a community-one thing I forget exactly how much they have in their treasury now but um it's a it's a pretty Vibrant Community that exists yeah I would agree with you for sure I don't I don't think you can really replicate sort of the loan to bitcoin or I mean I think nowadays everything that launches that that has promise I think is like so

oversubscribed and and sort of so I mean that the ownership tends to be very very concentrated uh before things sort of go on public markets where they sort of just start to disperse a bit um so you will never really get to this effect of like having 100 Founders and I don't think and but I would also kind of ask under what condition that's that's good versus bad right um because in in Bitcoin you can very easily argue why it's a good thing for there to be underfunders because it's a protocol that doesn't need a lot of iteration it doesn't need a lot of work what it what it does need is like bitcoin's entire value is in its ownership distribution and it's mind share and so you can argue that sort of

nothing is more important than like getting it into as many hands as possible but when you have other projects that's the need to drive Innovation they need to iterate what product Market fit then all of a sudden if the thing is dispersed too far that's actually to your detriment so I mean now we see together like sort of a very more recent example so we now see sort of Cosmos Hub 2.0 proposal um and this really surprised me and I think also a lot of other people because I thought that like Adam is too far gone basically it's like nobody owns enough of this thing anymore that it's not

recoverable basically like nobody is incentivized to like actually take this thing and like build out a proper Vision that allows it to you know Drive value and capture that which is still a very Apple better for for Adam but I mean so like you can have also this uh this version where it's like some where you want the ownership to be very distributed but then also where like being very distributed is is definitely to your detriment I'm actually think about like what are we what are you what are you optimizing for and maybe maybe we could actually get into start getting into um like corporate governance and then also like Capital allocation conversations um

when you look at like uh hasta I think were you the one who proposed the I think it was you who proposed the thing for for maker uh maybe like a different vision for maker um maybe two or three months ago and I'm just curious like what what do you think about the next wave of defy and the next wave of folks there are a lot of people who are probably sitting here thinking okay like maybe I'm gonna get to a point in the next cycle where I should like decentralize and I should turn my thing into a Dao and I should you know exit quote unquote like exit to the community like what are some lessons that you think we that builders in in D5 should should take from corporate governance today and both like on product decisions and corporate finance and capital allocation

I'm also I'm curious to get your take on that so I think I think sort of what this so this proposal I I made it a couple of months ago it was a bit of a response to this other proposal that eventually passed from roon from makers founder Christensen so he had a proposer it was very sweeping very broad sort of redesigned or like how like all of Mega governance and like some part of the core protocol were quite the end game proposal and my proposal was a bit of a response to that a way to where I think sort of IT addresses the big um the biggest problems in makeup but by making minimal changes and so then seeing from there and like iterating

towards something that's much more easy to implement and doesn't necessarily touch the core protocol so the problems that I I set out to solve this kind of I mean how do you in a completely decentralized protocol the problem that we saw in in Mecca concretely was that there was just no agreement at all about what the vision for the project should be and then what strategy we should have in order to achieve that vision um so there were like a lot of people all making sort of individually good proposals and then you have delegates and and other people sort of voting on them but there was no cohesion the these

these product these sort of proposals and initiatives were not pulling all in the same direction and I didn't even um I I didn't really care like what direction that would be but I thought it has to be like we have to have a process for all deciding on one and then those who don't want to participate they can leave but at least sort of um everyone who remains is running in the same Direction and their work doesn't neutralize each other right and I think this is something this is sort of a core principle that you have in in any effective organization where you know compromises they just tend to be very bad basically right it's like it's

okay like if you decide A or B that um you should sort of do one and then everybody sort of follows the group decision and they just execute on that with sort of everything they got um and um yeah so I what I suggested was uh to have like a more sort of a core uh group in maker that um we caught the the concert and the concept would just be it would in many ways just take the the role of a board of directors from a traditional company um where it would set the very high level strategy for maker and then it would make very high level allocation decisions so just saying why what core

unit what coins do we want how much budget do they get and what goals do they need to achieve so just very high level kind of code setting but like it really was supposed to be super high level because we wanted to give the core units a lot of um autonomy to like solve these problems in a very creative way that maximum maximally leverages the local knowledge local knowledge uh local knowledge that they have right um and also unlock a sort of collaboration between them and so so on um it was sort of just a way to align the different way that's dispersed actors um and but I mean of course once you

sort of centralize power or sort of a strategic decision making in such a way you need to create a lot of checks and balances around it and so the part that was supposed to provide that was twofold for one you would have um sort of the the counselor could only give recommendations um and um any decision would have to be voted on Chain by mkr holders uh so the pro the the um the counter could for example say well this is our budget for the next six months here's what we recommend and this is why or they could say even well here's like three options for our budget like one that's more aggressive one that's more neutral than one that's

maybe like more hawkish or whatever right and then you can still have the mkr holders um uh vote on that that's the first part so any actual like recommendation has to be voted on so all of the Power stays with the torque models and the second one was to provide a uh something that we call a constitution so the Constitution would encode on paper um all of the things that we don't want to change about maker so the kind of the high level Vision with what the protocol is supposed to do and what's kind of the the rights and responsibilities and values of the maker community and the different stakeholders to watch towards each other and we were kind of hoping by formalizing

