Episode #3 - DAOs are throwing away decades of startup wisdom. But why? - with Dmitry Lapidus of Dragonfly Capital
In this episode, I'm chatting with Dmitry of Dragonfly Capital about the ways in which we DAOs are ignoring accepted wisdom and why they should be thinking of themselves as on-chain startups.
Transcript:
Kerman: Today, we have Dimitry from dragonfly chat with us. Uh, Dimitry's been thinking a lot about Dows and I think there's a really cool conversation here.
Dmitry: Yeah. Hi Cameron. Um, yeah. Great to great to join today. just, uh, excited to, to chat about Dows. Um, it's a bit of a sort of weird side hobby of mine, but, um, yeah. As you mentioned, um, venture, uh, Partner at dragonfly and just been spending my time kind of thinking about this all for the last couple of years and, and, and trying to figure out kind of where, where the landscape goes.
Yeah.
Kerman: Sweet. So one thing that like, I don't know, I just keep coming back to you. I people like, oh, it turns out when you're running a Dow, you actually need genuine human connection. Oh, when you, with Dow you need genuine leadership and it feels like everyone's just saying, oh, it turns out if you are running a company, you need X, you need Y and it's just kinda like this huge face PO moment of.
companies are one of the most efficient ways of organizing humans at scale. Cuz we can do it up to like I think the largest company is about two and a half million employees or 2.3 million that's Walmart. So is a lot of this thing of like, if you just replace Dow with company. A lot of your problems get solved.
Like that's what I know. It's not perfect. Point one. There are nuances, blah, blah, blah. But I feel like 90% of the current problems of DAS, we just like, if you implement a good, like organizational playbook, you'll solve your Dow problems.
Dmitry: I mean, I, I think like this whole debate is all about kind of two things. It's organizational design and it's risk sharing. And, and it kind of goes back to like, how did we even get started with like the concept of a company, right. It happened because we needed a way to organize people and then have a way of like splitting apart their risks and their liabilities and, and, and encourage people to take risks.
And so the idea that, you know, these decentralized communities are going to be like the, the, the, the magical solution to all of this. I think is, is a bit flawed because you're not taking into account. The fact that, you know, you actually still need to address those issues of how are you gonna organize those people to the point that, you know, you, you just made and B like, how do you actually split the, the responsibilities and, and risks amongst the, the different members?
I think like, you know, overall, it, it's a wonderful idea because at the end of the day, it's like a communal passion and people want to, you. They wanna, they wanna drive that progress through like putting their passions forward and, and doing this. And, and like, I think that's the exciting thing for a lot of people when they're getting new into the space or, or, or joining a doubt, like, you know, newcomers are greeted with all this empathy and excitement.
And they're trying to find like all these rewarding ways of getting involved. But at the end of the day, it's true that like, all this collaboration is a challenge, right? E E E especially when you've got you. The people that are backing it, they're kind of sustained by outside work sometimes. decisions require like a lot of thought, right?
You need to deliberate over these things and that delays progress and all sorts of issues. I mean, we're seeing this play out with a few of the largest doubts, right? Make a doubt. The moment is going through quite a well publicized
Kerman: was just gonna speak about that. What, what, what do you think of that? Like to me with maker, it just feels. Like, uh, I wrote about it yesterday, but like, I think they're spending on average, so they make a ton of cash. They make 10 make tens of millions of dollars. Like in that range, I'd say like 40 to 120 million.
It's an insane amount of cash. But then it's like the running like 50, $60 million is, I, I just don't know how you actually feasibly do that without like handing out free money. But it's, it's like, Great business, but terrible management. And then like now, when there are more reforms trying to happen, it's, it's kind of stuck in this conversation I was having yesterday is like, Dows are more like governments.
Don't be like a government start off. Is it start off as a company and then move to being a government like governments are there to cement power and exercise control at scale. But like that they're not meant for innovation.
