Can new social and digital technologies transform governance?

Context

This piece outlines how we would approach analysing the potential of new techologies to enhance and transform governance across a range of contexts. It elaborates on the call for action outlined in our piece for Demos Helsinki's Untitled: Web3 Might be Excititng, But Tech Alone Can't Fix Governance.

Executive summary

Recently available technologies make it possible to govern and design organisations in novel ways - with different methods of voting, decision-making and trust-building. For example, bold claims are made for how blockchain can enable cooperation at larger scales, such as via DAOs (of which there are many thousands, with billions of dollars in assets) and other coordination mechanisms. In parallel there is growing interest in decision-making models such as quadratic voting, or combinations of artificial and collective intelligence using tools like Polis, alongside concepts such as Humble and Agile Governance.

However, this emergent field tends to polarise between overblown claims that the technologies can ‘fix’ the problems of democracy or economic hierarchy on the one hand and entrenched scepticism on the other. We believe work is overdue to look in more depth and what new tools could be used for which purposes - from rethinking democracy to decision-making in companies, mutuals or coops. This work is needed to provide guidance for designers and shapers of organizations who want them to be inclusive and effective and want to know what to do and what to avoid. We want a better roadmap showing how best to use these new tools for transformation and achieving the goals of transitions over the next few decades - to a net zero economy, greater social justice and the rebuilding of trust.

This project aims to undertake a rigorous and practical analysis of new governance and organisational models, focusing on evaluating the claims made about them, what might be learned, and how they might be applied across varied contexts, from organisations to cities. The aim would be to provide recommendations for design and for experiment. The project would proceed as follows:

• Step 1: Examine and map the many options, including technologies, organisational forms, decision-making processes and platforms.
• Step 2: Close examination on the most promising options, engaging the proponents and others to create a framework and taxonomy for classification and assessment.
• Step 3: Critically assess the models against this framework, with particular focus on the following:
  • Their viability
  • Their potential to solve problems
  • Their applicability across contexts, especially in more day-to-day areas such as local energy and housing systems, cooperatives and companies.
• Step 4: Conclusions with a revised map of what forms and methods are likely to be useful for what purpose. Recommendations for further research and piloting. Sharing and engagement around conclusions.

The project would be led by Professor Sir Geoff Mulgan (former Head of Policy for the UK Government and Professor of Collective Intelligence at UCL) and Dr Rufus Pollock (former Mead Fellow of Economics at Cambridge University and Policy Advisor to the G7, World Bank and UN), with a network of contributing researchers. Our project team is well placed to explore the potential of these new approaches, and how they might practically be applied throughout our societies. We view it as providing a useful supplement to databases such as GovBase and Participedia by adding a rigorous and comparative analysis of the utility of models, and exploring how they might apply beyond their initial use cases.

Motivation

Recent years have seen an explosion in organizational experimentation. This has been most significant in blockchain and DAOs but can also be seen more widely, such as in the rise of collective intelligence methods for organising tasks or teams, some combining CI and AI, the “Teal” organisational paradigm¹ and in the use of participatory decision-making platforms². These provide a valuable stimulus to those interested in innovating organizations and wider social & economic systems (and any serious investigation of the future of the economy or democracy cannot ignore these options).

However, the level and diversity of activity and options can be bewildering. Moreover, there are many who evince legitimate skepticism, especially for some of the grander claims. This echoes what happened a generation ago with Web 2.0 when there were high hopes that it would enable radically flatter and more democratic models of organisation. Instead, what predominated were very traditional corporate forms, although there was also a great deal of innovation around new types of platform and collaborative working tools.

In retrospect it’s clear that far too little serious work was done to find out how best to adapt the technologies to different tasks.

This research and action project aims to avoid this mistake being repeated, by taking a rigorous approach to addressing these needs, led by a team with deep theoretical and practical expertise.

Context

There has been growing excitement about the potential for governance innovations to enable more effective, large-scale human cooperation. The digital age has given rise to new forms of organisation, which have challenged traditional approaches to governance and collective decision-making³. It has also made possible large scale participatory governance, which is being trialled in cities and even entire nations⁴.

