Blending the Best of Hierarchies and Networks: An Organizing Structure for DAOs with David

It's early in the morning. My name is David Erlickman. I'm going to talk about the structure without capture. How can we do things in decentralized organizations? Decentralized organizations could be amazing.

They could be, but they are not reaching their potential. Because? One of the main reasons I see is that decentralized organizations, like all non-hierarchical organizations, have difficulty delegating functions and authorities in a revocable manner. And this presentation doesn't work. Let me try again.

Uh-huh. Very good. To reiterate, decentralized organizations could be amazing, but they are not reaching their full potential. And why? One of the main reasons is this.

Decentralized organizations, like all non- hierarchical organizations, do not have a good way of delegating and revoking functions, responsibilities, and authorities to get things done. Much has been said in this space about the importance of proxy voting with respect to good governance of DAOs. Give your votes to delegates so they can vote on your behalf for the governance proposals of decentralized organizations. What I'm talking about here is operational delegation, which gives individuals and groups the ability to take action on behalf of the DAO to get things done efficiently. At this time, only hierarchical structures are good for this, so Dows and other non-hierarchical structures have difficulties with it.

This is one of the main reasons why so many Dows present themselves as decentralized networks, but in reality are only controlled by a small group, or are truly decentralized but struggle to do things with any kind of consistency and cohesion. They are chaotic and disorganized cohesion. They are chaotic and disorganized , and this is one of the biggest problems in the sector today, as I see it. In this talk, I'm going to provide a framework on how we can think about this problem and how we can solve it. The good news, and perhaps also the bad news, is that this problem is not exclusive to the Dows.

It's something I've seen come up time and time again in my work over the past 12 years, building more than 50 different impact networks. These are coalitions of multiple organizations working together to address large, complex problems such as managing a large landscape or protecting the rights of migrants across borders. For the past two years, I have focused almost exclusively on Dows, trying to combine socialware, the social layer of technology that allows us to build high-trust communities and organizations . And then trustware, the technological capabilities that allow us to coordinate on a larger scale even when we don't know or trust each other, so that we can coordinate to address our biggest challenges without reinforcing or recreating the entrenched and extractive power structures we see today. And time and again in these collaborative efforts, there are many promises and they often do many interesting things and have a real impact, but something gets in the way that prevents them from reaching their full potential.

What's that? It can be framed as the tragedy of the commons of responsibility, with thanks to my co-founder Spencer Graham for coining this term. So, what are common liability assets? When people coordinate to do something, many things arise that need to be done. Sometimes it is not clear who is responsible for those particular things, so those things fall under a common responsibility.

Hierarchical organizations usually have very clear roles and responsibilities , so that common area of responsibility can be small and manageable, or there may be someone higher up in the hierarchy who can explicitly delegate a responsibility to people and then hold them accountable for getting things done. Therefore, they don't really have a big problem with this. But in Dows, in agent networks where people come together as equals, when people don't have explicit power over anyone else, many things arise that need to be done and there isn't a good way to delegate those responsibilities, or for people to claim them, or to ensure that the right people claim them that the right people claim them , and even if someone does claim them, to ensure that people actually fulfill those responsibilities. Then, many things arise that need to be done, and either they are not claimed or delegated, or the wrong person claims them, or someone claims them and they are not actually carried out. This is the tragedy of the commons of responsibility and is one of the main reasons why Dow organizations cannot be as effective and efficient as traditional organizations today.

So, how can we overcome this tragedy? There is a way forward, and I will share it with you. First, we need to analyze in more depth how we are organizing ourselves and what is getting in the way. Therefore, we will analyze the pros and cons of hierarchies, then the pros and cons of networks, then how we can actually solve the tragedy of the commons of responsibility, and examples of the solution in practice. Which brings us to the first part, the pros and cons of hierarchies.

Hierarchies are and have been a dominant organizational structure for thousands of years because they are really good at what they do best . They are very good at participating in complicated domains where it is clear what needs to be done and we can move forward, plan and execute. They are good at this because people generally have a clear understanding of their responsibilities or those responsibilities can be delegated to them. And these structures are quite reliable and stable, so they can scale well. But hierarchies face challenges when they become involved in complex and multifaceted issues where it is not clear what needs to be done and how to do it.

