Jack & The Giant Joint-Stock Pepe: The History & Future of the Corporation

or“The Mystery, Company, and Fellowship of Meme Adventurers for the Discovery of Blockchains, Dominions, Hashtags, and Pepes Unknown”

The design space of crypto-economics is incredibly broad. We have not scratched the surface at all of what is coming.

It’s usefulness is particularly apparent in its ability to coordinate amorphous groups: actors/agents who might not necessarily be aligned otherwise. It truly feels to me like some cocktail of design elements here will lead to the proliferation of the unfathomable, both in terms of wealth creation & the achievement of shared goals we haven’t seen before.

If you look at public blockchains such as Bitcoin & Ethereum, the designs has already managed the ability for amorphous actors to coordinate around some shared truth *without* a specific actor being responsible for it.

“Tokens not only make people burn electricity, but they also make people say things online.” — Maciej Olpinski

To paint more of the picture, I want to take a step back and explain how we got this current point. There’s interesting events from history that I feel forms part of a larger trend on where we could be heading.

As they say, the past doesn’t necessarily repeat itself, but it sure does rhyme.

Building larger systems of coordination is not as straightforward as just throwing more resources at it. After a certain threshold, our prefrontal cortex needs to be consistently “hacked” to allow for larger systems of coordination.

If we are to believe Dunbar’s Number, we are pretty much stuck at being able to maintain 150 strong social relationships. But why do we have companies larger than that? Nation states larger than that? We *do* organize in groups larger than 150, but what makes it possible?

There are various things that occurred in history that made it easier for us to remain meaningfully aligned on shared goals. It also made it possible to remain aligned at scales that weren’t possible before. These give us clues on where we might be heading and what systems of organisation might succeed over others into the future.

The key feature that changed organisations over the years has been: reducing transaction costs to coordinate.

This is reflected in Coase’s Theory of the Firm. You can do marginal improvements, like applying decision support systems within in an organisation, but every once in a while, a large systemic change occurs that at first looks like a marginal benefit, but in essence enables wholly new type of organisations to exist.

For example, allowing anyone to create a joint-stock corporation was originally implemented to reduce the legal burden of larger and larger general partnerships that were forming (eg it’s less admin to sue one entity than 100 people).

Certain systems work fine for certain shared goals. A general partnership for example can be fine for a 3 person auto-repair shop, but impossible for an organization at the scale of Apple. In other words: A limited liability joint-stock corporation doesn’t necessarily reduce transaction costs substantially more so than a general partnership for this 3 person auto-repair shop, but it does enable a corporation like Apple to exist.

Reducing transaction costs enable organisations to function at larger scales. You introduce the ability for this system to have a stronger gravitational pull at its center, which allows more weak ties to coalesce at the edges. The story of larger and larger organisations is what they look like when they lower the barrier to entry for more weaker tie coordination at its edges. Reducing the barriers to entry for small, incentivized contributions from the weak tie edges end up producing, grand, stigmergic emergence. We saw this with the change from mass general partnerships in the early industrial revolution to the explosion of the joint-stock corporation thereafter.

But now we can create Dogecoin, which in any circumstances pre-Bitcoin would not have existed. Creating a company to only create a memetic currency would just not have worked. There is a new “dark matter” rising that manages to coordinate a galaxy of people, and it is the ability to create new schelling points of coordination anchored into a shared, decentralized truth using blockchained tokens.

Before I give some more concrete examples, I first want to share some of the interesting reasons why new forms of organisation came about.

The Interesting History

It’s (loosely) estimated that about ~120–200m formally registered & incorporated SMEs exist in the world. How did we get here, and why is the “corporation” so prolific? It has created untold wealth, and irrevocably led humanity down a winding rabbit hole. It’s a fascinating history.

For much of humanity’s history, the modern corporation (as we know it) did not exist. It was only really at the tail-end of the industrial revolution that the modern corporation began.

Before that things were quite interesting. Sharing the risk of a venture usually took on the form of something that looks like a partnership. The joint-stock corporation with its limited liability were the domain of only a few. In order to be incorporated, one had to get a royal charter.

Before we named corporations after domain name extensions, companies had grand names such as: “The Mystery, Company, and Fellowship of Merchant Adventurers for the Discovery of Regions, Dominions, Islands, and Places Unknown”.

A royal charter usually meant that a specific corporation had monopoly rights (like access to trade routes or colonies). However, the ability of being able to transfer shares & have limited liability eventually became more important (vs the monopoly rights), especially during the industrial revolution when more charters were given for ventures not related to mercantilism (like building roads).

