Would a company like Twitter do better if run by a DAO?

Please fol­low and like us:
Pin Share

In 2023, busi­ness is evolv­ing. Remote work is on the rise, com­pared to the pre-pan­dem­ic times, and thanks to var­i­ous macro­eco­nom­ic fac­tors, many indus­tries aren’t offer­ing the com­pet­i­tive wages or ben­e­fits they used to. This has led to a reeval­u­a­tion of indi­vid­ual atti­tudes towards work by mil­len­ni­als and Gen Z, who have large­ly replaced the tra­di­tion­al 9‑to‑5 with free­lanc­ing and the gig economy. 

This shift may be under­stand­able, but it comes with its own issues. For one, busi­ness mod­els based on remote free­lanc­ing often don’t offer much room for employ­ees to move up, and they still strug­gle with exploita­tion and under-com­pen­sa­tion. For­tu­nate­ly, a new type of orga­ni­za­tion­al struc­ture is emerg­ing in the form of the decen­tral­ized autonomous orga­ni­za­tion, or DAO. When built cor­rect­ly with the company’s needs in mind, DAOs can rev­o­lu­tion­ize how busi­ness­es are run to improve the lives of all employ­ees, max­i­mize pro­duc­tiv­i­ty and returns, and keep bad man­age­ment — such as what has been hap­pen­ing to Twit­ter — in check.

DAOs for business governance

Tra­di­tion­al busi­ness mod­els offer a hier­ar­chy of author­i­ty. Typ­i­cal­ly, the CEO holds the high­est posi­tion, along­side oth­er top exec­u­tives and some­times a board of direc­tors. The CEO is pri­mar­i­ly respon­si­ble for mak­ing major deci­sions, and despite tak­ing input from oth­ers, only a few dozen indi­vid­u­als hold the pow­er to influ­ence poten­tial­ly thou­sands or even mil­lions of oth­ers, depend­ing on the scale of the business.

DAOs decen­tral­ize this hier­ar­chy. In the DAO mod­el, every mem­ber is a co-own­er and employ­ee simul­ta­ne­ous­ly. All par­tic­i­pants act as deci­sion-mak­ers and poten­tial con­trib­u­tors, and their invest­ment in the orga­ni­za­tion gen­er­al­ly deter­mines their vot­ing weight, usu­al­ly deter­mined by how many “gov­er­nance tokens” they hold. 

Known as “tok­enized gov­er­nance,” this approach offers var­i­ous advan­tages to busi­ness­es. One of the most note­wor­thy is its poten­tial to entice and retain essen­tial per­son­nel, exter­nal col­lab­o­ra­tors, part­ners and investors. By enabling stake­hold­ers to have a voice in the business’s tra­jec­to­ry, tok­enized gov­er­nance fos­ters a feel­ing of own­er­ship and respon­si­bil­i­ty that can inspire stake­hold­ers to ded­i­cate their time, ener­gy, and assets to the enter­prise. This, in turn, can help to retain vital employ­ees who may be more inclined to stay with an orga­ni­za­tion that rec­og­nizes their con­tri­bu­tions and offers them a stake in the company’s prosperity.

Indeed it’s been shown that work­places where employ­ees feel they are being heard and treat­ed fair­ly per­form 26% bet­ter and have 27% high­er reten­tion than those in which they do not.

Tok­enized gov­er­nance also has the poten­tial to enhance the effi­cien­cy of deci­sion-mak­ing. By dis­trib­ut­ing deci­sion-mak­ing pow­er across stake­hold­ers, tok­enized gov­er­nance can pre­vent cru­cial busi­ness deci­sions from being influ­enced by a sin­gle, cen­tral­ized authority.

Decen­tral­ized research, prod­uct devel­op­ment, mar­ket­ing and fundrais­ing are all pos­si­ble through DAOs, bring­ing more equi­ty in both con­trol and remu­ner­a­tion for every­one with­in the orga­ni­za­tion. Indeed, employ­ee com­pen­sa­tion is also pro­por­tion­al to stake in the oper­a­tion. Wages aren’t deter­mined by the whims of the com­pa­ny heads but rather by the guide­lines of the entire DAO, which are defined and vot­ed on by all members.

Anoth­er key ben­e­fit that DAOs can bring to busi­ness­es is the fact that vir­tu­al­ly any­one from any­where on the plan­et can par­tic­i­pate in them. All a poten­tial mem­ber needs is a work­ing inter­net con­nec­tion. This has impor­tant impli­ca­tions for expand­ing the poten­tial work­force and pro­mot­ing diver­si­ty. Stud­ies show that eth­ni­cal­ly diverse orga­ni­za­tions are 36% more like­ly to per­form bet­ter, on aver­age, than less diverse counterparts. 

Last­ly, DAOs offer a high degree of trans­paren­cy, which breeds trust. The impor­tance of trust for employ­ees, cus­tomers and investors can­not be under­stat­ed, as it defines the rela­tion­ship these enti­ties have with the company.