formalizing like a large part of what makes sort of the maker vision and strategy and then concentrating the rest of it that we would provide a very strong scaffolding that sort of aligns all of the other ecosystem participants to work together and work individually but with while it's sort of always running in the same direction um and so yeah so far like I mean the proposal obviously didn't go to vote and maker didn't pass um and so far no other um has done this I think I mean if anyone does it probably needs more work I mean I'm sure there's like a lot of things that we didn't think about

because it was a bit rushed in response to this but I think kind of the high level ideas um I still like them uh today so how so why is this the right solution you know with this kind of board of directors or the council with these subgroups and core groups that's the right direction and governance for maker whereas like this Dao but like more centralized than makers the right solution for Lido and then like false kind of centralization but with a flat team is the right solution for flashbots are those the right decisions for those organizations because that's just what they started with and like we're you're kind of just trying to solve for what the team did in the early days or is that actually based on

here's the intent of the protocol here here's the product direction that they have here's here's the maturity of them you know Maker's been around for seven years whereas flashbots has been around for one year like why are you why are those the right things to choose there yeah that's a great question so I think at this point we have to talk about regulation just because regulation actually drives all of these decisions like we can talk all day about where which like governance models which governance model is better than another and in reality is everybody's deciding because they are trying to do regulatory Arbitrage and they're like trying to like create a framework that lets them survive and grow decentralized so I think there's definitely I mean ethereum kind of is

the prime example right ethereum arguably started out as a security as a common Enterprise and then it became decentralized through its actions I I really believe that there should be something like a safe harbor where um like protocols can start out centralized for three years and then they have to like after three years they have to prove that they are decentralized and we have some way of kind of measuring that I think that would be sort of a good an experiment that I would like to see what kind of that is right because right now um it's not really there makeup for example maker is a decentralized bank I mean maker is sort of IT issues U.S deposit

USD deposits to foreigners it like it's it's like a bank that that takes sort of customers from Russia and Iran and well like all of these countries that the US doesn't like and we already know they don't like the euro dollar and ultimately they would sort of if they could they would sort of bring the whole euro dollar system under their control and sort of completely controlled money creation and and Reserve ratios and so on um for for a good reason but I mean the the point is that Mecca does have a lot of reason to be worried about Regulators coming after them and for their in order

to achieve their Vision they definitely have to be resilient so maker is very far on this kind of spectrum that Chris LED out where it does require a lot of resilience but maker occupies um so if we sort of expand this like we have sort of left right kind of like resilience and then agility um make a kind of it it needs both right it really like it needs a lot of resilience because it's in a very delicate area where there's a lot of pressure from Regulators um very motivated regular Regulators as well but it also is a is a bank and it sort of it needs to like the make us

kind of core parameter that everybody's looking at and that is like important to get Riders like how it manages its balance sheet and um these two are really difficult to combine I mean this is a really really hard problem where where you can say oh okay I mean let's just like make a have maker just accept uh on-chain assets that are uncensorable in the reward like if but then this makes you know the deposit on the other end completely unscalable and you completely cap how many people can use the dice table coin without it breaking completely off pack because just it just can't create enough

supply of it but on the other hand you can make a coin like a deposit that that's really scalable but it's sort of backed by increasingly off-chain assets like dollars in a bank account or sort of even like real estate or tokenized loans to kind of companies in the real world and so it's a really difficult problem how do you construct your balance sheet in a way that sort of you both optimize for resiliency and scalability like for both residency and scalability at the same time and how do you design a governance mechanism that gives you both and it is just an incredibly intractable problem and I by no means like want to say that sort of our proposal

would have magically solved these things right I I don't know if it can be served it is very well possible that there is no equilibrium where maker actually achieves its goals over like a five to ten year time Horizon and same Base by the way for like any other D5 protocol um it's not guaranteed that any of these Will Survive because it it may just be impossible to achieve resilience and scale at the same time Chris what about what do you think about that I mean how I mean maybe that the the that there is uh how much of Dao's is uh how much of this is just optimizing for regulatory arbitrary um I think it's a tricky topic

um because there's a lot of uncertainty around regulatory right now obviously um but I I think I think what's actually um so I think there are very very credible reasons outside of regulatory to do this and part of it is to to create resiliency and robustness even without um you know regulatory overhang um I think um even if we look outside of crypto this idea of community participation and Building Products actually has proliferated very widely it started I think with open source and the idea of collaborating on code and you've started to get companies that are public companies today that were built on open source projects to begin with that idea of community first building has spread

to productivity companies like notion and figma that fundamentally rely on their communities to to really do a lot of things for them and then in gaming too right the success of Roblox and Minecraft are just two examples of communities actually building on top of a effectively just tools that are given by the platform and so this idea of the community participating and building something is actually already widespread and you know it's something that I think we could bet on for the next 20 years to continue and probably proliferate even more so I don't think that this idea is is necessarily all because of regulatory I think we would have come to this experiment regardless because it's just the way that the world is moving broadly I think regulatory muddies the picture a

