WEBVTT - What’s the Deal with Decentralized Autonomous Organizations? 0:00:15.396 --> 0:00:33.276 Pushkin Pushkin from Pushkin Industries. This is Deep Background, the 0:00:33.316 --> 0:00:36.436 show where we explored the stories behind the stories in 0:00:36.476 --> 0:00:41.276 the news. Today's episode explores a fascinating story that combined 0:00:41.316 --> 0:00:44.316 two interests that I have. You may have heard about it. 0:00:44.716 --> 0:00:48.116 A few weeks ago, an original printed copy of the 0:00:48.196 --> 0:00:51.636 draft Constitution of the United States from seventeen eighty seven 0:00:51.956 --> 0:00:55.636 went up for sale at Southby's. The auction made national news, 0:00:55.876 --> 0:01:00.236 but not for the reasons you might think. The actual 0:01:00.316 --> 0:01:03.436 copy of the Constitution was not all that rare, though 0:01:03.436 --> 0:01:06.636 there weren't very many that remained on the market. What 0:01:06.796 --> 0:01:10.356 was newsworthy was that a group called the Constitution TAO, 0:01:10.756 --> 0:01:15.196 or a decentralized autonomous organization, came together over social media 0:01:15.276 --> 0:01:19.676 over a very very brief period of time to crowdfund 0:01:19.756 --> 0:01:23.236 tens of millions of dollars for the specific purpose of 0:01:23.436 --> 0:01:27.876 purchasing this copy of the Constitution at auction. Now, as 0:01:27.876 --> 0:01:31.156 it turned out, the TAO did not win the auction, 0:01:31.476 --> 0:01:34.116 but the whole event did a lot to raise public 0:01:34.156 --> 0:01:38.916 consciousness about taos, which are an innovative new technology that 0:01:38.956 --> 0:01:43.716 nobody can exactly decide about. Are they progressive? Are they progressive? 0:01:44.116 --> 0:01:48.556 Are they libertarian? Are they anti racist? Mark Cuban was 0:01:48.636 --> 0:01:52.476 quoted as calling them the ultimate combination of capitalism and progressivism. 0:01:52.676 --> 0:01:54.476 And I will leave it to you to figure out 0:01:54.476 --> 0:01:57.516 what that means. But I've been on a trajectory myself 0:01:57.596 --> 0:02:00.116 of trying to learn more about Taos ever since my 0:02:00.156 --> 0:02:03.956 conversation on this podcast with Vitalic Puderan, and I wanted 0:02:03.996 --> 0:02:06.996 to speak to someone who was deeply involved and engaged 0:02:07.196 --> 0:02:10.596 in the Tao world. Right now, I'm joined today by 0:02:10.796 --> 0:02:14.276 Eric Vorhis. He's a tech entrepreneur who founded the bitcoin 0:02:14.356 --> 0:02:19.556 company Coinipolt and later founded Shapeshift, which was a cryptocurrency exchange. 0:02:20.236 --> 0:02:24.116 This past year, shape Shift announced it was switching from 0:02:24.156 --> 0:02:27.156 a classic corporate style government structure with a board of 0:02:27.156 --> 0:02:32.596 directors to a DOW based on decentralized decision making, and 0:02:32.876 --> 0:02:35.876 Eric explained all that in a medium post that will 0:02:35.916 --> 0:02:39.436 put in the show notes. I'll be talking Eric about dows, 0:02:39.476 --> 0:02:43.636 what they are, how they function, and about the politics 0:02:43.996 --> 0:02:48.196 or anti politics of the DOO movement. Eric, thank you 0:02:48.236 --> 0:02:54.236 for being here. I'm really excited to talk about a 0:02:54.276 --> 0:02:57.156 topic where my own learning curve is, let's say, at 0:02:57.156 --> 0:03:00.476 the very steep part of the curve So let's just 0:03:00.596 --> 0:03:05.116 go right into the question of dows decentralized autonomous organizations 0:03:05.116 --> 0:03:06.596 to give you some sense of how new I am 0:03:06.636 --> 0:03:09.036 to the topic. The first time I talked publicly about 0:03:09.036 --> 0:03:11.116 the subject, I still wasn't clear whether it was supposed 0:03:11.116 --> 0:03:13.076 to be pronounced dow or spelled out as dao, and 0:03:13.116 --> 0:03:15.236 I was a little skeptical of the idea that DOO 0:03:15.316 --> 0:03:20.236 sounded too much like a Eastern religious tradition. So talk 0:03:20.276 --> 0:03:23.356 to me about doos starting with one oh one, and 0:03:23.396 --> 0:03:25.196 then with any luck, we'll move up to the