Origins of Self Organizing Organizations — Agile, Holacracy, DAOs
“ In the connectedness with other processes within an overall evolution, there is a meaning which is the meaning of life. We are not the helpless subjects of evolution-we are evolution .” — Erich Jantsch (1)
TLDR;
This article would answer some of the following questions:-
- Is there a better way of proposing, collaborating, and working towards common goals?
- Why has our governance and the political model remained the same for many years? Because is it the best way or are there better ways of doing things?
- Is the pyramid structure the best model to manage country, military, or corporations? Is there an alternative?
- Would improvement in technology help us in gaining better collective potential?
- Is the hierarchical model enough to tackle emergent complex problems that we are facing?
The Advent of Human coordination
The common theme between nation, company, and nonprofit is that they are organizations formed by humans to coordinate efforts to achieve certain goals.
Human beings are social animals and our collective cooperation has helped us survive the worst environmental and external threats. We are not physically stronger compared to other species but our collective effort has helped us survive and overcome harsh environments.
Before the invention of agriculture, we were hunter-gatherers for over 200,000 years where we used to forage for food. We did not have a fridge to store food, the constant movement of nomads kept populations small and life was less complex. Skills of individuals like hunting, foraging for food, eating and cooking food was easy and would not take long to learn. As shown in Fig 3, the collective behavior of the whole group of the nomadic population was not complicated compared to individual persons so they were at the mercy of disease, weather change, and other catastrophic events outside their control.
With the invention of agriculture 10,000 years ago, we settled down single place, had more time to procreate and increased the population size, started specializing in different skills, we grouped to make decisions. Top-down organization systems like monarchy were formed, where few people made decisions and the masses had to obey. Laws were passed to maintain law and order and to protect the rights of the people. With settled life, humans began specializing in different domains, like treating diseases, storing food, forming the governing body to take care of, social, economic, and security needs.
The history of human civilization reflects a progressive increase in the complexity of large-scale behaviors (notice Fig 3 C to E). Early civilizations introduced a few relatively simple large-scale behaviors by use of many individuals (slaves or soldiers) performing the same repetitive task. Progressive specialization with coordination increased the complexity of large-scale behaviors.
The Pyramid that never changed
“Almost everything has changed. But not management. Information flows up. Decisions flow down. A place for everyone, and everyone in their place” — Aaron Dignan (2)
History shows us that when there has been a need for large groups of people to coordinate and work together for collective goals, we have relied on systems of top-down hierarchy, as in corporations, governments, and the military. The hierarchical structure was formed as it was easy to form and rule over an unsophisticated population. Over time many layers of management were added as the sophistication of the company grew with many layers of procedures also known as bureaucracy which made an organization less agile and innovative.
While there is tremendous innovation occurring across every industry, every sector and every aspect of society, the underlying principles of collaboration, communication, and problem-solving remain the same. How we humans coordinate, organize and cooperate to reach specific goals in government, corporations, and non-profit has been static with a top-down approach overwhelmingly hierarchical.
The major drawbacks with hierarchies are that they have:-i, Single Points of Failure — a loss in leadership can negatively affect or collapse the system. ii, Limited bandwidth — A person ruling over a large population has constraints on how much information they can take and provide timely feedback or action. iii, Power Concentration — Decision-making is concentrated in the hands of few and is biased so many decisions are not fully weighed in. Leaders, even if they are benevolent, can’t always keep up with all the needs of their more numerous community members. Once an organization increases in size the hierarchical system cannot quickly make positive changes.
Dealing with Complexity
Why do many hierarchical organizational systems lose speed and agility as they grow in size? What are some solutions of the organizational management systems to tackle some of the complex problems we face in the world?
To understand solutions we got to delve deeper into ever-increasing complex problems of our world like climate change, corruption, poverty, social inequality, and unemployment. We have to understand:-
a, what are complex systems? How do complex systems like human organizations interact with external influences
b, How do we measure the complexity of an organization?
c, What are some organizational structures that can “absorb” and tackle complex problems we are facing? (First Law of Cybernetics)
Complex Systems
“The study of emergent behavior exhibited by interacting systems operating at the threshold of stability and chaos.” — William H. Roetzheim (3)
A complex system is composed of many components which may interact with each other and whose behavior is intrinsically difficult to model.As a discipline, complex systems is a new field of science studying how parts of a system and their relationships give rise to the collective behaviors of the system, and how the system interrelates with its environment.