In the blockchain sphere particularly, a growing number of initiatives are implementing market-like mechanisms for decentralised coordination, particularly around public goods and the commons⁵. These mechanisms bear striking resemblance to proposals such as Remuneration Rights, which our own team members have long advocated⁶.

Resources such as GovBase⁷ and Participedia⁸ already compile governance innovations and examples of their use, particularly those leveraging digital technology. However we identify great benefit in supplementing these with a more rigorous in-depth and comparative analysis of models, alongside an exploration of their potential to transfer across contexts.

The problem is that debate is extremely polarized, especially around blockchain. Grand claims about its transformative potential come up against strong skepticism that there is anything of value to be taken from it⁹. There is little hard evidence or analysis to bridge the gap between the evangelists and the sceptics. This hinders our ability to make sense of this emerging field generally, but is particularly problematic when evaluating its experiments with governance. Far too often assessments of blockchain technology itself are tied to assessments of the governance mechanisms being trialled using blockchain; either they are deemed transformative innovations just because they exist on the blockchain, or are dismissed as useless hype for the same reason.

The debate around Holacracy shows this is far from just a blockchain phenomenon.¹⁰ It’s rise to prominence was accompanied by grandiose claims that the world of work would be transformed forever. When some of its major adopters struggled or reverted away from the system, this was leapt on by critics as a sign the system did not work. The result is a lot of uncertainty around the potential of such approaches to operate at scale.

If we are to derive the learnings necessary for social innovation, it is necessary to disentangle these experiments in governance from their controversies. We must examine their value as social technologies in their own right. Rather than seeing them as universal answers to the problems of cooperation we think it’s wiser to look in more detail at the many different tasks and design challenges of organisation, which are likely to result on a complex ecosystem of different options for different tasks. What makes sense for a neighbourhood energy system is bound to be very different from what makes sense for a design cooperative or an investment fund. We think that those interested in creating more effective and inclusive institutions can benefit significantly from understanding how experiments in governance might apply across a range of contexts, so they can decide what to do and what to avoid.

What are organisations for?

Greater clarity on the potential of technologies has to start with an understanding of the many purposes that organisations have. We use organisations for everything from providing food to healthcare; administering justice to policing; educating to building infrastructures. Not surprisingly, this wide range of tasks requires a very wide range of organisational devices, with different approaches to decision-making, risk and accountability.

It’s also important to understand the different dimensions along which organisations are based. Some are very easy to join and leave; others are very ‘sticky’. Some are rooted in place - like neighbourhood governance, energy or housing, while others are entirely virtual. Some have formal and universal rules - like the principles of formal democracy - while others are much less formal and flexible. Some are based on one person one vote, others have variable rules, or confer power on providers of capital, providers of expertise or based on contribution.

Some organisational models focus on work - such as worker cooperatives - others on capital (such as many mutuals) and others still on guardianship of resources and commons - water, forests or data.

• What stakes are in the organisation – internal or external?
• How dependent on very specialist knowledge?
• What principles should govern votes – one person, one vote; contribution; longevity of membership; peer support?
• How dependent on context or place?
• How transparent (eg very different for a hospital compared to an environmental NGO)?
• How codifiable (eg most contracts can only codify a proportion of their inputs and outputs)?

Usually what results in successful organisations (whether tech firms or universities, housing management organisations or consultancies) is a combination of some elements of hierarchy, egalitarianism and individualism.

Surprisingly little of the literature on new technologies takes account of any these differences or indeed of experience and history. Yet we expect that this clarity will be key to making sense of how new tools can be used, particularly in relation to:

• The future of democracy - at neighborhood, city, region, national or global levels
• The future of the economy - how to organise work, capital, consumption
• The future of ecology - how to nurture and care for forests, wetlands and the biosphere

What can technologies do?