more 0:03:25.196 --> 0:03:28.516 advanced level or the course of the conversation. Cool Well, 0:03:28.836 --> 0:03:30.396 about a year and a half ago, I was probably 0:03:30.396 --> 0:03:33.636 in the same place you were, so this is still 0:03:33.676 --> 0:03:39.596 relatively new to me. Also, DOO stands for decentralized autonomous organization, 0:03:40.036 --> 0:03:43.076 which is a lot of syllables, and essentially it's just 0:03:43.156 --> 0:03:47.756 a new way for humans to organize towards some kind 0:03:47.756 --> 0:03:54.476 of economic ends. So generally people organize toward economic ends 0:03:54.836 --> 0:03:57.636 like a for profit corporation like an LLC or a 0:03:58.436 --> 0:04:01.036 C corps or something like that, or through some kind 0:04:01.036 --> 0:04:05.036 of nonprofit organization, and those are both very well known. 0:04:05.796 --> 0:04:09.236 Think of a DOO as basically a new version of 0:04:09.356 --> 0:04:15.356 economic organization, and the defining feature is that there's no center, 0:04:15.636 --> 0:04:21.796 there's no central entity whatsoever. It's not registered anywhere, there's 0:04:21.836 --> 0:04:26.276 no one who is the CEO of a DOO. And 0:04:27.316 --> 0:04:31.636 it is found generally in the cryptocurrency world, but I 0:04:31.676 --> 0:04:37.196 think it can expand eventually beyond that. So let's talk 0:04:37.236 --> 0:04:40.356 about what are the agreements that turn a DOO into 0:04:40.356 --> 0:04:42.676 a doao. If you and I wanted to create a 0:04:42.756 --> 0:04:46.836 DOO to disseminate this episode of this podcast, what would 0:04:46.836 --> 0:04:49.796 we want to do to do that. Yeah, So thinking 0:04:49.836 --> 0:04:52.076 about it from the perspective of contracts, I think is 0:04:52.276 --> 0:04:54.716 a good way to do it. The key difference here 0:04:54.836 --> 0:04:59.436 is that instead of being paper contracts written in English, 0:05:00.236 --> 0:05:04.076 signed by humans and enforced by the state, these are 0:05:04.156 --> 0:05:09.116 contracts written in code, essentially what are called smart contract 0:05:09.916 --> 0:05:14.636 which operate independently. They are not enshrined or protected by 0:05:14.676 --> 0:05:18.236 the state in any way. They simply execute because the 0:05:18.276 --> 0:05:23.716 code makes them execute. So they are much more immutable 0:05:24.036 --> 0:05:28.636 than the normal contracts that would govern a corporation, and 0:05:28.676 --> 0:05:31.036 they are subject to exactly how the code is written. 0:05:31.676 --> 0:05:37.316 So generally in the cryptocurrency world, the locust is the treasury. 0:05:37.476 --> 0:05:40.836 So you have like a treasury contract of a certain 0:05:40.876 --> 0:05:45.316 digital asset, and let's say that contract is holding a 0:05:45.396 --> 0:05:50.916 million dollars of ethereum cryptocurrency. That contract sits there and 0:05:51.196 --> 0:05:54.276 executes certain rules. And so the simplest set would be 0:05:54.996 --> 0:05:59.276 if fifty one percent of the holders of a certain 0:05:59.316 --> 0:06:03.716 token vote to move money out of this treasury contract, 0:06:03.756 --> 0:06:05.876 then it will move to where the voters say it 0:06:05.916 --> 0:06:11.276 should move around. That in entire DAO can form, and 0:06:11.436 --> 0:06:14.396 it doesn't use a bank account, it doesn't have a jurisdiction, 0:06:14.956 --> 0:06:18.076 it's not, you know, subject to any particular country. It 0:06:18.156 --> 0:06:22.236 just exists on the Internet as one or more self 0:06:22.236 --> 0:06:28.276 executing smart contract sets of code. A terminological question before 0:06:28.276 --> 0:06:31.716 we dive into the really fascinating I think already practical 0:06:31.716 --> 0:06:35.156 and philosophical consequences of this way of doing things. You 0:06:35.276 --> 0:06:37.636 spoke of it as a treasury contract, and then you 0:06:37.676 --> 0:06:40.756 said that contract sits there. I take it that this 0:06:40.836 --> 0:06:43.956 is a kind of term of art in taospeak. It's 0:06:43.956 --> 0:06:46.636 that the fund sits there, the money sits there, or 0:06:46.676 --> 0:06:49.956 the asset