Speaker 1: Pushkin Pushkin from Pushkin Industries. This is Deep Background, the
Speaker 1: show where we explored the stories behind the stories in
Speaker 1: the news. Today's episode explores a fascinating story that combined
Speaker 1: two interests that I have. You may have heard about it.
Speaker 1: A few weeks ago, an original printed copy of the
Speaker 1: draft Constitution of the United States from seventeen eighty seven
Speaker 1: went up for sale at Southby's. The auction made national news,
Speaker 1: but not for the reasons you might think. The actual
Speaker 1: copy of the Constitution was not all that rare, though
Speaker 1: there weren't very many that remained on the market. What
Speaker 1: was newsworthy was that a group called the Constitution TAO,
Speaker 1: or a decentralized autonomous organization, came together over social media
Speaker 1: over a very very brief period of time to crowdfund
Speaker 1: tens of millions of dollars for the specific purpose of
Speaker 1: purchasing this copy of the Constitution at auction. Now, as
Speaker 1: it turned out, the TAO did not win the auction,
Speaker 1: but the whole event did a lot to raise public
Speaker 1: consciousness about taos, which are an innovative new technology that
Speaker 1: nobody can exactly decide about. Are they progressive? Are they progressive?
Speaker 1: Are they libertarian? Are they anti racist? Mark Cuban was
Speaker 1: quoted as calling them the ultimate combination of capitalism and progressivism.
Speaker 1: And I will leave it to you to figure out
Speaker 1: what that means. But I've been on a trajectory myself
Speaker 1: of trying to learn more about Taos ever since my
Speaker 1: conversation on this podcast with Vitalic Puderan, and I wanted
Speaker 1: to speak to someone who was deeply involved and engaged
Speaker 1: in the Tao world. Right now, I'm joined today by
Speaker 1: Eric Vorhis. He's a tech entrepreneur who founded the bitcoin
Speaker 1: company Coinipolt and later founded Shapeshift, which was a cryptocurrency exchange.
Speaker 1: This past year, shape Shift announced it was switching from
Speaker 1: a classic corporate style government structure with a board of
Speaker 1: directors to a DOW based on decentralized decision making, and
Speaker 1: Eric explained all that in a medium post that will
Speaker 1: put in the show notes. I'll be talking Eric about dows,
Speaker 1: what they are, how they function, and about the politics
Speaker 1: or anti politics of the DOO movement. Eric, thank you
Speaker 1: for being here. I'm really excited to talk about a
Speaker 1: topic where my own learning curve is, let's say, at
Speaker 1: the very steep part of the curve So let's just
Speaker 1: go right into the question of dows decentralized autonomous organizations
Speaker 1: to give you some sense of how new I am
Speaker 1: to the topic. The first time I talked publicly about
Speaker 1: the subject, I still wasn't clear whether it was supposed
Speaker 1: to be pronounced dow or spelled out as dao, and
Speaker 1: I was a little skeptical of the idea that DOO
Speaker 1: sounded too much like a Eastern religious tradition. So talk
Speaker 1: to me about doos starting with one oh one, and
Speaker 1: then with any luck, we'll move up to the more
Speaker 1: advanced level or the course of the conversation. Cool Well,
Speaker 1: about a year and a half ago, I was probably
Speaker 1: in the same place you were, so this is still
Speaker 1: relatively new to me. Also, DOO stands for decentralized autonomous organization,
Speaker 1: which is a lot of syllables, and essentially it's just
Speaker 1: a new way for humans to organize towards some kind
Speaker 1: of economic ends. So generally people organize toward economic ends
Speaker 1: like a for profit corporation like an LLC or a
Speaker 1: C corps or something like that, or through some kind
Speaker 1: of nonprofit organization, and those are both very well known.
Speaker 1: Think of a DOO as basically a new version of
Speaker 1: economic organization, and the defining feature is that there's no center,
Speaker 1: there's no central entity whatsoever. It's not registered anywhere, there's
Speaker 1: no one who is the CEO of a DOO. And
Speaker 1: it is found generally in the cryptocurrency world, but I
Speaker 1: think it can expand eventually beyond that. So let's talk
Speaker 1: about what are the agreements that turn a DOO into
Speaker 1: a doao. If you and I wanted to create a
Speaker 1: DOO to disseminate this episode of this podcast, what would
Speaker 1: we want to do to do that. Yeah, So thinking
Speaker 1: about it from the perspective of contracts, I think is
Speaker 1: a good way to do it. The key difference here
Speaker 1: is that instead of being paper contracts written in English,
Speaker 1: signed by humans and enforced by the state, these are
Speaker 1: contracts written in code, essentially what are called smart contract
Speaker 1: which operate independently. They are not enshrined or protected by
Speaker 1: the state in any way. They simply execute because the
Speaker 1: code makes them execute. So they are much more immutable
Speaker 1: than the normal contracts that would govern a corporation, and
Speaker 1: they are subject to exactly how the code is written.
Speaker 1: So generally in the cryptocurrency world, the locust is the treasury.
Speaker 1: So you have like a treasury contract of a certain
Speaker 1: digital asset, and let's say that contract is holding a
Speaker 1: million dollars of ethereum cryptocurrency. That contract sits there and
Speaker 1: executes certain rules. And so the simplest set would be
Speaker 1: if fifty one percent of the holders of a certain
Speaker 1: token vote to move money out of this treasury contract,
Speaker 1: then it will move to where the voters say it
Speaker 1: should move around. That in entire DAO can form, and
Speaker 1: it doesn't use a bank account, it doesn't have a jurisdiction,
Speaker 1: it's not, you know, subject to any particular country. It
Speaker 1: just exists on the Internet as one or more self
Speaker 1: executing smart contract sets of code. A terminological question before
Speaker 1: we dive into the really fascinating I think already practical
Speaker 1: and philosophical consequences of this way of doing things. You
Speaker 1: spoke of it as a treasury contract, and then you
Speaker 1: said that contract sits there. I take it that this
Speaker 1: is a kind of term of art in taospeak. It's
Speaker 1: that the fund sits there, the money sits there, or
Speaker 1: the asset sits there, and that as it is referred
Speaker 1: to as the treasury, or effectively as the treasure, or
Speaker 1: as the treasury contract. Am I getting that right? Yeah?