Before the digital age there was a slowly evolving menu of organisational forms available, including private companies limited by guarantee, shares or membership; mutuals and coops; public agencies; associations; charities and many others, along with some innovations like B-Corps or Community Interest Companies.

The arrival of the Internet made new forms of organisation possible - including a wide variety of platforms. The promise made now is that Web 3.0 may allow for:

• New rules of membership
• New rules of decision-making
• Transparent and sometimes automated processes
• Automated contracts
• Inbuilt rewards and penalties for behaviours
• Support for achieving consensus in large groups

At the same time an emerging field of collective intelligence is bringing greater rigour to the question of how to organise meetings or teams to maximise shared intelligence; how to achieve synchrony and synergistic actions; and how to solve problems at scale, from scientific observation to social problem-solving, often combining human and machine intelligence.¹¹

The main purpose of the project is to understand which of these capabilities can be applied to different tasks, focusing in particular on the key tasks for the transitions of the next few decades.

Summary plan of work

We would propose an approach comprising the following steps:

• Step 1: Examine and map the many options, including organizational forms, decision-making processes and platforms.
• Step 2: Deep dive into the most promising
  • Engaging the proponents and experts
  • Creating a framework and taxonomy for classification and assessment.
• Step 3: Critically assess the models against this framework, with particular focus on the following:
  • Their viability
  • Their potential to solve problems
  • Their applicability across contexts, especially in more day-to-day areas such as local energy and housing systems, cooperatives and companies.
• Step 4: Conclusions with a revised map of what forms and methods are likely to be useful for what purpose.
  • Recommendations for further research and piloting.
  • Sharing and engagement around conclusions.

Plan of Work

Step 1: Examine and map options

Growing awareness of the need to innovate our governance systems has led to new concepts and experiments emerging. National and regional institutions are already exploring what Agile¹², Humble¹³, and Associative¹⁴ forms of governance may look like. There has also been renewed interest in organizational forms such as co-operatives¹⁵, particularly given their potential to be combined with new innovations in digital and social technology.

The emergence of blockchain provides a prominent example of this link between digital and governance innovation. The blockchain sphere has given rise to many new forms of organisation, and accompanying mechanisms for coordination and governance¹⁶. Some of the most pertinent are DAOs, or Distributed Autonomous Organisations. These are often transient and collectively governed organisations which transcend national boundaries - both geographical and legal - and whose governance rules are encoded into virtual “smart contracts”¹⁷. There has been growing interest in DAOs due to their purported benefits relative to traditional organisations, particularly with regard to their participatory and transparent governance and fluid membership¹⁸.

DAOs have shown great willingness to experiment with alternative governance mechanisms, particularly around member voting on organisational decisions. These voting mechanisms range from more established alternative mechanisms such as quadratic voting¹⁹ and liquid democracy²⁰ to entirely new forms such as conviction voting²¹ and novel forms of Futarchy²² (which incorporates the use of prediction markets into voting) such as holographic consensus²³ and knowledge-extractable voting²⁴. Each of these mechanisms purports to hold advantages over traditional forms of group decision making.

Claims about the potential of these novel organizations and governance mechanisms are wide ranging. Some argue that they can improve more traditional models such as platform cooperatives²⁵, while others believe they can revolutionize democracy entirely²⁶.

DAOs provide a prominent forum for experimentation with alternative governance, but the blockchain contains others also. Excitement has also grown around the potential of blockchain to facilitate governance of the commons. Potential connections between blockchain governance and Ostrom’s Design Principles have already been made²⁷, along with attempts to go further and encode these directly into blockchain based smart contracts²⁸. Experiments in this sphere have often focused on the use of market-like mechanisms to coordinate decentralised networks around a common social purpose. Mechanisms such as token bonding curves²⁹, curation markets³⁰ and networked social impact bounties³¹ are all claiming to form part of the solution to commons governance by aligning private, material incentives with the public good. There is understandably controversy even within the blockchain community both over their actual ability to fulfil their claims³² and the hyper-financialisation that lies at the heart of their approach to governance³³. Nonetheless, given the undeniable power of markets as a coordination mechanism, there may be lessons to be learned, particularly in the ever difficult spheres of funding public goods and services. This is something our team have previously argued for regarding the digital commons³⁴.

