Lessons from Experiments in Decentralized Autonomous Organizations (DAO) – The Human Dynamics of Voting

“As man advances in civilization, and small tribes are united into larger communities, the simplest reason would tell each individual that he ought to extend his social instincts and sympathies to all members of the same nation, though personally unknown to him.” (Charles Darwin in The Descent of Man) 

This is the second article in a series exploring the opportunity for professionals and developers in exponential and decentralized autonomous technologies, such as blockchain and crypto-currencies, to take into consideration research and expertise from domains such as social sciences, for example anthropology, behavioural economics, psychology and neurosciences in the creation of their platforms and coded governance to achieve the full vision of the potential of democratic autonomous organizations.

The creation of the Ethereum DAO project, the predicted plausibility of and then actual problems, with subsequent hard fork decision dominated the public discourse during the summer of 2016 . This is a social experiment and digital economy case study that provides valuable lessons about future decentralized platforms of digital asset value exchange, leadership, governance and decision making processes.

Even in centralized systems, humans have some degree of choice over what they do

“The aspirational goals for The DAO are to utilize the wisdom of the crowds for this decision-making process, and to eliminate the risks posed by middlemen using a programmatic approach to corporate management.” (Dino Mark, Vlad Zamfir and Emim Gun Sirer)

This includes rethinking the “innovation eco-system, which comprises disparate organization and sometimes even competitors that join together for the purpose of developing something new.” (Collective Genius by Hill et al) 

Central governance was created with the theory that it would create more efficiency in the flow of information, improve markets and lead to more effective solutions and ultimate economic growth. If engineered and coded to perfection and precision, these costs are reduced while control is gained across the value chain, and market dominance obtained by creating barriers to entry to maintain sustainability.

Bonnitta Ray from APP Associates points out that such organizational designs therefore need to create direct-reports dependencies, which authorizes certain people to use disciplinary power over others to constrain their activities or leverage their motivations. She provides examples of these direct report structures as demonstrated in the image below:

This inevitably creates challenges in attempting to coordinate actions by communicating over an unreliable link – human beings. Unlike the living organizations described as agents in complex adaptive systems, according to Ralph Stacey the sciences of complexity of human action “needs to be interpreted in a manner that takes full account of the attributes of human agents, namely, that they are conscious, self-conscious, emotional, often spontaneous, often thoughtful and reflective beings who have some degree of choice over what they do”.

“Human agents are basically interdependent, they respond to each other and their choices and intentions play into each other producing unpredictable, emergent patterns over time. To signal the move from the domain of natural sciences to the domain of human action, Stacy and colleagues refer to these processes as Complex Responsive Processes of Relating. These responsive processes take the form of:

  • communication understood, drawing on George Herbert Mead, as conversation;
  • patterns of power relations which take the form, drawing on Norbert Elias, of the dynamics of inclusion-exclusion and identity;
  • ideology as a combination of values and norms, drawing on the work of Hans JoasWilliam James and John Dewey; and
  • evaluative choices.”

It is in these local responsive processes that there emerge population-wide patterns of activity, culture and habitus. Organizational life is though of as the game people are invested in and organizing processes are understood to be the ordinary politics of everyday life.” (Wikipedia)

Centralized leaders are unable to see the whole picture and therefore under-utilize the innovation eco-system and collective wisdom that exists at the bottom of the “pyramid”

“In a world of increasing access to data, knowledge, resources, collaborative enterprise, and technological innovation, there will always be some people tracking data sets that managers don’t see, some people tossing around ideas that managers think are impossible, some people playing around in creative spaces that catalyze imaginative thinking, some people experimenting with their friends in a co-working studio or a backyard garage…” (Collective Genius by Hill et al)

According the Myrna Lewis, founder of Co-Resolve Management and the Lewis Method of Deep Democracy, we can use the metaphor describing the human psyche as being like an iceberg – a small part of our behavior is conscious and above the water level, while most of our behavior is below the water line in the unconscious. This metaphor can be expanded to group and group behavior – “the unconscious below the water line holds the potential of the group”. It is this promise of collective wisdom and inclusivity that draws so many people to decentralized platforms and models of organizations.

“A simple example to demonstrate these group dynamics are that, when a community meets, there is a stated agenda – which is what is above the water level.

However, we all know that “before important meetings smaller groups often lobby and discuss issues before the meeting. These smaller groups are the only ones who are aware of the ‘under the waterline’ agenda. In that way their lobbying is therefore in the group’s unconscious”.

