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Business without bosses: San Francisco innovators battle bureaucracy with blockchain

Business without bosses: San Francisco innovators battle bureaucracy with blockchain

A group of San Francisco technologists is envisioning a work world in which there are no bureaucracies, no headquarters and — most importantly — nobody is the boss of anyone else.

The business model through which they believe they can create this world is called a DAO, which stands for Decentralized Autonomous Organization. DAOs are built on blockchains, or transparent, immutable code that are freely available to audit online. It’s an organizational structure that allows participants a say in how an organization grows and is run.

While there are many different philosophies on how best to build on DAO code and use it, DAOs are less hierarchical than traditional companies, and have no need for headquarters, campuses or other centralized workspaces.

DAOs challenge much of what Bay Area tech culture has been known for during the last 30 years. And yet, some of the most visionary builders are here, living in San Francisco.

“It’s evolution,” says Li Jiang, chief operating officer at the blockchain startup Harmony. “Our parents’ generation, they might have worked with a company for 10, 20, 30 years. Our generation, we work for a company for three, four years. But then the next generation, they’re gonna work for three DAOs at the same time.”

The best analogy to understand is that it’s a digital co-op, kind of like an online version of REI or a local farmers cooperative. A group of people with a shared interest form an organization together, and collectively vote on important decisions.

In the case of a DAO, however, governance is even further decentralized, — i.e., there are no executives, or even an administrator with the sole power to tabulate the votes when it comes to making decisions. Developers instead program “smart contracts,” which automatically execute specified behaviors once conditions are met. There’s no central power dictating what happens, but rather a theoretically unbiased and uncompromised piece of code.

The most common use now are groups of people creating DAOs to invest in non-fungible tokens. These are unique digital items — traded like baseball cards — something that can’t be copied and accrues value within a passionate community over time. A DAO enables a group of people to pool their money and make collective decisions about their investments.

But the hard core folks, called maximalists, argue the DAO model could eventually be used for organizations big and small. After a few drinks in at local crypto conferences, techies can be caught theorizing about what would happen if Uber was a DAO, and drivers had a say in the pay structure, or Airbnb, with hosts and travelers voting on customer safety. Twitter CEO Jack Dorsey is even looking into creating decentralized social media with the project BlueSky, though the organization hasn’t referred to itself as a DAO.

Enthusiasts believe DAOs will transform the way future generations can work and live from wherever they choose. (Kevin N. Hume/The Examiner)

Enthusiasts believe DAOs will transform the way future generations can work and live from wherever they choose. (Kevin N. Hume/The Examiner)

Critics point out that blockchain technology, in general, is moving faster than regulators can keep pace with it. In some cases, like Bitcoin, it can create an unforeseen toll on the environment in terms of massive energy use. In other cases, international hackers abuse cryptocurrency to extract payments without being traced.

DAOs are also uncharted territory, as they are quickly developing new methods for organizing work with unclear implications for labor law and international regulatory cooperation.

It’s hard to explain why there’s so much DAO innovation in the Bay Area, given DAO members don’t need to be in the same location or time zone to participate online. Some say the phenomena is just a byproduct of DAOs evolution — up until the start of the pandemic, most of the people working on DAOs were techies doing so as a side hustle after they left their Valley and Financial District campuses. Another common hypothesis is DAOs are just the next phase of tech evolution after startup culture, appealing to those still enamored by the idea of “disruption.”

Maybe, it’s the very diversity of reasons that explain why the region’s leading DAO visionaries have such starkly different approaches to the tech. These are just a few of the San Franciscans on the forefront of that innovation.

A proposal on a ballot that DAO users vote on in blockchain startup Harmony. All users contribute to decision-making in a DAO.<ins> (Kevin N. Hume/The Examiner)</ins>

A proposal on a ballot that DAO users vote on in blockchain startup Harmony. All users contribute to decision-making in a DAO. (Kevin N. Hume/The Examiner)

Li Jiang, chief operating officer at Harmony

Jiang calls Harmony a “next generation” blockchain, which may be worth an explainer. The short version is that the first cryptocurrency, Bitcoin, and its main competitor, Ether, are transacted on two industry-dominating blockchains. One of the biggest hurdles for developers working on either blockchain is that each of these strings of code are slow to transmit information, and require high fees to execute transactions. Harmony has created its own blockchain which its users say is much more efficient.