The industrial revolution created economies of scale that led to a rise in wealth and population, which meant that more organisations were being created. Many of these companies however didn’t have the privilege of a separate legal personality & limited liability. This was still the domain of a few. This started to cause regulatory burden due to the large amount of unincorporated associations and general partnerships.

Then in 1844, the Joint-Stock Companies Act was passed in the UK. This allowed anyone access to incorporate a joint-stock corporation. Limited Liability was still not possible for these organisations, but eventually passed in 1855.

On both occasions, it was not without push back.

Edward William Cox wrote in 1855:

“…that there is a moral obligation, which it is the duty of the laws of a civilised nation to enforce, to pay debts, perform contracts and make reparation for wrongs. Limited liability is founded on the opposite principle and permits a man to avail himself of acts if advantageous to him, and not to be responsible for them if they should be disadvantageous; to speculate for profits without being liable for losses…”

It’s reasonable concerns, but the act of limited liability reduced transaction costs for capital to flow more freely to ventures. There was still risk, but less risk. There was more access to spaghetti to throw against the walls to see what sticks. The value of the benefits outweighed the wrongs that were perpetrated (like scams, and negligence).

The question of the power of corporations are still out there. They do have unmanaged risks. We often hear about the oligarchies & the plutocracy, that actually, really govern our society. This concern was shared since they took off. This comic was published in a daily in 1858, painting the horrors of the limited liability joint-stock corporation.

Published 5 June 1858. https://commons.wikimedia.org/wiki/File:Jack_and_the_Giant_Joint-Stock.jpg

When you look at a joint-stock corporation, its power is held primarily in 3 components:

  1. Separate legal entity. In other words, it is legally as a separate “person”. Thus many people can together, legally form one separate “person”. This entity has (for the most parts) the same rights as a “person”, like being able to enter into contracts, holding rights & obligations and sue, or be sued.
  2. Limited Liability (if applied). This means that there’s a “veil” that restricts liability to only what the company owns or has access to. It can’t claim from its shareholders. It (usually) lives and dies on its own accord. What’s only lost is the blood of this fictional “person”: investors who put money into it.
  3. Tradable shares/equity.

All these elements allowed organisations to exist on much larger scales, reduce transaction costs and attract more people to specific shared goals.

The rest was history, but what’s next?

The Blockchain, Cryptographic Tokens, Schelling Points & Meme Markets

Nick Szabo is one of my favorite thinkers. If you read two posts from him, read Shelling Out: The Origins of Money & Money, Blockchain & Social Scalability. They describe the value of tokens (such as collectibles) in its usage as tools for coordination and then describes why blockchains enable new types of social scalability.

What blockchains have done is the ability to create systems of coordination equivalent to the power of a joint-stock corporation (and greater) without the requirement of physical force to let it thrive. I refer to physical force here, as the enforcement of last resort for laws. We abide by laws due to social coordination benefits, but by not abiding by them, in the extreme results to the use of violence and force to keep it aligned.

Rather, blockchains allows the existence of a shared and enforceable truth by relying on crypto-economic incentives to make it costly (or impossible) to change this shared truth. It’s digital all the way down.

This provides immense power in providing new schelling points for coordination. It can significantly reduce transaction costs because:

  1. in the extreme, you don’t require a nation state to enforce the legal rights of a system of coordination.
  2. the barrier to entry to cooperate is lower (it’s easier for me to buy bitcoin, than buy dollars for example).

This allows even weaker ties to collaborate, and they can collaborate at the speed of information transfer.

In law, an organisation holds the same legal weight as a person. Apple can sign contracts as a person.

In blockchains, a program holds the same weight as a person. Your fridge can buy milk without you.

https://teespring.com/shop/nobodyknows#pid=6&cid=648&sid=front [ht to Richard Gendal Brown for this quote].

Blockchains provide opt-in enforcement through computation, not through law. It’s the power of the law, but at the speed of programs. The space to codify and experiment with different rules of engagement is still extremely broad.

“I see this as the killer app of smart contract technology — the ability to build software rules that facilitate the creation of useful economic equilibria” — Meher Roy (via Attention Networks)

We have only just begun to scratch this surface.

As history has shown, putting coordination tools onto a blockchain will first look like a marginal improvement. It will be useful and beneficial to simply shift normal companies onto a blockchain (several start-ups are doing this: like Boardroom or Aragon), but my gut feel is that the truly innovate coordination tools will leverage it in new ways.

There’s already traces of this experimentation due to the fact that because you don’t have access to certain kinds of repudiation as it exists in law, you have to design the systems in such a way as to be resilient to it (such as theDAO implementing a splitting function, that allowed minority holders to fork off when a majority attacks the organisation).

