The power of decentralization; and the decentralization of power.

• Original post (Apr 5, 2023) in Medium: https://medium.com/p/d3bf32c9c05e

Increasingly, it is becoming clear that (neoliberal) capitalism, as a global economic system, is not working for society at large.

Whether we analyze the growing gap in economic inequality or the climate crisis that triggered an extractivist relationship with the planet, it is clear that we must transition to another model. The complex thing, however, is that we don’t know how.

Even if the average consumer would start to opt for more responsible brands (at their own expense), this would not completely solve the problem since the richest 10% of people in the world are responsible for about half of global emissions and some times they are the ones who block transition to other energy sources.

In addition to considering that the elites, who concentrate most of the wealth, have a direct impact on public policies in the world. In fact, “elites are nothing more and nothing less than groups of friends who also participate in the same political activities”, as Joreen teaches us in The Tyranny of the Structurelessness’.

And to add, technology makes it easier to concentrate power in fewer hands, like a gravitational force taking money where there is more. This happens in part because the same company can have a global impact affecting distant latitudes without knowing its context (as is the case today with the tech giants); and partly because technology makes it possible to streamline processes and reduce the cost of production, which translates into a higher income for those who control precisely those means of production. A dynamic that will intensify even more with the entry of automation and artificial intelligence.

For this reason, to start a new economy that is more equitable and aligned with the ecology of the planet, we must first focus on distributing “power” centralized in so few people; especially in the context of organizations since they are the entities that govern the world today, and that is where, after all, we will probably spend a third of our lives.

The ways that agents in a system interact with each other, are essential for the survival of the system, because it is from these connections that patterns and continuous improvement are formed. That is, the relationships between the agents are generally more important than the agents themselves.

If we want to improve the system in which we live, we must analyze the ways in which we relate to each other, and the injustices that these power dynamics show. In this way, by redistributing power, we modify not only the individual but also the collective.

Fortunately, this process of decentralization of power is not only possible, but has already begun in various spheres. And in that process, we may achieve more than just a better economy but also build a way to organize ourselves into teams.

Miki Kashtan defines power as “the ability to take effective action to meet our needs.” Martin Luther King Jr. said that power is “the ability to achieve a purpose, power is the ability to effect change.” The nature of power is not inherently good or bad; it depends on your relationship with the other.

Richard Bartlett reminds us that there are three different types of power:

1. power-from-within or empowerment: it is linked to our sense of self-worth and our own perception of ability. It directly depends on the context in which we were raised.

2. power-with or social power: arises from collaboration and relationships. It is based on respect, mutual support and solidarity. It is what determines how much you are listened to in a group.

3. power — over or coercion: it is based on force, domination and control; and is largely motivated through fear. It is based on the belief that power is a finite resource.

In this sense, the promise of change lies in co-designing organizational structures where we minimize power based on domination, where a few have control over important decisions, towards a distributive model where we can all be powerful through collaboration and mutual trust.

Although the above may seem optimistic and naive, in reality there are already structures that teach us, not only that this is possible (and that they have been working for decades), but that distributing authority has great benefits in the current context.

Frederik Laloux, in his book ‘Reinventing Organizations’ described real cases of organizations from different geographical areas and sectors, with a minimum of 100 people and five years of operations. Thanks to his research, a new stream of teal organizations is emerging around the world, promoting three main concepts:

• Self-Management: a management system based on relationships between peers, without the need for hierarchy or consensus.

• Wholeness: The feeling of being able to be authentic and vulnerable; showing all facets of our personality

• Evolutionary Purpose: believes that organizations have a life and a sense of direction of their own. Instead of trying to predict and control the future, it invites us to listen and understand ‘what the organization wants to become’ according to the needs of the current environment.

Since centralized structures tend to concentrate power in a few hands, the system tends to have a single point of failure. That is, the entire organization depends on the person who makes strategic decisions. If it becomes corrupted and begins to collude for its own benefit and/or as a victim of manipulation, all members are affected in the same way.