Speaker 1: Treasury is just kind of like a colloquial name given
Speaker 1: to it. But it's a contract that holds cryptocurrency. So
Speaker 1: some kind of digitalized makes it a contract. What makes
Speaker 1: it a contract is that there's an encoded set of
Speaker 1: rules that are connected inextricably to the reality of this holding. Correct. Yeah,
Speaker 1: So think of it like a bank account. You know,
Speaker 1: the bank account has a bunch of written and unwritten rules,
Speaker 1: and if you have money in the bank account, the
Speaker 1: money will leave the bank account if certain things are done,
Speaker 1: like if the person who owns the bank account directs
Speaker 1: money to be moved, and if X, y, and z
Speaker 1: people at the bank approve of the transfer, the money
Speaker 1: will move out of it. All of that is handled
Speaker 1: and managed and overseen by humans on some layer. Smart
Speaker 1: contracts are operating as code, and so computers can make
Speaker 1: the money move on their own. No human has to
Speaker 1: be involved whatsoever. And so instead of money being held
Speaker 1: by a bank movable by humans, money is held in
Speaker 1: a smart contract movable by code and machines. Let's talk
Speaker 1: about change. So we've got your stylized example of a
Speaker 1: fund of a million dollars worth of I think you
Speaker 1: said ethereum sitting there. And there's a rule of decision
Speaker 1: that's built into the code, which is that if fifty
Speaker 1: one percent of say, the token holders who have a say,
Speaker 1: choose to distribute the asset in a particular way, then
Speaker 1: it happens. If you were to build in, as well
Speaker 1: to that initial code, the possibility that fifty one of
Speaker 1: the holders of the token could change the rules for distribution,
Speaker 1: then you'd have a more open ended set of arrangements,
Speaker 1: at least in principle. There's no reason you couldn't design
Speaker 1: it that way, correct. Yeah, And actually, since fifty one
Speaker 1: percent of the people can move the money out of
Speaker 1: the contract, if fifty one percent of the people decide
Speaker 1: that a change is needed, they just make a new
Speaker 1: contract and move the money into that new one. So
Speaker 1: the initial one doesn't even need to contemplate that kind
Speaker 1: of change. Well, what it does need to contemplate, though,
Speaker 1: is it needs a rule of decision. Right, it needs
Speaker 1: to know that fifty one percent is the rule of decision.
Speaker 1: You could also do it by any number of other
Speaker 1: modes of governance. Right, you could have ten percent of
Speaker 1: those who own a special token or just ten percent
Speaker 1: of the people could put it out of existence. I mean,
Speaker 1: there's nothing magic about the majority control. It's just whatever
Speaker 1: you lock in the program, because that's what this is. Effectively,
Speaker 1: it's a program. A set of programs will execute. Ye.
Speaker 1: So if that's the case, then I'm curious about how
Speaker 1: much thought goes into the process of choosing that rule
Speaker 1: of decision. I would assume it's an enormous amount of thought,
Speaker 1: because that's, as it were, the whole ball of wax.
Speaker 1: If you talk about a smart contract, they will execute itself.
Speaker 1: But actually it will execute itself unless that circumstances whereby
Speaker 1: the rule of decision can change is executed, in which
Speaker 1: case it won't execute itself. Yeah, and this is where
Speaker 1: dows are all just experimenting with different models. So a
Speaker 1: DOW can be very small, you know. It could be
Speaker 1: like two or three p bull that have some kind
Speaker 1: of smart contract that they all participate in. It could
Speaker 1: be massive. It could be millions and millions of people
Speaker 1: in controlling billions of dollars of economic assets. And the
Speaker 1: rules can be simple, like a simple fifty one percent
Speaker 1: moves the money, and that's the core. Nothing else is
Speaker 1: written other than that single rule, or it could be
Speaker 1: very elaborate with lots of interlocking contracts with different rules
Speaker 1: and singular Dao organizations may change over time. They learn
Speaker 1: how to govern themselves, they learn what works and what doesn't,
Speaker 1: and so they evolve and adapt. The important point here
Speaker 1: isn't what specific rules the Tao chooses. It's simply that
Speaker 1: you now can have humans interact economically with no central
Speaker 1: party being involved whatsoever. Well, let me ask you a
Speaker 1: follow one question about that. Let's say you know again,
Speaker 1: it's a simple dow You and I are the only participants,
Speaker 1: or maybe there're three of us, so that we have
Speaker 1: a fifty one percent option, and we write it so
Speaker 1: that there's a majoritarian rule of decision. Then two of
Speaker 1: us get together and vote within the system, saying we
Speaker 1: want to change things and disburse the funds in some
Speaker 1: different way. And in principle, that would seem to follow
Speaker 1: the rules as written. But the person who is the
Speaker 1: third person says, I think that somehow the system has
Speaker 1: been hacked here, and in fact my vote was cast
Speaker 1: let's say, without my knowing it. I didn't mean to
Speaker 1: vote this way, but someone voted my share the program
Speaker 1: doesn't know that. Presumably it's just going to execute. What
Speaker 1: if any recourse does that person then have. I mean,
Speaker 1: if there's no recourse to the state, then that person
Speaker 1: is just out of luck. Game is over for that person.