Even when there is a majority vote, with almost 100% of all voters casting their vote, we still need to be mindful that the experience of the minority voices could be felt as the ‘tyranny of the majority’.

As the leader or leadership team “leaves the room” (virtual or physical) the unconscious (that which is underneath the waterline) of the group is still with the group. “We have all seen how, when a leader is not present, a group will start talking. These conversations are often informal such as a late night dinner or over a cup of coffee.”

“Often the true sentiments are expressed and include negative emotions such as resentment, frustration, hurt, feelings of not being included or being discounted.” It is easy to see this on sub-groups, for example, in Reddit.

If the leaders continue to dismiss the “minority” vote or do not listen to the silent or “voiceless” majority, these feelings do not go away; they stay in the unconscious and over time build up, manifesting as “resistance/dissent” activities – these activities which specifically could obstruct the status quo or go against the decision. These actions are initially overt but eventually become covert.”

Studying the Resistance Line helps to understand how voting mechanisms can create dissent

 A key mechanism to include the collective wisdom in groups is through voting, such as also deployed in the Ethereum DAO, where the primary governance means offered in the business was voting by the shareholders.

 The following describes the some patterns in the behaviors that we see when participants have lost the vote (or right to vote), which we can describe as a Resistance Line as described by Myrna Lewis of the Co-Resolve Leadership Program and depicted in the image below:

Lewis emphasis that, the longer people remain on the resistance line, the greater the risk of issues exploding, and of course the more efficiency and effectives is reduced. The model is therefore valuable to use as a diagnostic to identify potential hidden conflict or unexpected actions.

  1. Jokes and then Sarcastic jokes

According to Lewis, “Loosing the vote is covert and is usually seen as unthreatening, even fun. Our first reaction is to make jokes about the decision as a way we communicate our decision.

After a while, if the voices stay unheard, the jokes will start to have an “edge” to it as the example below. “This stage is often seen if clever bantering, sparring, wit, and raconteur in groups. Bantering become a way for people to express feelings that need to be expressed but should they express these directly, they would be uncomfortable.”

In the DAO hack and debate to address it, for example, a controversial video emerged which initially had less than 100 views. Since the hard fork and now three months later it has more than 27,000 views. This needs to be compared to 11,195 views of the video of Gavin Wood presenting the hack of the DAO smart contract.

2. Excuses

Change management experts know the emergence of “excuses” to not participate in activities after a decision was announced, is often a familiar sign of resistance when a new technology or other change is being introduced into an environment. For example, people will “forget” to attend meetings, or suddenly have to play golf with a client when an innovative idea is to be presented to them. When you observe more than three excuses for not acting on a decision, you are experiencing the next phase in the resistance line.

3. Gossiping/lobbying

Lewis describes gossiping is part of human nature and fulfills an important role in relationship dynamics as outlet for our feelings with friends. When our views are not heard or when we are not given a chance to express our views, our gossiping escalates. Savvy change makers know that the true and real important reactions to decisions can be heard outside the formal meeting room at coffee machines.

For example, when the Ethereum DAO was established, various experts were authoring white papers to describe their concerns and trying to gain support in community forums for influencing the community to become more cautious while continuing to support the vision towards a more peer-to-peer economy and leaderless organizations. Many conversations were overheard at conferences around dinner tables to find out about the mood and how people felt about the situation.

4. Communication breakdown

Communication breakdown is when people, parties, sectors or divisions stop talking to one another. This is when we observe shakespearean squabbles that can last for months and years, creating high inefficiency and ineffectiveness.

Lewis provides an example where someone emails or texts a person as a way of avoiding them. Research has proven that people are more open to lying when texting or emailing. We can observe this behavior in “trolling” and flame “spats” in chat rooms or even public Twitter feeds.

5. Go Slow and Disruption

Lewis’s Resistance Line model indicates that, by the time communication becomes ineffective, the dissent and resistance is becoming overt. As the desire of the group to be heard becomes ever more desperate, they may begin to disrupt the process that was decided on.

When people become disruptive in the workplace, they tend to block the process and can even behave in an unruly and disruptive manner. Some people sabotage the process by creating bottlenecks or creating workarounds to new solutions they must use.

Most of us have been at the receiving end of bad service from a person who is creating roadblocks for us or take forever to complete a standard service. Their go-slow or unwillingness to help us is a disruption on the Resistance Line.