little bit on when you do it and how you do it and I think um there are also just tangible benefits to getting your community involved and actually participating and the the real question we have in front of us is how can we make sure that we do this that becomes a competitive Advantage for us rather than a liability yeah I just want to say I completely agree Chris there's definitely other reasons to do this other than regulatory um I think it just proved it's a laboratory provides kind of the frame that it this all exists in and it really kind of Narrows down the design space a lot more than we would like um I think companies would like like to stay startups for way longer than they

can and then decentralize sort of as they grow progressively and also experiment with different models of sort of community owner Community ownership and so on but none of these things like all of these things are currently sort of very tricky um and I think I mean it's always good to kind of remind ourselves like what blockchain is actually good for I mean blockchains ultimately are kind of trust machines they are they are really good at like allowing people to make credible commitments towards each other and like unlocking kind of cooperation and so on um and and I mean governance is one of the main things where this can have a really big impact in the future so if you ask me like is that governance in

like on the blockchain doomed like not at all it's it's it's it's potentially one of the most interesting Fields uh that there is kind of the way that people can make commitments towards each other and like a company can say well uh you don't you no longer have to trust me like not to do XYZ because now like the blockchain like proves that can literally not do this computation so um and I think that's just insanely powerful I have I have one question about that also because I've heard you say that before I I just like poses as an open question especially for an early stage company um I wonder how you would view the trade-off of hey like you know don't you

don't be evil versus can't be evil because it's written in the code so that's obviously a positive and that kind of solves some of the principal agent problem in corporate finance but the other side of that is most of these protocols these projects are less than two years old I I will say for when we were at least starting block works there was almost no decision that we made that I would have felt comfortable in coding in like the fabric of the universe that we couldn't change you know so I would I would question you know open question maybe both of you how you would trade off the benefits of immunability and some of that trickiness of the principal agent problem versus the inflexibility to change I think this kind of gets at the idea of uh credible neutrality

and I think credible neutrality is a spectrum and so on the far end of that spectrum of credible neutrality you have effectively governance minimization where you're ossifying something permanently into code and there's no way to change this thing and the only way that we're going to have a different outcome is if somebody releases a new version that everybody else starts using but that thing that thing that's been released will continue to run forever it's just that it's not going to get any usage so on the far end of that Spectrum you have governance minimization uh one step kind of more towards the middle I think is is decentralized governance which is still some commitment to to change things but a commitment where we're changing things that probably a slower Pace because this

is now referencing uh vitalik's post on concave decisions concave decisions are effectively just a median opinion and median opinion moves it does move like you know like a hundred years ago women earned the right to vote which is kind of crazy to think about now that that they wouldn't be able to right so so public opinion does move but it moves very very slowly and then on the far end of that other end of that spectrum is effectively a dictatorship where you could just decide anything you want and keep changing things whatever you want but if you're um if you're really looking to build something where the core value prop is other people build on top of what you're building then I think airing on the side of of actually resiliency and robustness

with the option to upgrade slowly over time makes a lot of sense hmm I think I think too few people see it from the perspective of kind of the entire user value chain um so I mean yes you can sort of argue that I mean let's take the position of someone who's looking to build on any of these public blockchains so what blockchain can they build on where they feel like well they're not gonna get rocked uh like like I don't know like Facebook wrecked sort of its app developers or like any number of like web 2 companies were ragging sort of people building on their open apis and so on then yeah you can argue that

um yeah you can argue that sort of ethereum is kind of clearly the most decentralized today and it's like the less the least likely to sort of rockets it's um the applications that build on top of it but if ethereum were to lose the other side of the market the users like if it didn't provide enough scale and it lost its mind share and it lost sort of like all of these other sides of the network the new developers coming in if it lost the scaling War if it like didn't position itself ethereum is extremely strategic by the way about sort of what they think they're going to do ethereum is pivoting to become a blockchain that Services other blockchains settlement and data availability like think think about that like

um and if ethereum didn't do that and it didn't improve and iterate and innovate and continuously invest and like sort of Steward this ecosystem that they are building then it doesn't matter for you as a user that the ethereum based layer won't change under you because everything else like this is just a small part of the things that matter for you as an app developer building on top of this thing you are bound to ethereum in way more ways than just like the code changing and this is not the most likely way that this is going to go down and you can extend this metaphor to like if you are someone who's building on top of

unisop or like building on top of maker Dao Etc right so um resilience is just one part like resilience in the short term means the thing kind of not changing abruptly but resilience in the long term means the thing being able to go with the tide and I think yeah this is system very important to get right yeah um I I would love to I mean there's a long you know Rabbit Hole though because I think what you're maybe alluding to a little bit sometimes I hear that frame within the conversation of public goods in crypto um and like unit swap is actually one that I've heard referred to a bunch where the maybe to oversimplify a much