sits there, and that as it is referred 0:06:49.956 --> 0:06:52.916 to as the treasury, or effectively as the treasure, or 0:06:52.956 --> 0:06:55.516 as the treasury contract. Am I getting that right? Yeah? 0:06:55.636 --> 0:06:57.876 Treasury is just kind of like a colloquial name given 0:06:57.916 --> 0:07:02.316 to it. But it's a contract that holds cryptocurrency. So 0:07:02.516 --> 0:07:04.636 some kind of digitalized makes it a contract. What makes 0:07:04.636 --> 0:07:06.716 it a contract is that there's an encoded set of 0:07:06.836 --> 0:07:15.636 rules that are connected inextricably to the reality of this holding. Correct. Yeah, 0:07:15.756 --> 0:07:18.196 So think of it like a bank account. You know, 0:07:18.236 --> 0:07:20.956 the bank account has a bunch of written and unwritten rules, 0:07:21.636 --> 0:07:23.356 and if you have money in the bank account, the 0:07:23.436 --> 0:07:25.876 money will leave the bank account if certain things are done, 0:07:26.076 --> 0:07:29.836 like if the person who owns the bank account directs 0:07:29.876 --> 0:07:31.956 money to be moved, and if X, y, and z 0:07:32.116 --> 0:07:35.516 people at the bank approve of the transfer, the money 0:07:35.516 --> 0:07:38.436 will move out of it. All of that is handled 0:07:38.516 --> 0:07:43.116 and managed and overseen by humans on some layer. Smart 0:07:43.156 --> 0:07:48.676 contracts are operating as code, and so computers can make 0:07:48.756 --> 0:07:52.516 the money move on their own. No human has to 0:07:52.516 --> 0:07:55.676 be involved whatsoever. And so instead of money being held 0:07:55.676 --> 0:07:58.916 by a bank movable by humans, money is held in 0:07:58.956 --> 0:08:04.796 a smart contract movable by code and machines. Let's talk 0:08:04.836 --> 0:08:10.636 about change. So we've got your stylized example of a 0:08:10.716 --> 0:08:13.596 fund of a million dollars worth of I think you 0:08:13.676 --> 0:08:18.116 said ethereum sitting there. And there's a rule of decision 0:08:18.156 --> 0:08:21.476 that's built into the code, which is that if fifty 0:08:21.476 --> 0:08:24.476 one percent of say, the token holders who have a say, 0:08:25.636 --> 0:08:29.036 choose to distribute the asset in a particular way, then 0:08:29.076 --> 0:08:33.116 it happens. If you were to build in, as well 0:08:33.156 --> 0:08:37.076 to that initial code, the possibility that fifty one of 0:08:37.116 --> 0:08:41.956 the holders of the token could change the rules for distribution, 0:08:42.796 --> 0:08:46.436 then you'd have a more open ended set of arrangements, 0:08:46.756 --> 0:08:49.676 at least in principle. There's no reason you couldn't design 0:08:49.716 --> 0:08:54.476 it that way, correct. Yeah, And actually, since fifty one 0:08:54.516 --> 0:08:56.476 percent of the people can move the money out of 0:08:56.476 --> 0:08:59.476 the contract, if fifty one percent of the people decide 0:08:59.516 --> 0:09:01.796 that a change is needed, they just make a new 0:09:01.796 --> 0:09:04.316 contract and move the money into that new one. So 0:09:04.356 --> 0:09:07.916 the initial one doesn't even need to contemplate that kind 0:09:07.956 --> 0:09:10.516 of change. Well, what it does need to contemplate, though, 0:09:10.556 --> 0:09:12.716 is it needs a rule of decision. Right, it needs 0:09:12.756 --> 0:09:15.116 to know that fifty one percent is the rule of decision. 0:09:15.156 --> 0:09:17.076 You could also do it by any number of other 0:09:17.396 --> 0:09:19.316 modes of governance. Right, you could have ten percent of 0:09:19.316 --> 0:09:22.196 those who own a special token or just ten percent 0:09:22.276 --> 0:09:23.956 of the people could put it out of existence. I mean, 0:09:23.956 --> 0:09:27.316 there's nothing magic about the majority control. It's just whatever 0:09:27.356 --> 0:09:31.116 you lock in the program, because that's what this is. Effectively, 0:09:31.116 --> 0:09:34.276 it's a program. A set of programs will execute. Ye. 0:09:34.636 --> 0:09:39.756 So if that's the case, then I'm curious about how 0:09:39.876 --> 0:09:42.916 much thought goes into the process of choosing that rule 0:09:42.916 --> 0:09:45.356 of decision. I would assume it's an enormous amount of thought, 0:09:45.596 --> 0:09:47.756 because that's, as it were, the whole ball of wax. 0:09:47.796 --> 0:09:50.636 If you talk about a smart contract, they will execute itself. 