Updating the DAO Operating System
0x1CC2
August 13th, 2022

This article was originally posted on BanklessDAO State of the DAOs newsletter on May 4, 2022.

Your DAO Already Has an Operating System

We are all familiar with a computer operating system (OS), which is the interface between the user and the computer. A buggy or poorly designed operating system makes for a miserable user experience and renders an otherwise very powerful tool useless.

Organizations have operating systems too. The organizational OS determines the way people work together within an organization and how that organization will function. Just like in a computer OS, a bug in the organizational OS can create ineffective systems, promote conflict in teams, and bring down the vibes of the community.

In DAOs, you might be familiar with the term ”Operations”, but the elements of an effective OS contain much more than just Operations. DAO Operations is a part of your OS, but it is not your OS. The OS is the whole system, the coordination layer that allows members to effectively work in the organization and the DAO to achieve its purpose.

What Makes a Good Operating System?

Every organization has a way of coordinating its functions, but they may not be conscious of this OS, what it is, or how it was created. Most likely, the OS emerged over time based on a series of decisions and procedures, implemented alongside the organization’s mission and values. Often, no one can say quite how the OS was developed, but people know “this is the way we do things around here.”

We can use the lessons of computer operating systems to understand organizational operating systems. What makes a good computer operating system:

  • User-friendly
  • Secure
  • Shareable resources
  • Accessible
  • Multi-tasking

A functional DAO OS would include similar elements. The member experience should be intuitive and give new members the knowledge and confidence they need to get started. The system should be secure, such as having governance processes that are resistant to coercion or attack. The system should be open, transparent, and permissionless, allowing for shared resources and ease of use. And the system should be flexible and adaptive in order to meet the changing demands of many users and teams over time.

What are some signs of a bad computer OS:

  • High cost (organizational and technical debt)
  • Unreliability
  • Complexity
  • Fragmentation
  • Susceptible to attack

Think about the DAO you work in. Do you see signs of a bad OS? Does your governance seem fragmented? Do new members complain about feeling lost? What happens in a DAO that has a lot of organizational debt, or outdated structures or policies that bring down productivity and culture? It’s easy to state the impact of a bad OS:

CULTURE SUFFERS. EFFECTIVENESS SUFFERS. PEOPLE SUFFER.
SARAH STARRENBURG

DAOs present an opportunity to change the way we work, but if they are to become the future of work, we need to upgrade the way we organize. We need a new OS.

Evolutionary (Teal) Organizations

While DAOs are an emergent organizational structure, they actually share a lot of the core elements with what are known as Evolutionary or Teal Organizations. Traditional organizations are hierarchical and tend to be profit-driven. Evolutionary organizations are more like living systems or superorganisms and tend to be purpose-driven.

Evolutionary organizations are complex organizations that are based on sense and respond dynamics rather than command and control mechanisms. They are characterized by three main breakthroughs when compared to traditional organizations:

  • Self-management: Persons and teams actively promote healthy and conscious ways of working.
  • Wholeness: Allowing members to reclaim their freedom and agency and work towards self-actualization.
  • Evolutionary purpose: The organization has a life of its own that continues to evolve by sensing and responding to its environment.

There are already many examples of Evolutionary Organizations that have successful operating systems rooted in decentralized decision-making, flat organizational structures, open-source information systems, and the promotion of human flourishing over profits. Examples include Buurtzorg in the Netherlands, Favi in France, and Patagonia in the United States. All of these companies have proven successful, not only in making money, but, more importantly, by allowing people to do meaningful work.

If DAOs are the future of work where people are free to pursue their creative self-expression, we need to design systems that support a sovereign life.

A New OS Canvas

Aaron Dignan is the Founder of The Ready, which is an organizational design firm that reinvents organizations around Evolutionary Teal elements. They have identified twelve domains to rebuild organizational operating systems from the ground up.

Credit: The Ready OS Canvas
Credit: The Ready OS Canvas

One way to understand the twelve domains is that each domain encodes the values and principles related to a particular aspect of the organization. The domains of the OS are composable building blocks upon which DAO tools, governance, teams, projects, products, and culture are all built. By learning the key elements of the OS, members can consciously update and upgrade their current system in a continual process of sensing what is broken and learning to respond with new ways of operating.

Unlike computers, DAOs aren’t able to download the latest and best OS available; the reality is in emergent, complex living systems, we always need to apply sense and respond principles. Change doesn’t have to be a top-down dramatic overhaul; rather, it can start with progressive improvement one meeting at a time. 

By understanding the core domains of the OS Canvas, you will find your bearings and be able to engage in wayfinding techniques. By sensing and responding to problems and tension in the organization along the way, you and the DAO can work towards a healthy community aligned around a shared purpose. 