The experiments of governance & coordination is bubbling underneath the surface. I’ve seen some very interesting new protocols that will soon see the light of day.

Because of the flexibility of this, I want to showcase some interesting things that might occur (disclaimer: some of these are my own work/thinking).

Examples: Curation Markets.

Be rewarded for simply reading & curating information.

I recently published a whitepaper on this concept: allowing people to coordinate around shared goals with a token without requiring a specific entity to create this token.

Maciej Olpinksi is experimenting with ranking these signals that are generated with a new start-up called Userfeeds.

Examples: Dank meme trading.

One of your kids will make bank on trading rare pepes. Hey, I managed to take a year off in 2014 and lived on my Dogecoin.

Coordinating around the shared values of a meme, and speculating on its popularity will be possible.

Examples: Disambiguation of realities (real & virtual).

FOAM has an in-development concept of creating a spatial index that allows interested parties to “meme” architecture into existence. Additionally, in virtual/gaming reality most of everything in it can be tokenized. Additionally, who gets to decide what we see in AR? Who is our “reality”mediators? Will we be okay with Facebook or Apple controlling what we see?

Examples: The Attention Web & Attention Markets

That is, being paid for your attention.

Brendan Eich (of Javascript & Mozilla fame) is launching a “basic attention token” that will reward users for their attention. By being an information consumer, you can be rewarded for it. The value is just not captured by the platform owners.

Examples: Personal Markets for investing in people

Using curation markets, one can create a personal attention bond-like system that essentially pays for people to get your attention.

Examples: The first billion-dollar artist that is only an AI.

An AI will be able to own what it creates, and one could own shares/equity in this AI. It’s success will be driven by a crowd of people modifying it over time to produce better and better art.

It’s going to get wild and interesting. At the end of the day, what becomes more and more possible is the possibility for this system to coordinate a wholly new set of agents: amorphous actors (be it human or digital) to coordinate together on their shared goals. The transaction costs have been reduced and we are already seeing organisations larger than anything we’ve seen before.

If we think of Bitcoin as an organisation, it’s total “employees” would already be larger than the largest private employer in the world: namely Walmart.

Jack & The Giant Joint-Stock Pepe?

The power of this seems amazing, but it is not without its potential concerns.

One of the most interesting statements I recently read was from the book, Sapiens. In it, Yuval Noah Harari, describes our relationship to grain during the agricultural revolution. The history of humanity and its relation to technology is one where the technology also co-evolves us. It’s not so much that we domesticated grain, but that it domesticated us.

He describes it as a Faustian bargain:

“More often than not it brought a worse diet, longer hours of work, greater risk of starvation, crowded living conditions, greatly increased susceptibility to disease, new forms of insecurity and uglier forms of hierarchy.”

New technologies allow more humans to survive, but ultimate we are all worse off for it: a seemingly unstoppable feedback loop. Although the desire about building these new systems *IS* about empowerment, agency and the ability for humans to make a living in an increasingly automated world, I’m vigilant about the power of these tools in its capacity to continue the trend started with the agricultural revolution.

Now it makes sense to say: “Hey, wouldn’t it be cool if you could you earn a living from your Instagram likes?” or “Hey, doesn’t it sound interesting that your kids will make some pocket money from trading rare pepes?!”

… but if that becomes the only way to subsist, the future looks strange and weird. Who controls whom then? In a Black Mirror-like world, you can starve if you didn’t curate the latest meme.

Nosedive: A Black Mirror Episode on the extrapolation of reputation markets. [PS. The pics above was shot in Sea Point, Cape Town where I live. ;)]

Like the roaming nomads in the agricultural revolution, we can’t go back, because their rapidly breeding agricultural peers made their life impossible.

Could the mass tokenization of all network effects end up being a net negative on society? Are we making a faustian bargain with the giant joint-stock pepe if we allow memes to have value?

Save us from the giant joint-stock pepes!


How we coordinate, and the “delusions” we birth to make it easier to coordinate has changed over time. The invention of the limited liability joint-stock corporation created wholly new systems of organizations. Blockchains, and the possibility to create new types of crypto-economic coordination systems will lead to a marginal improvement in efficiency the joint-stock corporation, but likely also allow the emergence of coordination systems we haven’t seen before.

It will likely allow many people to earn value from the contributions they make to society, but also create new, powerful organizations that to our eyes in 2017, will be weird.

We are dealing with network effects & feedback loops that we have never witnessed before. The new normal will be the weird. And boy, will it get wonderfully weird.

Simon de la Rouviere is the Engineer of Societies at ConsenSys: a venture production studio, building applications on the Ethereum blockchain. For more like this, follow us on ConsenSys Media!