Decentralised Governance and Self-Managing Teams in Coliving Spaces

Discover how the concept of Coliving can be combined with a new governance paradigm to achieve antifragility. Together, we unravel the complexities of traditional hierarchies and discuss why they are becoming obsolete in our dynamically changing society. Tune in to learn how the resilience of decentralized models, especially in co-living spaces, spreads risk, encourages adaptability, and harnesses collective intelligence—key elements for thriving amidst global challenges like climate change.

Step inside the world of self-managing companies and explore the realities of flat organizational structures. Gareth provides valuable insights into the legal frameworks like the FairShares Commons that bolster these innovative models and examines the hurdles they face in becoming mainstream. This episode is a deep dive into the transformative power of self-management, from consent-based decision-making to the scalability of flat hierarchies, shattering the myths of decision-making paralysis and revealing an untapped reservoir of organizational potential.

Transcript

Daniel: 0:19

Today we'll be discussing something that we haven't really covered so far we mentioned that a few times, but we felt we would dedicate an entire session on it which is actually a key component of communities in general, and especially the ColivingDAO model, which is governance. So we'll be going a little bit deeper on governance structure in particular, because we're talking about a DAO, we're talking about an innovative way of managing teams and systems and communities. We'll be discussing self-managing and self-governing structures, whether it's for teams or for communities as well. So, gareth, I know you do a lot of work in this space as well. What can we say the limitations of the old model are, and then how we can potentially address them.

Gareth: 1:15

Yeah, brilliant Dan. So yeah, just before we go into the limitations, just to give a quick recap for the listeners about why we were even talking about governance in a different way of governing, and it goes down to the foundations of co-living DAO as a decentralized organization, and what that means is that power and decision-making, instead of being concentrated at the center or at the top, is decentralized and given to all the stakeholders in the organizational structure. So, as we discussed on previous podcasts, the residents have power and they have a real voice to shape their community, and that also extends to the employees. So the employees are an important stakeholder as well in a decentralized organization. So we're going to talk a bit more about what this looks like from the employees and the staff point of view, but a lot of it is also applicable for the residents. And so, because it's decentralized and because we're giving out power to the employees and this is what we're going to talk about today we need a different way of structuring the company. So traditional companies are structured as a hierarchy, like a pyramid, and the big decision makers, of course, are at the top of the pyramid and everyone else kind of follows orders the further down the pyramid you go through the layers with lots of layers of management in between.

Gareth: 2:46

Now the limitations of that model. First of all, the really obvious one. Right, we talk about decentralization. That's a very centralized structure. The power is all at the top and the power of the lower layers is almost zero. Right, the very bottom layer, you basically do what you're told in those kinds of structures. So that's clearly not going to work. If we want a decentralized structure for our employees and our staff at Co-LivingDale and that is the first major limitation how do we get power out to those other layers of staff and what kind of structure does that look like?

Daniel: 3:28

Yeah, that's a very good point, and we've spoken so many times about antifragility and making sure that a system can not only resist shocks but also thrive in the presence of continual perturbations and so on. It's something that we don't expect Society all of a sudden become free from perturbations. We know there's going to be shocks to the system. We know things are going to happen, so we're looking for ways to make sure something is not just resilient but also antifragile, and we've spoken about this more in detail in other episodes as well. The whole point is really to eliminate central points of failures in this particular example, and having a centralized structure becomes very fragile, because what if there is, for example, one actor, maybe one malevolent actor or simply one person who makes a mistake or makes a serious mistake? What if there is no system to effectively adjust in presence of that? So when power is concentrated within one or a small number of people, what typically happens is that, if those people choose the wrong course of action, there are enough systems to really make sure that things don't end up becoming worse and worse. So the whole point of avoiding centralization is really not just spreading risk, but really allowing people to have enough options, enough flexibility and enough opportunities to steer the boat in the direction that is better for everyone.

Daniel: 5:13

So that's why centralization is something that is very limited and certainly it had a very pivotal role in society in the past in helping our society to become what it is right now. So there's definitely value in centralization and in, let's say, from a historical point of view. However, we realize that, because of the fast changing nature of the world, technology has effectively shown us that things now change so much faster and also we can talk about a lot of things that are looming, like climate change and potential risks to even to humanity as well. So there's so many things are happening, and things are happening faster and faster. So centralization right now is likely not the best way forward. So that's exactly why we are looking for better ways. So, gareth, is that what you had in mind when we're talking about the first big limitation?