In the crypto-space this manifests through using mechanisms such as a simple denial of service hack.

6. Strike

 The go-slow phase will heighten and lead to overt activity such as a strike – a refusal to work in an organized way (such as refusing to mine when asked).

According to Lewis a rebellion might now openly start to the surprise of the group who won the vote, as they were unaware of all the “under the water line” behaviors (they cannot be present at all the gossip and informal meetings and discussions) and the hidden “under the ice-berg” support for what appeared to be a minority group.”

An example of a “strike” is the decision of some exchanges to trade both ETH and ETC creating a black swan event in blockchain technologies.

7. War and/or Separation

If the minority’s voice is still not heard and the issue is sufficiently important to them, they will withdraw from the process altogether or, as a last resort, go to overt resistance and dissent. By this stage all contact between the parties has broken down.

The final consequence is that people leave. This is the time when teams, initiatives or companies dissolve or are up for acquisition. It equates to divorce in a marriage, or in a worst case scenario, the  “war of the Roses” where ultimately no-one wins.

In the example of the Ethereum DAO project this has resulted in two competing chains, a situation that continues to evolve in the public domain.

Decentralized autonomous organizations have an opportunity to rewrite the traditional “voting” operational models to harness the wisdom of the collective

Inclusivity and diversity brings difference and therefore also conflict. With conflict there is a growth opportunity and the potential for uncovering wisdom and innovation by intentionally lowering the waterline. This can be seen in community forums such as Reddit and Steemit. With difference comes tension because there are differences of opinion.

Unlike centralized systems where friction and difference is seen as disruptive and to be engineered away, we can continue to be mindful to not shy away from continuing the quest for peer-to-peer economies, decentralized platforms and leaderless organizations because we discover these bring about conflict, emotion, chaos, disruption and unpredictability.

In shifting our worldview to see such conflict as part of life there is an opportunity for growth and a potential for uncovering a piece of wisdom and novelty that would usually not be available.

Instead of looking towards models such as “classical” democracy which focuses on majority rule, decentralized communities are encouraged to study research and models from human dynamics that aim to include all voices, states of awareness, and frameworks of reality as important.

“If you want to produce something truly new and useful, you cannot know — by definition — exactly where to go. Instead of trying to come up with a vision and make innovation happen themselves, a leader of innovation creates a place – a context, an environment – where people are willing and able to do the hard work that innovative problem solving requires.” From the book Collective Genius: The art and practice of leading innovation by Linda A Hill, Greg Brandeay, Emily Truelove and Kent Lineback

About this article

The purpose of this article is to support the cultivation of meaningful thought processes and encourage action based research to learn from real events to develop decentralized systems and organizations.

Notes on the Lewis Method of Deep Democracy

In 2006, the United Nations recognized Deep Democracy as one of eighty leading African innovations. “Deep Democracy suggests that all the information carried within these voices, levels of awareness, and frameworks is needed to understand the complete process of a system. Deep Democracy is an attitude that focuses on the awareness of voices that are both central and marginal.”

“Deep democracy has many aspects, but at its deepest manifestation refers often to an openness towards the views of other people and groups. It also embraces emotions and personal experiences that are most often excluded from conflict and rational public discourse.” ( Deep Democracy Institute)

MaRi Eagar is a co-founder of Digital Futures and the Voice of Mindfulness in Blockchain and Decentralized Technologies and trained in Deep Democracy and the Co-Resolve Participative Leadership.

Talent management for the digital future

The race for attracting and retaining talented digital experts, is on. One of the elements that stand in the way of change and retaining high demand skills, are that current traditional talent practices that are widely used, were build for a previous age, IT platforms and organizational dynamics.  The modern era demands pragmatic, evidence informed yet light touch and some resourceful co-creation and learning while experimenting with new models, such as distributed leadership.

What this means right now for talent and people development strategies in the digital world

To attract, recruit, onbo041712.Tina.Seelig.Color.Innovation.Engineard, retain and grow digital futures talent you need to differentiate your business from others by providing a work experience aligned to the values and expectations of your community, your talent market, investors and customers. This includes thinking about and planning for people strategies that will enable rapid business scaling and change using contemporary models and practices.