We are concerned about how a complex system like a human organization can thrive or fail to interact with other complex systems. Other complex systems could be weather, external political, social, and economic organizations eg a start-up or a new product destroying an old organization. Let’s look into the field of cybernetics to understand the interaction.
Cybernetics
“Only variety can destroy variety.”
-W. Ross Ashby (1902 -1972), First Law of Cybernetics (6)
As shown in the Complexity map there are many ways one can study complexity, it is a multidisciplinary/transdisciplinary (7) field in which we are starting to understand and see patterns. (6). We will use Cybernetics to explain why hierarchical systems can fail to adapt to the complexities of the post-pandemic world, why flatter and networked structures like DAOs can “absorb” complexity.
Cybernetics is a study of living or non-living systems that uses feedback or communication to guide the system to reach its goals. (Cyber’ is from the Greek word for navigator). It is a transdisciplinary field where it can be applied in an ecological, technological, biological, cognitive, and social system (8). Examples can be a military unit changing its objectives according to reconnaissance intelligence.
We shall apply some of the principles of Cybernetics in human organization. The “First rule in cybernetics” also known as Ashby’s Law, named after W. Ross Ashby, a pioneer in cybernetics, states:-
“When the diversity of problems (complexity) of the environment exceeds the repertoire of responses of a system (living or non-living), the environment will dominate and ultimately destroy that system. (9)”
Let’s explain more on this via figures & examples below: -
Bug vs Superbug
Let’s explain the first part of the law with the help of Fig 2a and with an example of an organism that is usually found in a group or colony, ant. A single ant is not sophisticated to survive a flood, protect the young from dangers of the environment, and run the equivalent of 60 miles/hr or jump or cross a large abyss. So according to the First Law of Cybernetics, the inability of the ant to respond to challenges posed by external complexities can potentially kill the ant. As shown in Fig 2a, a single ant cannot fight the challenges posed by external complexities so it perishes.
Self-Organizing Bug
But when a group of fire ants is thrown in water as in Fig 2c, they self-organize without a leader commanding and form a complex lattice or a water raft. The collective potential of the group of ants helps overcome the environmental challenge thus the ants cooperate and thrive as shown in Fig 2b. Ants are behaviorally unsophisticated but collectively they perform complex tasks. Ants have highly developed sophisticated sign-based communication that helps in coordination and cooperating to together overcome external threats (11). This shows the group of leaderless ants can form cohesive force enough to tackle external environment. (12)
Organizations and Complexity
Today’s world is complex and competitive, complexity increased by inter-dependencies which can cause an unpredictable chain of events like the financial crash of 2008., the Great Recession, Nokia, and the collapse of Lehman Brothers. Now let’s take examples of human organizations like business corporations and apply Ashby’s Law or the First Law of Cybernetics.
We will see examples of traditional top-down hierarchical organizations and self-organizing organizations and expand on them later.
The best organizations are those that self organizes and taps into the potential of individual members, respond to the “unexpected” events, and have mechanisms to detect and respond to shocks. This is a key insight from the recent study of a financial crisis. Organizations especially startups are agile and adapt better to changing economic conditions while others mainly corporate are resilient recover from an unpredictable event or are robust systems that fail with a sudden change in economic conditions. How do we come up with an organization that self-organizes and can tap into the collective potential of the group?
Apple vs Nokia
Let’s take an example of an organization that is operating in a competitive environment, Fig 2a shows the organization not having enough responses to the changing market therefore it collapses and is taken out of the market. Take for example, in 2007 Nokia globally sold more than half of all mobile phones while Apple sold zero phones but within half a decade, Nokia would falter and be surpassed in the smartphone market by Apple, Google, and Samsung. Nokia did not have a strong response to tackle its competitors and change customer habits so Nokia collapsed — Nokia went from commanding a 152.7 billion market cap in 2007 to a fire sale of 7 billion dollars in 2013, sold to Microsoft around 23 times less compared to 2007 (13). Nokia was a typical corporate unable to survive and maneuver the changing world.
Pyramid vs Hybrid vs Networked
If ants can self-organize, group together, cooperate and form complex adaptive systems to overcome difficulties, can humans self-manage or self-organize without a pyramid hierarchical structure and bureaucracy to form an agile, adaptive, and human-centric organization?