Speaker 1: If there is recourse to a state or a government,
Speaker 1: or maybe to a broader set of users, that person
Speaker 1: could appear in some form and say, hey, you know
Speaker 1: this is supposed to only have happened if there's a
Speaker 1: majority vote. There wasn't really majority vote. I was hacked.
Speaker 1: I didn't mean to do this. Yeah, well, anyone familiar
Speaker 1: with cryptocurrency systems, you know this won't sound alien too.
Speaker 1: But the code executes, and that is the arbiter like,
Speaker 1: that's what happens. So there is no recourse outside of
Speaker 1: the code. If you make a mistake, or if the
Speaker 1: code is written poorly, or if there's a bug or
Speaker 1: anything that can happen, the code executes and then it's done.
Speaker 1: So when writing these kind of contracts, obviously you have
Speaker 1: to be very careful, and the more complicated they get,
Speaker 1: the more likely it is that there will be errors
Speaker 1: of some kind. You could, of course add complexity to
Speaker 1: help mitigate this effect. You could say, any vote can
Speaker 1: be reversed within a week if x, y and z
Speaker 1: factors happen. So you can write any number of arbitrary
Speaker 1: rules to these things. But yeah, once as they execute,
Speaker 1: no government in the world can unwind a smart contract.
Speaker 1: And this is super critical when it comes to something
Speaker 1: like bitcoin, which is arguably the world's first daw even
Speaker 1: though people didn't use that terminology for it, but it
Speaker 1: happens throughout cryptocurrency and these smart contracts, they just do
Speaker 1: what they are programmed to do. We'll be right back.
Speaker 1: Let's talk about what are the advantages and uses of doaos,
Speaker 1: at least at this stage, and what are the limitations
Speaker 1: associate with it. I keep coming back to the question
Speaker 1: of what an ordinary limited liability corporation does. So an
Speaker 1: ordinary limited liability corporation has shares and has shareholders who
Speaker 1: have paid in It has a governance structure, and typically
Speaker 1: it's organized to do anything that would make a profit
Speaker 1: for the shareholders. If it's for profit, they may have
Speaker 1: a goal at the beginning, but typically the rules are
Speaker 1: written so that they can have maximal flexibility and decision making,
Speaker 1: and there's also rules of decision just like there would
Speaker 1: be in a DOO in some sense, there could be
Speaker 1: a majority rule in electing members of the board, and
Speaker 1: then the board itself has the capacity to hire the
Speaker 1: managers or the firm, and then the managers make the
Speaker 1: decisions subject to supervision from the board. So it's got
Speaker 1: a set of rule of decision in it as well.
Speaker 1: So that has a lot of flexibility in It seems
Speaker 1: your flexibility is constrained by what you've said upfront, right,
Speaker 1: You've written that contract in and unless you have a
Speaker 1: rule of decision that enables it to be changed with
Speaker 1: an elaborate government structure attached, you sort of have to
Speaker 1: do what you started with. Does that seem like a
Speaker 1: fair concern? I see what you're saying, but I think
Speaker 1: it's I think it's the opposite. The main benefits of
Speaker 1: ADAO are the greater flexibility, not the greater constraint. To
Speaker 1: give a very like clear demonstration of how much more
Speaker 1: flexible ADAO is, any normal company that employees employees has
Speaker 1: to follow, you know, all sorts of employment laws in
Speaker 1: a specific jurisdiction. Those employment laws have nothing to do
Speaker 1: with serving the customer. They have everything to do with
Speaker 1: certain special interests. In the past, arguing for political reasons
Speaker 1: that external rules should be imposed on the mutual work
Speaker 1: between two people. A dow doesn't have to abide by that.
Speaker 1: A doubt does not exist within a territory, and a
Speaker 1: dow does not have employees as defined under law. So
Speaker 1: a dow can pay a worker in some country to
Speaker 1: do X, Y and Z task with zero concern about
Speaker 1: the five hundred different you know, labor laws of any
Speaker 1: arbitrary country. And that's this is a very important thing
Speaker 1: you're saying, and I want to take it on head on,
Speaker 1: and I want to do it, if it's okay with you,
Speaker 1: in two parts. First, I just want to respond to
Speaker 1: what you were saying about flexibility, and then I want
Speaker 1: to go straight into the employment law and the more
Speaker 1: deeply libertarian versus regulatory conceptions that one might have of that.
Speaker 1: But before we get there, and I'm really excited to
Speaker 1: get there, I just want to quickly do a clarification
Speaker 1: on the flexibility point. Yeah. So you know, a group
Speaker 1: of people got together and they very quickly created ADAO
Speaker 1: to buy a copy of the Constitution that was up
Speaker 1: for auction, and they all had to put in money
Speaker 1: because you have to put your assets in advance or
Speaker 1: create those assets in advance in a DAO and then
Speaker 1: they didn't win. They didn't get the object because they
Speaker 1: were outbid fair enough, and they need to have a
Speaker 1: rule of decision of what to do about that money
Speaker 1: after the fact, because the money was all in there,
Speaker 1: it was set that the program was set up. So
Speaker 1: if they won then auction, they would have bought the
Speaker 1: constitution if they if the TAO then wanted to say,
Speaker 1: we want to go into business now to do something
Speaker 1: completely different. You know, we want to go into business
Speaker 1: to promote I don't know, to promote the idea of doubts, right,
Speaker 1: and we want to have all the elements that you
Speaker 1: need to go into business that require more than just
Speaker 1: paying people, like a whole business operation. To do it,
Speaker 1: they would need to have a rule of decision that
Speaker 1: enabled the majority of the members of the doubt to
Speaker 1: enact what would be in effect rules of corporate governance. Right.
