Why the DAO must Resist “MBA thinking”

For those of you who do not know Matthew Graham, he is an innovative DAO thought leader in the realm of tokenomics, DAO treasury diversification and metagovernance. And like a lot of folks, he might be a wee bit frustrated with governance and decision making in the DAO space. On July 08th, he posted this comment on twitter:

If you are not following Matthew Graham — you should.

I can relate. And, he is likely not wrong, but for different reasons. I had a visceral response to his post and as I tried to argue my point — that we have to resist what I call “MBA thinking” in order to deliver on the promise of the DAO — and I failed miserably. Lets face it, Twitter is not the best platform for nuanced debate.

Let me back up. While doing my MBA at your typical Jesuit business school, we were indoctrinated with the concept that the point of Business was to “deliver better than average shareholder returns”. If I translate that into everyday speech, it means — make sure shareholders of the company you work at beat average stock market returns (make money). AKA: MBA THINKING

The response to the post from Matthew culminated into a twitter thread I posted that turned into a kind of manifesto. I am not sure it is complete or totally correct, but it’s a starting point to identify why I think MBA thinking to an extreme is detrimental to the DAO experiment.

To illustrate my views were not rooted in foofy-feel-good butterflies-bunny-rabbits idealism, I outlined that at heart, I am an entrepreneur and historically, a capitalist.

My first attempt at business was in grade 7th which ended up in the principal’s office. My second attempt was more successful as a Junior in high school. At University, I was an entrepreneur and was excited to work for myself and eat what I caught. Business was crystal clear. If my work was effective, I ate better. If it was not, I had to put in extra hours at the other jobs. And it paid my way through the California State University at Chico.

After university, I went to work for Procter and Gamble and became a capitalist, accepting business and putting shareholders first. The international lifestyle appealed to me and I was enchanted with the game of driving shareholder value. I was a good disciple of MBA thinking — Smith and Drucker were my guides and my MBA in International Business at Xavier University left me with the understanding and tools to make a difference in business.

I got good at cutting costs, outsourcing work, shuttering sites, selling businesses, and laying off people. I understood efficiencies and thrived on centralization. My last program was selling a $12B business unit, and it was my second mega-divestiture where the results started to justify the means. The company said “the interests of the business and the employees are inseparable” to which I understood, but it became hard to see how shedding jobs equaled the best interest of the employees. Sure my MBA thinking had a ready answer — shareholder value, but the line became too convoluted. And the means were no longer cogent with my principles. So I left.

All this to say, I am not Pollyannaish — or blindly idealistic — I understand business, I understand pragmatism, I understand the need/desire for profit & shareholder return. I lived it, I taught it, I led others through it.

Now, on to the DAO…

In my view, the DAO cannot compete with traditional business on efficiencies & shareholder value. It will lose. Modern business has the history, the focus, and experience to win at this game — the DAO has none of this.

But, the DAO experiment has advantages that can move us beyond the efficiencies of business. A global workforce, engaging passionate contributors around a purpose, the network effect, global open-sourced innovation, shared work processes, an ethos of collaboration vs. competition, the end of zero sum outcomes — these components are the power of the DAO. And where it can compete.

This is not about DAO porn. There are problems to be worked out — how do we govern better, how not get stuck in feedback-hell and never reach a decision, how do we partner with investors, what does leadership look like in a DAO, what about free riders, and what the heck is the mission and purpose anyway?!?

But — the inertia of pragmatism and efficiency can push back into the old models. If you have a hammer, everything looks like a nail. If you have been taught to think like an MBA — you will nail the efficiency-shit out of everything.

I think this is dangerous.

If we apply the old tools and models, how can we expect something different from the old results? Yes, we know how business works, we know how to drive token holder value. But is that the point? The first answer, or the easy answer, might be the wrong answer.

To be clear, I am not proposing we ignore lessons learned from traditional business. There are tools and processes we can reapply. My caution is to use those tools judiciously — and to recognize when we swing too far back into centralized business.

It is also naïve to think we will invent the right answer tomorrow. We must recognize that there is a lot of hard work to be done: defining the mission of the DAO, figuring out governance, driving accountability, how do we compensate across regions, what about diversity, and all the other sticky meat-sack issues.

This is all hard work. Let’s recognize it and not be afraid of it.

And, let’s be clear — if it is ROI you are seeking — the DAO might not be your model and traditional business models might be a better choice for your DeFi project. Attempts to turn the DAO into a means to deliver shareholder value — in my view — at worst is an attempt to do an end-run around the taxman and at best is a misunderstanding of the power of the DAO.

The DAO is the best attempt these generations have to change the world. That is, if we don’t squander it by singularly chasing wealth. Let’s do better. Lets resist MBA thinking and do the hard work.

Acknowledgements: my hats off to Matthew Graham and Mike Taormina — your experience in DAOland is the stuff of legends — when we look back on this period, I hope your efforts become the case studies for future MDO (Masters in DAO Operations) students.