0:09:50.636 --> 0:09:55.596 But actually it will execute itself unless that circumstances whereby 0:09:55.836 --> 0:09:58.796 the rule of decision can change is executed, in which 0:09:58.836 --> 0:10:02.076 case it won't execute itself. Yeah, and this is where 0:10:02.196 --> 0:10:06.236 dows are all just experimenting with different models. So a 0:10:06.316 --> 0:10:08.076 DOW can be very small, you know. It could be 0:10:08.116 --> 0:10:09.956 like two or three p bull that have some kind 0:10:09.956 --> 0:10:13.196 of smart contract that they all participate in. It could 0:10:13.196 --> 0:10:16.116 be massive. It could be millions and millions of people 0:10:16.156 --> 0:10:21.116 in controlling billions of dollars of economic assets. And the 0:10:21.236 --> 0:10:24.636 rules can be simple, like a simple fifty one percent 0:10:24.836 --> 0:10:27.516 moves the money, and that's the core. Nothing else is 0:10:27.556 --> 0:10:30.076 written other than that single rule, or it could be 0:10:30.156 --> 0:10:33.196 very elaborate with lots of interlocking contracts with different rules 0:10:33.636 --> 0:10:37.556 and singular Dao organizations may change over time. They learn 0:10:38.036 --> 0:10:40.756 how to govern themselves, they learn what works and what doesn't, 0:10:41.396 --> 0:10:45.036 and so they evolve and adapt. The important point here 0:10:45.076 --> 0:10:48.796 isn't what specific rules the Tao chooses. It's simply that 0:10:48.836 --> 0:10:53.796 you now can have humans interact economically with no central 0:10:53.876 --> 0:10:56.956 party being involved whatsoever. Well, let me ask you a 0:10:56.956 --> 0:10:59.756 follow one question about that. Let's say you know again, 0:10:59.796 --> 0:11:01.876 it's a simple dow You and I are the only participants, 0:11:01.916 --> 0:11:03.116 or maybe there're three of us, so that we have 0:11:03.116 --> 0:11:06.356 a fifty one percent option, and we write it so 0:11:06.396 --> 0:11:09.756 that there's a majoritarian rule of decision. Then two of 0:11:09.836 --> 0:11:12.676 us get together and vote within the system, saying we 0:11:12.716 --> 0:11:14.596 want to change things and disburse the funds in some 0:11:14.676 --> 0:11:17.916 different way. And in principle, that would seem to follow 0:11:17.916 --> 0:11:21.476 the rules as written. But the person who is the 0:11:21.476 --> 0:11:24.516 third person says, I think that somehow the system has 0:11:24.556 --> 0:11:29.196 been hacked here, and in fact my vote was cast 0:11:29.276 --> 0:11:31.316 let's say, without my knowing it. I didn't mean to 0:11:31.396 --> 0:11:35.636 vote this way, but someone voted my share the program 0:11:35.716 --> 0:11:38.756 doesn't know that. Presumably it's just going to execute. What 0:11:38.916 --> 0:11:43.276 if any recourse does that person then have. I mean, 0:11:43.316 --> 0:11:45.716 if there's no recourse to the state, then that person 0:11:45.836 --> 0:11:48.356 is just out of luck. Game is over for that person. 0:11:48.756 --> 0:11:50.836 If there is recourse to a state or a government, 0:11:51.476 --> 0:11:53.716 or maybe to a broader set of users, that person 0:11:53.756 --> 0:11:57.796 could appear in some form and say, hey, you know 0:11:58.156 --> 0:11:59.996 this is supposed to only have happened if there's a 0:12:00.036 --> 0:12:02.316 majority vote. There wasn't really majority vote. I was hacked. 