Speaker 1: They would have to say, this is how we're going
Speaker 1: to appoint our CEO, this is how we're going to
Speaker 1: how we're going to supervise the CEO, this is how
Speaker 1: the decision ers are going to proceed on a day
Speaker 1: to day basis. Otherwise, they'd have to make ever, have
Speaker 1: every single decision made by vote of the whole collective
Speaker 1: the way sort of like a town meeting in New
Speaker 1: England does it. And as anyone who has ever been
Speaker 1: to one of those town meetings, no, it's wildly inefficient.
Speaker 1: So that's why guess what I meant on the flexibility point.
Speaker 1: I mean, I get that in principle, the DAO could
Speaker 1: legal structures of the state provided just say we're not
Speaker 1: we're now adopting rules of incorporation. But unless they reinvent
Speaker 1: the wheel of the rules of incorporation, it seems all
Speaker 1: everything they do they have to do by the same
Speaker 1: rule decision they've adopted in from the beginning. If that's
Speaker 1: fifty plus one, then they need to vote on everything
Speaker 1: fifty percent plus one. Am I getting that right? Yeah?
Speaker 1: So this is a super important point, and it was
Speaker 1: one of the things that I was initially skeptical on
Speaker 1: about DAOs is you know, if every decision of an
Speaker 1: organization has to be voted on, it's going to be
Speaker 1: a disaster for many reasons. DAWs generally get around this
Speaker 1: by simply creating groups with delegated authority. So you create
Speaker 1: this initial tao. It has a million dollars, and it
Speaker 1: just has the simple rule that fifty one percent of
Speaker 1: the token holders can move the money. The next vote
Speaker 1: might be, Okay, we need marketing, so give one hundred
Speaker 1: thousand dollars to this guy because he seems credible with marketing.
Speaker 1: He gets one hundred thousand dollars. And then everything he
Speaker 1: does for marketing is not up to a vote. It's
Speaker 1: just up to him, so he has full autonomy over
Speaker 1: his role. At some point he's going to want to
Speaker 1: come back from our money, right, and so that's when
Speaker 1: he needs to demonstrate, like, hey, here's what I did
Speaker 1: for you as the DOAO, Here's how well I spent
Speaker 1: all that hundred thousand dollars, and here are the results.
Speaker 1: Give me more money and I'll keep doing this for you.
Speaker 1: So in that case, you know, only one decision was
Speaker 1: voted on, which was give one hundred thousand dollars to
Speaker 1: this guy, and he has tons of flexibility. I don't
Speaker 1: want to labor the point, but I do think that
Speaker 1: in the real world of contracts, one of the things
Speaker 1: that contracts are used for is repeated iteration by the
Speaker 1: same players over a long period of time, with ongoing
Speaker 1: negotiation and shifts in what the duties are. So let's
Speaker 1: say I have a company, and I hire an ordinary company,
Speaker 1: and I hire someone who does marketing, and I pay
Speaker 1: the person monthly for a certain amount of work, or
Speaker 1: by the job for a certain amount of work. Each month,
Speaker 1: we check in with each other, or maybe even every day.
Speaker 1: We check in with each other, and we see how
Speaker 1: each of us is doing, and when the term of
Speaker 1: the contract ends, we're capable of renegotiating the contract. In fact,
Speaker 1: we don't even have to wait for the term of
Speaker 1: the contract end. In the real world, people are constantly
Speaker 1: renegotiating contracts all the time, based on their needs, based
Speaker 1: on circumstances. And it does seem to me that that
Speaker 1: iterative structure of engagement. I agree that in principle it
Speaker 1: could be done. In a doubt, that seems correct to me.
Speaker 1: But it seems like one of the great advantages of
Speaker 1: ordinary corporate form of government is that the shareholders are saying,
Speaker 1: we don't have the time to manage the firm in detail,
Speaker 1: so we're going to delegate that management to people who
Speaker 1: have the full time job of, among other things, talking
Speaker 1: to the marketing guy who gets hired and making judgments
Speaker 1: about that. And it seems like, again, unless you reinvent
Speaker 1: that within a DOO, you lose that. Yeah, it's reinvented
Speaker 1: within the DOO. The DOO can decide to hire someone
Speaker 1: who acts sort of as a manager to oversee several
Speaker 1: roles beneath them. So if the DOO organization wants to
Speaker 1: do that, it absolutely can. There's no reason that can't work.
Speaker 1: So let's go to the point that you made about
Speaker 1: employment laws. And here what you said was to my mind,
Speaker 1: very reminiscent of some of the early arguments for cryptocurrencies, namely,
Speaker 1: you can avoid regulation. And I want to raise two
Speaker 1: concerns about that. One whether it's actually true that you
Speaker 1: can avoid regulation, and two whether you should avoid regulation
Speaker 1: as a normative moral matter. Even if you could, Let's
Speaker 1: say you say, we don't want to fill out. It's
Speaker 1: one of the things that employers have to do, even
Speaker 1: if they're hiring contractors, is they have to send them
Speaker 1: at the end of the year at tax documents saying
Speaker 1: how much money they were paid and go through this
Speaker 1: whole procedure of doing so. Even if it's only minimal,
Speaker 1: they still have to go through it. And you say, well,
Speaker 1: this is a DOO. It's not under the jurisdiction of
Speaker 1: any regulator of any states. It's not going to do that.