Dmitry: Yeah. That's I mean, that that's very much true. It's it's, it's funny cuz you, you start thinking about, you know, I, I, I'm a big kind of political philosophy buff and I've just been like reread. Jean Jacque Russo and, and, and, you know, the idea of the social contract and like, why did the idea of like the city politic come about and, and, you know, with, without going kind of too far down the rabbit, Um, there's all sorts of, kind of interesting parallels that one can draw in terms of, you know, organizational structure and creating a social contract between like the entity and the protocol and the people that contribute to it.
And, you know, in theory, you should have rights and obligations, right. And, and, you know, your kind of responsibilities, shall we say it. And some people. Sort of, they, they want the benefits of being in aoww. They want the, the control and the community ownership, but they don't really want to put in the work.
I mean, I, and I, I, I see that a lot of the time, like with the engagement programs all sorts of stuff, but, but to your point about compensation, I mean, that's a, that's a really big one and, and allocation of resources, right? We hear this the whole time about, you know, token distributions and people are getting annoyed about, you know, community members and VCs and founders, like who should get the right thing.
And what does that mean in terms of the relationships and incentive structures between them? that also extends to like compensation, right? You've got rewards and bounties and, and like the real questions as I see them, as I see it, sorry, is like, you know, the deciding factors are gonna be like, what do you pay.
Who should get paid? Like under what terms how much do they get paid and, and like, how do we even agree on, on like, how do we come to a consensus of what the right thing should be? And we haven't quite figured that out, like a, a perfect way of doing it in theory, it should be like, I think the idea, or like the idea ideolog in, in me.
And I think in a lot of other industry participants is, you know, should be this wonderful meritocratic model. And to some extent, I think like bounties have done some of that. But the reality is like, we're still at the stage of you have, you know, simply put like one token, one vote and that can lead to like really messed up outcomes.
Right. It, it, it it's like extreme plutocracy in some cases. and it's like, you know, one part, like we've seen this come up with the, the solid
Kerman: Oh, it's yeah. Yeah.
Dmitry: and, and so many other issues. And so it's like, okay, well, should the people with the largest allocation be deciding who should get paid? What. Now in the traditional equity world, we have like gov like boards, right?
And, and the shareholders don't decide
Kerman: no.
Dmitry: directly, um, what the CEO gets paid. You know, they, they might have to go through a voting process and vote in an AGM or an EGM and like vote out the, the, the, the CEO and like the board then has to decide that and, and, you know, those kind of corporate governance issues are often flagged by.
All sorts of different investors and activist investors, et cetera. And it's like, we haven't quite matured as an industry in crypto to, to, to address these pain points. I.
Kerman: Yeah, well, one thing, I just think the, a principle that I deeply believe in like capital allocation is the highest skill set in the capitalistic game of life. And like capital allocation can only be done by highly skilled individuals. That's why like decentralized VCs don't work. That's why, like, if you ask like, Hey, a hundred people, how should we allocate capital?
Like, everyone's gonna have a different opinion. It's like, I'm a firm believer that like only one person or like a very, very slick number of people should be allocating capital it, um, like it arced the way I see my job evolving over time is I'm just a capital allocator effectively. Because what to spend money on, how much to spend money on, when should that money give an effective payback period, running the numbers, projecting things out.
Like that's kind it's I view it as energy at the end of it. It's like the highest abstraction of energy that powers everything. And you need strong capital allocators at STAs. And to think that you can like distribute that responsibility is like, it's just messed up. Like, I'm not sure if you've heard the book, Michael, the eight great outside CEOs or the eight outsiders, something like that.
It's a really good book. And it talks about different public company CEOs. Really just sort of core skill is just like knowing how to allocate capital. So to think that you can get like one of the hardest, most skilled, like, even think about being a venture capitalist, right. To know whether you're a good venture capitalist takes about eight to 10 years.