0:12:02.356 --> 0:12:05.836 I didn't mean to do this. Yeah, well, anyone familiar 0:12:05.836 --> 0:12:08.676 with cryptocurrency systems, you know this won't sound alien too. 0:12:08.756 --> 0:12:13.196 But the code executes, and that is the arbiter like, 0:12:13.316 --> 0:12:16.196 that's what happens. So there is no recourse outside of 0:12:16.236 --> 0:12:18.716 the code. If you make a mistake, or if the 0:12:18.756 --> 0:12:20.716 code is written poorly, or if there's a bug or 0:12:20.956 --> 0:12:24.556 anything that can happen, the code executes and then it's done. 0:12:25.116 --> 0:12:28.236 So when writing these kind of contracts, obviously you have 0:12:28.276 --> 0:12:32.116 to be very careful, and the more complicated they get, 0:12:32.156 --> 0:12:34.276 the more likely it is that there will be errors 0:12:34.276 --> 0:12:37.516 of some kind. You could, of course add complexity to 0:12:37.636 --> 0:12:41.076 help mitigate this effect. You could say, any vote can 0:12:41.076 --> 0:12:43.756 be reversed within a week if x, y and z 0:12:43.916 --> 0:12:46.916 factors happen. So you can write any number of arbitrary 0:12:46.956 --> 0:12:50.276 rules to these things. But yeah, once as they execute, 0:12:50.396 --> 0:12:53.476 no government in the world can unwind a smart contract. 0:12:53.996 --> 0:12:56.596 And this is super critical when it comes to something 0:12:56.636 --> 0:13:00.076 like bitcoin, which is arguably the world's first daw even 0:13:00.076 --> 0:13:02.756 though people didn't use that terminology for it, but it 0:13:02.836 --> 0:13:05.956 happens throughout cryptocurrency and these smart contracts, they just do 0:13:05.996 --> 0:13:10.116 what they are programmed to do. We'll be right back. 0:13:19.716 --> 0:13:23.876 Let's talk about what are the advantages and uses of doaos, 0:13:23.916 --> 0:13:26.876 at least at this stage, and what are the limitations 0:13:27.196 --> 0:13:29.356 associate with it. I keep coming back to the question 0:13:29.356 --> 0:13:33.236 of what an ordinary limited liability corporation does. So an 0:13:33.316 --> 0:13:37.516 ordinary limited liability corporation has shares and has shareholders who 0:13:37.556 --> 0:13:41.236 have paid in It has a governance structure, and typically 0:13:41.476 --> 0:13:44.396 it's organized to do anything that would make a profit 0:13:44.436 --> 0:13:46.796 for the shareholders. If it's for profit, they may have 0:13:46.836 --> 0:13:50.156 a goal at the beginning, but typically the rules are 0:13:50.156 --> 0:13:53.116 written so that they can have maximal flexibility and decision making, 0:13:53.316 --> 0:13:55.476 and there's also rules of decision just like there would 0:13:55.476 --> 0:13:57.756 be in a DOO in some sense, there could be 0:13:57.756 --> 0:14:00.116 a majority rule in electing members of the board, and 0:14:00.156 --> 0:14:03.356 then the board itself has the capacity to hire the 0:14:03.396 --> 0:14:05.276 managers or the firm, and then the managers make the 0:14:05.316 --> 0:14:08.396 decisions subject to supervision from the board. So it's got 0:14:08.396 --> 0:14:10.236 a set of rule of decision in it as well. 0:14:11.676 --> 0:14:15.316 So that has a lot of flexibility in It seems 0:14:15.356 --> 0:14:21.636 your flexibility is constrained by what you've said upfront, right, 0:14:21.636 --> 0:14:25.836 You've written that contract in and unless you have a 0:14:25.916 --> 0:14:27.716 rule of decision that enables it to be changed with 0:14:27.756 --> 0:14:31.436 an elaborate government structure attached, you sort of have to 0:14:31.476 --> 0:14:35.316 do what you started with. Does that seem like a 0:14:35.316 --> 0:14:37.796 fair concern? I see what you're saying, but I think 0:14:37.796 --> 0:14:40.516 it's I think it's the opposite. The main benefits of 0:14:40.516 --> 0:14:45.516 ADAO are the greater flexibility, not the greater constraint. To 0:14:45.556 --> 0:14:48.716 give a very like clear demonstration of how much more 0:14:48.716 --> 0:14:55.156 flexible ADAO is, any normal company that employees employees has 0:14:55.196 --> 0:14:58.516 to follow, you know, all sorts of employment laws in 0:14:58.556 --> 0:15:02.436 a specific jurisdiction. Those employment laws have nothing to do 0:15:02.636 --> 0:15:06.316 with serving the customer. They have everything to do with 0:15:06.516 --> 0:15:10.436 certain special interests. In the past, arguing for political reasons 0:15:10.996 --> 0:15:15.196 that external rules should be imposed on the mutual work 0:15:15.236 --> 0:15:18.876 between two people. A dow doesn't have to abide by that. 0:15:19.516 --> 0:15:21.636 A doubt does not exist within