Hierarchies, Markets, Networks
This essay examines the organisational structures of hierarchies, competitive markets and collaborative networks and examines the optimal conditions for each form of organisation.
All organisational structures fall under these categories (in addition to tribes) and the interplay of these organisations is a key determinant of how successful a given ecosystem will be.
Sporos DAO is pioneering a new form of legally compliant business organisations which are onchain, governed by token holders and where tokens are allocated on the basis of valuable contribution. We believe this meritocratic method of allocating ownership will lead to better run businesses, but meritocratic ownership does not in of itself solve a central problem affecting every business: how to organise people and prioritise activity.
To answer that question whilst remaining true to our meritocratic principles we will consider the different forms of organisation, and attempt to relate those forms of organisation to the Sporos DAO project.
By recognising the strengths and weaknesses of each organisational structure, we can adopt the structures that work best for achieving different elements of the Sporos strategy.
Hierarchies
Hierarchies act as a centre for decisions, control and coordination. They involve actors adopting roles and responsibilities and being held accountable for results through a chain of command.
Strengths: Organising and prioritising tasks, enforcing rules.
Weaknesses: Processing complex exchanges and information flows. This is best evidenced with economic transactions at large scale. These become too complicated for a single entity to manage leading to bureaucratic bloat and ultimately failure (see Why Communism Failed)
Competitive Markets
Competitive Markets involve independent entities competing freely and fairly in the process of allocating resources.
Strengths: Enabling diverse actors to process diverse exchanges and complex transactions leading to a productive, diversified and innovative economy.
Weaknesses: Contributing to social inequalities and inability to fund and maintain public goods (see Tragedy of the Commons)
Collaborative Networks
Collaborative Networks involve individual, autonomous entities who may be dispersed across multiple organisations collaborating towards some shared goal.
Strengths: Preserving autonomy and resisting hierarchical control. Durability. Censor-ship resistance. Large scale coordination. Discovering creative solutions to difficult problems.
Weaknesses: High transaction costs requiring extensive communication, high levels of trust and reciprocity. Vulnerable to free-riders and can make for a slow complicated decision making process as all members try to have their say.
Combination of Forms
No organisational form exists in isolation. Each is at play in society. For example, hierarchical companies operating within private markets or social networks facilitated by hierarchical companies.
Each new organisational form builds from former forms. When Kings and Priests reached the limits of what their hierarchies could achieve, competitive markets began to form. But these markets are composed of their own smaller hierarchies, taking lessons learnt from history to build effective businesses. Today, we have networks being built on blockchains like Ethereum which are geared towards common goals (decentralisation, censorship resistance etc) but are composed of individual organisations competing within a market.
There is a strong link between organisational forms and the flow of information. In a hierarchy, information flows upwards. In a market, information bounces around being morphed and edited by competing parties. In a network (ideally) information flows freely without restraint or tampering. Notice how the progress of communication technology is paramount to the flow of information and therefore the rise of new organisational forms.
Sporos
All three organisational structures will be at play within the Sporos ecosystem.
In the long run, Sporos DAO will grow into a network of multiple organisations powered by sweat equity. The basis of interaction will be building and growing successful onchain businesses. These interactions will be underpinned by sweat equity tokens.
Each organisation that uses sporos will itself be a kind of hierarchical organisation. That’s not to say they will adopt rigid structures like traditional corporations. They may identify as DAOs and they may strive to adopt flat hierarchies. But power exists in every human organisation. Whether it is explicit or not. To be a successful business some kind of accountability for decisions and methods for controlling resources will likely be required. Our analysis in this essay would suggest hierarchies are the most suitable structure for these purposes.
The organisations using the Sporos system will, at some stage, operate in a free market. This will expose them to competitive forces. Our hope is these projects will be well prepared for the competition through their experience in the Sporos DAO network.
Coordinating resources to achieve aims is central to humanity’s success. By consciously studying dominant forms of organisation and integrating our learning with the technology of web3, Sporos DAO hopes to establish a platform that can power the next generation of businesses.
Learn more: sporosDAO.xyz
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