You don’t need a DAO

The overpromise of the DAO

If you’ve gone to a DAOfest or seen some of the articles and videos coming out of the DAO industry, it seems like DAOs will solve all kinds of problems, like:

  • DAO will allow everyone to have a voice!
  • Lots of people will join when they see they have a voice!
  • You can weight decision-making based on reputation!
  • Funding will be easier/magical!
  • It will be easy to join!
  • The organization will have a better chance of outliving the founders!
  • DAO is better for collaboration!
  • DAOs reach better decisions than hierarchies!
  • It’s better for the environment!
  • New kinds of business models are suddenly possible!

Why DAO

Before we speak about what a DAO isn’t and why you don’t need one, let’s briefly discuss why DAO tech has gathered so much hype (and why I devote a big portion of my life in the dGov/DAO realm).

Oligarchy doesn’t need a DAO

If you have a team of 20 or fewer people, and you need to make decisions together, get in a room together and make decisions. If you need a moderator or expert in group collaboration, get an expert. Learn how to use weighted decision tables. Learn some advanced communications skills. Don’t use a DAO.

It won’t solve your money problems

The work being done on sharing economies and cooperatives is promising in developing communities where people can reduce or eliminate scarcity by sharing resources.

Voting isn’t collaboration

As mentioned above, one of the promises of distributed/decentralized governance is that it will help people make good (or at least rational) decisions on common goods. Even if we are just talking about blockchains, the idea of the DAO is to “align incentives”. In some cases, this seems to be happening, at least along the lines of financial interests. However, being given a yes / no vote on proposals is a stunted form of governance.

Reputation is complex

A number of DAOs use “reputation” to weight voting for those who have more interest or reputation in the DAO. This one-dimensional measure of reputation is both superficial and random. Even within a fairly limited decision set, reputation isn’t one thing. Some people are financial experts and others are blockchain experts. Some people may be better proposal-makers but worse at executing proposals.

If your governors have never used a beta…

In 2018–8 I had my first experiences with using alpha technologies outside of an R&D lab. It was complex and expensive. If you are creating an organization based on normal humans who are not tech-savvy or willing to put up with lots of glitches, don’t try it. The tech is not ready for average computer users.

Do you want to lose control?

The idea of a Distributed/decentralized organization is that it will create a participatory form of governance where there is no “boss”. Most founders aren’t really willing to give up that kind of control, at least not when it comes to budget allocation, hiring and firing. I have not yet seen an organization in the DAO space that truly has group decisions about money and staff decisions. I’ve seen a lot of organizations where the founders, when faced with the idea of giving up control to a larger group, quickly decided it was a bad idea.

The upside: great Multisig!

Now that you know all the things a DAO won’t do, what will it do?

Best practice: wait a year

A lot of people are building a variety of governance models. Enthusiasm is on the rise for DAOs, direct democracy, collective intelligence and better collaboration tools. I fully expect that within a year or two, we will see some impressive pilots and useful tools emerging as a result of this enthusiasm. If you truly want to create a distributed organization or DAO, there’s no better time to explore and learn. But for implementation, wait a year or two.

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RebeccaRachmany

RebeccaRachmany

Founder, IwriteICOwhitepapers.com and DAOLeadership.com. Author: "So you've got a DAO: Leadership for the 21st century"