a territory, and a 0:15:21.636 --> 0:15:25.236 dow does not have employees as defined under law. So 0:15:25.276 --> 0:15:28.796 a dow can pay a worker in some country to 0:15:28.836 --> 0:15:34.596 do X, Y and Z task with zero concern about 0:15:35.396 --> 0:15:39.596 the five hundred different you know, labor laws of any 0:15:39.676 --> 0:15:43.996 arbitrary country. And that's this is a very important thing 0:15:43.996 --> 0:15:46.796 you're saying, and I want to take it on head on, 0:15:47.396 --> 0:15:48.676 and I want to do it, if it's okay with you, 0:15:48.716 --> 0:15:50.516 in two parts. First, I just want to respond to 0:15:50.516 --> 0:15:52.356 what you were saying about flexibility, and then I want 0:15:52.356 --> 0:15:55.036 to go straight into the employment law and the more 0:15:55.116 --> 0:15:59.476 deeply libertarian versus regulatory conceptions that one might have of that. 0:15:59.916 --> 0:16:01.596 But before we get there, and I'm really excited to 0:16:01.596 --> 0:16:03.636 get there, I just want to quickly do a clarification 0:16:03.756 --> 0:16:06.956 on the flexibility point. Yeah. So you know, a group 0:16:06.956 --> 0:16:09.676 of people got together and they very quickly created ADAO 0:16:09.796 --> 0:16:11.636 to buy a copy of the Constitution that was up 0:16:11.676 --> 0:16:13.356 for auction, and they all had to put in money 0:16:13.436 --> 0:16:16.036 because you have to put your assets in advance or 0:16:16.116 --> 0:16:19.756 create those assets in advance in a DAO and then 0:16:19.796 --> 0:16:21.956 they didn't win. They didn't get the object because they 0:16:21.956 --> 0:16:24.516 were outbid fair enough, and they need to have a 0:16:24.596 --> 0:16:26.516 rule of decision of what to do about that money 0:16:26.556 --> 0:16:28.316 after the fact, because the money was all in there, 0:16:28.316 --> 0:16:30.196 it was set that the program was set up. So 0:16:30.316 --> 0:16:32.076 if they won then auction, they would have bought the 0:16:32.156 --> 0:16:35.676 constitution if they if the TAO then wanted to say, 0:16:36.236 --> 0:16:39.196 we want to go into business now to do something 0:16:39.236 --> 0:16:41.596 completely different. You know, we want to go into business 0:16:41.596 --> 0:16:45.396 to promote I don't know, to promote the idea of doubts, right, 0:16:46.316 --> 0:16:47.996 and we want to have all the elements that you 0:16:48.076 --> 0:16:49.956 need to go into business that require more than just 0:16:50.116 --> 0:16:52.916 paying people, like a whole business operation. To do it, 0:16:53.996 --> 0:16:56.436 they would need to have a rule of decision that 0:16:56.596 --> 0:16:59.196 enabled the majority of the members of the doubt to 0:16:59.316 --> 0:17:03.196 enact what would be in effect rules of corporate governance. Right. 0:17:03.236 --> 0:17:05.116 They would have to say, this is how we're going 0:17:05.156 --> 0:17:06.996 to appoint our CEO, this is how we're going to 0:17:07.316 --> 0:17:09.436 how we're going to supervise the CEO, this is how 0:17:09.756 --> 0:17:11.756 the decision ers are going to proceed on a day 0:17:11.756 --> 0:17:13.796 to day basis. Otherwise, they'd have to make ever, have 0:17:13.916 --> 0:17:16.756 every single decision made by vote of the whole collective 0:17:16.756 --> 0:17:18.196 the way sort of like a town meeting in New 0:17:18.196 --> 0:17:19.916 England does it. And as anyone who has ever been 0:17:19.916 --> 0:17:22.516 to one of those town meetings, no, it's wildly inefficient. 0:17:22.596 --> 0:17:24.996 So that's why guess what I meant on the flexibility point. 