There are no doubt a great many other novel approaches to governance and coordination already being discussed and even trialled, within the blockchain sphere and more traditional forums . The plethora which is immediately visible demonstrates that there will be huge value to further investigation.

Step 2: Deep dive into the most promising

Part of the unclarity present in debates about these innovations is that there lacks a structured means of assessing their relative utility, particularly across varied contexts. A systematic assessment of promising models would seek to marshall the broad spread of claims and experimental evidence to ascertain potentials for use value.

To develop an assessment framework, we would undertake research in literatures such as organisational studies, economics and political science to compile a set of high-level criteria for utility based on key governance principles such Ostrom’s design principles and ability to address common problems such as the principal-agent problem. We would then construct a typology of use cases for governance and organisational models based on literature reviews, our own knowledge and key informant interviews. Examples would include organisations such as cooperatives and companies, local governance of key sectors such as energy and housing and perhaps broader democratic systems.

For each use case we would develop a further framework for assessing viability and utility of governance mechanisms in each of these contexts based on relevant literatures such as organisational studies, alongside key informant interviews with relevant stakeholders across each organisational context such as government officials, policymakers and leaders of non-public sector organisations. These interviews would focus particularly on the needs and challenges present for actors “on the ground”, creating a practical set of success criteria for new models to supplement those grounded in theory.

Finally, we would populate the framework with illustrative examples of more traditional modes of governance already used in these sectors. This would provide points of comparison against which to benchmark alternative models, including surfacing further problems faced by existing models which alternatives may valuably address. This process would also allow us to make adjustments to our framework to ensure it captures all the criteria relevant to efficacy. Should our knowledge of an existing model (such as representative democracy or command and control hierarchy) lead us to believe that a key feature, strength or weakness is not captured by our framework, then we will be able to make informed iterations to address this.

Step 3: Assessment

Our next step would see us undertake an assessment of the most promising tools and models based around:

• Their viability
• Their potential to solve problems
• Their applicability across contexts, especially in more day-to-day areas such as local energy and housing systems, cooperatives and companies.

We would initially assess the models we have collected based on our high-level framework for utility. Having done this, we would then begin to sort them into potential use cases based both on the uses already purported for them and our own understanding of both their functioning and the needs of specific use cases. We will begin by sorting fairly liberally and only discounting those models which seem resoundingly unfit for a given purpose. We therefore expect many models to be passed on for evaluation for a number of distinct use cases.

We would then assess the sorted models based on the criteria for viability and utility for the use cases they could potentially apply to. Conclusions around use-case applicability would then be combined with initial high-level assessments to draw conclusions both around where certain models may be useful, and the utility of different models relative to one another.

Step 4 Conclusion: mapping what forms and methods may be useful for which purposes

The project would produce an accessible output outlining which models may prove useful and in which contexts. This output would be designed to act as a practical toolkit for policymakers and those creating or running organizations to easily assess and implement alternative governance mechanisms.

We would disseminate and share our learnings with relevant actors, to maximize their usefulness in practical contexts.

We would end by offering recommendations both for further research and also around potential pilot projects which could be undertaken to further trial the most promising models in diverse contexts.

Appendix : Exemplar outline of different governance tools and approaches

Below we outline an exemplar list of governance models, voting mechanisms and market based coordination mechanisms. While it is far from exhaustive, this indicates some of the potential governance innovations which could be covered by the project.