Gareth: 6:12

Yeah, absolutely. That's a very good point, dan. And when you spoke about anti fragility and some of the problems of centralization, centralized power, and, yeah, you're absolutely right that the speed that society is moving at because of the pace of innovation makes it very difficult for a single, all enlightened leader, the CEO that knows everything about everything makes it more and more difficult and actually more and more impossible. In today's world, there is no single individual that can straddle all these different knowledge domains that are developing very rapidly. We're seeing that as a current example in the field of AI, where AI is developing so quickly that it's very difficult for one person to keep up. Even an expert in the field doesn't know where the cutting edge is, and this is happening on a timescale of weeks. It's not even years. It used to be years. Now these things are changing very, very fast, and so one of the major advantages of a decentralized structure is you have lots of decision makers and they all contribute to decisions, and we're going to go step a bit more into that and go into some of the details and how that might work, because I can tell that some of you might be skeptical about handing over decisions to a large group of people, which is perfectly rational, because there are some people who have higher capabilities than others and some people that have the expertise to make big decisions, but those things are taken care of in the right kind of structure. So, just to keep it a high level and talk about what we mean when we talk about these decentralized structures, the term that's used most frequently is self managing or self governing. Those are two of the most common terms for these decentralized structures that companies are using, and there are lots of notable examples of these companies out there and very successful examples, in fact. So this isn't something that's brand new. This isn't something that we invented. This is something that definitely works, but it is used by a small minority of companies in the present world. What's interesting is that a lot of these companies are at the top of their field. They're very high performing, and one example of a self managing company is Burt's org.

Gareth: 8:41

I'm probably pronouncing that wrong, but it's a Dutch company and they provide healthcare providers healthcare in the home and they started in 2006 and within a few years they became the market leader and took over 75% of the Dutch home healthcare market, and they run in very small self managing teams of nurses, so six to 10 nurses in a circle or a team. They usually use circles or a big part of these self managing structures. A circle is a small unit of people who can work closely together and work very fast and make decisions quickly, and they don't really have any bosses. Each circle of nurses takes on all the different roles, so, for example, they hire, they determine their own budgets and they determine how they organize their own workload and how they're going to deliver care to their patients, so they effectively in each circle they have an HR function, a finance function, an R&D function and all the rest, and all of these circles connect together in a very large organization. Obviously they provide the majority of home healthcare in the Netherlands and so the structure works and they were extremely efficient 40% savings on the previous hierarchical structures that went before them.

Gareth: 10:04

The government run home healthcare systems.

Gareth: 10:07

That's one example of highly successful self managing company.

Gareth: 10:11

Others include the tomato processing company in the States, morning Star, and a steel company called Newcore, also in the USA, which started innovating and giving its lowest level steel workers key decision making power and to innovate and actually create new types of steel making in the 80s, when the US steel making industry was facing a lot of competition from cheaper companies in the Far East, so this isn't a new concept.

Gareth: 10:46

There are lots of very successful self managing, self governing companies out there, and so that is the umbrella that we're talking about here and in co-living down. In particular, we are legally bound by the fair shares commons to use a self managing or self organizing dynamic governance structure of some sort, and this is written into law in the fair shares commons incorporation that we use, that we spoke about in previous podcasts, and this is a decentralized company incorporation. So in order to really give that company incorporation some legal power, there is a legal obligation for us as a company to use one of these self governing or self managing structures as the company. That's to give you an idea of the umbrella, dan, and we can go into a bit more of the detail in a minute.

Daniel: 11:38

Yeah, that's perfect. I really like the examples. It's great to see that there's companies out there that not only are they using the systems right now, but they've been using them for quite a while. So there's certainly a lot of literature, a lot of models to take inspiration from. One question that I'm sure a lot of people will have is, if these systems are that good or better for certain types of organizations, or more antifragile or present certain benefits, why are there so few examples right now? What's really getting in the way?

Gareth: 12:16

That's a really good question. I don't think there's a clear answer for that other than hierarchical structures. We're kind of the first structures. So if you go way back to and we spoke about this in one of our very early podcasts about the transition from hunter-gatherers to an agricultural society way back then hierarchical power structures were put in place, probably because they're the simplest way of organizing and maybe it's just a historical precedent that's come through and been magnified through the Industrial Revolution, because hierarchical structures work very well in a factory context. So factories are you know. It makes sense, as you said, to have hierarchical structures in certain places, and it made sense, certainly at the beginning of the Industrial Revolution, to have managers managing the workers for these new machines, because the workers didn't have a lot of knowledge, didn't have a lot of education at that point, and so it made sense. Maybe it was just the easiest way to organize things.

Gareth: 13:23

Now fast forward to the modern day, and why are there not more self-managing organizations? I think probably if you look at the little literature, the number of these organizations is increasing, and probably because it represents the next stage in the development spectrum for management. There are some amazing thinkers in this space. Frederick Leloux for reinventing organizations is a fantastic book. Gary Hamill wrote a book called Humanocracy, and they kind of allude to the fact that this might be the next level of human consciousness as it extends to the way that companies are organized. So maybe this is the next stage. And if it is the next stage, it might be slightly more difficult for people to get their head around how to organize themselves in this way.