0:17:24.996 --> 0:17:28.476 I mean, I get that in principle, the DAO could 0:17:29.876 --> 0:17:32.916 legal structures of the state provided just say we're not 0:17:32.996 --> 0:17:36.556 we're now adopting rules of incorporation. But unless they reinvent 0:17:36.596 --> 0:17:39.316 the wheel of the rules of incorporation, it seems all 0:17:39.356 --> 0:17:42.196 everything they do they have to do by the same 0:17:42.276 --> 0:17:44.236 rule decision they've adopted in from the beginning. If that's 0:17:44.276 --> 0:17:47.276 fifty plus one, then they need to vote on everything 0:17:47.276 --> 0:17:50.156 fifty percent plus one. Am I getting that right? Yeah? 0:17:50.316 --> 0:17:52.876 So this is a super important point, and it was 0:17:52.916 --> 0:17:54.996 one of the things that I was initially skeptical on 0:17:55.036 --> 0:17:58.436 about DAOs is you know, if every decision of an 0:17:58.476 --> 0:18:00.196 organization has to be voted on, it's going to be 0:18:00.236 --> 0:18:03.876 a disaster for many reasons. DAWs generally get around this 0:18:04.116 --> 0:18:09.076 by simply creating groups with delegated authority. So you create 0:18:09.236 --> 0:18:11.636 this initial tao. It has a million dollars, and it 0:18:11.676 --> 0:18:13.516 just has the simple rule that fifty one percent of 0:18:13.516 --> 0:18:16.836 the token holders can move the money. The next vote 0:18:16.956 --> 0:18:20.556 might be, Okay, we need marketing, so give one hundred 0:18:20.556 --> 0:18:24.076 thousand dollars to this guy because he seems credible with marketing. 0:18:24.556 --> 0:18:27.276 He gets one hundred thousand dollars. And then everything he 0:18:27.356 --> 0:18:30.996 does for marketing is not up to a vote. It's 0:18:31.036 --> 0:18:33.476 just up to him, so he has full autonomy over 0:18:33.516 --> 0:18:36.316 his role. At some point he's going to want to 0:18:36.316 --> 0:18:38.516 come back from our money, right, and so that's when 0:18:38.516 --> 0:18:40.556 he needs to demonstrate, like, hey, here's what I did 0:18:40.596 --> 0:18:43.116 for you as the DOAO, Here's how well I spent 0:18:43.156 --> 0:18:45.196 all that hundred thousand dollars, and here are the results. 0:18:45.436 --> 0:18:47.236 Give me more money and I'll keep doing this for you. 0:18:47.956 --> 0:18:50.476 So in that case, you know, only one decision was 0:18:50.556 --> 0:18:52.596 voted on, which was give one hundred thousand dollars to 0:18:53.476 --> 0:18:58.116 this guy, and he has tons of flexibility. I don't 0:18:58.156 --> 0:19:00.676 want to labor the point, but I do think that 0:19:00.796 --> 0:19:02.796 in the real world of contracts, one of the things 0:19:02.836 --> 0:19:07.596 that contracts are used for is repeated iteration by the 0:19:07.636 --> 0:19:10.556 same players over a long period of time, with ongoing 0:19:10.636 --> 0:19:13.436 negotiation and shifts in what the duties are. So let's 0:19:13.436 --> 0:19:16.156 say I have a company, and I hire an ordinary company, 0:19:16.156 --> 0:19:17.956 and I hire someone who does marketing, and I pay 0:19:17.996 --> 0:19:20.796 the person monthly for a certain amount of work, or 0:19:20.796 --> 0:19:24.516 by the job for a certain amount of work. Each month, 0:19:24.596 --> 0:19:26.516 we check in with each other, or maybe even every day. 0:19:26.556 --> 0:19:27.996 We check in with each other, and we see how 0:19:27.996 --> 0:19:29.676 each of us is doing, and when the term of 0:19:29.716 --> 0:19:32.356 the contract ends, we're capable of renegotiating the contract. In fact, 0:19:32.356 --> 0:19:33.556 we don't even have to wait for the term of 0:19:33.556 --> 0:19:36.036 the contract end. In the real world, people are constantly 0:19:36.036 --> 0:19:39.836 renegotiating contracts all the time, based on their needs, based 0:19:39.836 --> 0:19:42.996 on circumstances. And it does seem to me that that 0:19:43.156 --> 0:19:47.036 iterative structure of engagement. I agree that in principle it 0:19:47.076 --> 0:19:49.676 could be done. In a doubt, that seems correct to me. 0:19:50.316 --> 0:19:52.356 But it seems like one of the great advantages of 0:19:52.556 --> 0:19:55.996 ordinary corporate form of government is that the shareholders are saying, 0:19:55.996 --> 0:19:58.196 we don't have the time to manage the firm in detail, 0:19:58.596 --> 0:20:00.876 so we're going to delegate that management to people who 0:20:00.916 --> 0:20:03.356 have the full time job of, among other things, talking 0:20:03.356 --> 0:20:05.476 to the marketing guy who gets hired and making judgments 0:20:05.476 --> 0:20:08.796 about that. And it seems like, again, unless you reinvent 0:20:08.876 --> 0:20:12.316 that