Governance Models

• Humble Governance
  • The Humble Governance model allows for problem-Solving to be initiated as soon as decision-makers have reached a thin Consensus around a framework goal. Once a thin consensus is reached, the model gives societal stakeholders the autonomy to pursue these goals based on their proximity and knowledge of the topic. Peer learning and iterative revision of the framework goal then come into play, fostering a thicker Consensus as the process provides results and Actors prove to be trustworthy.
• Agile Governance
  • Agile policymaking deploys key elements of agile methodology such as user-centered design, prototyping, rapid iteration, and continuous feedback loops.
• Associative Governance
  • A networked approach to governance that is based on mutual trust, collaboration, devolution of power and decentralization of decisionmaking to the lowest level practicable
• Decentralised Network Governance
  • Our approach of decentralized network governance seeks to distribute governing tasks according to capability and exerted power, on a fluid basis. This implies that governance tasks are distributed neither on the basis of the identity of actors nor on the basis of the role they can perform in the governance process. Given that different actors perform multiple roles within blockchain structures, often simultaneously, the relational nature of power is fundamental in this conception of governance. Within a governance network, a relational conception of power necessitates fluidity in governance tasks. The distribution of power becomes variable and dynamic dependent on the specific relation between two or more actors.
• Holacracy
  • Holacracy is a method of decentralized management and organizational governance, which claims to distribute authority and decision-making through a holarchy of self-organizing teams rather than being vested in a management hierarchy.
• Ostrom’s Design Principles
  1. Define clear group boundaries.
  2. Match rules governing use of common goods to local needs and conditions.
  3. Ensure that those affected by the rules can participate in modifying the rules.
  4. Make sure the rule-making rights of community members are respected by outside authorities.
  5. Develop a system, carried out by community members, for monitoring members’ behavior.
  6. Use graduated sanctions for rule violators.
  7. Provide accessible, low-cost means for dispute resolution.
  8. Build responsibility for governing the common resource in nested tiers from the lowest level up to the entire interconnected system.