On the other hand, systems based on self-management tend to distribute power better since they are based on relationships between peers; rather than the well-known boss-subordinate dominance dynamics. This, in addition to increasing power-with and power-from-within, generates a greater resilience of the system (since there is greater autonomy to respond to the unpredictable and survive a disaster); a very important factor in the face of a VUCA context (with volatility, uncertainty, complexity and ambiguity) as the one in which we live.

Worth noting the difference between complicated and complex and how, when you deal with problems of a complex system (such as climate change, the migratory crisis and/or social inequality) and you try to control or solve them (from the mechanistic paradigm of traditional administration), things will almost certainly go off plan.
What we must do instead is learn to interact with conflict and learn from it.

Self-managed organizations achieve this by:

1. Transparency: Rather than guard and protect ‘sensitive’ information (such as finances, failures and policies), self-managing organizations make it available, in a cataloged form, so that it is accessible by all members (and sometimes the general public). In this way, people can use that accumulated knowledge for better decision making.

2. Response agility: self-management systems consider each member of the organization as a reality sensor, and for the same reason, when someone perceives a tension (and/or area of ​​opportunity), they do not need to request authorization from a ‘superior’ in a bureaucratic process, but can request advice from their peers, review the available information and decide for themselves.

3. Continuous learning: Precisely because ‘decision-making’ is distributed, so too is governance (that is, the creation of agreements and policies) an open process where all members participate directly. This promotes more constant evaluation cycles and that everyone can edit the rules by which their day-to-day work is governed.

4. Priority in people: Since authority is distributed, in times of crisis, it is based on the notion that solutions can come from anywhere. This encourages collective intelligence processes (using liberating structures) that take into account the needs of the vast majority. For the same reason, instead of prioritizing the profit of a few in exchange for the well-being of the many others (as usually happens in traditional structures), many times more democratic and supportive solutions are chosen; which in the long term strengthens the morale and cohesion of the collective.

Although the ‘Teal’ organizations show us the way forward, there is an element that is not present in most of the cases exposed and this is: ownership.

Start.coop summarizes ownership, in the organizational context, as a set of rights, including governance rights (to be able to change policies and partnership agreements) and financial rights (to receive part of the capital created by the work produced).

Although the Teal movement already considers having a governance shared by all the members of the organization and proposes the conception of a purpose that transcends the notion of providing a financial return to its owners as the only objective, it is important to highlight that the organization will always be in danger that the ‘owners’ (of financial rights — a.k.a. shareholders-) decide to impose a traditional leadership that abandons teal practices to pursue greater profit; especially when there are losing streaks or you are facing a critical election.

Frederic Laloux himself advises that the directors (including CEO) and the board must have embedded a worldview consistent with Teal development for the process to be worthwhile. In other words, that the owners are aligned is the most decisive factor for the experiment to be successful in the long term.

In other words, the owners of the means of production will always have the power to decide how to use them and what to do with the fruits of their labor. And if that is so, then the only long-term sustainable solution is for the property to be distributed among all involved as well.

If we seek to distribute property to create opportunities for social, economic and environmental development, then what better than to start by highlighting the efforts of the cooperative movement.

Marx expressed that the cooperative model demonstrated that the instruments of work could not be “monopolized as instruments of domination and exploitation against the worker himself.”

The International Cooperative Alliance defines cooperatives as “companies that belong to their members, who direct and manage them. Regardless of whether its members are customers, employees or residents, they all have the same vote in relation to the activity of the cooperative company and the equal distribution of benefits.”

The cooperative principles are the guidelines by which cooperatives put into practice their values ​​of self-help, self-responsibility, democracy, equality, equity and solidarity.

1. Voluntary and open membership: open to all people who want to use their services and who wish to accept the responsibilities of membership, without gender, social, racial, political or religious discrimination.

