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I recently spent some time learning about “decentralized autonomous organizations,” or “DAOs,” for a New York magazine column, which you can read here.
Andreessen Horowitz has invested $5 million in a group chat.
In September, the trendsetting VC firm joined Pace Capital, Kindred Ventures, Spark Capital, and the 31-year-old New York Times–appointed “It Girl in venture capital” Li Jin in putting a total of $10 million into Friends With Benefits, which describes itself as “the ultimate cultural membership powered by a community of our favorite Web 3 artists, operators, and thinkers bound together by shared values and shared incentives.” While it may be that, in practice it’s mostly a chatroom on the app Discord, populated by around 1,500 crypto enthusiasts, artists, NFT collectors, and various hangers-on. Sure, by the standards of venture capital, $10 million is not a huge sum. But how much money has your friends’ group chat raised so far?DAOs, maybe best described as “what if your group chat were a joint-stock corporation, a co-op, and also a pyramid scheme?,” are the latest anarchic-utopian-vision-slash-speculative-financial-vehicle to seize the attention and manic energy of the sneakerhead investors and bored traders who turned NFTs into a hugely active and seemingly quite lucrative market over the last year or so. If you have not heard of them yet, you will soon, from whichever brother/cousin/nephew/college roommate is your portal into this kind of thing.
Okay, but, what is a DAO, you ask? The basic idea is that, through the use of tokens on the blockchain, people can create leaderless, self-directed organizations. The tokens essentially act as shares; they give you the ability to make and vote on proposals (like how the group can spend its pooled funds, for example), and you can earn them for doing work for the group — programming, serving on committees, providing liquidity, etc.
Importantly, in most cases you can buy or sell DAO tokens on the open crypto market. See a cool DAO you want to join? Buy the tokens. Disagree with the last vote your DAO took? Sell your tokens and walk away with what you’ve earned. The idea, as far as I can understand it, is to align the incentives of group members by attaching the financial value of their token holdings to the overall health and value of the group. The more people want in to your network, the more valuable your tokens, so you’ll want to make a group that people want to join.
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What are DAOs for? Well … that’s still not entirely clear. They’re for investing and/or laundering money, certainly, since the main and easiest thing you can do with them is pool and democratically disburse funds. But they could also theoretically — very theoretically — replace some of the big web platforms. Instead of Facebook, which you do not own and cannot control, you have Decentrabook, tokens in which you own and can earn (by posting, say) and sell (to people who want to join Decentrabook), and which give you the right to vote on changes. If you start to hate Decentrabook, you can sell all your tokens and walk away.
(Needless to say, the actual practical work of building a huge decentralized Facebook competitor through an unwieldy democratic blockchain system has yet to be … fully described.)
If that sounds kind of cool, you should also be aware that a constitutive feature of the DAO scene is its techno-utopian, Hillsong-via-LinkedIn, Zoomer booster culture. DAO guys all seem to be about 24 and are constantly tweeting stuff like:
Community is the culture of success. 🫂
You are playing the RPG of humankind. 💯
DAOs are the future of human thriving. 💪
We are winning. 👀
💬15 ♻️334 ❤️472
I call this “constitutive” because the whole structure of DAOs obligates you to tweet like this: The point is to make the value of your tokens go up, and it’s much more efficient to do that by tweeting constantly about how you’re at the frontier of human development and everyone should be investing in DAOs than it is to do by creating something of any practical use. Hence stuff like a guy named “Tracheopteryx” telling CoinDesk, “DAOs are a bet on the future of human organization itself.”
I don’t want to beat up on a bunch of earnest or gullible twentysomethings in particular, but, full disclosure: I find this kind of motivational-poster prosperity-gospel stuff just unbelievably alienating, more alienating even than the Anonymous-mask crank culture of early Bitcoin. But I’m older and cynical and not much of a gambler, and I recognize that falling for power-of-positive-thinking success-mindset flim-flammery is an American cultural tradition that I must respect.
