The Pragmatists Guide to DAOing aka Reasonable ways to Govern a DAO
"You Are Here" – The Sobol Blog
0xA8fa
September 20th, 2022

This article is by some people who have “been there, done that” in the self-management community. In DAOs, there is much talk about whale capture and token weighted voting. There is an assumption that if you haven't designed the system well, you will be attacked in the Dark Forest of open, permissionless, networks. But this debate seems to stem from a limited set of governance ideas. 

Less discussed is bottom up, consent-based governance with unique incentives and the ability to simply say “No” to detected problems and attempted manipulations. In this article we’ll explore the foundational building blocks of this under-explored pattern, along with some real world examples as inspiration for experiments in your DAO. 

What’s really wrong?

We suggest DAOs reflect on how they think about decision making. Typical token weighted DAO governance has fundamental design flaws that create problems such as “whales über alles.” At least that’s how it appears to those of us who have worked with self-organizing, self-managing, self-owning systems. One major flaw is the idea that ALL decisions should be made by majority vote. We’ll talk about where and how that can be problematic. 

Most DAOs operate under the premise of a flattened hierarchy, but as soon as there is a vote, Presto!, a hierarchy appears. The majority rules the minority and has power over them. With this power structure whales can capitalize on power-over (aka. negotiating leverage). 

Furthermore, the ideas of a “flattened hierarchy” and “anonymity” implies sameness. It implies everyone is equal, or at the very least that everyone is fungible. But calling a DAO an “organization” completely contradicts that idea. Why? ORGANizations are systems of organs. And, organs are not the same. Systems have subsystems. And, the subsystems (or “organs”) are all different. An example of a DAO organ: when several representatives of City DAO joined Mike Yin, DAO spokesperson, in visiting the first piece of land the DAO purchased in Wyoming. Those representatives are a subsystem (organ) of the City DAO organization!

TL/DR: Voting creates hierarchies and ignores the organs of the organization. The organs themselves have no formal say in what’s going on. The overall DAO owns itself, why can’t the organs of the organization own themselves, too? 

A possible different strategy

Diagram 1 shows common decision making methods on the lower row and indicates that the most fundamental form of decision making is consent decision making. (We see the idea that consent is the most basic form of decision making in the US Declaration of Independence, which asserts that “governments exist by the consent of the people.”)  So, for an organization, nation, or a DAO to use any of the decision methods on the bottom row, its members must consent (implicitly or explicitly) to do so. 

Diagram 1 - Consent Is The Fundamental Form Of Decision Making
Diagram 1 - Consent Is The Fundamental Form Of Decision Making

There is value in each of the bottom row decision methods, and we suggest that a joyful, well-run DAO should take advantage of all of them, depending on the situation or need!

Chaos 

Chaotic decision making may seem to be haphazard with no order or discipline whatsoever. However, chaos is not the same thing as “randomness.” Rather, it is a complex collection of unpredictable potential patterns, and self-organization can arise from this complexity. Here's an example of how this might work in practice. In the chaos of people milling about at a country fair, if there is an emergency such as someone having a heart attack, people will immediately organize to help the person in distress. If you’ve ever experienced an “open space” event, you’ve likely seen new ideas emerge unpredictably from a large collection of people milling around. In self-organizing systems, many decisions are left to whoever notices the problem first. Of course, the downside is that chaos, if mishandled, can also be the breeding ground of a destructive riot. People can be crushed to death in a panic. 

Magic (Belief)

“It’s how we’ve always done things” is a form of magical thinking. Belief, tradition, and rituals convey and preserve deeply held values, and establish rhythms that coordinate activities at a social subconscious level. For example, it is rare to find people deviating from the rhythm of a seven-day week. On the downside, the inertia of custom and habit can be very dysfunctional. The United States, for example, continues to cling to the British Imperial system of measurement while even the British have stopped using it. 

Orders (Authoritarian)

Authoritarian decision-making means someone directs the actions of others. People making decisions for everyone can be helpful. For example, a skilled facilitator can bring great effectiveness and efficiency to a meeting. A person with special knowledge can lead a surgical team, or keep us from getting lost in the forest, or make timely decisions about shifting resources to meet sudden changes in business decisions. However, as we all know, “bosses” can be highly destructive both to the people whom they are leading as well as the organization itself. You don’t own a digital Kodak camera today because several years ago incompetent bosses at Kodak failed to anticipate the digital revolution. It makes a big difference whether a boss can be corrected by the people who are receiving their leadership. You may think of a DAO as a flat organization - meaning no bosses. But a truly flat organization would quickly fall apart. Even in self-managed organizations where the powers of traditional CEOs are divided between roles, those roles can have authoritarian control over matters in their domain. A flat organization can be both flat and use correctable hierarchies as it needs them.