In these cases, faced with complexity, the structure creates bottlenecks. And although the structure is reliable and stable, it is also relatively inflexible. Therefore, it is slow to adapt. Meanwhile, the high concentration of power in hierarchies means that certain groups and individuals at the top have entrenched structural advantages over others and are rewarded much more generously than others lower in the hierarchy. Another way to say this is that the system structure is captured.

That there are certain individuals and groups that are capturing more resources from the system than the value they are providing. The distribution of power in the system is unbalanced. Correct? They are like black holes that absorb resources and value from the system. This is one of the main reasons why we are seeing this change, this widespread shift from these entrenched power structures to more collective ways of working .

I have never seen as much attention and interest in alternative organizational structures as there is today, in cooperatives, special purpose trusts and Dows. Each of them is adopting a network approach to coordination. Which brings us to the second part, the advantages and disadvantages of networks. Networks are quite good at addressing these complex problems because they are good at combining diverse perspectives. They are resilient and adaptable, and are much more receptive than hierarchical.

And that's why networks are actually better suited than hierarchical structures to do things like govern and manage shared resources and public goods shared resources and public goods , which is why the Dows have adopted this approach and why the Dows favor more collective forms of decision-making rather than unilateral control. But the Dows, as they grow and become more diffuse, like all networks, have difficulties in those complicated domains; we either know what needs to be done, we just have to go and execute it done, we just have to go and execute it . The problem is that there ends up being a lack of clarity regarding the roles. Who is responsible for what? There are so many things happening.

We don't know who is responsible for what. There are no clear roles or responsibilities. To a large extent, it is ineffective in holding people accountable for their commitments because people have no power over others to demand accountability. And it's relatively unclear how we can delegate and revoke authority when we come together as a peer network. All of this points once again to this tragedy of the commons being held responsible.

That's what's holding us back . So how can we overcome this tragedy? How can we solve this problem? In three main ways. First, we need to be able to explicitly delegate roles and responsibilities in a nuanced way down to the individual level, not just the group level.

And we need to be able to delegate and revoke the necessary authorities to fulfill those roles and responsibilities. And we need accountability mechanisms to ensure that people actually keep their commitments. Right now , only hierarchical structures are good for this. Therefore, in non- hierarchical organizations we need ways to delegate functions and authorities, while at the same time reinforcing the decentralization of power. Another way to say it is that we need a structure without capture.

We need a structure in which the ultimate authority is not held by an individual, but by the collective. We need a way to give structure its place within the self-organizing organism of a DAO. We need to empower people to do things without creating entrenched power structures throughout the organization. Another way to put it the organization. Another way to put it , thanks to Brennan Mulligan, is that we need to create finite hierarchical structures within a collectively governed whole.

I'll repeat it. We need to create finite hierarchical structures within a collectively governed whole. Hierarchy is really good for tackling those complicated problems where we know what needs to be done and can put it into practice. The network is good in those complex areas where we do n't know what to do, but we can bring people together and solve it. Therefore, we need to combine the best of networks and hierarchies to obtain the agility, resilience, and resistance to capture of networks with the execution and implementation capabilities of hierarchies.

implementation capabilities of hierarchies. How would this work in practice How would this work in practice ? Let's take three examples of how we can create these appropriate hierarchical structures within this collectively governed whole. The first example is that a DAO would like to run a grant program. He realized he needed a structure to do it.

Therefore, he delegated the authority to make decisions about what resources were allocated to the grants committee. A great first step. But the grants committee realized it needed to delegate more responsibilities. They identified that they wanted specific people, whom they called champions, which is why they have the small force there, to oversee the grants and support the recipients, and to make sure that they actually meet their commitments and have the authorities they need. Perhaps those authorities are access to a certain communication channel to a certain communication channel , documents, or GitHub administrator rights, whatever.

As you can see, this is a structure , but it is a structure suitable for a purpose. TRUE? It arises when it is needed and will dissolve when it is no longer needed. You can see that the roles and responsibilities are clearly delegated. The authorities are also delegated.

But there is no individual at the root of the tree of authority. It's the collective. It is the DAO at the root of the tree of authority. And therefore it is resistant to capture therefore it is resistant to capture . And at any time those authorities could be revoked if someone failed to fulfill their grant or if the advocates failed to meet their commitments.