more nuanced argument what it sounds like to me a lot of the time is all right we've got uniswap V3 we have concentrated liquidity that's good that's now a public good and we will build things on top of that and I've always kind of thought to myself hearing that it's like are we really yet you know have we really solved if we iterated as far as we need to on the exchange layer for for uh crypto I'm not 100 sure maybe we have but you know I think there's probably good reason why uh you know Capital could continue to be allocated at that layer and keep improving that protocol um but I would love to um I'd love to get your your guys thoughts on you know you're marked on this in the the intro section here it was last season was a little different from

the season in that it was very easy to find positive stuff uh there was a lot people had a lot of pretty negative things to say about about uh doubt governance as it exists today I would I would love to get uh we were starting to talk about some of the advantages um the way that I think maybe Jason and I think about it a little bit is there are different advantages at different stages and it's very easy for me to I think both Chris and haasu you guys have done a great job of elaborating the value proposition of like what a mature Dao that's very close to the kind of infrastructure layer why that censorship resistance credible neutrality immutability why that's a great Boon and a benefit right you want to thread that needle in between uh you know you don't want to not change at all but change

like pretty slowly almost the same way that like building in a country with strong property rights right even if there are changes they're kind of slowly and you can see them coming where I still struggle and frankly where it was hard to find anyone with anything good to say was was the early stages of a Dao uh why that's good to be a dow um instead of just a a company I I might take a swing and I'd I'll propose something and you guys can shoot me down or tell me why I'm wrong and propose something that you would say instead but I do think one of the the benefits of web3 is or like the the protocol structure in general is the kind of decreasing the friction of issuing Equity let's leave

aside the regulatory aspect for a second down to the level where it makes sense that you can essentially give it to your customers and then they will become evangelist before you so I do see kind of a if we were to get you know with the large caveat that if we were to figure out the regulatory component here that incentivizing early early stage customers with equity helps with distribution it's a massive distribution advantage and that that's where you'd want that over a uh you know then you'd maybe take some slower decision making for increased distribution which probably as a founder I might take like distribution is a huge part of the game that you're playing I'd be curious to see if you think that distribution might be an advantage for

early stage Styles if you agree with that premise if not what are the advantages that you see right for being a dow in its in its early stage I can take a stab I just tried jot it down like a few things I mean so I don't necessarily agree with all of them but why would it be good to be a doll in the beginning I think one touched on it like permissionless Capital formation um as a Dao you can just like from like within a couple of days you can just raise money from strangers on the internet based on an idea I think that's a pretty powerful concept I don't think we're using it right now like very well and I don't think I think like regulatory especially

provides a lot of um friction that sort of um selects for exactly the wrong people to use this technology today but you can imagine that in the future there might be um like there might be actually good projects getting funded in this way and people coming together in order to do something magical and then like no need for lawyers slash paperwork um possibly anyone can contribute to a Dao like anyone can join a forum and say hey guys I have an idea like give me a grant let me do this or is there a way that I can be helpful then uh optimally you'd have a meritocracy of ideas [Music]

um and the final one I think um I mean like the also really like there's one thing that's sort of being very slow moving and being very public buys you and that is sort of a commitment device like partnering with the Dao can be more attractive for someone else because just the Dao is is kind of very unlikely to you know walk back on its deal and I think we have I mean we have seen um examples that run content to this we are sort of dials just like walk back on like the explicit even like legal agreements and and that's just I mean that's just sort of eroding that the trust in the sort of dials as an

institution and I think that's just doing an enormous disservice to the entire sort of dial space just I mean they sort of be because one has to see right the kind of um Institute or like these kind of rappers like corporate rappers that if we like count um Dows into that they all compete as well amongst each other right and kind of the Delaware let's see like why is it so popular because it has these amazing guarantees it's like very easy to spin up and so on right and like optimally I think that's how people start thinking about McDowell Frameworks as well or dial wrappers as well like these are kind of wrap us from a toolbox of like legal rappers that you can use that give you certain properties and for some uses

it might be really good and fathers might there might be something else that works that's going to work better right but if somebody comes along and uses kind of a dial rapper and then does something horrible basically that the roads trust in in in in this rapper as a whole then of course that's going to be bad for for everybody who kind of wants to sit down succeed yeah I I think there are two I kind of want to highlight two different use cases um for two different potential audiences the first is for uh protocol dials that that we've been talking about for um a chunk of this this podcast and for those I think you know in the very early stages the thing that matters most for

any protocol is finding product Market fit and I think it invites um early users um to be able to actually contribute in a permissionless way and you know you could always write to like a a support Forum or something like that in the old days but this provides a more direct way to contribute and it's actually kind of interesting um this is part of uh AWS lore but they have a building called low-flying Hawk which is named after one of their early kind of community devs that provided such valuable feedback for them that actually changed their products so much that they decided to name a building after that so there are examples of this happening outside of crypto even and you know we've talked

