A Decentralized Autonomous Organization, or DAO, is an entity that seeks to coordinate the actions of a large number of humans and resources around the pursuit of a very large and often improbable goal. Whether that goal is to democratize team ownership in sports (Krause House), fight climate change (KlimaDAO), fund public goods (Gitcoin DAO) or to decentralize space exploration and put a base on the Moon (MoonDAO :-), when it comes to DAOs the more ambitious the mission the better.

Ambitious missions take time, and time is cruel to organizations. Most companies don’t last 50 years, while less than 20% of the 8.4 million U.S. companies are more than 25 years old. This means that any DAO aiming for society-level impact must first simply withstand the test of time. To do so, they must lay the critical groundwork that will allow seemingly inconceivable feats to be accomplished by their members 25, 50, 100, or even 1000 (yes, 1000) years in the future. This involves developing anti-fragile and anti-capture strategies made possible by web3 technologies and focusing a significant amount of energy on managing, cultivating, and deploying a DAO’s two greatest assets: their treasuries and their communities. Surprisingly, the key to doing this can be found in a very old and boring idea.

Diversification

The value of diversification as a general concept is embedded in the world around us, even if our brains are often moths drawn to the flame of sameness (see “affinity bias”).

In the world of finance, Modern Portfolio Theory tells us that a portfolio with a wide range of assets with varying degrees of risk performs better over time than an investment in a single asset. This idea won Harry Markowitz the Nobel Prize in Economics in 1990, but the idea has been baked into our cultures for hundreds of years. Miguel de Cervantes allegedly coined the term “don’t put all of your eggs in one basket” in Don Quixote in 1605, and we see a similar sentiment in the Chinese idiom 孤注一掷 / gū zhù yī zhì, which means to bet everything on one “throw” (MoonDAO’s large Chinese community will have to help me on the origin of this phrase).

We also see this phenomenon in nature. A gene pool with a wide variety of genes will produce a healthier population than one with a limited number of genes. A field planted with a single crop will be more susceptible to soil depletion, disease, pests, and erosion than the same soil planted with a diverse range of plants. Even the Pareto Principle – the well-observed phenomenon in which 80% of outcomes are determined by 20% of the causes – implies that you can’t just cherry pick the optimal 20%: you also need the diversity of the other 80% to get to success.

Financial diversity

Financially speaking, diversification for a DAO is low-hanging fruit, but its obviousness also means it is often overlooked or deprioritized. MoonDAO, for example, has a treasury worth around $50 million USD (as of this writing), but this is held in only five assets, all of them crypto, and the largest one is our internal governance token MOONEY. To exist long enough to achieve some of our stated goals such as launching our own spacecraft or establishing a base on the Moon we need a strategy to preserve and grow these assets over time. This might look a little different for a DAO than it would for a traditional company because a DAO has access to a wild new ecosystem of web3 diversification options that traditional companies can’t touch or won’t touch. I’ll leave the portfolio building to the experts, but a DAO seeking long term diversification could, for example:

• Stake ETH or other Proof of Work tokens.
• Yield farm on DeFi platforms.
• Provide liquidity on Uniswap.
• Lend directly to other DAOs.
• Token swap with emerging DAOs.
• Collect blue chip NFTs.
• Commission NFT artists in exchange for a portion of royalties.
• Allocate funds to a small YOLO degen trading team.
• Invest in crypto index funds.
• Invest venture capital in startups in their domain.
• Buy land in areas that will be havens from climate change.
• Buy a building in NYC (or anywhere).
• Buy stocks, bonds, or other traditional financial products.
• Earn revenue from developing products and services.

The last few on that list are there to illustrate the point that a DAO adds a new dimension to diversification by opening up crypto-native investment options on top of having access to more traditional methods. With that in mind, Modern Portfolio Theory would suggest that a DAO has a greater probability of long term investment success than a traditional company since it has a wider range of investment options, and the risk profiles of those investment options are much more variable. Similarly, since DAOs are generally more motivated by their mission than by profit, they may have a greater risk appetite or be less affected by cognitive biases such as loss aversion. So when a DAO wins big, it might win bigger than others. And as I said before, ambition is key in a DAO.

Human diversity

But let’s get to the real point of this all. Financial diversification is only one aspect of diversification for a DAO, and arguably not the most important. The most valuable resource that any DAO has is its community. A DAO, after all, is just a collection of human brains – those magical meaty computers that have allowed us to do impossible things like splitting apart atoms and escaping the bonds of gravity. A DAO aligns these brains toward a shared purpose, and when it comes to brains the more that you have and the better that you coordinate their activities, the more successful you will be.