Majority 

Making decisions by majority vote can be effective so long as the minority remains a “loyal minority,” accepting the will of the majority. DAOs typically use majority voting to make decisions on rules, processes, and policies. Majority voting is particularly efficient when large numbers of people are involved. As discussed at the beginning, there are downsides to majority voting. For example, when majority is dictated by ownership stake, whales can become problematic. Even without whales, if issues being decided are complex, it is difficult to educate the large number of people to the point they can make informed decisions.

Consensus

Consensus means everyone is in agreement on a topic. Consensus can build very strong commitment in a group. For example, NATO requires complete agreement among its member nations on major decisions. NATO’s strength depends on its unity. The downside, of course, is that it can be slow and clumsy, dissolving into endless arguments on relatively small points. 

Social Protocols

Social protocols layer overtop of the decision making primitives, and act as a means of coordinating the formation of consent.  Below we highlight two in particular that have seen substantial testing and iteration in self-organizing communities.

The Advice Process

The advice process declares one person as the owner of a particular decision. Most often it’s the person who recognizes the problem, holds the related accountability, or is closest to the problem. The decision owner starts by seeking input and advice from two groups: those who will be affected by the decision and those with subject-matter expertise. This process assumes that people trust their colleagues to make decisions in the best interest of the collective, and that people’s input will be sought when appropriate. After seeking input, the decision owner proceeds in a way they deem best for the organization. They do not need to act on all advice provided. Seeking approval or announcing their decision in advance of acting is not required. 

The Advice Process happens often within good friend and family dynamics. Someone might make dinner plans, ask for input from those that may come, and then choose a place. It might not be perfect for everyone, but it moves towards action much faster than consensus. The Decision Maker by Dennis Bakke is a quick read and does an excellent job of explaining the advice process in detail. Also, see The Advice Process Visual Overview by Human First Works

Generative Decision Making

Compared to the advice process, generative decision-making is more structured. The generative decision-making methodology is best used in a live (in-person or remote) meeting with everyone relevant to the decision present. Two key elements make generative decision-making powerful. First, there is no single decision owner. Whoever makes the first proposal becomes the proposal holder. Their job is to onboard and integrate feedback from other meeting participants until a final decision emerges. This process may develop in a decision that diverges completely from the initial proposal. Second, participants may only object to a proposal if they feel it will “cause harm or move us backward.” For more information, see this overview of Generative Decision Making.

This process creates generative decisions that are typically better than what any one person would have come up with, and generally respects the voice and wisdom of the minority. However, like the other methods of decision-making, participants may not consent to (accept) the definitions and restrictions of the generative decision-making methods.

Focus on basic consent decision-making

Next, we’ll answer the questions: “What is basic consent decision-making?” and “How can I start experimenting and learning to do it?”

Diagram 2 - Basic Consent Decision-Making Needs A Facilitator
Diagram 2 - Basic Consent Decision-Making Needs A Facilitator

Consent is both old and new. As mentioned, consent has been around at least as long ago as the US Declaration of Independence. However, using consent decision-making in everyday life is rather new. And only in the last 30 or 40 years has the topic been researched, more or less the same period of research into the topic of complexity. 

Use consent decision making when you’re dealing with lots of complexity, when you’re thinking about how things are going (eg. a retrospective at the end of an agile sprint), or when you need to change your policies or develop your overall strategy. It’s useful for small groups like a family, as well as large groups like a big company or a DAO.

If you want to try consent decision-making for your group, it’s important to know that like majority voting, generative, and consensus decision making, it is best served with a facilitator. See Diagram 2. 

Of course, facilitators need a process. Here’s a simple consent decision-making process to experiment with in a group where you are comfortable.

  1. Ask someone to make a specific proposal about how to solve some issue or take advantage of some opportunity.

  2. Do a round asking for clarifying questions. A “round” means you ask each person at the table (or on the computer screen) if they understand the proposal - regardless of what they think about it. If not, what questions do they have. Go in an order and don’t allow cross talk. As the proposer answers questions, change the proposal on the spot to reflect the clarification. 

  3. Do another round asking for reactions.  Do another round (maybe starting with a different person than the first round) and ask each person, “What are your reactions to this proposal.” Again, change the proposal if needed to reflect each person’s viewpoints. If opposite ideas are expressed, say “Great!” and place the opposing views in the proposal. (eg. “We will leave the window open; we will leave the window shut.”) 

  4. In another round, ask for a simple “consent” or ”objection” to the proposal. You can ask this question in a number of ways. For example, ”Is this decision good enough for now and safe enough to try?” If someone says “no objection” or “consent” but seems uncomfortable or disengaged, note it as an objection because there is “something going on.” If there are objections, listen to them and listen for needs underneath. (Note: there are no “invalid objections” because the process is open to all parts of each person - rational, emotional, gut feel, etc.)

    *“Both-and thinking” is important here. Susan wants the window open to get fresh air and Charles wants it closed to stay warm. Perhaps we can meet both needs if Susan can sit near the window with it open a few centimeters and we can get Charles a special space heater for his desk. 