Speaker 1: If the state then appears, it can say to the
Speaker 1: employee you got paid, well, hey, you you were under
Speaker 1: a duty to do this and you didn't pay your taxes,
Speaker 1: And the DAO could say, well, we don't care, not
Speaker 1: our problem. But then if the state turns to the
Speaker 1: DAO and says, look, if you're going to operate in
Speaker 1: the state of Delaware, we obligate you to follow our
Speaker 1: employment laws, and we will sanction you by sanctioning the
Speaker 1: people who are in our jurisdiction, who are within our jurisdiction,
Speaker 1: who are participants in the DAO. And if you say,
Speaker 1: and this is going to be easier for the government
Speaker 1: of China than for the government of Delaware, but it's
Speaker 1: in principle possibly even in Delaware, if the TAO effectively says,
Speaker 1: I mean, the DOO can't speak. But if the DAO
Speaker 1: effectively says, sorry, we're not subject to your regulation, the
Speaker 1: hell with you. You know, we're libertarians. The state's ultimate
Speaker 1: sanction is to say it's unlawful for people in our
Speaker 1: jurisdiction to own or participate in dao in the same
Speaker 1: way that some countries have already done with some cryptocurrencies,
Speaker 1: and then people could hide from the law, they could
Speaker 1: unlawfully trade in crypto or unlawfully participate in the tao,
Speaker 1: and then it becomes just the ordinary count and mouse
Speaker 1: game of any unlawful activity. So in those senses, isn't
Speaker 1: it the case that you really can only avoid regulation
Speaker 1: insofar as the state entities where the human beings who
Speaker 1: participate live chooses to allow the dao to remain unregulated. Yeah,
Speaker 1: fascinating topic. So what you've really done in a doao
Speaker 1: is you've removed the corporate entity from the equation entirely.
Speaker 1: So instead of having a bunch of individuals and then
Speaker 1: a corporate entity, which is where all regulation is applied
Speaker 1: at a corporate level, that entity is gone. There is
Speaker 1: no entity. A state can obviously enforce whatever coercion it
Speaker 1: wants against individuals within its territory. And that's true regardless
Speaker 1: of a DOO. But let's say Delaware becomes totally tyrannical
Speaker 1: and says, you know, we don't like all the all
Speaker 1: the freedom going on here. We will make it illegal
Speaker 1: to participate in a dow. How that would be worded
Speaker 1: legally would be very interesting, and obviously it would be
Speaker 1: immediately a First Amendment issue. But even if they succeeded,
Speaker 1: then okay, the people that were part of the DOAO
Speaker 1: in Delaware end up selling their tokens because they can't
Speaker 1: participate anymore, and the DOO morphs into the jurisdictions where
Speaker 1: it can work. Right. So, unlike a corporation, which if
Speaker 1: it's in Delaware and Delaware shuts it down, it's in
Speaker 1: big trouble and it would take a lot of work
Speaker 1: and effort to pull the roots out into redomicile somewhere.
Speaker 1: A doo is very fluid. It's like trying to regulate,
Speaker 1: you know, the movement of air or water, and for
Speaker 1: that reason, it's a it's an entirely different beast. Eric.
Speaker 1: That metaphor of airrow water really nicely tease up the
Speaker 1: should we question, because the reason we, I mean, the
Speaker 1: truth is we can regulate air and we can regulate water,
Speaker 1: and we try to or at least we try to
Speaker 1: regulate human interactions with them. But the reason that it's
Speaker 1: hard to do that is that those are naturally occurring
Speaker 1: entities that don't in their very nature subject themselves easily
Speaker 1: to jurisdiction. Employment relations are different from that there are
Speaker 1: human interactions between people, and states are interactions between people
Speaker 1: and exist to regulate relations between people. Well, you described
Speaker 1: employment laws, I think essentially what you're saying was that
Speaker 1: they're the result of special interests lobbying for different forms
Speaker 1: of regulation at past times. And that's absolutely the way
Speaker 1: some people would describe employment laws, the way some economists
Speaker 1: might describe it. But another way to describe employment law,
Speaker 1: of the way say legislators would describe it, or unions,
Speaker 1: is that they're the product of complex social negotiation between
Speaker 1: people in society, making moral judgments and political judgments about
Speaker 1: how much people need to live, about whether this social
Speaker 1: conflict between unions and management that you almost burned down
Speaker 1: Europe and the United States in the nineteen and twentieth
Speaker 1: centuries should be regulated by some set of mechanisms. That
Speaker 1: they are products of social forces, for sure, I think
Speaker 1: everyone would concede. But many people think that employment law,
Speaker 1: like other law, is a desirable set of forms of
Speaker 1: regulation of human conduct. And if you believed all that,
Speaker 1: I'm not saying that you have to or that one
Speaker 1: has to. But if someone believed all that, would they
Speaker 1: be right in thinking that taos are very very bad things.
Speaker 1: I mean, if they exist to evade regulation, then they
Speaker 1: exist to evade to the extent that they're able relations that,
Speaker 1: at least in adjust in democratic society, have been adopted
Speaker 1: by everybody in the hopes of making everybody better off,
Speaker 1: and ironically, that have been adopted by democratic procedures, which
Speaker 1: are the kinds of democratic procedures that the Tao talks
Speaker 1: about using. So should my listeners who who like the
Speaker 1: rule of law be turned off of taos? Exactly at
Speaker 1: this point in the conversation, I like the rule of law.
Speaker 1: I just think that there's a lot of laws that
Speaker 1: are coercive and unethical. And the reason to be opposed
Speaker 1: to taos is if you didn't like the idea that
Speaker 1: two adults could just consensually interact with each other. Anyone
Speaker 1: who's opposed to consensual interaction between adults is not going
Speaker 1: to like taos because it allows them to do that.
Speaker 1: You know, an economic pow do you have to be?
Speaker 1: I mean, I guess I'm asking is how much of
Speaker 1: a libertarian do you have to be? To like taos
Speaker 1: because could one be a non libertarian dow lover or
Speaker 1: is it that you have to basically be a libertarian
Speaker 1: to love a doo. Doos are like pristine equality in
Speaker 1: relationships between people. There is no corporate hierarchy, there is
Speaker 1: no boss. It is simply a format on which any
Speaker 1: two individuals or more can come together and opt in
Speaker 1: to trade with each other on terms agreeable to both.