Harmony is unique from other San Francisco startups in that, according to Jiang, the executives are prepared to cede power. Jiang wants to see Harmony become a DAO. He and his colleagues have already started the process by creating several mini-DAOs to work out the company’s approach to several hot-button issues, like community-building and social fairness. These mini DAOs are made up of both Harmony’s founding team and citizen-users of the blockchain.

Harmony was autonomous from the moment it was created, existing permanently on the internet like a website for which the owner forgot the password. The founding team instead makes up the Harmony Foundation, which built these mini DAOs on the Harmony blockchain. Once Harmony Foundation members have the confidence the mini DAOs can be operated by the community without the founder’s help, the Harmony Foundation itself will become a DAO, through which members will have a role in deciding how to invest the founder’s money in new startups.

“I’m a DAO maximalist, for sure,” says Jiang. “It’s worth it for every organization to think about transitioning to a DAO.”

Ian Lee, co-founder of Syndicate

Unike Jiang, Ian Lee does not identify as a maximalist. In fact, he sees himself as quite the opposite, looking for clear, identifiable problems in the in-person world that blockchain technology can solve. Thus, with a background in finance, it makes sense that he cofounded Syndicate to democratize investing.

With Syndicate, people form DAOs with others who are interested in investing in the same, often mission-driven or identity-driven projects. One DAO, for example, invests in Black and African startup founders, while another is investing in women and non-binary founders. Some DAO members go by pseudonyms, while others do not. What’s most important is that DAO members deliberate and vote on who they want to fund collectively, deciding how much they want their own identities and backgrounds to color other member’s perceptions of what they have to say — rather than the traditionally white, male-dominated world of venture capital notorious for hierarchies and gatekeeping.

Critics point out that Syndicate is still fairly centralized. There is a core team of people, including Lee, who build the technology themselves and are funded by institutional investors like Andreessen Horowitz.

Lee says that’s not the point. His approach to building DAOs is, he says, the most practical way to move toward the ultimate goal of democratization.

“Investing is a really powerful way in which the world is shaped and built. Investing allocates resources, and in that process of allocating resources, it is deciding who builds what, for whom, and where,” he says. Syndicate might decentralize eventually, Lee says, but the first goal is to enable community investment. “We are the infrastructure — a tool provider for communities that want to create DAOs.”

Gresshaa Mehta, product designer at Orca Protocol

Unlike Harmony and Syndicate, Orca Protocol isn’t a blockchain. Rather, it’s an decentralized app (called a dApp) built on the blockchain — kind of like an app built for the app store, but without a central company like Apple deciding the terms. Orca’s main function is to make DAOs more effective by splitting members into teams.

The product they’ve created, though technically complex, is philosophically simple. They were inspired by Dunbar’s number — a theory which says humans only have the cognitive ability to maintain relationships with 150 people at a time.

DAOs in their most basic form invite every member to vote on every problem, even though it’s impossible for most humans to constructively deliberate on issues with large teams. Orca, on the other hand, encourages members within the DAO to form smaller pods, where members can vote on issues where they have applicable expertise. This way, members can choose not to participate in issues they don’t care about or aren’t knowledgeable about, without getting in the way of other members who actually do.

When asking San Francisco developer Gresshaa Mehta why she’s excited about DAOs, she quickly connects the tech to her personal experience. Originally from India, she came to the Bay Area as a student to draw on opportunities here she felt she couldn’t find back home. DAOs allow for people to work in globally distributed teams, and she sees a future in which she never would have needed a U.S. work visa to participate in projects she’s excited about.

“I could easily be making a U.S. salary without having to worry about, ‘What if I get deported?’” says Mehta.

Completing the code

Blockchain technology, and DAOs specifically, can be seen as taking some of the good of the Bay Area’s tech boom while discarding some of the bad. Despite the looming stereotype of the “crypto bro,” the people building DAOs are obsessed with avoiding hierarchy, individual power and fame.

“I am not attached to this idea of like, I need to have ‘influence’ on where this project or the community goes,” says Jiang. “Personally, what I want to do is influence a billion people to get into blockchain, and evangelize this whole industry, together.”

It’s possible that all the talk about community well-being is smoke and mirrors. After all, it certainly wouldn’t be the first time some high-minded tech executive misled investors and the public about some product they didn’t know worked. But these technologists aren’t pitching a novel new product that can test blood with a pin prick — they’re trying to evangelize an entirely new way of work. If their apparent willingness to give up power proves anything, it’s that they really believe they can pull it off.

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