Research from the Centre of Positive Organizations indicates that positive leadership and organizations create extraordinary performance through positive climate, positive relationships, positive meaning and positive communications. This does not mean a business where the negative does not get addressed – in fact positive organizations enables organizations to deal more effectively with challenges. Gallup studies shows that positive leadership creates

  • a more positive mood
  • enhanced job satisfaction
  • greater engagement
  • improved performance

Applying 21st Century Talent and People Strategies are less costly, more flexible and generate better results

Creating a scaleable, human-centered workplace will generate attractive work experiences and create a strong and committed leadership cohort and brand. Examples of new practices include:

  • Letting go of old-school job descriptions and instead targeting individuals through matching their strengths with your organization’s strength profile and values. This will ensure better, socially diverse and targeted candidates are attracted and you achieve a higher retention rate. It also creates a better brand and competitive differentiation.
  • Recruitment using strengths-based interviews while assessing core traits and experiences from a person’s past, capability – the abilities and technical skills that a person can do and capacity – the strengths, appetite and values that determine what a person would love to do (based on the high potential model from the Centre of Applied Positive Psychology).
  • Designing and developing lean, smart and better ways of assessing people by letting go of personality tests that do not predict success. For example, developing a deep understanding on how to assess for motivation and identifying genuine potential for success  through machine learning tools will give you the edge.
  • Applying strengths-based, realistic and high potential interviews, and combining it with an assessment of the past, the present and looking to the future, will help you to truly begin to understand a person and your teams’ potential (and areas for unique and customized growth).
  • Creative on-boarding for you and your new team member to ensure a smooth integration and clear easy first 90 day including a customized guidance plan and action steps for team members as well as critical stakeholders, such as clients or investors. This will make a new person feel welcome and productive while you set them up for success.
  • Designing your culture with neurosciences in mind to ensure your people are motivated and flourish. Using a behavioral science approach also increases individual, team and organizational awareness and improve decision making.
  • Developing team member’s unique strengths to enable them to achieve their full potential, and embedding a strengths-development and solutions focused mindset for competitive advantages in not only talent retention, but your growth and profitability.
  • Designing management practices, compensation and reward approaches aligned with unique talent segments in mind will help you retain the values and purpose your business is found upon. This means fair payment and a commitment to helping them grow their financial wellbeing so that they focus on the task at hand while being empowered to make a positive impact in the world.
  • New team onboarding, alignment and development plans, including team leadership development while working on projects and building your talent pipeline. This means truly valuing teams and cross-functional team work.
  • Creating positive exit experiences when people leave the organization. This will promote your reputation and generate a network of loyal alumni.

“In the beginner’s  mind there are many possibilities, but in the expert’s there are few.” Shunryo Zuzuki

Digital Transformations: Trust is the bandwidth of communication

Trust is the bandwidth of communication –Karl-Erik Sveiby   (veteran in knowledge management and intangible assets)

How can you build  more trust with your investors, clients, teams or colleagues while you have to deal with designing and implementing new solutions like blockchain, address tough business challenges and implement complex organizational change?

How do you build trust when you are a new leader who inherited an environment and team with a history of incompetence or poor performance, or uncommunicative team members?

During new technology development, proof of concept projects or an organizational change implementation a lot of effort is put into creating well-scripted and thoughtful messages using best practice methods to communicate important ideas, such as the vision for large scale transformation or the benefits of a new exciting technology revolution.

If the human trust “bandwidth” is low, it does not matter how well branded your messages are, how inspiring the words, what social media you use, the careful story telling techniques or expertise you employ… A low trust bandwidth means people will just not believe you, will maybe hear messages that are not here, make up their own stories about what is going on and probably continue with current habits that contribute to the very climate you want to change.

High trust contributes not only to more effective and sustainable investor confidence, customer service or team productivity –  it is critical for effective change, as well as individual, team and organizational success, engagement and happiness at work. Steven Covey placed trust in the centre of his Four Leadership Imperatives.

How does lack of trust between people deplete innovation, work performance, productivity and work wellbeing?

A study at the Stress Institute in Stockholm found that  employees who had managers who were incompetent, inconsiderate, secretive and uncommunicative, were 60% more likely to suffer a heart attack or other life-threatening cardiac condition,

Being in an environment of low trust feels like a sense of never feeling “solidity underneath you, as if the parts continue to move all the time and you never know where it will be the next day or where you stand with someone. It uses a lot of energy in your need for constant alertness and creates a sense of anxiety about when the next unexpected event will occur.