Updating the DAO OS

Purpose: How we orient and steer

Evolutionary organizations are purpose-driven and therefore they need a visible north star to orient contributors. A clearly stated purpose allows organizations to organize around a shared vision and fosters wayfinding. It is unlikely any single person in the organization knows the next best step, but with a clear purpose, DAOs can collaboratively ensure the steps taken are in the right direction.

Authority: How we share power and make decisions

Governance, or how we make decisions, is a key part of the DAO OS. DAOs distribute power and authority to the community based on the values of shared freedom and autonomy. If everyone has the power to create change, then we need systems that promote decision-making and self-managing teams.

DAOs use a variety of governance models to facilitate decision-making: advice-based, consent-based, gated voting, quorum requirements, soft and hard consensus. Each of these models has their own advantages and disadvantages, and there is not a one-size-fits-all model for DAOs. DAOs are complex and adaptive systems, which require governance models that use a continuous improvement cycle. They are constantly learning and experimenting, sensing and responding to what is happening in order to find a way forward.

Structure: How we organize and team

DAOs can be thought of as multicellular organisms, where many people, projects, and teams create a dynamic lifeform. As decentralized organizations, DAOs tend to be flat rather than hierarchical and the DAOs that will thrive will be built upon open, composable structures. In many DAOs, self-managed teams are responsible for their own governance processes and determine how and why they work. Individuals often hold multiple roles across the DAO, and even in different DAOs.

In many ways, the structure of a DAO can be compared to fractals, which are complex patterns that are self-similar across different scales. Self-managed individuals work in self-managed teams, in self-managed projects, in a self-managed community in pursuit of a shared vision. It’s fractal sovereignty all the way down.

Strategy: How we plan and prioritize

Traditional organizations have been obsessed with profit and winning for so long that we have forgotten what an alternative strategy can even look like. When it comes to understanding the strategy of DAOs as superorganisms, we need to start thinking about infinite games rather than finite games. The goal of infinite games is to keep playing, not to win or maximize profit. Similarly, the goals of a superorganism are to thrive and survive, that is, to keep playing for the long term.

Evolutionary organizations often talk about sense and respond, rather than command and control strategies. Persons and teams are encouraged to develop awareness and sense tension and opportunity in the organization, and then find workable solutions and iterate on how best to take advantage of an opportunity.

IN COMPLICATED SYSTEMS, WE CAN TRY TO FIGURE OUT THE BEST SOLUTION. IN COMPLEX SYSTEMS, WE NEED WORKABLE SOLUTIONS AND FAST ITERATIONS.
–FREDERIC LALOUX

Resources: How we invest our time and money

In Evolutionary Organizations, profit is not made for profit’s sake. Profits fuel purpose, and allows the organization to scale its impact and fulfill its purpose.

In DAOs, resources like time, money, attention, energy, and skilled labor nourish potential and possibility. Ecological systems are very efficient at utilizing resources, moving energy through the community, and recycling waste. What does nature have to teach us about how DAOs should invest our resources?

In nature, healthy soil enables a flourishing ecosystem. In DAOs, healthy humans, a nutrient-rich layer zero, facilitates human flourishing. DAOs need to create regenerative systems and continually reinvest in human potential.

Innovation: How we learn and evolve

In BanklessDAO, everyone is encouraged to form a squad around ideas. Before going through the proposal process and seeking funding for a project, start with building something and see what sticks.

DAOs should encourage ideas to percolate and for groups to form around ideas. Many of those groups will dissolve, but some will go on to produce loonshots. Often, we think about innovation as the work that happens in the organization, but sometimes the most important innovation is working on the organization.

“THE WHOLE NOTION OF HOW YOU BUILD A COMPANY IS FASCINATING. I DISCOVERED THAT THE BEST INNOVATION IS SOMETIMES THE COMPANY, THE WAY YOU ORGANIZE.” –STEVE JOBS

Workflow: How we divide and do the work

Projects are where the magic happens. The value created by projects is what powers mission-driven organizations and this is where people spend most of their time and energy.

Self-managing teams in DAOs often struggle with basic project management. Coordination is hard, and in teams where members are free to come and go, getting the work done to spec and on time can be a challenge. High-performing teams often have a core group of contributors that promote a strong cultural dynamic that consistently delivers.

Meetings: How we convene and coordinate

Meetings provide an opportunity to build connection, amplify the community vibes, foster trust, and provide a space for the wisdom of the collective conscious to find its voice. Meetings should have a clear purpose, even if the agenda is built on the fly. The BanklessDAO Writers Guild has three types of meetings each week:

  • Governance Meeting: focused discussion around changes to structure, strategy, and resources.
  • Team Sync: project-focused discussions around workflow, innovation, information, compensation, and retrospectives.
  • Council of Writers: community call with discussion around purpose, authority, information, membership, and mastery.