Speaker 1: That's it. A lot of people are uncomfortable allowing to
Speaker 1: adults to consensually agree with one another, and for those
Speaker 1: people probably not going to like anything that increases the
Speaker 1: ability for human adults to just like interact freely. You know,
Speaker 1: dows are not asking anyone's permission for anything, and if
Speaker 1: you don't like the DOO, you shouldn't be involved in it.
Speaker 1: The DOAO is only by definition, going to include participants
Speaker 1: that willingly wanted to interact with that organization. So Eric,
Speaker 1: let me just be clear again about why I'm asking this.
Speaker 1: I mean, I think I'm actually really interested in the
Speaker 1: moral questions, but I think that's not the thing that's
Speaker 1: most valuable to listeners. What's most valuable is people are
Speaker 1: trying to figure out I think many people are trying
Speaker 1: to figure out how serious or taos, how long will
Speaker 1: they last, what kinds of capacities do they have to
Speaker 1: the extent that doos are dependent upon. If they are
Speaker 1: dependent upon that kind of a theory, no boss, no master,
Speaker 1: they run the risk of being regulated in exactly the
Speaker 1: way that everything else in society is regulated. Right, So,
Speaker 1: democratic theory says that in democratic society there are no bosses,
Speaker 1: no masters. And yet within democratic societies, by a whole
Speaker 1: set of processes, vast economic inequalities emerge, those generate property
Speaker 1: and equalities, and then via contract, we get bosses, and
Speaker 1: we might even get masters and slaves if they enter
Speaker 1: into those relationships by contract, And in principle, you know,
Speaker 1: through if you think of an indentured servitude contract, which
Speaker 1: was a very common form of contract in early America,
Speaker 1: you get something that looks a heck of a lot
Speaker 1: like slavery, just by voluntary contracting. So that's why the
Speaker 1: great majority of well all governments that have ever existed
Speaker 1: have regulated in ways that are in commensurate with genuine libertarianism.
Speaker 1: Now again, I'm not saying that to make a philosophical
Speaker 1: argument against libertarianism. I'm saying it because if the DAO
Speaker 1: depends on that libertarian theory, then a lot of us
Speaker 1: think that as a predictive matter, it's way more likely
Speaker 1: the taos will in fact be subject to radical regulation
Speaker 1: and therefore won't be able to achieve they're somewhat utopian purposes.
Speaker 1: Then if you told me no, as a lot of
Speaker 1: people are saying in crypto, look, there's nothing wrong with
Speaker 1: crypto being regulated. Sure, crypto can be regulated. You know,
Speaker 1: at the beginning people said, well, what's great about cryptos
Speaker 1: It will evade all regulation. And now as crypto's getting
Speaker 1: bigger and bigger and more and more successful, lots of
Speaker 1: advocates of crypto say, it's not a problem for crypto
Speaker 1: can be regulated. We can we can manage that regulation.
Speaker 1: And crypto's got all kinds of other valuable functions other
Speaker 1: than the evasion of regulation. So I guess what I'm
Speaker 1: trying to figure out is is that where are DAWs
Speaker 1: different in some way or is it like crypto where
Speaker 1: of course there's still lots of crypto people who would
Speaker 1: like no regulation to exist, but lots of advocates of
Speaker 1: crypto have sort of accepted the reality of future regulation.
Speaker 1: So both in cryptocurrency and in DAOs, you are established
Speaker 1: a layer of human society that is beyond politics. And
Speaker 1: this is a weird thing to say and to hear,
Speaker 1: because it's not really existed before a smart contract, you
Speaker 1: cannot regulate it. Or, to be more precise, politicians can
Speaker 1: write whatever rules they want, and the smart contract is
Speaker 1: oblivious to them. It will execute according to the code,
Speaker 1: no matter the rules that politicians write about it. In
Speaker 1: the same way that if if I write rules about
Speaker 1: how the dust on the moon should settle, it doesn't matter.
Speaker 1: The dust on the moon shall settle according to the
Speaker 1: laws of physics, and the rules within a cryptocurrency protocol
Speaker 1: will execute according to the rules of the code the
Speaker 1: code is. This is just a clarifying question, not an
Speaker 1: argument question. But on the clarification side, isn't it the
Speaker 1: case that there has to be a distributed network of
Speaker 1: computers on which the code runs, unlike the laws of physics,
Speaker 1: which I mean, they need some substrate. We need to
Speaker 1: live in the universe as it's presently constituted. But if tomorrow,
Speaker 1: you know, all computers in the world went down, or
Speaker 1: if all states in the world that were capable of
Speaker 1: hosting big enough servers to run a global network regulated
Speaker 1: and shut down these smart contracts, they would stop, right.
Speaker 1: I mean they're dependent on distributed computing, right, correct, and
Speaker 1: certainly not quite like the laws of physics, not quite
Speaker 1: in that. Yeah, they do have prerequisite technology that exists.
Speaker 1: But if the argument against cryptocurrencies functioning, or against you know,
Speaker 1: smart contracts and DAW's functioning, is that maybe all computers
Speaker 1: in the world will shut down, we're already talking about
Speaker 1: some kind of horrible dystopia in which, you know, most
Speaker 1: of humanity is dying from starvation. Anyway, I didn't mean that.
Speaker 1: I meant what if all states where there are enough
Speaker 1: big server farms to host distribution insisted on regulation or
Speaker 1: where or in a world where all states regulated their
Speaker 1: citizens sufficiently to bar them from engaging in the conduct
Speaker 1: that is required to keep the thing running. Yeah, I mean,
Speaker 1: you know, most states have made it illegal to consume
Speaker 1: certain kinds of narcotics, and yet those narcotics are everywhere.