about this before but this concept of community is actually contributing back to your product is is the way the world is moving and I think uh actually the the framework of a dow provides a very direct way that people know that they can trust that they'll be able to actually contribute and also be be a real part of that that product and organization um the second one I think is uh with things that are less serious things that are social and fun where I think it it just removes the friction uh and it lowers it so much to the point that um you can really experiment and get a lot of fun social activity that happens um whether they be collector Dows or things where you become a Services dad with a bunch of your friends where you

can all your you know like vector dial is a good example of this um and you can kind of bootstrap some of these organizations in a way that that was more difficult to do in the yeah I think that is a set of a business model here I think it's like just like Community as a as a business right and I think this is something where Dallas can probably also be very good uh so going going to to Chris's point I think the nouns now is is probably that right it's like people don't participate in the Dao you know that necessarily like to to drive like a lot of success to nouns although that that's part of it but I think it's more about like people want to be part of this community and they want to make you know cool decisions together they just want to like make

money they just want like uh get the brand everywhere and like they just want to do like cool publicity stunts and have a cool Community experience and um I I think this is some this is definitely something where Dallas can also shine I have a question uh and I I agree with you I don't mean to be a Debbie Downer here on that but I would maybe maybe um propose this idea so one of the early uh iterations of what we want to talk about this these and the season was like and to many to a degree I still really believe this uh that the community is an enormous part of the advantage of a Dao and while you probably don't want your community making financial decisions or Capital allocation decisions for the

Dell like you can go to the forums and it's replete with examples where I think there are lots of people weighing in on financial decisions in like non-expert ways probably or not with a great understanding of Roi if like if you're a if you're a dow service provider you have my heart because I've seen like a lot of great proposals get voted down because like too expensive no it's like guys uh but but um one thing that I did kind of think was it would be really helpful to get product decisions from your community or maybe input on product because uh like even Jason and I we have this like informal like when we're trying to figure something out that we don't really know we have like our brain trust and that's like five people you know that we like hey calling Hey do you

think this is a good idea and it would be really good to be able to Source you know have a direct line to your most hardcore users um and I ran this by a couple people and the response was like that kind of works great in theory right there's this there's this idea that your token holders are going to be your users and that was supposed to be part of the incentive but in reality I think a lot of times it doesn't necessarily work out like that and your most hardcore users are not actually your token holders so I'd be curious to get your guys view on that um and whether or not you think this whole Narrative of the users and the token holders and the shareholders being the same thing is maybe more narrative than fact I mean I I completely agree with you I

think that's that's not rooted in reality I mean for one you as a as a quite as a startup I hope that you have a direct wire to your biggest customers because that's your job like it's one of your only jobs like talking to your customers and figuring out what they want and by the way they will not tell you what they want so uh if you build what they tell you then like you're not gonna succeed anyway in my experience so um I I haven't seen I mean if I'm totally honest I haven't seen the value of community for adults I think it's just just a massively overstated meme um I would always rather work in peace and like build products

for the people actually use them rather for like a community of investors so like if you're not building a monetary instrument then the longer you can stay off the public markets the better in my experience because it just sends you like a massive headache a massive distraction as well and kind of introducing short-term incentives into this system now if you're dependent on public markets for funding that's different so I would caveat for that if you have no other way of raising money but this is not a problem that we have in crypto um yeah the private markets are flush with money so I I don't really see any good like yeah the whole like value from

Community meme to me is yeah I think it's just massively overrated oh so what I'm hearing from you is you are unless you are optimizing for a credible neutral protocol or censorship resistance you are pretty bearish on douse is that right uh I mean it's sort of um more like a monetary instrument where kind of the distribution is the value right I think that's that's when you want like ownership to be like I mean that's when it matters that you get the the token into as many hands as possible and then but then like do you count ethereum as a Dao um I don't know I mean are you okay I mean in that case yeah if it's like a

Loosely organized group of kind of Open Source contributors then I mean like there's no other way to Steward ethereum so I would not say yeah I mean then I would say in this case I'm I definitely see it but on the other I think where I like don't agree with your characterization is that many of the most interesting use cases of crypto are ones where you leverage kind of the credible neutrality of the platform where you build systems on top that inherit these properties like creating like a very robust and neutral kind of euro dollar instrument or where you do create sort of with what Lido does like a liquid staking protocol that just you

know makes ethereum so much better um for steak us and so on and you want these things to operate with minimal trust and I don't see like inspired on my my skepticism like I don't see the Magic Bullet that would solve this so I hope that we keep iterating I hope a couple of things I hope you keep iterating on dial designs and like ways to come to decisions as a group um and like be maximally resilient yet agile um and second I just hope for like more regulatory Clarity um and hopefully like some kind of Safe Harbor where you can it's actually recognized that the roots are not the

same for decentralized like truly decentralized protocol and I don't mean fake decentralization um but give something that you know these protocols can walk towards and give them some time to get there I think that's the kind of that's the things that I would ask for yeah I think everyone's hoping for that right now Chris anything else you'd add to hasu's point or agree yeah I mean I do disagree a little bit because I think if you separate out leadership from permissionless participation then I think maybe that's the the balance that we're trying to hope for here I don't think it's the idea that you know your community is going to Define 90 of your product roadmap in the early days but if somebody has a more direct line to you