2. Democratic member control: They are democratic organizations controlled by their members, who actively participate in setting their policies and making decisions.

3. Economic participation of members: Members contribute equally to the capital of the cooperative, which is used for benefits for the members themselves.

4. Autonomy and independence: Cooperatives are autonomous self-help organizations managed by their members. External capital and/or alliances should not come at the cost of their autonomy.

5. Education, training and information: Cooperatives offer education and training to their members, so that they can contribute effectively to the development of their cooperatives.

6. Cooperation between cooperatives: Cooperatives seek to strengthen the cooperative movement by working with local, national, regional and international structures.

7. Interest in the community: Cooperatives work for the sustainable development of their communities through policies approved by their members.

Although the cooperative model is a reference of what a more democratic and equitable structure could mean, there are some deficiencies that have limited its spread. Some of them are:

• Decision making by majority: Often assumed to be the only democratic decision-making mechanism, cooperatives often use majority rule to choose between 2 or more options. This, although it gives a feeling of participation for those who vote, tends to generate polarities between the groups; commonly known as the tyranny of the majority, which leaves the losing minority dissatisfied.
  Something that could be remedied by applying a decision-making mechanism by integrative consent.

• Representative democracy: Although on smaller scales cooperatives manage to maintain some direct democracy (where the notion of ‘one person, one vote’ is maintained), as the organization grows, it tends to transition to a representative democracy (where a committee is elected that will assume ‘ the direction’); which centralizes the power of decision-making in a few. This, mixed with the majority rule, can generate political groups that use their position of power to generate influence peddling. A possible alternative would be to seek a more active participation as happens in liquid democracy

• Closed Organizations: Although cooperatives maintain democratic ownership and decision-making, this only brings benefits to their members; and not necessarily for the common good. In other words, a for-profit cooperative can work in the capitalist market with a competitive mentality and an extractivist model without this detracting from its cooperative model. Other constituents (stakeholders) that are not official members (as would happen with suppliers and/or surrounding communities influenced by their operations), have no influence on decision-making. That is why the importance of integrating the factor of common goods that promote open cooperatives.

• Lack of financing in early stages: Since cooperatives seek to maintain ownership among members, there is not such a clear incentive for investors; since allocating resources would not imply having power in decision-making and/or financial rights as happens in a technological startup. If we add to this that a greater number of people are legally required to register a cooperative (in Mexico being 5), this implies that the barrier to founding a cooperative is higher than in a traditional company. A possible solution to this would be to search equity crowdfunding, and seek that the beneficiary community (stakeholders) act as investors; a model that is actively exploring the DAO ecosystem.

A DAO, an acronym for Decentralized Autonomous Organization; is a group of people who co-design the governance of an organization and, by automating smart contracts, seeks to maintain a decentralized structure where there is no need to have a hierarchical authority. This, in the context of the emerging industry based on the technology of blockchain, it means that that code becomes law, and everyone can verify if the deal was fulfilled or not.

This, from the point of view of resilience, makes it possible to resist a greater number of ‘attacks’ or eventualities before the system fails. Or in other words, it is an organization that, being distributed among more people, has a better chance of surviving if one of them disappears.

One of the innovations of the DAOs is their fundraising mechanism based on crowdfunding in exchange for tokens. In other words, potentially anyone can buy a ‘currency’ created by the same organization, and obtain a series of rights in exchange; either influence in the creation of governance policies, or economic returns in case of future success; among other things.

In this way, DAOs not only allow large absentee investors seeking voracious returns to be delegated (and sustain themselves in a community that is much closer and more aligned to the purpose) but also solve a need perceived by millions of people: the lack of financial support in the early stages of the project.

Something that, for example, greatly limits the cooperative movement that, by not seeking astronomical profits (in the style of Silicon Valley unicorns), do not usually receive financing in the same proportion as their capitalist counterparts.