To answer the above question we have to understand how sophisticated are human organizations set up to deal with and adapt to the external changing environments which are measured by the “complexity profile” of an organization. Complexity profile is used for comparing the impact of an individual versus emergent collective behavior of an entire organization ie how much an organization can adapt to external threats and impact the surrounding environment (14).
Notice in Fig 3 (15) notice that initially, the work done by humans was simple and repetitive, there was almost no specialization but as humans grouped, many groups formed the hierarchical structure as the job done was easy and civilization was not sophisticated. Hierarchical organizations are not agile to adapt to a quick external changing environment, the top management is usually satisfied with the status quo than dealing with the complexity of innovation. One major problem with top-down hierarchies is that they contain one, concentrated points of bottlenecks and failure, there is a limit of information a ruler of a large country or manager could take and are subject to bias and have limited bandwidth. This imposes a limitation on the degree of complexity of collective behaviors a hierarchical system could make.
As people became skilled it was hard to pass more information to the top as manager was constrained to how much information was passed on. With the advent of new internet tools, a collaboration between the groups is enabled but is still constrained by the amount of information and decisions of top-level managers.
A Flat Networked Organization
If you go back to Fig 3, you will find that the complexity profile of any decentralized networked self-organizing flat organization is high, that means, as an organization adopts a flatter management structure, it becomes agile, better coordinated, and easier decision-making process thus making it adaptable to tackle complex environments.
Our world is getting more complex every day and to deal with modern challenges we need a community and organizations sophisticated enough to deal with modern problems. To increase the level of sophistication, this new decentralized networked group formation is a flat, cooperative, peer-to-peer, human-centric, and self-organization where authority is distributed. There are many new forms of flat management like holacracy and agile management and recently the advent of DAO (Decentralized Autonomous Organization).
Manifestos
Are self-organizing organizations without any rules? Most are bound by common rules and values. If you read Agile Manifesto (16), Holacracy Manifesto (17) and one of the famous DAO, Aragon Manifesto (18), these self-organizing organizations have something in common:-
- Self-sovereign — Self-sovereign — exercise individual freedom — leave any time, you own data, you get rewarded for your contribution, you have a say in governance you preserve your individuality, your ideals, and your way of thinking and doing things.
I did not mention like-minded, you can be different-minded but share the same goals, whereas if you have a difference in opinion you can easily withdraw your money move instead of repressing emotions and playing politics. - Sense of ownership — members join organizations for example DAOs to complete a mission that they all resonate with and vote on proposals and issues and have a say in it, also get rewarded for their contributions. It creates something called creators economy where the creators not only own their work but also have a say in the organization they work for, they create and benefit as opposed to online Facebook or twitter where it is hard to monetize your work. Web 2.0 companies make the money off the ads showing your work. In Web3.0 you get rewarded and have a say in your work, in cases like NFT you get rewarded everytime there is a sale unlike middle men who make money off the artists. Artists dont have to be sales savvy in Web3.0.
- Respect due to competence vs authority/compliance — People respect due to being competent than being top of the hierarchical organization.
- Tap collective potential — The self-organizing organizations can grow large enough that they are broken down into guilds according to skill levels or sometimes according to projects. Some SSOs like Holacracy call these circles. Through these circles, projects are completed and results are coordinated and interacted with other circles.
- 𝑰𝒏𝒄𝒓𝒆𝒂𝒔𝒆 𝑻𝒓𝒖𝒔𝒕- In DAOs all the members work towards common goals and since there are managers to manage there has to be common respect among the members, leaders are selected out of respect not due to authority.
Blockchain has increased transparency and code has helped reduce coordination and managing costs.
All these incentives and transparency can reduce friction and costs of coordination thus creating trust. Trust can increase credibility and reduce time to do business and thus create powerful efficient and engaged organizations. - Emergent self-organization — One may find in an SOOs that once the whole ecosystem coordinates it is more impactful from the individual that is making up the organization.
- Reduced coordination costs via technology — In a centralized hierarchical organization reduces coordination costs via technology
, it is faster and cheaper to get things done but in a decentralized environment, the members need to discuss, propose and talk before a final well-rounded decision is made, various technologies are used to coordinate and collect the collective knowledge of the group.
