If you read my Human Organization 4.0 blog series you know that I believe that DAOs (or whatever their next evolution is) will become the predominant form that humans organize in the future. This is due to their inherent ability to unleash the talents of the world’s population, much of which currently don’t have that opportunity due to geographical, political and/or financial issues. However, humans lack experience in the type of decentralized and bottom-up decision making processes that DAOs utilize and therefore DAOs in their current state tend to be chaotic and inefficient. That will change over time as humans learn new techniques for interacting with each other, reaching consensus, building trust and respect, and ultimately organizing activity towards a common goal, much in the same way that the creation of corporations led to modern management theory and modern leadership practices.
This article is an exploration of how I believe leadership will change as a result of the spread of DAOs and what types of skills will be most important as society moves towards decentralized decision making.
Leadership in DAOs?
Does it strike you as odd that I believe leadership will still be important in a world in which decisions are made from the bottom-up? Wasn’t the point of DAOs to remove the authority from a central and small group of people? Let me explain. Leadership, I believe, is a core feature of any human organization, whether it’s a centralized or decentralized organization. DAOs will still have leaders, however leaders will be empowered only by the preference of DAO participants and any given DAO will have multiple, if not many, leaders at any given time. What makes leadership in DAOs different than leadership in modern top-down organizations is these characteristics:
How leaders are chosen - In a DAO, leaders will be determined by the DAO participants in a process called liquid democracy. Essentially, leaders will be those who receive additional voting power within the DAO because other DAO participants trust those leaders with their vote.
Scope of leadership - Leadership within DAOs will be more narrowed-focused, most likely around topics in which the leader has expertise. This is in contrast to leadership today in which leaders are expected to be decision makers within a broad range of subjects (for example, a politician may be expected to vote on topics ranging from economic to foreign policy).
How long leaders serve - In a liquid democracy, common in DAOs, participants are free to change who represents their vote at any given moment. Therefore, leaders in a DAO can be replaced at any moment.
Types of Power
In 1959 social psychologists John French and Bertram Raven categorized power in six categories:
Legitimate - Power obtained from formal organization structure.
Reward - Power obtained from the ability to compensate others.
Expert - Power obtained through a person’s abilities and knowledge.
Referent - Power obtained through respect from others.
Coercive - Power obtained through the ability to punish others.
Informational - Power obtained from the ability to control information needed to accomplish something.
I believe some of the above types of power will become less important or even extinct as DAOs become more prevalent and some of the above types of power will become much more important.
Less Important in DAOs
It’s hard to see how a decentralized group of people will utilize legitimate power, when one of the features of a DAO is the lack of organizational structure. It could be that legitimate power becomes extinct if DAOs become the de facto form of organization. Likewise, DAOs tend to operate globally and online (although that doesn’t have to be the case) and it’s hard to imagine how coercive power could be utilized since there are only a few ways in which a person can be punished online. In addition, the nature of DAOs align participants’ incentives such that it will often be the case that punishing one DAO participant will be punishing all DAO participants. Finally, blockchains are typically public and auditable by design and therefore information will be more widely accessible. Informational power will most likely decrease due to this, however DAO participants with specialized technical skills in data science or software engineering may still hold an advantage in their ability to process blockchain data.
More Important in DAOs
I believe in a DAO-empowered world, having influence on DAO proposal votes will be one of the main forms of power. There are two ways in which that power could be realized: (1) through DAO participants choosing someone to represent their vote in liquid democracy or (2) through the ability to make online arguments that sway voting behavior. The first form of power realization will place a heavy emphasis on expertise as liquid democracy allows the ability for specialization-based representation. The second form of power realization will place heavy emphasis on referent power.
I believe that expert and referent power will blossom as DAOs become more prevalent, coercive and information power will decrease in relevance and legitimate power will become extinct.
Leadership Style
So how does the source of power effect leadership? Kurt Lewin is often credited with branding the basic leadership styles as:
Autocratic Leadership - a focus on leader authority and subordinate compliance
Democratic Leadership - a focus on consensus and group buy-in
Laissez-faire Leadership - a focus on individual autonomy and empowerment
Transformational Leadership - a focus on a grand vision and excitement/engagement in that vision
If you want to be a leader in a decentralized organization, it’s clear autocratic leadership styles will not work as there is no legitimate power and no mechanisms to enforce compliance. In fact, the purpose of DAOs is partly to eliminate autocracy and the central point of failure they create. In a DAO-centric world, it would be wise to avoid autocratic leadership styles.
However, there does seem to be a place in DAOs for democratic leadership, laissez-faire leadership and transformational leadership. Democratic leadership styles could thrive in DAOs due to their ability to lead others towards consensus, a skill that will aid in leading others towards specific proposal votes. Laissez-faire leaders, who tend to focus more on the big picture than minute details, may play a significant role in guiding proposal crafting while also allowing specific details to be worked out by more vested individuals. Transformational leadership in a DAO will perhaps be one of the bigger winners as the decentralization nature of DAOs will naturally place more emphasis on leaders who can articulate a vision that other DAO participants can support.
Skill Sets
It’s clear that the source of power within a DAO will be different than it is in today’s centralized world and that autocratic leadership styles (which still dominate in today’s business world) will become far less effective. That leads to the final question, namely, what types of skills will thrive in a DAO organization structure?
It’s pretty clear what skills won’t thrive in a DAO. When you think about the fact that authoritative power and autocratic leadership will both wane in a decentralized world, the skill sets useful to both will also wane in effectiveness. Specifically, the skill of delegating work and tasks and the skill of self-reliance (also known as “going with your gut”) will be particularly inefficient in a DAO organization.
However, since the dominant forms of power in a DAO are referent and expert power sources, skills that lead to respect and trust (reference power) and domain expertise (expert power) will find increased importance. These skills include:
Good communication, particularly in online mediums
Ability to organize thoughts and ideas into coherent stories and actionable steps
Building consensus and goal-oriented teamwork
Relationship building and collaboration
Critical thinking, particularly towards new ideas
Conflict management in an online setting
Innovation and ideation
Colleague motivation
Luckily, modern management theory has tended towards the above skill sets so much of that experience can be translated from the centralized world to the decentralized world. However, as mentioned above, much of centralized leadership revolves around delegation and single-point decision making, so leaders in a centralized environment may still find it difficult to translate their skills in a decentralized environment. The above skill sets also align well with leadership styles that will be most effective including:
Democratic leadership - heavy emphasis on the ability for a group to reach consensus. conflict management and critical thinking
Laissez-faire leadership - heavy emphasis on relationship building, collaboration and motivation
Transformational leadership - heavy emphasis on organizing thoughts and ideas, innovation and communication
The arc of history has always bent towards increasing the population that has autonomy and self-determination. DAOs are the next evolution of that arc and will be a significant change from previous ways humans organized. As such, power dynamics will change and there will be a need for leadership styles to change. The net result, though, is the inclusion of the entire world’s population into the decision-making process and a more equitable distribution of opportunity. The individuals who figure this out quickest, and the DAOs the participate in, will be the real benefactors of the transition.
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Kyle