and there's one piece of feedback that actually materially changes your product or the way that you think about it I think that channel will have done its job very well and so it kind of feels to me like as not as long as you're not um assuming that that is the only thing you're relying on for the development of your product I think having a more direct line to your early users is actually a helpful thing as long as you maintain leadership of the decisions that need to be made so I you know a lot of the way that I've seen the benefit where I think about the benefits of of Dao's is enabling the idea of permissionless participation and and I think that is materially different from organizations we've had in the past where you know we have to jump through a lot of interviews and a lot of Hoops in

order to gain trust and to actually be able to contribute and and I think um there is marginal benefit from from having permissionless participation as long as you maintain the idea of leadership and and don't dissolve that I I think maybe to Chris you know maybe your vision of daos uh as well as I think I see it being in line with a lot of other Trends especially for younger workers right especially post-pandemic trends like people want to be remote and Global uh if you talk to a lot of younger people one interesting thing is there's maybe an extension from a longer you know in like the 50s people had one job they worked it my Grandpa worked at warlitzer you know if I'm right out of college until he retired

and got his like gold watch and that doesn't work anymore right like most people do much more job hopping than that or change careers but if you talk to someone who's even young they don't understand the idea of why one you should only be able to work for one company at a time so I think I see Dallas as kind of a I don't personally necessarily agree with this this isn't what my preference would be but I see dad's like a logical extension of this trend of more of a transactional relationship in some ways between employer and employee or less of a structured commitment maybe than you would otherwise have it's also kind of global day one I also agree with you in this idea that you can play with incentives over you know the ability to play with incentives can be very

powerful you can really mess that up but it can be powerful if you coordinate it I think one angle that maybe we haven't yet explored as kind of governance or Taos from kind of almost like first principles in the sense like causes theory of the firm right so coach said Coast was looking into the question why people organizing firms and what's the benefit of doing it and I think the thesis is that it just like lowers the transaction costs like some things that is like cheaper to do inside the firm than outside and um and for me it kind of if you frame it that way I mean we like

talked about well in Mecca kind of the way that they force public transparency and like radical transparency really in the truest sense of the word does this increase or this is lower transaction costs and I mean to me it definitely seems to increase them whereas if we if I look like in the conversation that I have inside flashpoints I mean it just feels so much more like fluent and and easy going and so on um and yeah I think I would be really interested in someone like doing kind of an analysis of what what other sort of the functions that you do inside a company um or like in the process of like

creating a successful business and how would they react to being done in a Dao versus being done in a firm so like a really kind of like bottom-up look at this I think this would be really interesting if anyone's listening and like looking for the next research project I I'd be interested in how you'd see the transaction costs in a dial versus otherwise and then maybe we can from there we can sort of adjust and I mean it's sort of what I hope is that it would really um like uh sort of more formally write down kind of what even other levels in adult like because we always say Dao like it's kind of a defined term but I mean just among the things that we talk about it

can be like 100 different combinations um and so what does even exist like what what part is actually permissionless what sort of bottom like what what's kind of group decision making versus leadership what part is like hard-coded versus variable um yeah and then I think it would be really interesting to just explore it from that anger I guess maybe I know we're we're running long on time here so maybe we can close with this because I think a lot of what we're drilling down to kind of gets at this one question which is how much of this whole experiment be it Dows or crypto more broadly comes down to censorship resistance because it's very you know I think there was almost a a super hard push towards decentralization

and now there's this there's this other Trend which is pushing back it's like guys we just have to make good products but if you take good products to their logical conclusion a lot of times like a lot of what we're doing would just be more efficient and you could produce a better product running on one server right so for me at least a lot of this has to be the caveat of we need great products to bring people in but if that was the only thing then we could be doing that in so much of a better way than what we're doing right now so I guess like how much of this whole experimentation how much of Dao's for for you guys comes down to this idea of censorship resistance I can I can take you back to that that's a big question I do draw is actually from the political

world where I think if you were to take that same analogy then the most efficient form of government government is a dictatorship and you just pray that it's a benevolent dictatorship um and and the alternative obviously I think you know a lot of us are fortunate to live in democracies where you know sometimes it's very very stressful on you know the lack of progress or the lack of movement but as we discuss things do move and um median opinion does change and so I I think about credible neutrality in addition to censorship resistance as actually a very key kind of value proposition here and I think that matters for certain types of projects more so than others yeah for me

it's kind of I don't know if like censorship resistance is thread framing but I thought I have a very pragmatic view about blockchains and how they fit into what I think they would only reach Mass adoption if they really fit into what people want to do with them and allow them to solve problems better in two ways either they allow them to do something that they do today cheaper or they let them do things that they were completely unable to do before um and I am I'm actually like optimistic about both cases um on a long enough time frame I think especially lowering the cost of trust um and like completely sort of offloading parts of the like what you would