In a decentralized organization, there is no central management, and once the decision is made the code executes. A computer program is objective and works 24/7, institutions are usually human owned and are biased, sleep, code does not sleep and are not biased so lots of manual tasks like counting votes, tallying white list, and transfer of money once a majority is achieved is done via smart contracts. Code thus reduces coordination and operating costs making DAOs efficient and effective so members can focus on major tasks. - Meta-stable — Low-level randomness: which allows for the exploration of new possibilities — Nothing is fixed and static in SOOs and something like public DAOs the spontaneous ideas flow in grow from there.
- Quit anytime — groups if they are not happy can play internal politics, favoritism, and games as there are individuals in centralized organizations who cannot just quit easily, in decentralized organizations like DAO, members of organizations can quit any time called ragequitting.
Holacracy organizations like Zappos used to pay people to leave after the training phase and most stayed due to the great culture of the company. Thus a decentralized organization can preserve its coordination and engagement by keeping members who resonate with its culture and mission and by keeping the low barriers to quit, disengaged members can leave anytime without major cost or repercussions. Thus people are entitled to have their views and remain engaged, a disengaged member can quit anytime. - Skin in the Game — In today’s hierarchical world as the distance between ruler and ruled, those decision-makers and decision takers increases those people who make decisions CEOs and Politicians don’t suffer the consequences of their decisions. For example, a CEO can make decisions that can be disastrous for the company but bails out with a golden parachute. It was not always the case, in antiquity, a king usually died in battle or was imprisoned due to their decisions. In Hammurabi’s code, If a builder builds a house for someone, and does not construct it properly, and the house which he built falls in and kills its owner, then that builder shall be put to death.
In DAO’s communities pool in money to decide on a mission. In some DAOs, the more money one has pooled, the more decision power one has. DAOs ensure those who put in money get more power (governance tokens) at the same time if they make a bad decision they suffer consequences.
Most of the DAOs operate where more tokens one possesses they have more power to operate and influence, this ensures while one has more power one also suffers the consequences of their decision. This ensures that they make decision that is long-term and sustainably focused than short-term gains.
Generation Ys need more than just remuneration in their workplace and require engagement, voice, and being part of something which they would love to be part of and more than just a job. An organization that is people first where they can serve and be served and can have and voice an opinion and work towards bringing more fruition to their goals. The hierarchical world has speed but is less agile and over-dependent on few players, unlike Self Organizing Organizations where the maximum potential of the group could be unleashed and we can make workplaces, our institutions, and organizations a great place to work, discuss and fulfill our goals.
References
1 — The Self-Organizing Universe: Scientific and Human Implications of the Emerging Paradigm of Evolution
2 — Aaron Dignan, Brave New World
3 — Chris Lucas — http://mountainman.com.au/news97_h.html or http://www.calresco.org/
4 — W. Ross Ashby ( 1902 -1972), An Introduction to Cybernetics (1956)
5- Complex Systems, https://www.art-sciencefactory.com/complexity-map_feb09.html
6 -W. Ross Ashby , Introduction to Cyberneticshttp://pespmc1.vub.ac.be/books/IntroCyb.pdf
7 — Magellan, Transdisciplinary, https://www.magellanschool.org/transdisciplinary-education-approach-learning-authentic-relevant-real-world/
8 — Paul Pangaro, Cybernetics definition https://pangaro.com/definition-cybernetics.html
9 — Requisite Variety — https://requisitevariety.co.uk/what-is-requisite-variety/
10 — Ant Raft, https://www.quantamagazine.org/ants-build-complex-structures-with-a-few-simple-rules-20140409/
11, Ant as raft https://antlab.gatech.edu/antlab/The_Ant_Raft.html
12, Stigmergy, https://mpra.ub.uni-muenchen.de/10004/1/MPRA_paper_10004.pdf
13, Nokia vs Apple, https://www.researchgate.net/publication/304882535_Apple_and_Nokia_The_Transformation_from_Products_to_Services
14, Complexity Profile https://necsi.edu/complexity-rising-from-human-beings-to-human-civilization-a-complexity-profile
15, New England Complex Systems Institute , https://necsi.edu/complexity-rising-from-human-beings-to-human-civilization-a-complexity-profile
16, Agile Project Manifesto- https://agilemanifesto.org/
17, Holacracy manifesto https://github.com/holacracyone/Holacracy-Constitution/blob/master/Holacracy-Constitution.md#article-5-governance-process
18, Aragon Manifesto, https://github.com/aragon/AGPs/blob/master/AGPs/AGP-0.md
