The WelderDestiny Compass

DAO Leadership - Issue #055

Wednesday, February 14, 2018 / Perth Australia / By Niekie Jooste

In this edition of "The WelderDestiny Compass":

• Decentralized Autonomous Organization Leadership
• The Old Model For Leadership
• The Role Of Game Theory
• Skills For DAO Leadership
  

Decentralized Autonomous Organization Leadership

Two weeks back we started looking at Decentralized Autonomous Organizations (DAO's) in more detail. To get the most out of this issue of The WelderDestiny Compass, please read that issue, if you have not done so already. (Click here to read issue #053...)

While we dealt with the bigger picture of how DAO's work, we need to take a closer look if we are to see the opportunities that we could potentially take advantage of. After all, the basic reason for taking the trouble of reading this e-zine is to see if we can gain an understanding of where the job market is moving, before it gets there. Then we can prepare ourselves to make the most of it.

Clearly an organization that operates without central control will have a totally different leadership dynamic, due to different drivers being present. Today we take a brief look at how the leadership would potentially work within such a DAO. I am sure that we will add a lot more details in the future, as things progress.

If you would like to add your ideas to this week’s discussion, then please send me an e-mail with your ideas, (Send your e-mails to: compass@welderdestiny.com) or complete the comment form on the page below.

Now let's get stuck into this week’s topics...

The Old Model For Leadership

There have been many management and quality "guru's" around. Their advice has always been focused on leadership and quality principles in typical large organizations. A great many of them have published very nice "motivational" type books, but in the bigger scheme of things they were rather forgettable.

The person that made the most impact on me as a quality focused professional, was W. Edwards Deming. In a way he was credited with helping Japan to change from a maker of "Jap Crap" products, to the maker of the most sought after high quality technological products in the world.

One of Deming's important points for achieving high quality products is to make sure that people were not remunerated on "piece work", and the organization was not incentivised through a system of "management by targets". To get people to work together for the betterment of the organization, required "management by leadership" rather than "management by targets". If you are interested in taking a quick look at how leadership works within this context, then read issue #026 of The WelderDestiny Compass...

Deming obviously had a lot more to teach, and I believe that his advice today is just as relevant as it was in the 1950's and 1960's. (Before my time, jus in case you were wondering!) Unfortunately most organizations never took Deming's advice regarding the dangers of management by targets, hence the rather large number of poorly run companies that are little more than fiefdoms for top management, and the rather frequent scandals associated with poor quality products and poor moral judgements. Think Volkswagen, Kobe Steel, Enron, Tyco and a whole slew of banks and pharmaceutical companies that are paying billions of dollars in fines on a continuous basis. Also keep an eye on General Electric. It looks like there is a scandal brewing there as well.

The problem is that Deming's fundamental belief that people should not be remunerated on a "piece work" basis is in direct conflict with the way that DAO's operate. In fact, the very basis of operation of a DAO is that each contributor is remunerated on a transaction basis.

Can we reconcile these two opposing ideas on incentivisation and leadership?

The Role Of Game Theory

The reason that Deming wanted organisations to steer clear of remuneration based targets, is that people incentivised in such a way always found ways to sub-optimize the system to give themselves the biggest payout, at the cost of the wider organisation.

In other words, people "gamed" the system to their own advantage. The idea of management was that the incentives and targets would be so well designed, that any gaming of the system would result in the biggest gain for the organisation. Unfortunately the non transparent nature of organisational systems and their reliance on people for capturing the data needed to do the measurements, means that it is impossible to design system that are so good that they cannot be manipulated or gamed by "insiders".

The idea with DAO's is that this very principle that people will want to game the system to their own advantage is used in the design of the transactions that constitute the workings of the DAOs. In addition, these transactions are totally transparent and known to all participants before anybody takes part in a transaction.

Furthermore, each transaction is captured in an immutable way on the blockchain, making it totally clear how and to whom the "currency" flows within the organization.

Actually a better word than "organization" is "community". Each community member pays or is remunerated, based on their role within a transaction.

This dynamic means that as soon as one group of community members perceive that they are getting a raw deal compared to other community members, then they can institute changes to the "smart contracts" that make up the transactions.

It will mean that there will be numerous possible contracts available for each transaction, and that different community members will be able to negotiate which version of the contract they are prepared to use. "Unfairly" structured contracts will just not be used once better alternatives are available.

In this way, the DAO will be a rather democratic system where it will only work for the greater good of the community if the majority of community members are treated fairly. If any important part of the community feels disenfranchised, they will just leave the community and go to greener pastures. If this happens to enough community members, then the DAO will die.

In short, the DAO workplace will be a very dynamic place where transparency and fairness will have a very high premium. Either the majority of members are happy in the community, or it will die, and then the whole community will loose out, especially if the community is operating on their own "currency" or token. Suddenly that big time account of tokens that was worth thousands in fiat money terms will be worth nothing.

Big incentive to cooperate indeed!

Skills For DAO Leadership

It is important to keep in mind that while there will be many individuals working directly within the DAO, there can also be very conventional looking "companies" that are operating within the DAO. If a service within the DAO can best be delivered by a group of people working together, then these roles will be filled by conventional looking companies.

So, what would leadership look like inside DAO's?

We have principally looked at the dynamics within established DAO's. The problem is that DAO's don't just pop out of nowhere. They need to be established, and the community around them needs to be built. This takes visionary type leadership. People that can "sell" the bigger picture so that community members will get interested to contribute.

In the early stages of a DAO project, a number of community members will be taking a lot of risk in giving of their time and expertise. They may be remunerated in a "crypto token", but in the early stages of a project these tokens are not actually worth much. It is like working in a start-up company and only being paid in company shares.

If it works out well, then the shares will end up having a lot of value, but if the project does not work out, then the company shares will be worthless. Same with an early stage DAO.

Depending on the typical community members, the ways in which the leadership will need to get the news out will vary. Most of the current DAO's are broad based "consumer" focused DAO's. For these, social media marketing is a very important tool, so people with marketing skills within a social media context will have sought after leadership skills.

For the more "business to business" type DAO's, the visionary leadership often associated with non profit and even religious organisations will be sought after. Their marketing platforms will be more business oriented and will rely on being able to broker deals with established large organisations, while also being able to motivate individual contributors to buy into their "visions" of the future.

Examples of the DAO's that fall into this category are those based on energy distribution (e.g. WePower and Power Ledger) and financial systems that integrate the crypto networks with conventional banking.

While these visionary leadership skills will be necessary at higher levels, the basic leadership skills applicable to ordinary organisations today will be just as applicable when dealing with individuals within the DAO of tomorrow.

Yours in welding

Niekie Jooste

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