In addition, DAOs are relevant because they have managed to materialize something that had been practically impossible before: moving from a representative democracy to a liquid democracy.

Since tokens carry rights, often linked to the organization’s decision-making, token-holders (a.k.a. shareholders) can, if they wish, actively participate in the development of their democracy. And if they prefer to delegate that power (in decision-making), they can choose to whom; and withdraw that power at any time. In this way, we can directly ‘influence’ the way of functioning as a collective.

Although DAOs hold great promise for the future, it is important to note that, at times, they also show the danger of designing a system with machines in mind over people themselves. Here are some shortcomings, so far, of the DAO model:

• The token-holder model does not generate real equity: Several of the fastest growing protocols base their consensus mechanism on the model of proof of stake (or ‘proof of stake’), where the ‘token-holders’ decide to ‘freeze’ their actions in order to influence a governance decision and the greater the amount of resources you put in, the greater the reward you will get in return. This with the logic that, if you have a lot to lose, you will have less incentive to attack the system on which you depend.
  And yet, an inherent result is that whoever already owns more ‘capital’ than the rest will also have more influence on the governance of the system, tending to generate plutocracy.

• Anonymity as an obstacle to solidarity: Since many of the DAOs allow anyone to participate, many times they start by interacting with ‘profiles’ that show no signs of ‘humanity’. And since on the Blockchain, a profile can be triggered through a smart contract, there is no way to fully recognize who is on the other side of the screen. That level of anonymity, although useful for certain types of interactions, is an obstacle to building deep relationships based on intimacy. In addition to hiding important information from the person’s context, which has important implications.
  By taking compensations to such an exact and automated reciprocity, we lose the depth that a human relationship based on solidarity allows us; which takes into account the needs of the person as a factor to distribute resources equitably.

• The tyranny of the majority as a contradiction of innovation: So far, many of the DAOs use the majority decision model, so common in representative democracies, where a binomial decision (A or B) tends to be presented. This, although useful from the point of view of programming (so consistent with computers) and enough to industries with specific and complicated problems, it is a limited look before a broader and more complex context. At best, the decisions will be a reflection of the status quo of the group that participates in a periodic survey of its values.
  The collective intelligence necessary for the resolution of complex problems is not harvested from majority voting (where the options have already been pre-defined by a few) but by allowing it to emerge, accumulating in a fractal way, many deep conversations of small groups of people.

• Forking as a polarizing solution: When the collective of a DAO can’t reach an agreement (and the minority is not willing to compromise), they can always make a code fork, resulting in a fragmentation of two parts; each with their version of the decision. This, although a necessary mechanism for any distributed organization, is in danger of being overused (in a majority decision context) and dispersing the energy of the initial collective in similar versions that now compete among themselves to be the dominant discourse.

• Lack of efficiency in operational decision making: Although it is positive to distribute power in the design of governance (which establishes the series of policies and reference frameworks shared by the participants of the system), the operations of an agile organization require a model that allows greater autonomy in trivialities from day to day. DAOs that by definition try to avoid centralization (again) in a few people, by trying to involve all token-holders in all decisions, end up being inefficient, and in practice, end up involving much less than what It is expressed at the level of discourse.

We are experiencing the birth of a new form of ‘organizational model’ compatible with the digital world that governs a large part of our lives.

And yet, I resist predicting the winning formula because, precisely, there is no one as such. There is no single solution for all contexts. A same template that works for all the groups in their different locations.

It is much more likely that the new great model is nothing more than the collection of many small alternatives coexisting with each other. A world where all worlds fit.

But if something is clear to us, it is that the decentralization of power is at the heart of this new paradigm; since an organization that manages not to depend on a single point in the system (be it a person, a node or any contributing entity) is a more resilient organization to the changing environment.

It does not matter if we call them ‘distributed autonomous cooperatives’ or any other term that is in force in the future.

The important thing is to understand that a world with less coercion is a place where we all have more power.