    **And try it out for a week to see how it works - rapid prototyping is also important. 

**
**As with any facilitator-led decision-making process, some training really helps. Without an experienced facilitator, consent decision making can get hung up, at least for a while, by dysfunctional personalities. There are a number of certified consultants/trainers around the world who can provide consent training. See the list provided by the International Sociocracy Certification Board, www.iscb.earth. (John Buck, co-author of this article is on this list: www.GovernanceAlive.com.) 

*If you are interested in learning more or simply bringing in experienced facilitators to help you explore these ideas, Travis & John both facilitate professionally. BPetes also facilitates meetings for Bankless DAO.

DAOs, Consent Decision Making and Distributed Systems

Most DAOs are built on principles of decentralization. However, the methods for decision making have gravitated towards token-weighted majority voting at the DAO level. When voting is token-weighted, there is an implied assumption that every token is “equal”. This leads to misaligned decision making as discussed earlier in this paper.

The breadth of decision making frameworks, in reality, goes far beyond majority voting. We strongly believe many DAOs would benefit from viewing themselves as bottom-up organizations and adjusting their decision making appropriately. In this way, they can maintain decentralization without having to pretend that all people and all roles are equally fungible.

In the rest of the paper we’ll explore how bottom-up systems can work, and how these systems leverage decision making paradigms.

Bottom-up systems

Consent decision making lends itself well to a bottom-up system of governance. A bottom-up structure allows decisions to be made at the lowest level possible. This is the essence of being decentralized: spreading the basic decision making to the smallest organs of the organization that are able to function autonomously. But some decisions affect more than one autonomous unit. Those decisions need to be made by consent of representatives selected by each of the base level units (or organs). It is possible to select representatives by consent. In fact, it’s a rather neat process. There are no winners or losers like you get in majority voting. Furthermore, representatives can be recalled quickly if necessary.  

Don’t believe what we’re saying? Numerous successful bottom-up systems exist in the non-DAO world. 

In the State of Kerala, India hundreds of thousands of neighborhoods (“neighborhood” means about 30 families) are organized as basic units of government. Every group of 30 neighborhoods select representatives to an area unit. Clusters of 30 second level area units select representatives to a third level (more or less a township - called a panjayat in India). The government of the State of Kerala does not allow this upward “federation” to go above two levels. Traditional governments (and politicians) tend to get a bit freaked out about the power of effective bottom-up governance. 

The Kerala experience is attracting attention elsewhere. For example, a project called SONEC, funded by an Erasmus grant, is trying to replicate the Kerala system in Europe. See https://sonec.org/ And there is direct experience with consent based governance in the Dutch City of Utrechtse-Heuvelrug, a city with a population of about 50,000. 

In the bottom-up Communes of Rojava in North East Syria a kind of DAO has emerged. Everyone takes police training and the responsibility for serving on the police force rotates so that no one gains too much power. The women are equal with the men. 

In addition to these community and quasi-government bottom up systems, many for-profit companies have adopted these practices. Examples include Valve, a video game company where everyone’s desks have wheels so people can move on a moment’s notice when they believe they can contribute more in another area. And lest you think that this is only possible in software companies, Buurtzorg, the largest healthcare provider in The Netherlands, with 10,000 professionals, uses it. The vast majority of the Buurtzorg team is organized in community care units of 10-20 nurses serving a particular community. The entire corporate headquarters consists of ~50 people and only reacts to requests by the teams. The ‘CEO’ Jos De Blok, is famous for having so few formal responsibilities that his calendar regularly has no more 1-2 meetings/week, mostly with other CEOs and media that want to understand the Buurtzorg system. And these distributed systems have scaled to over 100k people. 

Haier, the largest home appliance manufacturer in the world, has been on a quest to build a company with “zero distance” between employees and customers. It divided its organization into a thousand micro-enterprises, with just two levels separating frontline employees from the CEO.

Many other examples are documented in the best selling business books Reinventing Organizations, Humanocracy, and Brave New Work.

CONCLUSION

DAOs need refinement in their decision making systems. Decision by majority is appropriate in some cases, but not in all, and not even in most situations. Without a change in decision making, stories of hacks will continue unabated. 

DAOs need to consider new ways to make decisions. We encourage them to consider bottom-up decision-making by consent. This approach offers a very strong, well-tested foundation for distributing authority to where it can be most effective while offering protection from attack vectors. If this strategy is something that interests you, we’d love to talk with you more.

You can reach the authors at:

bpetes.eth - @BryanPetes

John - john.buck@governancealive.com - @johnabuck

Travis - travis@humanfirstworks.com - @TravispMarsh

Also, stay tuned for our next article about a technical implementation using NFTs, Decentralized IDs, Verifiable Claims, and emerging DAO tooling stacks to structure bottom-up decision making automation in your DAO.

**
**

 

**
**

Subscribe to "You Are Here" – The Sobol Blog
Receive new entries directly to your inbox.
Collectors
View
#1
#2
#3
View collectors
This entry has been permanently stored on-chain and signed by its creator.
More from "You Are Here" – The Sobol Blog