Values-based DAOs

Values-based DAOs
DAOs that open themselves up to outside investments are at a high risk of falling into the same capitalist spiral as today’s organisations, where values are slowly eroded away in place of profit.

Is it possible to create an alternative model, whereby organisations are driven to pursue values, such as happiness and sustainability, instead of profit?

DAOs open to external investors with access to reputation are at severe risk of values erosion due to the fact that investors have a direct say in the operations of the DAO. This values erosion risks being even greater than that of a traditional capitalist organization, which is scary.

The challenge arises from two groups with differing incentives. Investors want to maximize returns, while reputation holders (likely) want to maximize a metric which isn’t necessarily returns (but can be). Is it possible to align these two orthogonal views?

The values erosion problem
In traditional organizations, values are generally compromised over time.

  • The original Apple values did not include paying factory workers in harsh working conditions in China.
  • The original Nestle values didn’t include sucking aquifers dry in locations around the world
  • The original Levis values did not include polluting rivers and oceans with dyes

DAOs will evolve in the same way as organizations of today have (with likely an even faster values erosion), unless precautionary measures are taken. Even with a minority voting power, investors are motivated to sway votes (via bribes), and push the organization further from the values on which it was founded.

Proposed solutions
There are likely many ways to achieve this goal, and still allow investors to capitalize an organization. Below are two:

  1. Do not allow investors to own reputation in the DAO. This can be achieved via the issuance of debt instruments to investors, along with some mechanism to hold DAO members accountable in situations where debts can’t be paid back.
  2. Allow investors to own reputation in the DAO, but scale the reputation of investors based on how close the DAO is to the “Founding Values” of the DAO which were created on inception. If the DAO deviates from it’s values, more power would be given to members of the DAO who are more aligned with the Founding Values.

Why would a DAO want to be values-based?
If a DAO is founded with this kind of mechanism, it will make fundraising more difficult. Similar things have been seen in B Corps and social enterprises.

But for DAO looking to raise funds from investors, they should be free to decide whether or not they want their core values eroded over time, or maintained in perpetuity.

There is likely no better time to start discussing values-based DAOs than at this early stage of inception as it could have far reaching implications beyond what we can imagine, and move the globe towards sustainability.

Imagine a system for example, where values based DAOs have preferential treatment and reduced friction, which ultimately put at a disadvantage non-values based DAOs. Maybe such a vision is possible.

Next steps
Please comment and help push this discussion forward, and invite anyone who might be able to add value.

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Investors by default are looking for opportunities to increase the value of their funds and maximize returns.
Social values are norms that some investors will not be willing to compromise on even for the sake of higher profit, and some will.
Organizations and therefore DAO’s will have to choose their business conduct values in a way the is aligned to the values of the organization members

In today’s world, it is more and more expected from organizations to have positive social impact, and therefore it is part of their strategy to behave so, because this is how their investors, members / employees and customers decide upon if they want to engage with or not

Therefore, isn’t it already embedded in the way these organizations behave ? is there a need to add another design mechanism or friction above that ?

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Investors want to maximize returns, while reputation holders (likely) want to maximize a metric which isn’t necessarily returns (but can be). Is it possible to align these two orthogonal views?

You seem to assume that investors are worse actors than others, when you state that they are motivated to bribe others and move the organization away from its values.

“Reputation holders” is not a role. They could be investors, founders, workers, users, partners, etc. Each role has its own perspective on the organization, its own interest that might go against whatever “values” have been deemed as primary “drivers” for the organization.

The issue with investors isn’t that they are bad people less concerned with human values than others, but that they have greater power over firms than the other categories, especially with the “Anglo-American model”. Actually, co-founders often side with investors because they share the same incentives.

I’d rather consider “solutions” based on multistakeholder governance and a better balance of power (aka reputation in DAOstack-like systems) between diverse actors. See co-determination for instance.

The point is not about replacing the people in power, but balancing them so that collective welfare can be achieved.

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It’s an interesting question – ultimately I think that it’ll be the incorporation of time-based mechanics that allow us to “dampen” or “regularize” the effect that new entrants have on existing organizational values.

For example, consider an organization where budgetary decisions are made via a type of time-weighted “conviction vote” – earlier participant’s opinions carry more weight, and so it takes longer for later entrants to shift the direction of the org.

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Reputation should be commensurate with contributions made to the achievement of the DAO’s values.

Thus investors deserve some reputation for having enabled, through their investments, the DAO to function. For investing they may receive a token whose value is correlated to the state of that which the DAO values.

Investors cannot be assumed to have the proper relevant expertise, nor to be acting in good faith. Hopefully the bad ones will lose their rep quickly. The total amount of investor rep must be balanced with the rep of others in the DAO’s community who it is hoped will make right choices and apply their energy to advancing the DAO’s values. It is critical that a DAO be able attract these kind of people.