Maybe in crypto it only takes five , but it's definitely not gonna
Dmitry: Or as we are discovering, it's like, Hey, a lot of the people that we held up as heroes, um, you know, they're sort of, you know, one cycle beneficiaries. And, and actually it was like, Hey, it was the greatest time with the easiest monetary conditions ever. let's see how things play out now that it's considered to be more difficult.
Kerman: exactly. So it takes like two cycles. If you're still here and you made a ton of money in two cycles, it's like, great. You actually have skills. So to think that you can outsource capital allocation just feels like pure insanity to me.
Dmitry: Yeah. I mean, I think it, it, you, you can kind of, you can kind of parlay this into a whole different conversation about whether, you know, the benefits and the risks and downsides potentially of, of like representative democracy. But I think. You know, for, for a lot of people, you know, we look, we look at this around the world, like different systems of government.
And I go back to your analogy of like governments, right? It's some of the best systems are ones which, you know, actually delegate power to like, whether it's, you know, republics with. Or, or, or devolved assemblies, like in the case of the UK or lots of other places around the world and, and it has benefits and drawbacks, and it's like, you should assume that at some layer, some level above you someone can kind of upstream more information as to what is going on and then decide like who should decide, you know, Who should have certain responsibilities, but yeah, it's, it's the idea that the, the overall mass of, of people, you know, it's not a politically correct view, but the mass is all deciding, you know, that isn't necessarily always the best idea, because guess what, not everyone has access to the same information.
Not everyone has the same, like understanding of the intricacies and the nuances and, and especially, I think. In a world where unfortunately, again, without going into too much of like a, a segue into something else in a world where it's increasingly a lot of complicated debates, uh, uh, are reduced to simply good versus bad or, or black versus white, or, you know, zero versus one.
we're living in this kind of binary world. And unfortunately that's not how things are in reality. I, I find this again in, in a lot of protocols, it's like, you know, it, it is the best idea or like blockchains, like, should it be fully decentralized or not decentralized? Um, should we have a Subo or should we have, you know, a, a single emperor who decides everything?
It's like, I don't think there's that many kind of family run businesses in the real world. Where the, the founder controls everything. Like what tends to happen over time is as a business scales, they have, you know, business managers and committees and, and different people overseeing different things because they build expertise in a certain subject matter.
And I don't see why Dallas should function together that differently. Like there, there is yeah. Centuries of history showing that specialization works.
Kerman: democracy used to actually be that you had to. Certain level of education and be an informed voter before you had the power to vote.
And I think what's terrible about like, I guess modern day politics, or like even crypto politics is like you the same thing, like, oh, alright, selection time. I'm forced to vote. At least in Australia. You are because otherwise you get a fine. And then you, you you're at the thing. You're like, who do I vote for?
You're like, huh? That guy's hair looks better. All right. there you go. And you're like, this is such a broken system. Or it's like, ah, that guy spent way more money on his marketing campaign. and because he executed a successful marketing campaign, he rises to power and like, it is just such a deeply flawed model.
And I think. There's an element of people just not having the humility of being like, you know what? I actually just don't know enough about this. let me just trust. Whoever actually has the most context about this decision. And I mean, like when you have trust amongst people, it's incredibly easy to do.
Even within my team, I'm just like, look, I just don't really know everything. Like you're gonna make the decision. You're the most empowered person to do this. And. weird that you just don't see more of it, right? Like people saying, Hey, I actually don't know everything. You go for it instead.
It feels like everyone's like, I know everything. Not only do I think I know everything I'm going to assert, like with a very loud voice that I think I know everything
Dmitry: I mean, we see this, like in the, in, in, in, in the real world, like again, I think the tra equivalent that I think of. How do shareholders typically express their views? Well, aside from, you know, buying and selling and driving up share prices, the reality is you can vote at annual general meetings or extraordinary general meetings.
And guess what? Most of the time, the average person doesn't exercise their voting rights. I don't know that many people, I don't know whether you invest in any stocks or ever have, but like how many times have you actually gone on to vote something typically you don't, um, you, you end up going to a proxy voting firm, like ISS or glass, and guess what these guys exist, because they understand like, okay.
