I am a great believer in a flatter, more “decentralized” world.
I genuinely think that less hierarchy means more innovation. And a decentralized culture creates more opportunities for personal expression, fulfillment, and — ultimately — happiness. At least, that is my everyday experience of working in several organizations and observing many more.
But why? Why is “hierarchy” the enemy of happiness?
Well, for a start, hierarchical structures kill open and honest discussion, leading to either indifference, apathy or exhaustion. Plus, hierarchies seem to go hand in hand with formal procedures, and an over-reliance on procedure — especially procedures designed and imposed “from above” — can suck the joy out of any activity.
As I’ve written before, the Millennial generation gets this. They view decentralization as a given for autonomy, responsibility, and happiness. Millennials — and this is a mindset, more than a generation — just seem more attuned to the freedoms and possibilities of a flatter world.
I think this is why they invest so much hope in the potential of new distributed ledger technologies, such as blockchain, that facilitate “flatter,” peer-to-peer relationships and transactions.
This was brought home to me again last week when I invited a mathematician to teach on my business law program. He gave us important insights into the “mathematics” behind many of the “technologies” (particularly, distributed hash tables, blockchain, smart contracts and decentralized autonomous organizations) pushing decentralization.
In class, we discussed the strengths of blockchain and smart contract applications.
They inhibit “rent-seeking” and offer transparency. And they are secure. For instance, the governance protocols used in a decentralized autonomous organization (or a DAO) are open source and weaknesses are constantly tested.
An openly readable ledger means anyone can check the integrity of transactions. The distributed cooperation component implies that “attackers” must be able to “out-compute” the entire network (which is practically impossible).
When we look at these strengths and advantages, we can also conclude (as we did in class) that DAOs will eventually overtake any organization which lacks these incentives and efficiencies. Moreover, DAOs are cheap and straightforward to “clone,” which will potentially lead to more competition. The distributed and anonymous nature of the organizations prevents natural and political monopolies.
Of course, we aren’t quite there yet.
Blockchains and DOAs still have significant technical and operational shortcomings. And it was interesting to get a mathematician’s take on this issue.
In our discussion, the following weaknesses were highlighted. There is still a lack of decentralization (there are currently no true DAOs). For instance, Bitcoin’s proof of work protocol has led to “mining pools” because of economies of scale and unbalanced reward structures. Also, the anonymity in blockchain organizations means that they are prone to “Sybil attacks” and “51% attacks.”
There are many examples in which the anonymity (and autonomy) has led to hacks. Remember that in a truly decentralized system, any mistakes (stolen/lost passwords, programming bugs, etc.) are permanent and irrevocable.
We are currently living in a fast-developing “space” between two co-existing realities: a centralized “old world” reality and an emerging but incomplete new “decentralized reality.”
The centralized reality with its hierarchical organizations, rules, regulations, and institutions still prevails. It appears unlikely that we will say goodbye to our familiar, centralized procedures and organizations anytime soon. Mainly, since the “success” of decentralized procedures and organizations very much still depend on the goodwill and altruism of the parties involved.
Nevertheless, a more decentralized reality has already emerged. Facebook, Twitter, Uber, Airbnb, and Spotify are early examples of this. They offer flatter transactions with less reliance on intermediaries.
But with trust in these new “centralized companies” already declining (mainly due to the concentration of power, wealth and information), distributed ledger technologies, including blockchain, are increasingly viewed as offering a superior long-term model.
The technologies have the potential to create real level playing fields, transparency and “applications that run exactly as programmed without any possibility of downtime, censorship, fraud or third-party interference.”
And, here’s the key point. We have already passed the “tipping point” in our experimenting with decentralized technologies.
There’s simply no going back.
So, instead of locking yourself away in the traditional “centralized” world or remaining trapped in the space between these two realities, it is better to study and embrace these new organizational developments.
I would even argue that it is necessary to become actively involved in the further development of blockchains and smart contracts and the creation of a decentralized reality. Only, if we build the new reality together, will we ensure that a decentralized world can reach its full potential and offer greater transparency, convenience, and trust.
When we co-create the future together in this way, new jobs, opportunities, possibilities will inevitably emerge.
And incorporating multiple perspectives — business, mathematics, and law — will be essential to make sure that we make the right decision in our journey towards a better decentralized and distributed reality.
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