within a DOO, you lose that. Yeah, it's reinvented 0:20:12.316 --> 0:20:15.836 within the DOO. The DOO can decide to hire someone 0:20:15.916 --> 0:20:19.236 who acts sort of as a manager to oversee several 0:20:19.476 --> 0:20:22.516 roles beneath them. So if the DOO organization wants to 0:20:22.516 --> 0:20:27.516 do that, it absolutely can. There's no reason that can't work. 0:20:27.916 --> 0:20:29.716 So let's go to the point that you made about 0:20:29.716 --> 0:20:32.876 employment laws. And here what you said was to my mind, 0:20:32.956 --> 0:20:38.236 very reminiscent of some of the early arguments for cryptocurrencies, namely, 0:20:38.956 --> 0:20:42.836 you can avoid regulation. And I want to raise two 0:20:42.916 --> 0:20:45.156 concerns about that. One whether it's actually true that you 0:20:45.196 --> 0:20:48.876 can avoid regulation, and two whether you should avoid regulation 0:20:48.876 --> 0:20:51.516 as a normative moral matter. Even if you could, Let's 0:20:51.516 --> 0:20:52.956 say you say, we don't want to fill out. It's 0:20:53.076 --> 0:20:54.436 one of the things that employers have to do, even 0:20:54.436 --> 0:20:56.876 if they're hiring contractors, is they have to send them 0:20:57.156 --> 0:20:58.836 at the end of the year at tax documents saying 0:20:58.876 --> 0:21:01.036 how much money they were paid and go through this 0:21:01.036 --> 0:21:03.716 whole procedure of doing so. Even if it's only minimal, 0:21:03.716 --> 0:21:05.396 they still have to go through it. And you say, well, 0:21:05.476 --> 0:21:07.356 this is a DOO. It's not under the jurisdiction of 0:21:07.356 --> 0:21:10.036 any regulator of any states. It's not going to do that. 0:21:11.236 --> 0:21:15.196 If the state then appears, it can say to the 0:21:15.236 --> 0:21:18.556 employee you got paid, well, hey, you you were under 0:21:18.596 --> 0:21:20.796 a duty to do this and you didn't pay your taxes, 0:21:20.836 --> 0:21:22.396 And the DAO could say, well, we don't care, not 0:21:22.476 --> 0:21:25.356 our problem. But then if the state turns to the 0:21:25.436 --> 0:21:28.836 DAO and says, look, if you're going to operate in 0:21:28.876 --> 0:21:33.756 the state of Delaware, we obligate you to follow our 0:21:34.156 --> 0:21:39.516 employment laws, and we will sanction you by sanctioning the 0:21:39.556 --> 0:21:43.076 people who are in our jurisdiction, who are within our jurisdiction, 0:21:43.836 --> 0:21:47.676 who are participants in the DAO. And if you say, 0:21:48.076 --> 0:21:49.436 and this is going to be easier for the government 0:21:49.476 --> 0:21:51.036 of China than for the government of Delaware, but it's 0:21:51.036 --> 0:21:54.636 in principle possibly even in Delaware, if the TAO effectively says, 0:21:54.676 --> 0:21:56.116 I mean, the DOO can't speak. But if the DAO 0:21:56.116 --> 0:21:59.356 effectively says, sorry, we're not subject to your regulation, the 0:21:59.396 --> 0:22:03.396 hell with you. You know, we're libertarians. The state's ultimate 0:22:03.396 --> 0:22:06.076 sanction is to say it's unlawful for people in our 0:22:06.156 --> 0:22:09.436 jurisdiction to own or participate in dao in the same 0:22:09.476 --> 0:22:12.236 way that some countries have already done with some cryptocurrencies, 0:22:12.516 --> 0:22:14.916 and then people could hide from the law, they could 0:22:15.116 --> 0:22:18.836 unlawfully trade in crypto or unlawfully participate in the tao, 0:22:19.036 --> 0:22:20.876 and then it becomes just the ordinary count and mouse 0:22:20.876 --> 0:22:25.556 game of any unlawful activity. So in those senses, isn't 0:22:25.556 --> 0:22:28.636 it the case that you really can only avoid regulation 0:22:28.756 --> 0:22:32.396 insofar as the state entities where the human beings who 0:22:32.436 --> 0:22:38.036 participate live chooses to allow the dao to remain unregulated. Yeah, 0:22:38.156 --> 0:22:42.516 fascinating topic. So what you've really done in a doao 0:22:42.756 --> 0:22:46.876 is you've removed the corporate entity from the equation entirely. 0:22:47.756 --> 0:22:49.916 So instead of having a bunch of individuals and then 0:22:49.956 --> 0:22:53.116