Based on like, Decades or if not, like perhaps a century, in some cases of history, it's like, okay, this is how things should be run. Like, why do we not have a similar situation in, in, in, in crypto? I'm not saying it's a like for like analogy, but it's true that there are some people who understand better.
I like the, the comment you made earlier, because it makes me think about the fact that, um, you know, in politics, like historically again, going back to the, the ancient Greek times and, and the Roman kind of empire, like you used to have to have an, had an entire career as a general or, or a public speaker or a public orator or, or a lawyer or doctor, you know, before you'd be allowed to join.
The ruling ranks. Right. And, and similarly, like that used to be the case, I think in modern society until probably about 20 years ago, um, 30 years ago. And, and people would have to be, you know, skilled, like the idea of being a politician was something that happened after you'd had a successful career. in public service in other fields, we don't have that now, nowadays it's like, I go into politics, I study politics and therefore I go and join a party.
And then I, you know, I think to the founding fathers of the us and most of the, you know, the, the, the Western nations today the idea of someone being like an 18 or 19 or 20 year old and, you know, being a politician, we're starting to see this a lot more around the world. It's like younger prime ministers, younger presidents that would've been unfathomable.
They would've thought these people haven't proven themselves. They don't have that. So I think a lot of that is similar in crypto. It's like, it's okay. To just say to your point, like, you don't necessarily know, like the founder of a protocol doesn't necessarily know exactly what's best in all the market conditions.
They had a brilliant idea and they executed on it, like give them credit, give them kudos for that. But that doesn't necessarily mean that they absolutely are the best person to figure out like what's the next stage of growth. And we haven't quite got there.
Kerman: Yeah. I wonder if, kind of like, there's a theme of like identity or official, but what would be the crypto native version of like, you've done your hard work and now you're allowed to vote?
Dmitry: So I, I I've thought about this at length in terms of kind of reputation based voting systems. And, and again, like, I, you know, I think lots of decentralized identity solutions are trying to work on this ATEST solutions are trying to work on it. But, you know, in, in the simplest form, it's like a different way of proof of work.
Like you did your work and you, you know, you participated in. The community you put together, certain proposals, certain measures you know, you helped update, the GitHub repository, or you helped translate it into different languages or whatever, and you helped onboard different people, or you helped out with the marketing or the growth strategy.
And in theory, like there should be a way of tracking your on chain activity or whether you're doing it through snapshot or through something else. And actually seeing like, Hey, how much did this person. Contribute. Let's give them a weighted number of votes. Now that to me seems much fairer than one token.
One vote.
Kerman: Yeah, one token, one vote needs to die. Like I think that is the absolute worst idea in the history of ideas.
Dmitry: It's terrible, but it's unfortunately it's what 99% of our space functions on at the moment.
Kerman: it's gonna change soon. I'll uh, I'll I'll just keep it at that. But okay. Let's say theoretically, like dig deeper. Like what does, what else does it look like to have to pay your dues? Like that would be in the context of a protocol. How would you really qualify if someone's like, well versed in the space?
Is it, how old is your wallet? What's the amount of like, entropy's generated, like, for example, someone like if has, comes into your thing and then leaves a comment, you're probably going to want to pay attention to that. But if, uh, the latest, latest trader of the month comes in. Uh, you're like, okay, cool.
You have reputation. But like, I don't really know if it's the right one, cuz you're like your intentions are very different.
Dmitry: Yeah, that's a good question. I actually don't think I, I, I, I know the answer. I don't think there's an easy answer. Put it that way. You know, you could take a, a, a score of like how people have interacted with other communities. And again, like, defi is pretty wonderful because in theory we'd have interoperability and composability amongst lots of different.
