Power to the People: Part 3 of the Why DAOs series
This is Part 3 of the Why DAOs series, a series which lays out the master thesis for the utility of DAOs. Part 1 shows that world problems including nuclear war result from coordination failures and lack of collaboration, and Part 2 further describes the power of international DAOs to remedy international coordination failures including the global climate crisis. Now, Part 3 describes how DAOs give Power to the People, leveling the playing field and counterbalancing the economies of scale where the rich get richer and the poor get poorer.
Increasing Returns to Scale dominate society: Money ➡️ More Money ♻️
“For to everyone who has will more be given, and he will have an abundance. But from the one who has not, even what he has will be taken away.” — Matthew 25:29, ESV
- Retail and grocery stores: The largest stores and collectives have the highest purchasing power, and so get the biggest bulk discounts. This has led to consolidation where small retail stores and grocery stores are swallowed up by corporate behemoths
- Online shopping: Amazon is able to pay the lowest prices to deliver the same package because they have economies of scale that allow them to benefit from hiring their own drivers. They also receive significant shipping discounts, along with other large online retailers like EBay.
- Banking: The biggest banks are also the banks which are “too big to fail”, in other words, the government will bail them out to avoid economic consequences. This allows big banks to spend taxpayer money when they make poor decisions, whereas smaller banks and everyday people would simply go bankrupt.
- Investing: Large investment firms gain exclusive IPO access and deals which aren’t available to average people. What’s more, an investment firm pays a certain amount for research and management which can stay the same even if they invest more money, leading to economies of scale. Investors who invest a larger amount even pay a lower margin rate.
- Land: Buying land is cheaper in larger chunks. For example, Hawthorne Capital is a private equity firm that buys large chunks of land, subdivides the land into smaller plots, and sells the plots at a profit.
- Taxes and government: The richest people also pay a lower tax rate, partially because they can afford to optimize their taxes and take advantage of tax breaks and loopholes which the average person can’t. Governments also tend to funnel stimulus money into the hands of wealthy businesses in far higher quantities than individuals ever receive.
- Manufacturing, construction, software development, transportation, and much more.
- Across many sectors of the economy, it’s clear that there are increasing returns to scale. The internet and zero margin distribution costs give even more returns to scale, Ben Thompson writes in Stratechery.
Monetary economies of scale for all 💰
Purchasing or pooling assets together for collective ownership is emerging as a major benefit of DAOs. DAOs allow people to pool their capital to achieve the same economies of scale as millionaires and corporate behemoths.
DAOs are springing up quickly to make all kinds of purchases, such as TungstenDAO, which won a bid for NFT ownership of the largest tungsten cube ever on October 31. Spice DAO organized to purchase the “Dune Bible”, a never before seen movie manuscript, and a DAO member acquired it for the DAO on Nov. 22.
DAOs enable unique uses for these items which wouldn’t normally be possible. According to MSN, TungstenDAO’s “cube will remain at MTS’ facilities where its owners can schedule one visit per year to touch and photograph it.” Meanwhile, Spice DAO plans to make a series based on the unreleased manuscript, and they’ve already raised ~$12 Million to do so.
Successful DAOs 📈
DAOs buying NFTs for collective ownership and/or tokenization have proven immensely profitable. For example, PleasrDAO’s Doge NFT, which the DAO purchased for $4 Million in June, has a circulating valuation of over $200 Million after being fractionalized and sold.
DAOs open up a world full of possibilities around collaboration and sharing. Take Creator Cabins, which owns a cabin used by DAO members for retreats and envisions a decentralized city with “a network of decentralized properties, owned and operated by small groups of independent online creators and entrepreneurs.”
Meanwhile, “Media and culture” DAOs like Bankless DAO produce content and NFTs. DAOs are also organizing major events — SporkDAO is organizing ETHDenver, for example.
Today’s crypto-focused DAOs are only the beginning. As the knowledge of the benefits of DAOs continues to spread, small businesses will likely use them to organize, gaining increased bargaining power and other collaboration benefits.
Unions and Collective Bargaining 1.0 📉
Unions were the driving force for workers’ rights in the 20th century, and are credited with improving working conditions across the globe via Collective Bargaining 1.0. As time went on, however, many unions became corrupt or stagnant as their power declined. Today, the structure of Unions tends to benefit the most senior employees at the expense of more talented junior employees. In America, for example, Teachers Unions are notorious for preventing the worst teachers from ever being fired simply because they have tenure.
Unions rely on coercion — employees are usually required to be a member of the union and pay union dues, or else lose their job. Coercive membership requirements are the defining characteristic of Collective Bargaining 1.0, and they’re used because otherwise union members are incentivized to leave the union and avoid paying union dues.
Power to the People: DAOs and Collective Bargaining 2.0 💪
Collective Bargaining 2.0 has no coercive membership requirement, and attracts DAO members based on the merits of the DAO alone. Instead of being forced to join a traditional Union to get a job, people join industry-specific DAOs out of choice. These DAOs will provide access to knowledge, networking, and discounts to industry tools with Collective Bargaining 2.0. Opolis is one DAO already doing this and providing DAO members — mostly crypto workers and freelancers — with payroll services and discounted health insurance.
Also unlike Unions, DAOs are highly transparent organizations — necessarily so, because votes and DAO payments are shown publicly on the blockchain. DAOs allow anyone who shares a common interest to join, not just workers within a specific company. Imagine fitness coaches from all around the world forming DAO to gain purchasing power on — or even create and own their own — fitness training software.
This type of industry DAO allows sharing access to knowledge, networking, and industry tools while granting collective bargaining power. DAOs like this could form for accountants, barbers, coaches, plumbers, lawyers, car mechanics, and many more. DAOs benefit from the same economies of scale as other organizations, but are better able to fairly distribute the benefits of these economies of scale to a large group of people with fewer restrictions.
Constitution DAO’s $PEOPLE 👨👩👧👧
Part 2 of this series mentioned how Constitution DAO failed to buy the constitution. They were outbid by Citadel’s CEO, which made the DAO seem like a failure, but something amazing has happened since then. The price of $PEOPLE token, which had been trading around its fair value of $0.0045 given an ETH price of $4,500, started taking off. It was up over 30X from its fair value at its peak, as a fervor of excitement filled the chaotic ConstitutionDAO Discord.
The excitement around Constitution DAO is just an omen of things to come. Even though the DAO failed at its mission of buying the constitution, the widespread mainstream media coverage of the event enlightened many to the awesome power of DAOs. DAOs allow groups of people to coordinate to do things which would be impossible for them to achieve individually.
DAO coordination can be around large purchases or other monetary economies of scale, with groups of citizens from all income brackets pooling funds to rival multi-millionaires. DAO coordination can also involve arts and media, event planning, and more. The possibilities are endless, and the dawn of the DAO Age is just beginning. 🌄
Looking to join a DAO? DXdao is the most decentralized DAO in existence, and anyone can join! To get started, simply join the Discord and/or Keybase and introduce yourself. You get out of DAOs what you put into them.
