Traditional companies are built, but DAOs can grow…

Most aspects of our lives have been revolutionized by software.

Web3 is coming for our institutions next…

In the last 3 months our web3 community, called Banyan DAO, has swelled from 20 to 200 product people working together to learn by building a DAO.

After 15 years of starting and scaling companies, I now believe that DAOs are within a decade of making traditional corporations look like a horse and buggy after the launch of the car.

Here’s what I mean…

Letting go of control gives freedom to grow

There’s an old Simpsons episode where Homer gets his hand stuck in a vending machine. The town spends hours trying to free him but to no avail. It’s only until someone finally asks him if he’s still holding onto the can. Of course — he was trying to hold on to control, and as soon as he let go, he was free.

As dumb a premise as this might seem, I’ve seen so many organizations stuck for this very reason.

The urge to maintain control in order to build an organization often keeps us unable to grow into the next phase of business.

Traditional Businesses are the result of survival of the fittest

From day one, a founder generally has limited resources and thus needs to control those resources very deliberately to survive. Each phase of growth requires focus, discipline, and hard decisions. Businesses that don’t have this rigor, discipline, and control generally fade away.

In top-down organizations, managers have the authority to hire, fire, promote, and fund with the responsibility of returning a business result — control is built into the system. Generally, employees want to keep their job and have the opportunity to be promoted, and employers have clear goals that they need to deliver.

This structure creates a culture of control up and down an organization.

DAOs can take a very different approach… Instead of starting small and staying in control, a DAO can set a vision and build a large community of contributors quickly.

Web3 tools give us a different path than control

“Community first” is a phrase that gets thrown around a lot, and there’s a good reason. We now can incentivize and govern a large group of people without direct human control. Another way to say this is :

Something beautiful happens when an entire community is empowered… the organization shifts from a machine that we’re building, into an ecosystem that we’re growing with.

A 3-month-old organization with 200 people:

At Banyan DAO we got together in January, and a small group created a strategy for getting the group aligned behind a goal and organized. Here’s a graphic to visualize how we’re using an event as a forcing function to get working together.

Two hundred human beings have so much wisdom, energy, passion, and potential. Two hundred human beings are also trying to cooperate over Discord — it’s a beautiful mess.

• How do we decide what to do?
• How do we build teams?
• How do we make sure projects are well defined?
• How do we ensure projects are moving forward?

In just 90 days we’ve been able to form our DAO on the blockchain, plan and promote a training event, develop our v1 best practices for working together in a decentralized manner, and we’re currently in the process of planning several products to incubate in Season 1.

When the community runs into an obstacle, they work together to find the best path forward.

Benefits I’ve seen starting a DAO vs. a traditional start up:

• Our DAO is faster and better organized than any startup I’ve seen.
• It hasn’t required any significant capital to this point.
• When we have a product that is ready to get funded we have the people and the network to do so.
• We have a built-in social network for promoting our products.
• We have the flexibility to spin off our projects into whatever vehicle best suits their future growth (Corp., LLC, DAO, protocol, token, 501c3 etc.).
• Every contributor, process, project, governance, and treasury is managed through digital voting — we are literally fully digital from day 1.
• The tool sets for DAOs are in a Cambrian explosion, and each quarter we know that the ecosystem will give us more powerful tools.
• DAOs cooperate with each other, there is a culture of “win and help win” where we share best practices, work together, and share.

Conclusion:

Software is eating the world.

We watched software revolutionize newspapers, music, movies, tv, commerce, transportation…

Today, Web3 technologies are quickly enabling software to “eat” finance, governance, and business…

As software consumes our current institutions, I foresee a new ecosystem of DAOs quickly moving into align and incentivize people to grow on a global scale.

I’m going to keep writing about this experience and what I’m learning, please feel free to follow me @mikeyanderson on Twitter.

Thanks!

Photo by Ashish R. Mishra on Unsplash