Decentralized apps. And you could see how people have interacted in all the places. So you could see, Hey, someone could be a really. You know, benevolent actor in one in one community, but actually they've completely destroyed something else. But because all of that is transparent for the market, then you could somehow score against that or, or take that into consideration.
I'm not sure length of, of, of participation is necessarily good as a standalone measure. I think it's a good partial measure. But I think there's a risk of just, you. like, lots of people have been involved in protocols or just simply download them because they were airdrop farming. Right. And then, you know, five years later, just because you've never participated, you've never interacted with a protocol.
And suddenly you've got a really old wallet that, that has something in there it's like, I'm not sure that's the best idea either.
So yeah, that's a good question. I, I, I, I don't know. Is, is the honest. Hmm.
Kerman: Yeah. So I guess like going back a few threads, one thing I love to think about is like, Having more mature practices around how tokens are run, managed and operated. And that sounds really boring, but like tokens are essentially kind of like public companies or they're like startups through like also simultaneously public companies.
And
Dmitry: Liquid VC.
Kerman: Liquid DC. I think the liquidity hurts way more than it helps, but anyway I think one bit I've been thinking as like, how do you add more mature practices to like the management and running of like tokens? Right. Like what do those, like corporate controls looks like, look like how do you have your rights and your responsibilities clearly articulated.
How is like free cash flow, distributed in intelligent way, between reinvesting in growth, distributing new shareholders, or just holding his cash reserves. Like these are all like the more sophisticated nuance points. Like how do you know, how do you think about your unit economics and communicate to like shareholders?
There's all these things that like are just standard and everyone thinks that, oh, this is boring. Why do we need to do it? No, we're new and cool. It's. Yes, but these are kind of principles of capitalism and human organization. And if we want the largest capital allocators in the world to actually take it seriously, we kind of need to get our shit together.
So I wonder what are those like key things that we're missing is an industry that allow us to actually level up to the point where say like a 10 billion hundred billion capital allocator say, Hey, I can follow through this logic. This makes sense. I know what I'm getting. I can make a capital allocation decision.
Dmitry: Hmm. That's a really good question. Look having to some extent, uh, I, I, I think, again, going back to the, make a Dow example, I, I think about, you know, treasury management and I think about that in a, in a positive and a negative light, right? The negative light is like what happened to make a Dow during black Thursday.
And then the positive light is, again, the announcement or the vote that happened either. You know, yesterday basically, or earlier this morning depending on which time zone we're in , um, about, you know, what to do with our excess liquidity and put that into treasuries. Right. And, and I think these sort of things are kind of, you know, just the fact that there is a discussion going on about these things and that you have learned from mistakes.
So the example was you. Maker Dow's treasury historically was denominated in its own token. And guess what? Like make AOW nearly went out of existence. A and, and, you know, through learning the part way, they then massively kind of, diversified their treasury portfolio then ended up having it in, in a bunch of like different tokens or stables.
And now it's like, okay, well, what do we do? We're not getting the yields in defi. They're very low. Why don't we just, you know, and maybe. Some of the risks involved in keeping it in defi actually pretty high. We have whatever it was, I think several hundred million. Let's put that into treasuries. And I think, you know, the idea there is that you've kind of iterated, or you've gone through a process of iteration of like learning, you know, there was an issue you thought about what the potential solution might be.
Then you put it up to vote and guess what? People actually went and thought about this in a sensible way. Now I think that comes with kind of history and experience. I'm not sure that's immediately easy to replicate with a brand new protocol. But that's certainly something I would think about.
I'm trying to think what else, I guess, again, we talked about delegation of responsibilities, so there are obviously very different models involved, but Put it this way in, in the traditional equity world. I think a lot of money tends to not like, well kind of institutional money. Doesn't like investing in, in businesses where it's like the CEO and the chairman are the same person.
And that person is basically controlling everything because they started the company and, you know, they're holding off a dear life, even though they're like 70 or 80 years old. And that's a reason, like a lot of companies that trade, for example, and you know, family owned businesses in, in. Family owned conglomerates in places like Southeast Asia haven't performed as well as other places around the world, because there was a lack of professional management and stuff.