I wouldn’t want to write off DAOs entirely, anyway, for two reasons. The first is that V.C. firms like a16z are putting money behind them, which means that even if the culture around them is cringey and the overall value of the market is highly inflated, people in the Valley with enough money and influence to make them matter have taken an interest. The second (related to the first) is that they are, philosophically and structurally, pretty interesting — or, at least, revealing. And if the rich bleeding edge of the tech industry is talking up the DAO, it seems worth understanding what it is, and why.
One key philosophical concept for the DAO worth exploring is the “ragequit.” In gaming, ragequitting is when you lose so badly (or unfairly) that rather than finish, you quit in the middle of a game; in software, it’s when a user finds themselves so frustrated or confused that they quit. In most DAOs you have a fundamental right, as a tokenholder, to leave and sell your tokens whenever and for whatever reason you’d like. (It’s sometimes also called “permissionless exit,” because you need neither social nor software permissions to walk away.) Here’s Adam Kerpelman at DAOhaus, a DAO that provides tools and support for other DAOs, explaining it:
In DAO speak, "rage quit" is […] probably more aptly called "freedom to leave" or something like that. And, like the domino that kicks off a paradigm shift, it seems too simple to be such a big deal. But it is. […] Rage quit is actually the ability to leave, and take your money with you. This is very powerful and aligned properly it can motivate cooperation and empower a community. […] The programatic existence of "exit rights" creates a new dynamic for contribution to a project. Sure, anyone could throw money in and then just go about their business. But the built in transparency of a DAO means that anyone who wants to protect their money can see what's happening in DAO transactions, and take their share back out.
“The ability to leave, and take your money with you.” Does that sound at all familiar? “Ragequit”: Is there a better term to describe the deepest fantasy of tech billionaires and their court philosophers? I’m thinking here of, e.g.
Tech executives like Peter Thiel shopping for new citizenships outside the U.S.
Billionaires like Jeff Bezos and Elon Musk launching companies for the purpose of creating and supporting space colonies. (Mars, as the terms of service of Musks’s Starlink satellite internet assert, is “a free planet and that no Earth-based government has authority or sovereignty over Martian activities.”1)
The ongoing message-board libertarian fantasy/magazine-feature fodder of the “start-up” country or city, like this recent one in Honduras or the seasteading project/grift of Milton Friedman’s grandson Patri.
Bitcoin philosophers pushing the idea of “crypto-secession” or “non-territorial exit” — the abandonment of (or exit from) supposedly oppressive or restrictive institutions like the Fed or the U.S. dollar for crypto alternatives.
Fantasies of exit among right-wingers are not new; the Confederate South famously attempted a ragequit in the mid-19th century. (Nor are they unique to the political right — but if the ragequit is specifically about “taking your money with you,” it will always be favored by the rich.) But in Silicon Valley these fantasies emerge from a particular kind of logic: that of the market.
The most famous and influential deployment of the idea of “exit” is Albert Hirschman’s 1970 book Exit, Voice, and Loyalty. Hirschman was interested in the kinds of leverage consumers can bring to bear in situations where the quality of a good or service declines. If — say — your favorite beer changes its recipe and starts to taste like shit, you can call the hotline on the bottle, complain to your shopkeeper, write a blog post about it, hold rallies, etc. That’s “the voice option.” Or you can just stop buying it and buy another beer instead. That’s “the exit option.”
Hirschman himself was not a market fundamentalist, but he understood that the exit/voice framework that worked so well in the context of economic decisions could in turn apply to political behaviors. A person leaving one political party for another, or moving to a different state or country — what Ronald Reagan famously advocated for as “voting with your feet” — could be seen as a means of leveraging power without “voice,” akin to a shopper choosing Miller over Budweiser.