Speaker 1: So so what but that's not Yeah, but that really
Speaker 1: doesn't seem analogous to a lot of physics. That just
Speaker 1: seems like governments are incapable of complete enforcement. Well, what's
Speaker 1: analogous to the physics is that the code will execute
Speaker 1: if the system is turned on. And you can debate
Speaker 1: about whether a government can turn the system off or not,
Speaker 1: and that's a fascinating discussion, but practically speaking, these networks
Speaker 1: cannot be turned off, or more specifically, the ones that
Speaker 1: are the most robust are the furthest away from being
Speaker 1: able to be turned off. You know, Bitcoin cannot be
Speaker 1: turned off at this point. Ethereum cannot be turned off.
Speaker 1: If you start a new crypto platform tomorrow and it
Speaker 1: has it's just running on your own computer or like
Speaker 1: you and your three friends, obviously that one's going to
Speaker 1: be a little more fragile and susceptible to some kind
Speaker 1: of intervention. Eric, tell me, what are some advantages and
Speaker 1: benefits of taos that are distinct from being able to
Speaker 1: evade existing regulations. So, yeah, it's not I don't want
Speaker 1: this to come across as like the point is to
Speaker 1: evade regulations. The point here is that you remove frictions
Speaker 1: which have been built up by society, which are arguably
Speaker 1: harming the purpose of what many organizations try to do.
Speaker 1: If you're a you know, if you're a for profit business,
Speaker 1: You're really there to build some kind of product or service,
Speaker 1: serve customers, and earn a positive return on that. So
Speaker 1: you should care a lot about how happy the customer is.
Speaker 1: You should care a lot about how good your product
Speaker 1: is and how resilient it is. These kind of things
Speaker 1: are at the core of any business, and any one
Speaker 1: of your listeners who's ever run a company, you know,
Speaker 1: at any management or executive level, will know that so
Speaker 1: much happens in a corporation which is not at all
Speaker 1: about serving the customer or about making the product good.
Speaker 1: It's about all this other like cruft that has built up,
Speaker 1: some of it regulatory, some of it just habitual. Some
Speaker 1: of it has to do with like you know, IP
Speaker 1: law and that kind of thing. There is a whole
Speaker 1: world of friction that is built into corporations today, and
Speaker 1: all of that disappears when you're in the doo world.
Speaker 1: And this does not mean that dows are utopian. They
Speaker 1: have other problems, right, They're not perfect. They introduce new
Speaker 1: new issues that a centralized corporation may not suffer from.
Speaker 1: But having lived through building a centralized corporation and being
Speaker 1: in the midst right now of transferring this into a doo.
Speaker 1: Speaking of my own company, Shapeshift, I have just seen
Speaker 1: the degree to which we can focus our time, attention,
Speaker 1: and resources on serving the customer and building the product
Speaker 1: has increased dramatically, and that is I think fundamentally highly
Speaker 1: valuable to all of society. I want to close by
Speaker 1: asking you about the egalitarian sort of aspirations here that
Speaker 1: you've mentioned a few times, specifically in the context of
Speaker 1: your company. So, in preparation for our interviewer, I read
Speaker 1: you're fascinating, fascinating medium post about how you were going
Speaker 1: to go about transforming shape Shift into a DOO. I
Speaker 1: guess you must have had some unconscious expectation of that,
Speaker 1: given the name of the company with shape Shift. But
Speaker 1: but you say somewhere towards the end of the post,
Speaker 1: listen full disclosure. I'm going to be the largest holder
Speaker 1: of this new currency, I think at five percent of
Speaker 1: the total unlocking over some period of time. Others who
Speaker 1: are your co founders or your close associates will also
Speaker 1: have larger blocks. So coming right in the DOW has
Speaker 1: some features that other corporations might have, namely that some people,
Speaker 1: just from the get go have more say in how
Speaker 1: the entity is conducted than others, And it sounded like
Speaker 1: from what I read, at least in your case, that
Speaker 1: didn't give you more than five percent of the voting rights.
Speaker 1: You just had five percent of the voting rights alongside
Speaker 1: five percent of the currency. But one could imagine people
Speaker 1: organizing DAWs where there were differential voting rights for different
Speaker 1: kinds of ownership. You could have a governance token that
Speaker 1: was set up more like shareholder voting, so you could
Speaker 1: have different classes of governance tokens. Why wouldn't we expect,
Speaker 1: and in fact, why wouldn't eleborate libertarian welcome the emergence
Speaker 1: of radically non egalitarian structures in the now world, where
Speaker 1: it wouldn't be that everyone would have the same say,
Speaker 1: Some people would have much greater say than others, and
Speaker 1: it would be consensual in the same sense that any
Speaker 1: economic relationship is consensual. Right. I need a job, but
Speaker 1: I can negotiate at arm's length with Uber. But I'm
Speaker 1: not going to get very far if I say to Uber,
Speaker 1: you know what, if you want me to drive, you
Speaker 1: have to pay me a lot more than everybody else
Speaker 1: gets paid. Right, I don't have a lot of negotiating
Speaker 1: power in that situation. So why wouldn't we just get
Speaker 1: at the re emergence of exactly the same kinds of
Speaker 1: societal inequalities here that we get in the real world
Speaker 1: over time. And I guess maybe there'd be nothing wrong
Speaker 1: with that from your perspective either. I don't mean to
Speaker 1: say that would be a bad thing. Yeah, I think
Speaker 1: there's a lot of kinds of inequality that are not wrong. Right.