It was like friends and family getting involved. And, and, and over time as these organizations become. More professional, shall we say they get professional managers and they delegate to commit and they start splitting up responsibilities. People start thinking, Hey, actually, like you're taking corporate governance a bit more seriously.
You know, there's, there's various incentives that you're creating, like you're giving equity away to professional money managers. So they have, you know, skin in the game or sorry, professional managers within your organization that have skin in the game. And then they have incentives to actually do a good job.
So a similar thing could be you. Granting particular types of you know, options to people who are involved in the protocols. and, you know, to your point about liquidity right now, there's this like broken incentive structure, because you can basically dump your tokens, the moment you get them.
Like, what if you actually had long term incentive structures? Like why isn't there no ESOP scheme in crypto?
Kerman: Yeah, I mean, it it's weird. Like there are very few dads that will enforce four year investing schedules. We do it arc, but like, it just, it feels standard really standard. Um,
Dmitry: I've done this myself. Like I even locked up my own money in some protocols for up to four years. And everyone I spoke to was like, you're crazy. Like you have no idea what could happen. Well, obviously, like in hindsight, like, well, temporarily I think the market's saying like, Hey, okay, everything's blown up, but I'm convinced that long term.
it's, it's the right decision.
Kerman: Yeah, there's not that much long term thinking, but going back, it sounds like a lot of what we're saying, this is all stuff to do with on chain companies. And I wonder if like the Dow label is actually just a terrible label cuz like decentralized autonomous organization. Like, I mean they're all very like subjectively loaded terms, but it sounds like a lot of what we're saying is just actually on chain companies.
And ideally it's like. Being a Dow is a privilege, not really something that you get to be out the gate. Like I even wonder, like, I think makers could only just justify being a Dow, but I think they would've hit a much greater edge in the market if they stayed as an on chain. Um, I coming, but of course there's
Dmitry: Well, I mean the history of Dow. I was gonna say the history of Dows is actually, you know, like kind of long it's it's people talked about, you know, Dows emerging like in the, in the 1990s. Right. And we had all these multi-agent systems in like OT environments and people had all these like different ideas about nonviolent decentralized action and, you know, countering globalization and all these other things.
And then that evolved into, um, you know, decentralized autonomous corporations. Right. And I. That was most synonymous with, um, I guess with Bitcoin and you know, a lot of the, like the early message board and, and foreign people in, in, in, in, in like the crypto space, they started talking about decentralized autonomous cor uh, corporations as this idea of like tokenizing shares as a means of providing dividends to, to shareholders.
But then that whole thing became as like, You know, bizarre corporate governance model. And then it was like abandoned because it was seen as being too restrictive. And I think we've kind of bastardized the term of like what a Dow is meant to be. So I, I, I think a lot of the issue is like, people aren't aware of a, what was the history?
And like, how did we get here? And B like, what is it really meant to be like, I think we have this broken idea of what is decentralization and what does that mean for a company, but. At some point, someone has to make a decision internally within the company or within the protocol or whatever it is like, this is how we're gonna grow.
This is the product that we're gonna launch. This is what we're going to price it at. And this is who we're gonna target to sell it. And, and that can be a decentralized decision. Like it, it, it just, I, I, I don't see how so . Yeah.
Kerman: Yeah. It's I wonder if like I was thinking Dows and then you said corporations, like Dows versus DS, but I wonder if there's like something like catchy keyword here? Is it like on chain companies versus Dows like, what does that new term that it makes sense for this, right? Like, is it decentralized autonomous corporations?
Decentralized word can throw people off. Is it just autonomous corporations? ACS. So like dials versus ACS. Cause I mean, crypto just
Dmitry: they're not necessarily, I mean, yeah, some, some, some of them can, can exist. Some of them can exist just in the ether themselves as, as like just code that's out there and does stuff. Right. And to some extent again you know, not to keep rehashing the point about makeup, but I, I would argue that's a good example, right.