But isn’t it more efficient if we all just think the same way? It might be more efficient, but you will never generate radically genius ideas that way. To get to the 20% that produces 80% of the results, to cross pollinate different forms of intelligence in ways that create ideas that no single person could have come up with alone, you need to bring together a set of minds and human experiences that is as diverse as possible. A growing body of research – from Harvard Business Review to Forbes – suggests that greater diversity in the workforce has a very strong correlation to both financial success and the innovation that such success depends on.

But as good as diversity is for your business, it’s even better for your soul. Interacting with people who are different from you and who may challenge your way of thinking makes you think more deeply about who you are, what you believe, why you believe it, how you perceive the world, and how others might perceive it differently. Our minds are extremely powerful, but they are riddled with unconscious cognitive biases. Regularly digesting a diversity of viewpoints creates a healthy mental diet that makes us aware of these biases and allows us to be even more valuable contributors to the communities we are a part of. As NASA eloquently puts it in their Policy Statement on Diversity, Equity, Inclusion, and Accessibility:

Our astronauts have taught us about the “Overview Effect” – a cognitive shift in awareness achieved through a transcendent perspective in space – which helps us understand that all human beings are connected by the commonality of our existence and our interdependencies on a small and fragile planet; therefore, the success and wellness of our species and planet depend on the equity, inclusion, and access accorded to the full diversity of all people on our Earth.

New trajectories

Unfortunately DAOs and web3 in general have a long way to go in embracing diversity and battling racism, misogyny, homophobia, transphobia, xenophobia, ableism, and other anti-human behaviors that plague both the tech world and society at large. The inhabitants of web3 have a generational opportunity to demonstrate a different path that will create both better businesses and better humans, but to do so we must invest in building that path, and building it early.

At MoonDAO, our mission is to decentralize access to space and bring it within reach of as many people as possible. To do so, it is critical that our DAO not only reflects the best minds of web3 and the best minds of science, but also the incredible diversity of the planet we call home and claim to represent. There are a variety of things we can do as DAOs to create an environment that nurtures diversity, equity, and inclusion and ensures the long-term health and stability of our community.

• Establish a constitution or other social contract that clearly defines both the purpose of the DAO and its core values, and then measure every action against that purpose and those values. At MoonDAO we have a constitution project that is working on developing just such a document, with a team specifically focused on our mission and values.
• Think beyond compensation when it comes to incentives. Compensation is one of the least important drivers of worker happiness. Culture, values, and leadership quality are much more important.
• Decentralize leadership and execution by empowering DAO members to start and manage projects on their own. Assume positive intent and positive outcomes until proven otherwise, and provide support and advancement opportunities to new leaders who take initiative.
• Invest in community managers. These are unsung heroes who have emotional intelligence and people skills that can unlock a huge amount of value for a DAO.
• Encourage dissent. At a bare minimum, do not silence dissenting voices.
• Specifically ensure that groups that have been historically marginalized or exploited in wider society – women, people of color, indigenous people, LGBTQ+ communities, and many others – have a true seat at the table of power within the DAO. This involves diversifying traditional centers of power in a DAO like the multisig, system admin rights, or Discord roles, as well as looking at things like pay equity and promotion opportunities that have historically been imbalanced for these groups.
• Embrace, support, and empower a diversity of language groups and find ways to work asynchronously to account for our round planet and its many time zones. Our large Chinese community within MoonDAO has helped us build this thinking into our culture, but it is still a big challenge to overcome language and geographic barriers.
• Attract both experts and amateurs, and break down barriers between them. We would love to see world class aerospace engineers collaborating and interacting with young space enthusiasts around the world, because these will be the scientists of the future (the ones that we hope will build our Moon base).
• Have a zero tolerance policy for harassment, hate speech, bullying, spamming, or other gross human behaviors. We are all adults and we know these things are wrong. To say otherwise or call it “canceling” is gaslighting bullshit.
• Find ways to have fun together and connect as humans. Maybe we will see you at our launch party when we send our first explorers into space in July.

The early bird gets the wormhole

At the beginning of time, the most important things happened earliest and defined the future shape of our 13.8 billion year old universe. Quarks and electrons formed protons and neutrons in a few millionths of a second, nuclei were formed within minutes, and a mere 380,000 years later electrons began orbiting nuclei and formed the atoms we know today.

The same is true in the genesis of all things. Early actions create patterns that endure. The right soil, light, and nutrients early on creates a healthy plant. Early investments create the majority of long term gains. So even though it is extremely important for DAOs to understand and invest in the diversity of their finances and communities, it is even more important to do so early. This is true of both individual DAOs like MoonDAO and the ecosystem of DAOs in general. We are in the midst of an early explosion of growth, and we will be shaped by the choices we make during this exhilarating, heady moment of youth. Let’s make sure this wormhole to a different way of living stays open for our future selves by investing in the right things early.

(Author: zeroindex; Editor-in-chief: CarolW)