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I agree, time-based mechanics would definitely help slow things down, but not sure how effective this would be long term…

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In the long run, how do you think “values” should be determined? A set of rules which once defined can never change? Surely there needs to be some room for change process, and there must be some method for new ideas to be legitimately incorporated.

I imagine some sort of DAO defined values document like @pepo’s Mind of DAO project.

Interestingly, the actual problem is not that the orgs’ mission statements didn’t include these, but that they didn’t include the opposite. More modern organizations e.g. social startups or NGOs are explicitly values-based or at least “values-oriented”.

In terms of an anti-rivalrous economy, what you’re saying is very valid imo. We do have to recognize that money makes the world go round and is the oxygen for every enterprise.

The idea is very interesting and I believe there’s a true need for that. I recently came by few concepts while researching different organization types and found for-purpose enterprises and steward ownership ideas. I think there is a great similarity between what you are proposing and those two.

I suggest the following articles to have the main idea and would like to know your opinions about how can these conceps be encoded into for-pupose DAOs.

Encode.org - For-purpose Enterprise:

Steward Ownership:

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@Ezra you’d like the above articles (tie into your post about stakeholder driven governance)

Via Benjamin Bollen:

And my response:

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You may be interested in this post by Luis Cuende, which addresses this exact issue:

Manifesto-based organizations

https://blog.aragon.org/manifesto-based-organizations-3c8ddcf6e666/

and the follow-up talk at Web3 Summit:

https://www.youtube.com/watch?v=k7hXkiTCTC0

as well as this post by Luke Duncan:

Trust Minimized Governance Tokens

https://blog.aragon.one/trust-minimized-governance-tokens/

and the follow-up post:

Proposal Agreements and the Aragon Court

https://blog.aragon.one/proposal-agreements-and-the-aragon-court/

I think a combination of tools such as the Aragon Court and proposal agreements based on an organizational “charter” or “manifesto” are the best solution I’ve seen proposed that protects DAOs from having their values subverted by their own members.

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Thanks for sharing

I do really like the concept behind Aragon Court and Manifesto based orgs. Is it possible to include a “…It is not possible to change the Manifesto of this DAO at any point in the future, by any member…” clause in the DAO’s Manifesto, to ensure that the original values are locked in stone?

If you have a manifesto that can be changed, I think you still end up with original values erosion.

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Yes I think there is certainly the possibility of having “eternity clauses” written into a DAO’s manifesto. It might even be a necessity to stave off a majority attack, since if the majority can change the manifesto then it defeats the purpose of having the manifesto + Aragon Court as a means of protecting the minority.

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I’m not sure there’s a pure way of preserving values or mission in a DAO, even with “permanent” clauses/code. Even if you have an eternity clause or eternal bit of code, the DAO can send ownership of its assets to a fork without the eternity bit and migrate there.

The strongest way I see of preserving values or mission in a DAO is for the people in the DAO to actively defend them, and the key defense is probably managing voting power: make sure all current or new voters have proved their skin in the game of your values/mission, through investment, participation, circumstance (I live in neighborhood X, which proves I have some interest in making it a good place to live), or some other method. That’s definitely easier with some kinds of values/mission than others, though.

Could you please elaborate? How does one “fork” a DAO, without also forking the underlying chain itself, thereby (most likely) destroying the value of the assets in the process?

This seems probable.

One option I think could result in permanent values is to have some cost associated with ditching those values.

This could be done potentially through the power of network effects: and forming coalitions of DAOs with a certain set of shared values. Every DAO aligned with those values could get some benefits or some preferential treatment from other DAOs which share those same values. (for example)

Ah, sure. I just mean that anyone can copy the DAO structure (redeploy the contracts, same params, same voting power distribution, etc.), excluding whatever bit of it they don’t want. No need to fork the blockchain itself. Then everyone just moves to the copy.

The only thing you can’t copy is the external assets the DAO owns (any Ether it holds, for example). If you have protection against tyranny of the majority, like a schelling point kleros court-type thing, you might be able to prevent the transfer of the assets to the fork, but you can’t stop voters from moving to the new DAO if they care more about getting rid of the eternal clause more than keeping the assets. You also can’t stop transfer of most of the assets if the DAO has “ragequiting.”

I really like this approach as I can imagine many mechanisms that could be utilized to enable it.

The question I have is, where/when should this cost/benefit be applied? Proposal Stage? Hindsight? On the member? On the DAO itself?

#One interesting approach would be for enabling the functionality of a Staking Proposal that would allow for a vote to be held to implement an asset lock among vested members/DAO’s until such activity is rescinded or altered to meet the stated values.