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.

Lessons from Experiments in Decentralized Autonomous Organizations (DAO)

Understanding human dynamics — cultural software — to achieve the vision for decentralized governance and leaderless organizations

For those who managed to follow the travails of the Decentralized Autonomous Organization (DAO) vision and then demise of the Ethereum DAO project that lead to the Ethereum protocol fork, this series of articles explores the opportunity for cryptocurrency professionals and developers 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 importance of establishing credible case studies and trust in decentralized organizations and governance

The rapid speed and volatile properties of the current emerging blockchain eco-system makes for a charged atmosphere. Participants experience disrupter technology pressures, such as continued accusations of not following the law, publicity on hack attacks, while also having to build use case studies and gain trust for winning over the mass market, governments, and investor communities.

Image: Manie Eagar: CEO Digital Futures

This new technology and its community are under rigorous scrutiny — some may say even more than the established incumbents. According to Coindesk, a recent Gartner report cautions and recommends firms understand issues surrounding blockchain governance, an issue it highlighted as a “critical factor” for adoption.

For digital currencies and blockchain technologies to continue to gain ground and trust, it is imperative that we pay more attention to the evolution of the people elements as these impact the technology development, which in turns creates the people dynamics and culture.

Neglecting human dynamics in a hyper connected world can multiply poor decisions like a chain reaction

As everyone interested in the blockchain networks have discovered by now — relying on technology alone cannot dissolve the hard problem of people issues in, for example, governance and decision-making.

In a hyper-connected world where poor decisions can multiply like a chain reaction, understanding human behavior has never been more urgent or important. Exponential technologies demonstrate how experimental technology escalate “people” issues and dynamics towards unexpected random and non-linear events.

In such turbulent environments we have already witnessed black swan events. “The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. The term is based on an ancient saying which presumed black swans did not exist, but the saying was rewritten after black swans were discovered in the wild.” (Wikipedia — August 23, 2016)

The vision of distributed and/or decentralized organizations

The promise of decentralization is to move us from a “my way” or “your way” to “our way” where we were able to tap the full potential of the group (or hive). These goals include mitigating the limitations of bias outside conscious awareness, approaching solutions from multiple perspectives and increasing diversity of thought.

Decentralizes aims to also enable the principals of inclusivity and vitality, based on worldview that the whole is greater than the sum of the parts. The theory is that it would result in superior solutions, better decision-making, processes, increased commitment to implement decisions made, or a combination of two or more of these and therefore establish a better future.

“Decentralization is often linked to concepts of participation in decision-making, democracy, equality and liberty from higher authority.[35][36] Decentralization enhances the democratic voice.[28] Theorists believe that local representative authorities with actual discretionary powers are the basis of decentralization that can lead to local efficiency, equity and development.”[37] Columbia University’s Earth Institute identified one of three major trends relating to decentralization as: “increased involvement of local jurisdictions and civil society in the management of their affairs, with new forms of participation, consultation, and partnerships.”[8] https://en.wikipedia.org/wiki/Decentralization

“Decentralized governance, refers to the restructuring or reorganization of authority so that there is a system of co-responsibility.”

Decentralized technologies are not just economic but social sciences experiments that look chaotic and possibly too disruptive to outsiders

Decentralized platforms are conceptualized and developed testing different ideas of not only of autonomous decentralized organizations, but also new decentralized governance for decision making, reward and business models for participation to achieve more fair, transparent and trust-worthy organizations.

Establishing decentralized governance and decision making for autonomous decentralized organizations is, as with the technologies itself, highly experimental.

Many people not in the thick of decentralized experiments are not always aware that these technologies are also social experiments captured and deployed as software code. Usually published as a white paper, such as Satoshi’s paper on Bitcoin which was designed to enable decentralized autonomous organizations — upon securing sufficient funding and resourcing the technologies are then developed, deployed and evolve.

This social sciences experiment is in the public domain, which results in further innovation and experimentation as new philosophies, platforms and apps are developed.

For outsiders not so deeply involved, this might look like chaos. Critics describe what they perceive as too disruptive, or assign what they observe happening in the public domain as lack of experience and real insight into how organizations should be managed.

This then becomes a feedback loop that self-reinforces the paradigm that decentralized systems are inherently inefficient, result in poor decision making and outcomes, have no governance and therefore limited trust, too complex and uncontrollable. In other words, maybe not worth the effort.

The most important consequence for the decentralized community is that first adopters become discouraged to further investigate, experiment and experience what decentralization really means and what the underlying untapped potential of it is.

And no amount of praise singing from credible experts will sway them, especially if they feel burnt through some investment, be it a use case development in their organization or as a direct investor. At the end people will naturally flock to experts and technologies developed by traditional and familiar incumbents.

Turning crisis into a positive learning opportunity will change the narrative in the public domain

Cryptocurrrency and blockchain experts have an opportunity to examine cognitive bias and pay more attention to the human dynamics inherent in the conceptualization, design and deployment of decentralized autonomous organizations and governance.

It is proposed that social sciences offer a currently untapped value to improve decentralized technologies. Examples include developing mechanisms for voting on funds disbursements, crisis management and critical decision making, such as the recent Ethereum decision to hard fork which unfortunately has resulted in a very public exposure of deep rifts within the blockchain community.

This includes decentralized networks having “crucial conversations” based on social sciences to “nourish community relationships and develop tools, skills and enhanced capacity to find better and new solutions to our problems”. (Crucial Conversations: Tools for Talking When Stakes Are High — Kerry Patterson, Joseph Grenny, Ron McMillan and Ai Switzler.)

Human resources domains also offer frameworks such as crisis leadership to deal with organizational crisis, such as recently experienced with the Ethereum DAO project’s hack.

Code it not only Law, but Code is also “Culture — the knowledge, beliefs, art, morals, customs, and material expression which, over time, expresses the continuities and discontinuities of social meaning of a life held in common” (Wikipedia)

The next article will explore the impact of leadership styles on decision making, and how it can result in unexpected resistance.

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 during the we development of decentralized systems, technologies and organizations.