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Shaking strategy to the core: A look at decentralized decision-making and trade bodies of the future

By Simon Forrester and Miles Hoare

Would your association function more efficiently without a traditional command structure?


Over the last 10 years, Big Data and other major technology trends such as social networking, cloud computing, mobile comms, new analytical applications and algorithms have created significant opportunities for associations and their members to improve their decision-making capabilities. They offer speedier and better conclusions, they provide instant access to financial and other key performance data, they prompt opinion on issues affecting the industry they serve, and they even facilitate virtual policymaking through online forums. Our apologies to those of you yet to engage with these innovations — that’s yesterday’s news. The association of tomorrow may not have any formalized decision-making structure of volunteers. Rather than the traditional association role of attempting to lead the masses, why not let the masses lead us? Some organizations are embracing decentralization and the writing may be on the wall for the traditional association decision-making model of volunteer-led committees. As a traditional association manager, you may either be rubbing your hands or, alternatively, clutching your pearls at the very thought.

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It’s a long-held notion that things decided and dissected by groups can often, “become a camel” (the proverbial horse designed by committee) — and much can be said for this when it comes to trade association boards. Whilst association leaders do their best to sense the prevailing winds in the trade and take quick, proactive decisions to best serve their members in ever-changing markets, they’re often let down by ego-driven or unqualified individuals, tedious and burdensome decision-making processes that slow progress, and the dearth of market intelligence caused by limited networks.

For those of us who are lucky enough to work within sleek and efficient governance models (and ad hoc research shows that is a low percentage), the nagging doubt that we are heavily engaged with a vocal minority of members (i.e., those who choose to join a committee) still weighs heavily. What if our volunteers are unrepresentative? What if we are dominated by a few large voices with egos to match? The danger lies in taking decisions based on a small and unrepresentative (or downright biased) sample. And while tools exist to gather the views of the wider membership, this is currently cumbersome — and can, in fact, annoy and alienate members through survey fatigue.

To members of the association or those tendering deals with them, this can sometimes be a small frustration; but when it comes to getting the best out of your business and being able to rely on a trade association to be at the cutting edge, it can mean the difference between beating the competition or losing out to other businesses, or entirely different industries altogether.

So, how can trade associations and professional bodies be more nimble and adaptive to changing climates? How can they act in the best interests of their members and with the prevailing wisdom? Well, until very recently, this was a difficult task — that was until the concept of the Decentralized Autonomous Organization (DAO) was born.

WHAT IS A DAO?

It is essentially as it sounds — an organization that has no central power and is run autonomously without governance. The concept of “networks that run themselves” uses a complex set of what are called “smart contracts” and allows the autonomous exchange of contracts, information, payments and settlements through a decentralized network of computer systems. Decisions on how the organization is run are taken by participants in the network, known as “voting nodes,” who are stakeholders that can steer changes in the network in a democratic fashion.

The most popular use of this democratic, trust-less form of organizational structure is Bitcoin. Bitcoin proved you can run a basic organization through a decentralized system without the need for trusted third parties. This means individuals need not know — or trust — the other individuals in the network, but simply agree to the rules baked into the system to be able to exchange contracts. As the rules cannot be altered without a majority decision of voting nodes, no one need trust the other parties, as they cannot act outside the rules of the network.

Being trust-less, the network can work, even if each individual actor operates in their own interests. In fact, this dynamic actually makes the network possible and can align incentives with positive actions, without resorting to centralization and third parties such as boards or committees. Thus, rather than putting power and trust into a few individual board seats that can make decisions in the interest of the association (or, in all too many cases, themselves) it means no one individual can stifle progress or loot from the group if everyone else doesn’t agree to these rules and decisions of the organization.

HOW DOES THIS WORK IN PRACTICE?

For a membership organization, each participant in the network would have to agree on terms of contract before becoming a member of the network. Payment for say, a membership subscription would go into the DAO — a centralized pot, on which the organization can then vote to spend in certain areas, can give back to members as digital assets or “shareholdings” (thus overcoming the whole “company limited by guarantee” issue), or be used as an in-platform currency that acts like a share exchange for additional products and services.

The network develops based on proposals that can be signaled by the network for approval or disapproval. In terms of a DAO, proposals can be from a centralized body — the CEO and admin staff who run the day to day “services” of the organization — if an organization requires or decides to have these staff — or they can be proposed by participants in the network, the members themselves.

These are then voted on by the network using the same blockchain ledger technology that makes Bitcoin a secure and trusted payment network. Voting in this way can be based on a percentage majority vote and a quorum of votes; it is secure and immutable.

Payments in and out of the DAO could then be traced through a private (member-only) or public ledger so that DAO funds can be tracked, assuming any third party such as employees are given access to funds. Reporting for purposes of auditing or final accounts would require submission of the ledger state for one accounting period, and any member data collected bythe system could be prepared into a statistical yearly report.

Through smart contracts these processes can be automated, in theory ridding the organization of the need for boards and patronage, allowing trust-based systems to hard code the agreed consensus of the majority into the governance of an organization.

And if the thought of members being bothered to respond to every question about the future direction of the organization fills you with dread, that’s been considered too. Instead of voting for each and every action, members can simply relay their broad preferences to an artificial intelligence (AI) agent. These thousands of micro-decisions can then be addressed autonomously by the network’s AI actors.

WHAT DOES THIS MEAN FOR ASSOCIATIONS?

This won’t just be an insurrection for associations, but for the way the world operates. You only have to look at Johann Gevers’ “decentralized society” project, or the Japanese city of Tsukuba to see how entire voting and legal systems, currencies, production and services can be baked into decentralized contracting frameworks — powered and decided on by people voting on trust-based systems.

What this means is that people will again have control over how knowledge, services and products will be sold and traded — rather than those with positions of power. It will be through the will of the voting participants in a system, exchanging value and contracts by consensus — agreed by the democratic majority and enforced by the rules of the code. Perhaps the perfect model for an association — an engaged and wholly democratic organization, free to spend all assets on projects of sole benefit to the majority of the membership.

If there is a revolution coming in the next 10 years — it won’t be from the streets. It will be from the bedrooms of computer geeks with libertarian ideals, creating a new form of capitalism without third-party interference, cronyism, fraud and corruption. A society powered by direct democratic means, where the people can truly decide their own rules and trade freely without the old middlemen. Perhaps the writing is on the wall not just for boards and committees, but for association CEOs too.


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