DAO meets FPE – PART 3: Synergies Between DAOs And FPEs

As we explored in the previous articles, there are a lot of commonalities between DAOs and FPEs. In this article let’s have a closer look at what the obvious points of synergy between both models are.

What FPEs have to offer to DAOs

Systematic PowerShift

The seat of power shifts from a collection of people to a collection of rules. The rules bind everyone equally with no personal authority over the rules themselves or over others.

It’s roles and circles all the way down…

Scalable Holarchical Structure

The embedded Holacracy® framework replaces a hierarchy of people with a nested hierarchy of organizational roles and circles (“holarchy”) that is highly scalable.

High Agency and Autonomy for Role-Leads

The rules of the game empower Role-Leads to make decisions with a high degree of autonomy within clear bounds.

Robust Governance Process

The Holacracy Constitution provides clear rules and an efficient process on how each circle governs itself and can develop the expectations and boundaries on its roles.

Dynamic Equity and New Financial Instruments

The FPE frameworks legally encode a way to account dynamically for the inputs of different partners during the start-up phase using the Slicing Pie methodology. The various units of account (Dynamic Equity – A-Units, Deferred Interests – D-Units, Profit Interests – P-Units, Capital Interests — C-Units) provide greater financial flexibility.

Clarity on the Legal Framework

The company encode.org already managed to encode its principles of Purpose, Structure, Awareness, Agency, and Transparency in the legal documents of its Nevada-based LLC container. It is currently adapting it to fit the brand-new Wyoming LLC DAO solution. This will make encode.org “a legally registered power-shifted DAO, operating as an FPE” — a solution that could be highly attractive for any existing DAO and its members as well.

What DAOs have to offer to FPEs

On-Chain Representation of Governance Records

DAOs live on the blockchain. Currently, FPEs and organizations that practice Holacracy still store their governance records in software tools that are hosted centrally by the respective tool providers, GlassFrog and Holaspirit. A decentralized app (“dapp”) version of these tools could make them tamper-proof and would increase trust in their veracity. This would be especially relevant for larger organizations with many hundreds or thousands of people.

Elaborate Tokenomics and Well Working Incentive Systems

The crypto space in general and DAOs, in particular, have figured out how to create well-working incentive systems. They have managed to attract a huge inflow of money, skill, and attention. FPEs could definitely use more of all of those.

Summary

It is an exciting time and technological, as well as organizational innovation is moving at neck-breaking speed. For anyone with eyes to see, it is obvious that DAOs and FPEs have many points of convergence that should be explored for mutual benefit.

Their respective value sets are overlapping to a large degree: both value radical transparency, aspire to distribute power systematically, encourage participatory decision-making, and enable peer-to-peer collaboration for a common goal or purpose. It’s a match made in heaven — a legally registered power-shifted DAO, operating as an FPE.