Voting mechanisms

• Quadratic Voting
  • Quadratic voting is a collective decision-making procedure which involves individuals allocating votes to express the degree of their preferences, rather than just the direction of their preferences. By doing so, quadratic voting seeks to address issues of voting paradox and majority rule.
  • Quadratic voting works by allowing users to "pay" for additional votes on a given matter to express their support for given issues more strongly, resulting in voting outcomes that are aligned with the highest willingness to pay outcome, rather than just the outcome preferred by the majority regardless of the intensity of individual preferences. The payment for votes may be through either artificial or real currencies (e.g. with tokens distributed equally among voting members or with real money).
  • Quadratic voting is a variant of cumulative voting in the class of cardinal voting. It differs from cumulative voting by altering "the cost" and "the vote" relation from linear to quadratic.
• Futarchy (prediction market incorporation)
  • Holographic Consensus
    • Holographic Consensus (HC) was a concept spearheaded by DAOstack. This voting mechanism associates a prediction market with each proposal. Predictors can stake funds for or against a proposal they believe will pass or fail. If they predict correctly, they benefit financially. Proposals that are predicted to pass are “boosted” and voting switches from 50% quorum to relative majority (where you only look at For vs. Against votes, and no quorum is needed), making the barrier to pass proposals much lower than proposals that don’t have funds staked on them.
  • Knowledge-extractable Voting (KEV)
    • The core of KEV is to give knowledgeable experts more voting power. KEV’s thinking stems from a reflection on populism in realpolitik.
    • In the KEV mechanism, proposals will be divided into different topics, and different topics will correspond to different knowledge tokens. Possessing a certain type of knowledge token can have greater voting rights in the proposal of this type of topic.
    • If Alice has knowledge tokens on many tax law topics, Alice’s votes will have greater weight when voting on tax law proposals.
    • If Alice’s vote matches the final voting result, Alice will be rewarded with more knowledge tokens corresponding to the topic. On the contrary, if Alice’s vote is inconsistent with the final voting result, her knowledge tokens will be deducted. The KEV mechanism encourages people who have more professional knowledge of a proposal to vote, and also encourages people who do not have enough information and knowledge about a proposal not to vote.
    • NB - in the final analysis, to judge whether the expert’s choice is correct, it still depends on the final voting result itself, not whether the voting decision itself has a positive impact . Out of Furtachy’s frame.
• Permissioned Relative Majority
  • Relative majority (ie, where you just compare total number of for and against votes) isn’t a viable governance option for DAOs due to the ease with which they can be attacked (1 person can easily drain the DAO’s funds while others aren’t looking!). However, Moloch DAOs have a nice little feature to prevent this: proposals need to be sponsored by DAO members in order to be voted on, which adds a nice security buffer.
• Conviction Voting
  • Conviction Voting offers a novel decision making process that funds proposals based on the aggregated preference of community members, expressed continuously. In other words, voters are always asserting their preference for which proposals they would like to see approved, rather than casting votes in a single time-boxed session. A member can change their preference at any time, but the longer they keep their preference for the same proposal, the “stronger” their conviction gets. This added conviction gives long standing community members with consistent preferences more influence than short term participants merely trying to influence a vote.
• Lazy Consensus
  • In this system in development by Colony, , anyone in the community can make a motion for something to happen. If no one objects within a certain amount of time, it happens. If someone objects, then a reputation-weighted vote decides whether or not it should happen.
• Liquid Democracy
  • Users with voting rights can choose to delegate their voting rights to people they trust and consider professionals, but they can withdraw their delegation at any time and exercise their voting rights in person, or transfer the delegation to others. In addition, delegation is multi-level, and the votes you delegated may be delegated to others again.
• Weighted Voting and Reputation Based Voting
  • Voting utility can be linked to holding time (of voting share/tokens) - guards against financialisation of voting tokens
  • Reputation is a non-transferable, non-negotiable point. You may gain reputation by holding or locking tokens, but it is reputation, not tokens, that has voting rights. Reputation can also be earned by contributing to an organization. It should be noted that reputation holders do not have absolute ownership of reputation. The reputation you have acquired can be destroyed through code rules or governance voting. For example, when a reputation holder acts in a way that harms the interests of the organization,
  • its reputation may be deducted; for another example, in order to avoid the continued influence of the reputation acquired in the early stage and undermine fairness, the reputation can be gradually deducted over time. deduction, or lapse due to expiration.
    • Reputation voting gives DAO the ability to adjust the voting weight based on its community ecological distribution and token distribution, and also avoids governance attacks and fairness issues brought about by token-based voting. By customizing the calculation rules and obtaining methods of reputation value, DAO organizations can practice the “democracy” that they understand and recognize.

Market like mechanisms

• Token Bonding Curves
  • A bonding curve contract (bonding contract from now on) is one that issues its own tokens through buy and sell functions. To buy tokens, you send ether to the buy function which calculates the average price of the token in ether terms and issues you with the correct amount. The sell function works in reverse: first you provide the bonding contract with permission to take the amount of tokens you want to sell and then you trigger the function to take those tokens from you. The contract will calculate the current average selling price and will send you the correct amount of ether.
  • Put simply, the token bonding curve is essentially an infinitely liquid, decentralized central bank. At any time, you can buy newly minted token from the token bonding curve using specific reserve assets, or sell your tokens (which are instantly burned) for one of those assets.
• Curation Markets
  • Token curation markets create models for group cooperation and group achievement that are incentivized by tokens of value. A group agrees upon a goal, or task, and issues a specific digital token called a project token through smart contracts. Participants use project tokens to reward the successful curation of agreed upon information. Project tokens are issued for the curation of information causing them to increase in value per token each time new tokens are issued.
• Social Impact Bounties
  • A bounty is a simple social contract, where the issuer of the bounty names the price they’re willing to pay for a certain deliverable. Bounties have recently been added to social goals and delivered via the blockchain.
• Remuneration Rights
  • With Remuneration Rights, creators and innovators would receive a “remuneration right” instead of a patent or copyright they receive today. The remuneration right would entitle their owner to payment from a central Remuneration Rights fund. The payment would be proportional to the usage and value generated by their creation. For example, with a medical remuneration rights payment would be linked to the estimated health benefits. With music remuneration rights it would be based on total plays.

References