Speaker 1: So an obvious example, if two people are hanging out
Speaker 1: and one guy sits on the couch doing nothing, and
Speaker 1: the other person goes out and does something productive, that
Speaker 1: person is going to end up with something more than
Speaker 1: the one sitting on a couch, right, And this is
Speaker 1: a very simplistic example, but I think most people would
Speaker 1: agree in that in that example, the outcome being unequal
Speaker 1: is not an ethical problem. If you imposed something to
Speaker 1: cause the outcome to be equal, even despite that difference
Speaker 1: in their input, that would arguably be unethical. So I
Speaker 1: have to be careful about this inequality perspective. Certainly, doaos
Speaker 1: won't suddenly make everyone economically equal. What they do, however,
Speaker 1: is they give everyone the same set of rules. The
Speaker 1: rules can't be changed by you know, like bias. So
Speaker 1: here's a good example in the Shapeshift dow. A lot
Speaker 1: of the people that contribute to it and are part
Speaker 1: of it are pseudonymous. I don't know. I've never seen them,
Speaker 1: I don't know who they are, I don't know what
Speaker 1: country they're in. I don't know if it's a male
Speaker 1: or a female, and it doesn't matter. They're just an identity,
Speaker 1: a pseudonym on the Internet, and they're based on their merit.
Speaker 1: Their contribution is based on their merit. So a lot
Speaker 1: of inequities that you see in a corporate setting that
Speaker 1: people rightly point out as wrong, you know, certain biases
Speaker 1: or something, you know, racism for example, there's no racism
Speaker 1: in Adao, right because anyone can take whatever identity they want.
Speaker 1: They can assume full pseudonymity. They can be public about
Speaker 1: who they are, what they look like, their background, or
Speaker 1: they can keep it all private. Coming from a position
Speaker 1: where you care about equality for the right reasons, that
Speaker 1: should be very encouraging. Someone should look at that and
Speaker 1: be like cool. You know. Finally, there's a system of
Speaker 1: economic organization that removes a lot of these biases, and
Speaker 1: it doesn't remove them through some kind of government diktat.
Speaker 1: It removes them through a new a new method of
Speaker 1: interaction between people. Yeah, I mean, I think I hear
Speaker 1: the appeal of that for sure. At the same time,
Speaker 1: although the doo is not a human, the people who
Speaker 1: make the dour humans and the people who invest in
Speaker 1: the dower humans, then the outputs are also going to
Speaker 1: reflect inequality. And that doesn't mean that the process is racist.
Speaker 1: It just means that the process replicates the inequalities which
Speaker 1: we already have in a society that has historically been
Speaker 1: inflected by racism. So it's hard to and it's not
Speaker 1: that dowers are unique in this problem that it's that
Speaker 1: you can't always escape the results of the past just
Speaker 1: by entering into a new domain. Yeah. Yeah, doos don't
Speaker 1: solve history, but neither does anything else, right, So what
Speaker 1: are we comparing it against? What dows do is allow
Speaker 1: people to have transparent economic organization with no center, and
Speaker 1: that is a fundamental new primitive of humanity. DAOs did
Speaker 1: not force anyone to do anything. They're purely voluntary for
Speaker 1: people who care about results and interacting with other people
Speaker 1: toward productive ends, and doing it in an open, equitable
Speaker 1: way in which the rules are clear, open source. This
Speaker 1: is something really beautiful, but it doesn't solve world poverty.
Speaker 1: It doesn't solve all iniquities of the past, but neither
Speaker 1: does a centralized corporation, and certainly neither does a government. Well,
Speaker 1: I think on another occasion it would be fun to
Speaker 1: talk about the empirical side of this, and we might
Speaker 1: not see exactly eye to eye, but what I want
Speaker 1: to say is, thank you for a really helpful walk
Speaker 1: through of the basic principles and some of the philosophical
Speaker 1: consequences of the dao structure. I learned a lot, and
Speaker 1: I very much enjoyed the conversation, and I'm super grateful too.
Speaker 1: Thank you so much for your time. Thanks. Yeah, this
Speaker 1: was really good. Happy to be on the show. We'll
Speaker 1: be right back. I was really fascinated by this conversation
Speaker 1: with Eric Vorhees, and I really am grateful to him
Speaker 1: for sharing it with me. On the one hand, he
Speaker 1: really helped me understand some of the basic structure of
Speaker 1: what a tao is and how it functions, and I
Speaker 1: hope that his explanations were of value to you listeners
Speaker 1: as well. I remain interested in trying to figure out
Speaker 1: for what taos are good and for what taos may
Speaker 1: not be good. I am fascinated by the question of
Speaker 1: whether they are more or less efficient than traditionally existing corporations,
Speaker 1: and whether they are more or less flexible than those corporations.
Speaker 1: The other theme that came out very strongly in this
Speaker 1: conversation was the question of whether taos ultimately are connected
Speaker 1: to a libertarian ideal of evading governmental regulation. Eric seems
Speaker 1: to think fairly strongly that they are. It's not that
Speaker 1: he's saying that the only advantages of taos are its
Speaker 1: ability to avoid regulation, but he is saying that what
Speaker 1: makes a doo worthwhile distinctive, unique and original, and to
Speaker 1: his mind, attractive, is its capacity to array people in
Speaker 1: freely entered into contracts free of what he calls government coercion,
Speaker 1: but I and others would think of as governmental regulation.
Speaker 1: I was reminded of the fact that in the crypto
Speaker 1: world as well, many of the early innovators were very,
Speaker 1: very focused on the libertarian and I would say, to
Speaker 1: some degree utopian aspects of the idea of currencies that
Speaker 1: could operate outside of governments and outside of states. My
Speaker 1: own view is that there may be many benefits to
Speaker 1: taos that have nothing to do with its capacity or
Speaker 1: lack of capacity to evade regulation. I promised to continue
Speaker 1: to explore this issue in future episodes until the next
Speaker 1: time I speak to you. Breathe Deep, think, deep plots,
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