DAOS TOO NEED HIERARCHY
…Unless you don’t want anything to get done. Here’s why.
Crypto values decentralization, yet the tech is just as decentralized as the social layer backing it in most cases. That’s why it’s en vogue to distribute tokens to a bunch of random ecosystem participants and enable them to vote on decisions. Sure, some DAOs also choose to select people who can vote on candidates, who are then supposed to represent the views of the majority.
Regardless of how they got put into the DAO, there’s still a bit of a problem in most of these organizations these days. Little gets done, and often, who makes decisions isn’t close to the democratic ideals we’d like to embody — but just a question of who has the most money or informal power.
So what’s going wrong?
DAOs are simply a different way to organize people. They innovate on existing organizational structures to increase efficiency, promote participation, and generate a sense of belonging. Or so the theory goes.
Organizational structures
To understand what’s happening in DAOs, it helps to start with the organizations that came before them. All organizations we deal with have formal or informal structures.
Organizational structures simply define things like job titles, roles, and responsibilities in companies — and determine who reports to whom. Most traditional corporates have a pretty triangular structure, where a few people at the top have most of the power, and then the base widens down to the low-level clerk with little to no decision-making power.
Matrix structure (image src: Monday.com)
Compare that with Startups, where teams operate frequently in a matrix structure with different departments working closely together on projects. In startups, there is a less clear separation of roles, with employees often covering more than just one area.
Why structure?
Businesses have had structures for centuries, mainly because they
- help implement efficient decision-making processes
- assign specialized roles while avoiding double work
- help not lose track of what everyone’s doing, especially as they scale
- can contribute to fostering collaboration.
As we all know, not all of these structures have created an environment where people were actually heard. The drastic pay gaps between managers at the top — who often lose any notion of what it’s like working at the “front lines,” aka customer-facing, have created alienated workforces and further inequality.
We identify the hierarchy in these cases as having people at the top making decisions without a notion of what happens for most people as the root of the problems.
Is Hierarchy bad?
In the above corporate example, hierarchy leads to bad outcomes.
“If you took the most ardent revolutionary, vested him in absolute power, within a year, he would be worse than the Tsar himself.”
― Mikhail Bakunin (A fancier way of saying absolute power corrupts absolutely)
Yet, hierarchy is just a mode of organization and can be seen as a tool enabling humans to group things, ideas, and concepts into categories. The term hierarchy itself doesn’t always make assumptions about someone having more power over anyone.
It’s popular in counterculture and crypto to condemn everything traditional — hence saying hierarchy is terrible. But creating a collective where everyone is equal might be just as delusional.
DAOs might benefit from looking at examples of companies who tried something in that direction. Zappos, a shoe company, ditched all its hierarchy in 2014 while on a mission to empower its employees. 80% of employees stayed on to join the big experiment.
Long story short, Zappos quietly ditched their efforts since their “holocracy,” as they called it, turned out to be too complex and got in the way of getting things done. Ever been in a DAO?
Sounds familiar, right?
The blogging platform medium tried a similar experiment and found it problematic for larger initiatives requiring coordination across functions. They also highlighted that legitimate leadership could reduce infighting, establish order, and enable a group to achieve its goals more effectively.
Another piece to take away from this is that enforcing the abandonment of a top-down structure when its very goal is to empower people might not be the correct approach either.
If you’re still one firm believer that no hierarchy is the best hierarchy…
Just because you can’t see it doesn’t mean it isn’t there.
In her essay, The Tyranny of Structurelessness, the feminist Jo Freeman writes about her observations on the women’s liberation movement. She notes that the natural reaction to the overly structured society that prevented women from participating in elections was an aversion to authority and structure. Nevertheless, she realized that building a movement in a structureless way wouldn’t lead to the change they were looking for, nor did it prevent hierarchies from forming.
In particular, she points out that there will always be elitists, a small group of people who have power over a larger group they’re part of, often without consent or the bigger group’s knowledge.
Learnings so far
- Hierarchy is just a mode of organization
- Companies who tried completely removing it failed at that
- No structure is also no solution
- Hierarchies will form even if you don’t want them to, just in less transparent ways.
Humans are flawed. One of our flaws might just be that we’re not as capable (as anarchists would like to make us believe) of managing ourselves in big groups. Just try ordering food with ten friends, where each has different food preferences. Good luck!
Without formal structures, informal ones will arise — even with the best intentions to create an open, accessible ecosystem. Which is worse since it often leads to toxicity…
“Able people with time on their hands and a need to justify their coming together put their efforts into personal control and spend their time criticizing the personalities of the other members in the group.”
Readings on game theory further suggest that even if you spread your tokens/ power as far as possible in the initial phase, as soon as players start working together, you’ll start seeing the accumulation of power — and eventually, hierarchy arises (Leandros & Piliouras 2021).
What’s the best course of action then if you’re trying to build an organization that manages a protocol in a way that isn’t business as usual, aka founder dictatorship?
A few suggestions:
- formal structure with checks and balances in place. There should be a mission and values.
- establishing a clear strategy and purpose
- a fine balance between accessibility and capability. If people are to be put in charge, they should also be capable of the job they are to fulfill
- accountability for actions and decisions made on behalf of the DAO. With blockchain, we’re uniquely positioned to hold people accountable — also to the things they promise vs what they deliver in the end.
- acknowledgment that not everyone has to vote on every little thing
In the end, DAOs will only succeed if they manage to move things and turn some of their ideas into reality. Unless humans change entirely and abandon all self-interest and desire for power, maybe a little structure and accountability as part of DAO frameworks isn’t such a bad trade-off.
—
If you want to read more into this:
Freeman, Jo (1970) Tyranny of Structurelessness
Leandros & Piliouras (2021) Oceanic Games: Centralization Risks and Incentives in Blockchain Mining
Rayner, Tim (2016) Medium’s experiment with Holocracy failed
Written by @NEAR_intern
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