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By
MIDAO
In an era where the average lifespan of organizations is shrinking, the concept of resilience has never been more crucial. Decentralized Autonomous Organizations (DAOs) are emerging as a potential solution to this challenge, offering new ways to structure and govern organizations that could lead to greater longevity and adaptability. This article explores how DAOs can create more resilient and long-lasting organizations by leveraging decentralized governance and stakeholder participation.
Traditional organizations are facing an existential crisis. As Al Mithani, known as "Links" in the DAO space, points out:
"The average lifespan of an organization is shorter now than it was 50 years ago. The average organization fizzles out within 20 years."
This trend is alarming, especially when we consider the impact of organizations on our society, economy, and individual lives. The quest for more resilient organizational structures is not just an academic exercise—it's a necessity for building a stable and prosperous future.
Several factors contribute to the shortened lifespan of modern organizations:
Mithani highlights this issue:
"The investors and founders get the lion's share of the authority and the upside, and other stakeholders—like users and employees—don't get nearly as much. It's almost negligible what they get."
This misalignment can lead to decision-making that prioritizes short-term profits over long-term resilience and stakeholder value.
Decentralized Autonomous Organizations offer a new paradigm for organizational structure and governance that could address many of these challenges. Here's how DAOs can contribute to building more resilient organizations:
One of the key strengths of DAOs is their ability to experiment with different governance structures and adapt quickly. As Mithani explains:
"I think it's the ability to experiment that's really important. If you're starting a new business in Canada or the U.S., you have, like, three options for legal structures that will work. You have two options for funding, right? There aren't that many options."
DAOs, on the other hand, allow for much greater flexibility:
"With DAOs and Web3 in general, I think there's a desire from the people working there to build something different. It's like a parallel system to our traditional system, and it's unencumbered in certain ways."
This flexibility allows DAOs to evolve their structures and processes in response to changing conditions, potentially leading to greater resilience over time.
DAOs enable a wider range of stakeholders to participate in governance and share in the value created by the organization. This broader participation can lead to more balanced decision-making and a stronger alignment of interests.
Adam Miller, co-founder of MIDAO, highlights a unique aspect of DAOs:
"Never before in human history did we have nonprofits with market caps. Never before did we have nonprofits with hundreds, thousands, or even millions or billions of owners."
This democratization of ownership and governance can create a stronger sense of community and shared purpose, potentially contributing to the organization's longevity.
DAOs allow for rapid experimentation and iteration on governance models. Mithani notes:
"The real unlock of DAOs is not necessarily that they're brand-new organizations, but that you can rapidly change the organizational structure. You can iterate on structures."
This ability to quickly test and refine governance models can help DAOs find more effective and resilient structures over time.
By distributing ownership and governance rights more broadly, DAOs can create better alignment between various stakeholders. This alignment can lead to decision-making that balances short-term needs with long-term sustainability.
To understand the potential of DAOs for creating long-lasting organizations, it's helpful to look at examples of traditional companies that have achieved remarkable longevity.
Mithani cites several examples of companies that have stood the test of time:
"Nintendo—the company has been running for hundreds of years. Maybe not 400, but there are Japanese companies that have been running continuously for that long. Hudson's Bay Company has been going for over 100 years."
These companies demonstrate that it is possible to build organizations that last for centuries. However, they are exceptions rather than the rule in today's business landscape.
While it's too early to point to DAOs that have achieved similar longevity, the unique characteristics of DAOs suggest they have the potential to create equally enduring organizations. Here's why:
While DAOs offer exciting possibilities for building resilient organizations, they also face several challenges:
The legal status of DAOs in many jurisdictions remains unclear, which can create challenges for long-term planning and operations.
As Mithani points out, not all decisions are suitable for decentralized governance:
"It's not about everyone deciding what to include—it's about deciding who gets to decide what to include."
Finding the right balance between decentralized and delegated decision-making remains a challenge for many DAOs.
As DAOs grow, maintaining effective governance and stakeholder engagement can become more challenging. Mithani notes:
"I think most DAOs aren't going to be as big as Maker or Aave or these other DAOs, right? That's what people think of when they think of DAOs, just like how people think of Facebook and Google when they think of corporations. But really, most corporations—probably 80%—are below ten people, and I think DAOs are going to be something similar to that."
While the ability to experiment is a strength of DAOs, it's also important to maintain enough stability for long-term planning and operations. Finding the right balance between innovation and consistency will be crucial for building truly resilient organizations.
Based on the insights from the podcast discussion, here are some best practices for building resilient DAOs:
Establish a strong foundation by clearly defining the DAO's purpose and core values. This can provide guidance and stability as the organization evolves over time.
Design governance structures that can adapt over time. As Mithani suggests:
"I do think that the way we're doing it with BCard is through delegated authority. Instead of voting on each individual decision, BCard holders vote for the multi-sig, and the multi sig elects a champion—me—from within themselves."
This approach allows for efficient decision-making while maintaining community input on key issues.
Build and nurture a strong community of stakeholders who are invested in the long-term success of the DAO. This can create resilience through shared commitment and diverse perspectives.
Maintain clear and open communication channels to keep all stakeholders informed and engaged. This can help build trust and alignment over time.
Consider how the DAO will sustain itself financially and operationally over the long term. This may involve creating multiple revenue streams or building up reserves to weather challenging periods.
Foster a culture of continuous learning and improvement. Regularly review and refine governance processes and organizational structures based on experience and changing conditions.
The potential of DAOs to create more resilient and long-lasting organizations is significant. By enabling broader stakeholder participation, flexible governance structures, and rapid experimentation, DAOs offer a new paradigm for organizational design that could address many of the challenges faced by traditional organizations.
As Mithani concludes:
"That idea of resilience—of an organization, a society—means there's something working. It means we can bring individual humans together and create something bigger, and that's really important."
While it's still early days for DAOs, and many challenges remain to be addressed, the promise of creating organizations that can adapt, evolve, and endure over long periods is an exciting prospect. As we continue to experiment with and refine DAO structures and governance models, we may well be laying the groundwork for a new generation of resilient organizations that can stand the test of time.
The journey towards building truly resilient DAOs is just beginning, but the potential impact on how we structure and govern organizations could be transformative. By learning from both the successes of long-lasting traditional companies and the innovative potential of decentralized governance, we have the opportunity to create organizations that are not just built to last, but built to evolve and thrive in an ever-changing world.