Of course, as Hirschman noted, the cost of switching political and monetary regimes is generally extremely high. While the super-rich shop for citizenship and incorporation in countries with more favorable tax laws, most of the rest of us are restricted in where we live and whose rules we follow, if not by a lack of resources to do otherwise, then by law and social custom.
This is where the ragequit comes in. Fantasies of entrepreneurial metropolises on oil derricks and Martian settlements populated by Tesla dorks aren’t just utopian visions of the future; they’re idealized consumer-citizen alternatives. Mass democracy getting you down? Try Musktopia’s brand of nerd-authoritarian capitalism! Crypto suggests that you don’t even need to leave your computer to “exit.” “What blockchains really do,” the economists Trent J. MacDonald, Darcy Allen, and Jason Potts argued in a recent paper, “is radically reduce institutional exit costs.” What the crypto ecosystem asks is: What if it were as easy to pick your currency as it is to pick your beer? Actually, not even. It’s: What if it were easier? You can find the apotheosis of the ragequit vision — its logic followed all the way to violently stupid apocalyptic vision — in reactionary philosopher Nick Land’s looney-tunes (and wildly racist) essay “The Dark Enlightenment”:
Once the universe of democratic corruption is converted into a (freely transferable) shareholding in gov-corp. the owners of the state can initiate rational corporate governance, beginning with the appointment of a CEO. As with any business, the interests of the state are now precisely formalized as the maximization of long-term shareholder value. There is no longer any need for residents (clients) to take any interest in politics whatsoever. In fact, to do so would be to exhibit semi-criminal proclivities. If gov-corp doesn’t deliver acceptable value for its taxes (sovereign rent), they can notify its customer service function, and if necessary take their custom elsewhere. Gov-corp would concentrate upon running an efficient, attractive, vital, clean, and secure country, of a kind that is able to draw customers. No voice, free exit.
Freely transferable shareholding in a nebulously defined gov-corp judged by its ability to draw customer-user-owners. Huh.
In the context of the 2021 internet, dominated by inescapable platforms over which you have no control2, you can understand the appeal of organizations built around the ragequit. How much work and value have I given away to Twitter or Instagram over the last 10 years, not a cent of which was returned to me when I quit those platforms?
DAOs takes the scaled-up, Thiel-Musk-Bezos-Friedman-Land vision of the civilizational ragequit and scales it back down to the group. Or, really, what it does is provide a model for the “right to exit” that can scale in any direction. If your DAO-structured group chat becomes a rival to Facebook in size and influence — or even larger than that — the ragequit option is still (in theory) built into the software itself.
It even includes, also built into the code, something like a “voice option” — the ability to propose and vote on projects and ideas for the DAO to pursue. If this is only really an approximation of democracy (voting rights and power usually being dependent on the size of your token-holding), it is still more than Facebook or Apple or Amazon offer us.
The trouble is that the logic of the ragequit — the logic of market consumption — is relentless. Hirschman knew this. The “presence of the exit alternative,” he wrote in Exit, Voice, and Loyalty, tends “to atrophy the development of the art of voice.” The voice option — let’s just call it “politics” — is an art, which is to say it’s difficult and anxiety-inducing, and the opportunity to simply walk away will always threaten the delicacy and complexity of its progress. DAOs may not be Landian “gov-corps,” but anything where “free exit” is the principle is going to find itself in “no voice” territory pretty quickly.
Ultimately, the practical effect of the widespread adoption of the ethos of the ragequit, and of DAOs as the capital/organizational/software structure of internet platforms and communities, is likely not some new democratic ownership-type society, but unending institutional instability. If anyone can quit and take their money with them, and if everyone is too impatient or weak to avail themselves of “voice-option” processes, new, decentralized Facebooks and Twitters (or banks and mints and governments) will rise and fall in a matter of months, their fortunes tracked by the prices of their ownership tokens.
A “future of human organization” goes, this sounds incredibly exhausting. But as an arena for financial speculation, it sounds like paradise.