It just is out there. And you know, there's a lot of other great examples of, of protocols that are just out there and they don't require someone. To function as they are today, but then that assumes a very static view of the world. Right. It assumes that these things never have a goal of growing beyond just serving one purpose.
And I don't think that's how the real world is, unless you, you know, you are trying to basically create a historical Monument
to, to write idea. Exactly. Right. so you have to assume that they, the autonomy has to break somewhere. In order for them to progress. I,
Kerman: Yeah, I don't even know if like, like autonomous makes sense. Just, I don't know, on chain companies just feels like the most natural fit and
Dmitry: I I'll go with that. Yeah. I mean, yeah. It's uh, on chain collective or something. I, I don't.
Kerman: I, I even just like, I know the word company is just like dirty and bad and crypto, but like, it's just at sometimes, like, let's just call it for what it is. Let's like it's far more harmful to use a term that doesn't accurately describe reality. Then using one that suits some sort of image. It's like you wanna model as close to reality as possible because as soon as you deviate away from reality, whether it's a price straw, whether it's your understanding of reality that's really when kind of problems start arising.
And like, it feels like our description of reality. We've got this term called Dow and it's. Well, no, you're actually a startup and you need to act like a startup, be fast, like a startup and earn money like a startup. So stop with the incorrect label, you know, like it's, like the, the labels create the wrong expectations.
If it's like you are an on chain startup or you're an, like, it is. Okay. Cool. Well, what's startup advice now. Like I'm gonna be thinking, okay, let me read why seed, let me look at all the legendary wisdom. That's come before me. Like, I feel like the do was really harmful because you actually throw out a lot of the learning done by the greats of the past 20 years.
Like if you've read hackers and painters by Paul Graham or just anything by Paul Graham, like that meant is just filled with wisdom. And to think That you can
Dmitry: That you can
Kerman: ignore that you can crowdsource it. You can ignore it. I just think that's like really being ignorant and rude to like the people who've actually done the hard work in history for you.
Like, why
Dmitry: some extent. I mean, some, some, some of the bears on this would, would argue, you're trying to reinvent the. And doing it for unnecessary reasons. Now that's not to say there's not huge benefits. Like I, I personally am someone who believes that there's huge positives in, in, in dos, but just not in their current form.
Like, I, I, I think that's ultimately what the argument boils down to. It's like, how do we actually structure this in a more efficient way that actually aligns people's incentives to not. Profit maximize for themselves and extract value for themselves. That's, you know, there's, there's all sorts of other issues like that.
Kerman: Yeah, I loved your point going earlier, right. Is there are two problems, like ultimately this is just like a human coordination problem. And we create companies to like a organize large groups of human beings and then decide how the risk and a reward is split between the different parties. And I'm wondering if, kind of, let's just call it like.
Whatever entre collectives is like the meta category of everything. And then you've got sub categories within that meta collective. And you kind of describe these different viewpoints on the axis of like organization and risk responsibility. So like you could have completely decentralized organization that very tightly assumed risk and responsibility, or it's like very tight organization, very tight risk responsibility.
And then on the other hand, you have like very loose organization, very loose risk and responsibility. And I think like those are the two things that like, everyone's trying to consistently trade off, but nobody's made explicit into a framework. So if you can kind of, let's say the on chain, collective framework and then measure an organization or create kind of like model out the different scenarios of where does an organization lie on this two by two spectrum.
That feels like a really healthy way to actually start like deconstructing this in a like highly systematic logical manner. And maybe that's blog post we write is like a result of this conversation.