There is no bet­ter mod­ern exam­ple of this than what has been unfold­ing with social media giant Twit­ter. After Elon Musk famous­ly bought the com­pa­ny in late 2022, Twit­ter has seen a long list of tech­ni­cal issues, mass lay­offs and con­fus­ing pol­i­cy changes that all seem to stem from the whims of its new own­er. Mean­while, the com­pa­ny appears to have com­plete­ly stopped releas­ing trans­paren­cy reports as of Jan­u­ary, mean­ing the view into this mas­sive ser­vice has become exceed­ing­ly opaque from the outside. 

Alter­na­tive­ly, if Twit­ter were being run by a DAO, these issues couldn’t real­ly exist. Even if Elon Musk were the major­i­ty own­er, the voic­es of every­one else in the com­pa­ny (and poten­tial­ly the user base) would still hold weight over deci­sion-mak­ing. It couldn’t be a one-per­son show. Changes to the code base, employ­ee line­up and ser­vice pol­i­cy would all need to be vot­ed on by the whole, and the entire sys­tem could be built to be whol­ly auditable and transparent.

Even with­in Web3, projects are often not gov­erned in a tru­ly decen­tral­ized man­ner. For exam­ple, recent­ly The Arbi­trum Foun­da­tion began sell­ing their ARB tokens even before the gov­er­nance com­mu­ni­ty of token hold­ers had final­ized the organization’s near­ly US$1 bil­lion bud­get. This caused wide­spread back­lash in the com­mu­ni­ty and saw the price of ARB fall 9% in the fol­low­ing 24 hours. If this deci­sion had been made in a decen­tral­ized fash­ion via a DAO, it would have been impos­si­ble to do any­thing with­out com­mu­ni­ty approval.

Current reality of DAOs

While DAOs offer excit­ing pos­si­bil­i­ties for both star­tups and exist­ing brands, some kinks still need to be worked out. For one, the type of DAO struc­ture so far described is called “flat.” Even before DAOs, com­pa­nies have tried build­ing archi­tec­ture that did away with tra­di­tion­al hier­ar­chy, often with poor results. Major names like Medi­um and Zap­pos have had pub­licly doc­u­ment­ed issues and have had to aban­don their flat busi­ness mod­els outright. 

This is due to the fact that in such a mod­el, there are many ele­ments of run­ning a busi­ness that sim­ply doesn’t get done. Who man­ages employ­ee ben­e­fits? Who over­sees key per­for­mance indi­ca­tors and enforces that they are met? The list goes on. While every­one is free to make pro­pos­als and vote on these issues, it isn’t specif­i­cal­ly anyone’s assigned job, and so many things go undone.

When applied to DAOs, there are also prob­lems with how pow­er dynam­ics play out in prac­tice. If vot­ing is sim­ply weight­ed by the num­ber of gov­er­nance tokens held, then majori­ties or alliances can still form that will effec­tive­ly con­trol the project and silence any oppo­si­tion. If the DAO offers the abil­i­ty for investors to get more tokens, then those with deep­er pock­ets will invari­ably hold the most sway.

But those chal­lenges could be over­come through bet­ter DAO design.

Making DAOs work

DAOs can be designed with a wide array of roles and incen­tives built in, emu­lat­ing the best work­ing ele­ments of tra­di­tion­al com­pa­nies. Instead of asset-weight­ed vot­ing, influ­ence can be assigned through mer­i­toc­ra­cy and past con­tri­bu­tions. For­tu­nate­ly, there are already some exam­ples like this being devel­oped. Open­Chat is one such appli­ca­tion, as it is a ful­ly decen­tral­ized chat app gov­erned by the users them­selves. Vot­ing pow­er is based on a more com­plex sys­tem that accounts for not only assets held but how long they have been staked. This gives every mem­ber a real incen­tive to par­tic­i­pate with­out sim­ply putting all the pow­er into the hands of the wealthiest. 

Imple­ment­ing such an approach stands to be a pow­er­ful tool for trans­form­ing busi­ness across almost all indus­tries. The poten­tial that DAOs offer has even been not­ed and explored by the World Eco­nom­ic Forum, which agrees that this tech­nol­o­gy stands to over­haul how col­lab­o­ra­tion is going to work in the future of the dig­i­tal busi­ness. DAOs may even pose a threat to exist­ing large cor­po­ra­tions that are slow to change. Cus­tomers may quick­ly piv­ot to com­pa­nies run by cor­po­rate mod­els that focus on their com­mu­ni­ty, not their CEOs and share­hold­ers. The key to unlock­ing all of this will be to build them prop­er­ly and bal­ance equi­ty, respon­si­bil­i­ty, and compensation. 

The bot­tom line is that some form of decen­tral­ized gov­er­nance is the future of busi­ness. The poten­tial ben­e­fits for both employ­ees and the com­pa­ny as a whole are too great to ignore. While there will need to be metic­u­lous thought put into the struc­ture of these orga­ni­za­tions, once account­ed for, this mod­el could become the stan­dard in many indus­tries. The com­pa­nies that embrace this change could be the lead­ers of the next gen­er­a­tion of ser­vices that define our world, and the ones that don’t may see their work­force begin to aban­don ship.

Source link

Please fol­low and like us:
Pin Share

Leave a Reply

Your email address will not be published. Required fields are marked *