Information: How we share and use data

DAOs are open-source, transparent organizations, and therefore it is standard practice to make all information available and to work in public. DAOs utilize collaboration tools like Notion and GitHub to distribute and store information, create Community Handbooks to align contributors behind a shared mission, often host AMA (ask-me-anything) information sessions, and operate most efficiently when using pull-based information systems.

Membership: How we define and cultivate relationships

Community and culture are the glue that hold DAOs together. DAOs that fail to create a strong vibe also struggle with growing their community and keeping members engaged. Designing intuitive and opt-in onboarding systems can move new members into working teams, where they can quickly shift their focus to contributing and finding or creating roles. Members should be encouraged to hold roles on projects, and even multiple roles across the DAO.

Status and affiliation are the core building blocks of our identity in relationship with other humans, and it is easy for decentralized, self-managed teams to fall into centralized, top-down command and control mechanisms based on our deeply ingrained cultural habits. Teams that organize around central actors and status will often have difficulty onboarding new members, because new members can quickly sense how the group structure and authority affect decision-making and the distribution of power. A good onboarding experience will equip the member with the knowledge and confidence to know what they want to commit to.

Mastery: How we grow and mature

The future of work is less about filling a role and HODLing than it is about role-playing. Members should be encouraged to stretch beyond their comfort zone, explore the edges of how they can contribute, and learn to work with tension and resistance. Much like children learn when playing, members should learn by doing, taking on roles and growing into them, only to hand them off and keep exploring.

This type of role-playing fosters self-sufficiency and competence, but it also creates a flexible community where many members can step in to fill a gap when needed. This agility reduces the risk of founder syndrome, where one person or a core group of people hold the keys to the organization’s success. It is common practice in the BanklessDAO Newsletter Team for members to fill a role for a period of time, and then train and transfer knowledge to a new member who takes over the role.

As people explore new ways of working in DAOs, they also need new reputation and decentralized identity tools which can serve as your Web3 passport. Onchain reputation through Meritverse, NFTs, and POAPs can serve as a proof-of-work resume in a pseudonymous ecosystem.

Compensation: How we pay and provide

Compensation is the last and maybe one of the most challenging domains of the DAO OS. Getting paid in crypto offers unique incentives like ownership and equity in the organization, but members often struggle to pay the bills when DAOing full time. There is nothing worse than having to exchange your equity for fiat in order to buy groceries.

While actual money is a primary motivator for work, DAOs offer other motivators that are often hard to find in traditional organizations. Many people who work in DAOs emphasize the recognition they receive for their contributions, personally find the work meaningful, enjoy being involved in decision making, and witness and undergo the rapid personal growth and development that happens in DAOs.

Most self-managed teams in DAOs develop participatory budgeting practices, where team members work together to develop compensation structures. By making compensation and pay transparent and open for discussion, consensus forms on the various levels of compensation appropriate for the type of work done. DAOs would do well to transparently tabulate compensation across projects and teams in order to standardize compensation and work to shift the organization to internal growth-based incentives rather than external money-based incentives.

The Next Big Unlock

Crypto natives are familiar with Moloch, the god of coordination failures, which is a failure in the way the community works together. When certain domains of the OS are out of alignment or fragmented, people suffer, the work suffers, and the organization flounders in progress towards its mission.

A poorly designed OS creates domain islands or fragments that don’t connect well with the other domains. An organization that has a decentralized structure and claims to distribute authority and power might still limit information and hold meetings where most decisions are made behind closed doors. In this example, structure and authority are held as theoretical ideals, while the organization itself operates by other values and principles.

A well-operating OS is one in which each of the domains is well integrated and interconnected to make a complex, evolving system. When distributed authority is in alignment with decentralized structure, people have the capacity to act on the resources and information available to them in innovative ways based on sense and respond strategies. Teams naturally form around ideas and coordinate effectively to get work done in a productive and efficient manner. The culture attracts talent and organically onboards new members. People rediscover their dignity, feel recognized for their work, and have a sense of meaning and purpose. As the people grow and develop, the organization becomes more productive and that value brings in revenue and profit. Profit fuels purpose, and the organization flourishes. 

DAOs can unlock new ways of working in a Web3 world, but only if they move away from traditional corporate operating systems. By creating an OS that fosters an open, composable, and collaborative work space, DAOs can usher in a new era of human flourishing organized around productive, creative, and happy humans. 

DAOs are what the communities of the future look like. They can be the playgrounds for creating change and solving the biggest challenges we face. 

The future of work looks bright. Let’s update the way we work together and build the better world we know is possible. 

Thank you to the BanklessDAO Writers Guild, especially Jake and Stake and hirokennelly.eth for editing, and to circlesandsticks for the cover image.

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