Dmitry: I, I like that. I mean, yeah. Ultimately it's like who, who takes responsibility for which side of things and how do they get compensated for it? But then obviously that's gonna have risks. And so it's like, you have like a multidirectional. Multidimensional way of scoring this. Again, I think, you know, some, some Dows have tried to go down the route of like sub Dows or delegating to like other groups.
a bunch of different guys have tried to do this with like pods or different other things or, or, or kind of communities. I know Bankless is a big one who, who have tried to do this, um, you know, index coup have tried to do kind of, I forget what their, their model was.
There's another one called Orca, which tried to do pods anyway, a bunch of different people have tried to like delegate responsibility to like different groups with different expertise and they take responsibility and then get paid a certain amount of tokens or, you know, get a certain allocation within the potential future risk of the business.
But you can definitely use that framework for like analyzing the real world. I think it. I mean again, tread fire seems to work that way. Why are we trying to like reinvent this necessarily? Um, I think the benefits of the blockchain come from, you know, a allowing. Computers to kind of make the, the, you know, Christs and talks about, um, computers being able to make commitments for us right.
Or, or, or enabling a computer to make commitments. And I think that's, that's a really powerful thing because it basically creates trust. And that goes back to your earlier point. So if you can create trust by code that kind of helps with, with one side of things, but doesn't necessarily like answer the other part of thing, which is like, how do we split the risk equally?
Kerman: something just popped into my head. As you're speaking about, that was sub and pods. So here's why everyone gets it wrong. It's not about like getting a bunch of humans, splitting them off into different groups and then being like, yep. Problem solve like the guiding principle is autonomy at the end of the day.
And what these pods have is like, yes, it's a small group of humans, but they're still not autonomous. And leading it back to traditional organizational design, it's like, cross-functional. Whatever that pod is, it needs to be completely self-sufficient to do everything it needs. But you can't have a pot of here's the engineering part, cuz guess what?
The engineering part is gonna need the marketing part, which is gonna need the
Dmitry: and I'm sure each one of them has their own objectives. Right. And their own view it, or take of like what's appropriate or what's best.
Kerman: Exactly instead. It's like, I love to think of it. Nature has all the best designs. You don't need to reinvent the wheel either. Just like, look at nature. And like, when you think about cells, a cell has to do one thing and do it, right. So when you have a cross-functional team or a team that's highly empowered to achieve an outcome, that's when sub Dows or pods or whatever work.
Nobody's thought about the why they've just kind of done the organizational design without looking at the, as we said, roles, responsibilities, rights, and rewards that come along with it. It's like in crypto, we all love theorizing about, oh cool. Like we can draw some charts, split it up in this way and done, but no one thinks about roles, rights, and responsibilities.
Dmitry: And I'd say the same is true for like modern political society, but as a whole,
But I mean, in, in, in the simplest way possible, I mean, the way I'd kind of summarize this is like advancing any agenda, whether it's like the top layer one or like you. The Subha, regardless, regardless, sorry, advancing that agenda requires some sort of initiative. And that initiative is often gonna come into conflict with the goal of achieving kind of trustless consensus.
And we haven't figured out a way of actually fixing this. I think what this entire space needs is like layers of iteration above that. And, and, and maybe a bit more like wacky thinking outside the box. Um, or maybe we just go back to what has existed for working. You. In the traditional world for, for, for, for hundreds, if not thousands of years.
Kerman: Feels like you probably wanna like model this closely to what's worked, but then also be open to new ideas and different
Dmitry: Yeah. And use the benefits of like what blockchain gives us, which is transparency and a way of, of, you know, cutting out middlemen and, and doing out a bunch of other stuff, you know, not, not everything needs to be. On the blockchain, but guess what? It helps that some things are, are, are, are aided by it. So let's not try and fully reinvent the wheel.
Let's just upgrade it.
Kerman: love it. Well, I guess, uh, we'll call it here as well in time. Um, thanks so much, Tori for, uh, jumping on and yeah, I think there's probably like a great blog post or two that we could, uh, derive from this conversation.
Dmitry: sure. Yeah, my pleasure. Um, great speaking with you coming. Thanks for your time.