And if the grant program didn't work at all, the DAO could revoke that authority granted to the grant committee. The dotted line here is that you can see that the grant committee and advocates are members of the DAO and the grantees are external to the DAO the grantees are external to the DAO . Therefore, we can create these structures that encompass both internally and externally Dows, both inside and outside the system. Again, this is a structure to do something and add a new capability to a DAO, but it is resistant to capture. Let's take a second example.

Let's say a DAO wanted to organize an event here at ETH Denver. So they organize a project team to do it and give the project team the authority to manage the event budget by making them signatories of the multi-IG. That's great, but we need to go further. We need to delegate more responsibilities, not only at the team level, but also at the individual level, because even teams need structure and clarity about who is responsible for what. One of the roles the team identifies as needing is that of a facilitator, someone who can be the point of contact for everything that is going on.

And they give that person the authority to have a discretionary budget for small, one-off and time expenses, and the responsibility and authority to post on Twitter or broadcast on Warp Caster, and also the responsibility to oversee the catering provider and event logistics staff, and the ability to give them the authority they need to do their job. In this case, access to a Dow communication channel . And here again, the project team and that facilitator are members of the DAO. The catering provider and the logistics person are external to the DAO. Therefore, these structures work both inside and outside of any system you are working with.

As before, we have a clear structure here. And although the facilitator has been given certain powers to do their job and take action on behalf of the organization, they have no power over the group. Actually, it's the complete opposite. It is the team that has the ability to revoke the authorities and powers delegated to that facilitator if they are not fulfilling them. Or they could even link those authorities to specific eligibility criteria or certain accountability metrics to ensure that they are actually meeting them.

And if the DAO didn't like the way the event was unfolding, they could also revoke the authority granted to the project team. It is a suitable structure for the purpose. Do something. Completely resistant to capture. The collective is at the root of the tree of authority, right?

It's not an entrenched power structure, but we have a structure for getting things done. Another example. Let's say a DAO has a lot of different arguments and needs a way to resolve those disputes, a moderation or arbitration process. In one of those arguments, there is a green hat that is in favor of the argument and a red hat that is against it, and they cannot resolve it on their own. Therefore, they must go through this arbitration process to hold them accountable.

They have to participate as part of a participation agreement that opens the case and gives them access to this communication channel. And the DAO is delegated the authority to make decisions on this and other cases to a group of arbitrators. These arbitrators are also accountable through their participation via a contract that also gives them access to the communication channel and grants them verified voting rights to make decisions on behalf of this case. So, a very different structure in this case, but another capture resistance structure to get things done. These are just three of the many, many different examples you can imagine different examples you can imagine .

What we call structural Legos, the ability to add structure to your DAO to create new capabilities. We've analyzed a grant program, but you can also imagine that a similar structure could be used in a rewards program or an investment committee, a project team or working group or workflow, an arbitration or dispute moderation process , and much more. You can imagine guild structures, holacratic or sociocratic circles, a board of directors or central team, recognized delegates, authorized representatives, and much more. So imagine the ability to attach a suitable structure to your DAO to add a new capability. One way to give the structure its place within this self-organized organism of a DAO.

This is what I mean by a structure without capture. We need structure to get things done while simultaneously strengthening the decentralization of power and resistance to capture of power and resistance to capture . This is what I believe will resolve the tragedy of the commons of responsibility and what will allow Dows to take the next leap to be able to work and do things at the same level or a higher level of efficiency and effectiveness than today's traditional organizations. As you can see, this is what really excites me and what I dedicate all my time to thinking about and doing with my team at Hats Protocol. If you are also excited about this and want to know more, visit Hats Protocol.

xyz XYZ and participate. A quick summary: we talked about the tragedy of the commons of responsibility and our inability to have structures that allow us to do things within a non- hierarchical context and with decentralized power hierarchical context and with decentralized power . We then analyzed the pros and cons of hierarchies, the pros and cons of networks, how we can resolve the tragedy of the commons of responsibility by delegating roles and responsibilities in a nuanced way, delegating and revoking necessary authorities or assigning them to specific responsibilities and providing accountability criteria for doing so. Then we saw examples of the solution in practice, different structural templates or structural Legos that you could use to attach to your own DAO. I hope this talk has been interesting and has given you new perspectives.

I hope to co-create with you a future in which Dows has the optimal structure to manage shared resources and do things with the same or greater level of efficiency that we see today in organizations. Thank you.