The purpose of uncomfortable emotions, such as anxiety,  is to help you pay attention to potential risks and threats in your environment and move you into finding solutions and opportunities to address it. But being in a state of constant “alertness”  depletes valuable cognitive and physical resources. As vitality diminishes, physical health and strength diminishes, which ultimately results in loss in confidence in your physical ability to deal with the constant changes. Lack of confidence is a big reason why people don’t try out new things, lack creative options or just become apathetic or avoid change altogether.

This is a particular challenge in the current technology revolution of continuous innovation, of constantly starting and stopping (agility) or  always being in motion or increasing the speed of decision making and activities due to aggressive competitiveness in the market.

It is also present in teams and organizations where leaders are not inclusive, or try and be the “lone hero” who will solve everything on their own, or the worst – playing team members off against each other in a way to keep them “on their toes” to push for increasing productivity and high performance.

In low trust environments you will notice a lot of sarcasm, a lot of blaming and avoidance of talking about glaring issues. People will hardly ever be in open conflict with each other – a sure sign that there is no trust because people who trust each other are able to have really important conversations in a timely way.

If I don’t trust you as a leader, I will simply not tell you important things because, well –  I don’t think you will do anything with it or just take my ideas and build your career without acknowledging my contribution to your success. Why should I then give you more than the effort that my job description requires? If I am an investor, I will simply walk away to find another project to support.

How do you build trust?

Trust takes a long time to build, yet it can be destroyed in a minute if you discover that a person has not been truthful and have not operated from their best selves but instead from an self-centered  place.

A concept that people often associate with trust is valuing Consistency or what we could also call Integrity.  A good example of how I see integrity is the following analogy. If I travel with my car across a bridge, I trust in the integrity of the structure. Structure is not to be confused with bureaucracy, but could instead be simple “rules of the game”, guiding principles that are applied consistently. This allows for some sense of “predictability” in often uncertain and continuous change. Integrity creates that sense of a solid basis and provides for a source of inner strength that is crucial for times of continuous change.

Trust1

Trust Building Model by MaRi Eagar

Without connection it is almost impossible to trust someone. Connection is about caring. The old saying still holds: Friendly face-to-face interaction is still the best. I know two leaders who walk “the rounds” once a month and personally interact with each person who work in their hospital. This takes them a whole day, as they not only hand out snacks to everyone, but also ask each person one simple question, personally write down each answer and then publish it for everyone to see. The questions they ask are simple and focused on cultivating positive interactions, such as “what makes you proud of your work?” or “what acts of kindness have you seen the past few days”?

Character has particular qualities that differentiates itself from ‘strengths” or skills or charisma or other leadership qualities. Leading from character strengths, per Chris Peterson, does not generate envy in others but inspires them, and makes people feel energized and motivated. Expressing and generating value from character strengths creates credibility and ethical leadership. Terry Bacon states that “Being recognized as a person of character enhances your capacity to lead and influence others because they trust your intentions, are more confident in your leadership, and see you as a person worth emulating.”

Competence is often under-estimated in a world where leadership is described as being “visionary” or “leading to purpose and passion” and so on. But competency is also about knowing what you are talking about, emotional leadership and creating opportunities to experience personal satisfaction and making a positive impact derived from work.  No-one of us will embark on a dangerous climb up a mountain without a competent guide. Why should people trust you with risky projects if you are not competent?

Investors, employees and customers or business partners do not just listen to what you say.  They see how you act around them including your behavior towards your team and clients and competitors. They determine your competence based on the outputs and the impact you make through your actions and your non-actions. The way you role model (or not). Telling people to change their habits but you yourself don’t change your own in a very visible way means they will think you are not serious about it. As a leader you need to demonstrate competence not by words and jargon or quoting best practices but in your embodiment of what and how you want the new patterns of behaviour to be.

The final component to remember is that you have to cultivate all of this as a consistent habit. Doing things on a whim diminishes trust if you only demonstrate positive qualities and take positive action on an ad hoc basis. The consistency will be what contributes to building trust, so you need to work hard at creating new habits that are visible and that people can see – frequently and over a period of time. The worst thing you can do is, for example, declare that you are now starting a more inclusive and open environment, and then fall straight back into command and control when people start behaving chaotically around you. The advantage of consistently trying to build trust is that people will be a lot more forgiving when you do make mistakes (and you will).

Trust bandwidth is increased through intentional effort.

How can you lead  in a way that increases your bandwidth of trust?