nowadays like see it's the stack of a company um the back-end infrastructure and everything all of this to sort of a public blockchain um and like getting getting a lot of benefits in in terms of like accessing um like you get so many benefits like you tap into an immediately Global Market where people don't need to like sign up they don't need to make accounts they don't need to like wire you money um maybe they don't even need to trust you um that sort of I mean in what world like can sort of a business from India like get a Us customer I think this is just like it's just not possible for like a variety of reasons and so um if sort of some barriers disappear that they are there today and we saw a

bunch of challenges around like scalability and privacy and Mev then I'm actually very optimistic um and I think in that word there's going to be a lot of Need for fire also new forms of governance alright guys you've been uh super generous of your time both you thank you given Jason me a lot to think about and uh set up the framing for this entire season super well so if you have any closing thoughts uh you know Now's the Time but otherwise guys this is a fascinating conversation just really appreciate your time thank you for having me I'm really glad you guys are exploring this because do you think it's absolutely critical that we talk about this more and and actually get all of these ideas out there and I don't think it's talked

about enough so thanks for doing this guys yeah I completely agree with Chris and yeah thanks for the great conversation thanks also thanks Chris talk to you guys soon what a good first episode that was so great that is awesome yeah yeah that was really interesting I knew I knew haasu would be good Chris I've only had one conversation before this with Chris but I just really like the way that they think about where Dows are going I would say an OP skeptical but optimistic um really interesting what what were your takeaways from this conversation or like any big things that stood out I think the I think the big thing that stood out to me you kind of get it from listening to us you speak and if you read Chris's piece which we've Linked In the show notes um then this will come

across as well but this idea of immutability I think is is big and one kind of light bulb moment for me and just in terms of how to think about this is it's an argument that I knew before but honestly because of a recent decision that you and I have been making it's coming to light much more clearly so imagine the difference between like imagine if you are running a business or you're about to make a product decision and you have to base it on one specific vendor right like you can only use this one vendor to do it and enormous amount of your business can be built on that that thing you might not do that you probably wouldn't right because the history of business is replete with examples right of you know you build the product on top of you know like a

Twitter API and then Twitter unilaterally decides boom uh I don't want to do the offer this anymore or Facebook makes a software update and overnight right uh you know zynga's out of business I think the the ability to if you create something that I think that framing that Chris had for protocols that are closer to the core infrastructure layer like lower down on the stack that the immutability premium maybe let's call it goes up quite a bit and the governance that fits with something whose value is based on being immutable is probably one that's highly decentralized actually um so I thought that was that was a big I kind of knew all those

arguments coming in but listening to them over this past interview really teed that up in the framing for me yeah I I completely agree with that any any surprises for you from this episode not really not really surprises I think the one thing that I'm I'm not gonna make my own I think it's very difficult to have an honest on-air conversation about is the degree to which this is all this is a play on regulatory Arbitrage I think that's the thing that's that's tough I think it's very early I think it's very easy to see the end state of what a product dowel right like a a low a low infrastructure layer product dial the

correct governance should be something that's very decentralized should be it's really hard to Jim your way into an argument for that for an early stage startup I think I just it's been really hard even on this episode I think to find anything necessarily positive to say about it and you know we kind of ran on out on time so I didn't want to delve too far into Chris's uh you know assertion there at the end which was permissionless contribution but I struggle with that a little bit because in my experience like good decision making doesn't necessarily get made by larger groups of people right have you ever heard that expression a camel is a a horse that was designed by a committee you know actually most good

decisions actually come from taking people away from contributing to certain decisions I think and maybe this is too silly or simple of a framework for looking at it but you know imagine if Apple tomorrow was like big announcement guys uh anyone who wants to contribute to Apple you all can contribute now like I want the market react I just would that yield a a better iPhone I I just don't think so um so I could be geez I could be missing something there but I really struggle with this idea that decision making gets better when you open source it yeah I think it was interesting you tying in like themes and trends of younger people today they want to work

for two different companies and I think Chris might pause it that like self-sovereign future work habits might effectively or like explicitly like start unraveling kosa's theory of the firm yeah I think he might say that I'm I'm I would say I'm pretty skeptical on that and it seems like costume might be pretty pretty skeptical and I think hosu said it pretty bluntly he's like look this all sounds fun until like all your decisions are aired out and your dirty laundry is aired out in public like on the maker down forum and then it gets posted I was like I agree with that so much like I love making decisions in a room with like five different people and then executing on it and then it's public once it's live you know I think that's purely an ideological thing that is a moment in time I just there's

nothing about the mechanical the architecture of a blockchain and the organization of a Dao that says everything needs to be public that is purely an extrapolation that didn't need to happen I just I don't think there's any benefit to it I'm not even gonna say that the opposite word on that I I do think that you know one thing that we didn't really explore more in depth was this idea of incentive design and motivating larger groups of people with your your token um we didn't really talk about this much but I know at least haasu isn't a big fan of yield farming Visa is a very expensive form of customer acquisition I would actually quibble and say I think you'd actually probably by the end it wasn't great but

in the beginning it certainly was because the benefit that yield farming has it was a very blunt tool and a very expensive one but it was very simple it was a very easy like one action that you take and you get this reward whereas in incentive design it's very you you really should be optimizing for Simplicity think about it we've designed sales comp plans before it took a while to figure out but like the more complicated it is the worse it is and it's very easy to say well I want to motor this specific action this specific action this but every incremental layer of complexity that you add to incentive design dilutes the entire value of what you're trying to do uh so that's what I would say about you know I I and I think that probably the

next iteration of yield farming that we see will be something slightly more complex right than than what we saw in the yield farming phase but it does kind of see like there is there are these businesses that have harnessed the value of community out there in the real world like the canvas and if you added Finance to that I I do think there's a the company that figures that I think there's a difference between I think there's a difference between community and cult actually yeah all of these doubts all of these Dows and protocols and like every company in crypto says they have a community and like all every company even even like SAS companies like oh we have like communities now they don't have Community doesn't matter in a world where there's an infinite amount of

communities right if you think about what community used to be in the physical world it was like your church and like your softball league on Thursday nights after work right like you had like two or three communities what the internet did is it unlocked an infinite amount of communities so then the value of a community really goes down because once the going gets tough in a community the tough get going and they go join a new computer a new community and I think what um these Dows have been able to do the really successful ones is create Cults actually and and actually the the protocols the the layer ones have been able to do this well so I think a lot of like apps have like these nice communities but they don't have Cults and you want to create Cults and you who else has it called apple has a cult

there's a cult following around Apple Tesla I was actually and so like I was gonna bring that up yeah okay I have a hypothetical question for you and the reason Tesla is a call is because they can align incentives a lot of the Tesla cult people are people who also own what stock is like pure sellers like you're going to hell okay okay I've got a question for you what do you think the Venn diagram is greater between owners of Tesla stock and people that drive a Tesla or people that own ethereum and use Ethan defy what percentage would you think is greater oh own Ethan use defy I'll take I'll take the other side of that I think a higher percentage of

Tesla shareholders actually own a Tesla then if people that own some eth and like actually either contribute to governance or you use it in some way right like extract the utility yeah yeah and then I think and then I think it would be interesting to look at that for Solana you know that would be a pretty interesting metric that I would just like to know the question you're asking is if really the question you're asking is if you're financially aligned with something does that make you more likely to use it yeah and has crypto and has crypto done that better and is down necessarily the form of governance that achieves that thing yeah I it's funny to think about Tesla because for all their the Flack that they get they've probably done a re I would bet you that there's

an enormous overlap in between people that own shareholder like own the stock and actually have a car have a Tesla um maybe it's also the pro maybe it's the well maybe it's the other it flips too it's like what what's the chicken in the egg it's like you buy a Tesla and then you're like oh my God this is so much better than any car I've ever bought like let me go buy the stock so anyways back back to the governance stuff though are you any other like takeaways from this conversation anything else that you were like wow that was I mean I thought this was such a good episode to kick off the season but anything else that you're really thinking about there um no I think you know the next thing that the question that we this was a really good overview largely of the the

season I thought and initially what we wanted to get out of this episode you know this is introducing the idea of business governance fit and the idea that the governance structure that you pick for an organization needs to fit the objectives of that organization I think probably we could have done a little bit of a better definition of terms like we started to get into this Dao as if it's like some understood thing there are multiple different types of organizations that borrow Dao structured we were largely referring to layer 1 daus which I would argue Bitcoin and ether both daus uh and then there are also product dials which the objective of that dial like all of air compound is to create a product or service um and then there are other you know

noun Styles a very different objective and there are other like nft type dials that that have different objectives but we were largely referring to that very specific thing um but I think we covered this idea of business governance fit and also you know I think I think some of the the mistakes the the things that we learned incorrectly from layer ones going to the product layer I think in this next episode we're going to be talking with uh Larry and Derek from reverie who these guys in terms of you know their thoughts on governance and their actual Hands-On work with dials I think they're they're two of the leaders in the industry it's got a great great podcast called I pledge allegiance Shilling uh definitely go listen to it I've learned

a lot listening uh to their interviews but I think we're going to be talking about more specifically the idea of we're going to get a little bit more in the Weeds about corporate governance so what are some of the principles that we can use uh you know borrow from existing corporate governance and apply that specifically to the layer of product Dows um and then I'd also like to I'd like to continue pulling on this thread of different like maturity different stages of growth of the Dow and having a different governance structure for for how old or mature a dow is because I don't know I in an ideal state you have a regulatory framework that allowed you to

be for your token to be governed differently depending on how mature and decentralized you are but that that sadly isn't really the case so I I want to keep pulling on this threat of uh you know maturity you know life cycle maturity governance fit as well yeah yeah I think you said it well in the in the first in the kickoff episode of the season the episode before this which is it comes down to intention and maturity I think that was well put so anyways for great great first episode of the Season uh we've got Derek and Larry from reverie coming up next I hope you guys enjoyed this first episode of uh season two of bell curve and I will see you next time thank you