Gareth: 14:13

It will involve a different way of thinking and a different way of organizing and, of course, when you give people power and autonomy to make decisions, that can be quite a scary thing at first. Many people are quite comfortable actually to take orders and to be told what to do. In many senses, it's easier to be told what to do, and there's nothing wrong with that. Some people are more comfortable with that. But to take on more responsibility and to be given the power to make decisions and to have that responsibility is quite a big deal, and so maybe people have shied away from that, and particularly business leaders have also probably shied away from giving away some of their power to the workers and the employees at the lower levels. It's also quite an uncomfortable cultural shift and requires somebody to be at a higher level of consciousness as a leader to do that. So I think it's a combination of all of these factors, dan, that have come together, which is why you don't see a lot of examples.

Daniel: 15:17

That makes a lot of sense and in fact, we're quite used to seeing dynamics such as people being reluctant to change, especially if we're talking about organizations that are already being quite successful in some ways. So when something is working to an extent and we're not talking about being perfect but when something has, such as a system or an organization has already achieved a certain level of success, changing presents a lot of perceived risk at least, and presents a lot of psychological barriers as well. What if something doesn't work? What if there's something that we aren't even seeing right now that can get in the way and actually takes us further back instead of helping us spring forward? So it's understandable that there's a lot of psychological barriers. At the same time, it's quite clear, as we mentioned before, that an innovation is needed, and we see the same pattern in a lot of other domains as well.

Daniel: 16:21

We talk a lot about Web 3. Web 3 is revolutionizing the concept of ownership, revolutionizing potentially the financial system as well, and so on. So we notice already that the bigger a system, the harder it is for the system to really accept the psychological risk of changing and for smaller systems or more unsuccessful systems, systems that are really not working well. There's not that much at stake, there's not so much to lose, so it's much easier to make the decision to change, and that's why that type of change sometimes starts from smaller organizations and then gradually spreads from that point. So this barrier is definitely understandable and it is a barrier that needs to be overcome on a wider scale and a broader scale as soon as possible. If we want to see more sustainable organizations and because we talk a lot about sustainability, we talk a lot about fairer, equitable societies, we talk a lot about regeneration as well this type of organization is definitely in line with the type of future that we are creating.

Gareth: 17:35

Absolutely, dan, and you know the key thing is it takes bravery right.

Gareth: 17:40

There's an element of bravery for new companies to take on and use these structures, but, as you quite rightly said, you know, this could be one of the really powerful ways that we reinvent the future and tackle some of these really difficult problems that society is facing across the board from, you know, from climate change to the speed of AI and technological development being too fast for governments to react to really good examples.

Gareth: 18:08

And this bravery to jump in and give away power to the organ, from the leaders to the rest of the organization. It takes bravery, it really does, and it's kind of like a leap of faith in a sense. You really don't know what lies on the other side until you make that leap of faith. And so the great thing about starting afresh with a new company like co-living Dal, is that we're willing to be brave enough to make the leap and go for that higher level of human consciousness and embed that in the culture of the company and make it work and work at it. We know it's not going to be easy. We know there are challenges to making a big cultural shift, but you know why not go for it. Why not really go for it and be ambitious? And that's why we're doing it, right, dan?

Daniel: 19:07

Absolutely, and we'd love to become a leading model for organizations in the future that realize that they need to adapt anyway, because we're talking about something that surely has psychological barriers and, yes, it requires bravery. The reality is, effectively, when you look at why, historically, the biggest organizations failed, it's because of their inability to innovate or the inability to adapt to constant change, or just sometimes we could be talking about shocks, unexpected events. But sometimes it's not even that. Sometimes it's just a slow, gradual change that is happening, and if someone or something doesn't adapt to that, things are going to go downhill. And we can make examples on very different scales. We can talk about companies like Blockbuster or Nokia that were not able to adapt to the shift that the world was taking anyway, or even bigger organizations such as the Roman Empire and some other empires in the past as well.

Daniel: 20:12

So surely it's difficult psychologically to make that decision to change something so major in the way the organizations operate. But at the same time, without doing that, it's pretty sure that sooner or later things are going to go south. And this is something that we effectively realize and we say, okay, let's not only make sure that the living doll can start with this system, so that we don't have to face the change later down the line. Or there's going to be changes, of course, but the system already embraces change. So that's something that can happen seamlessly and naturally. But also, as I mentioned, it would be great also to show what's possible, show how things could be done, even innovate in a number of ways, and potentially inspire other organizations, even major organizations, to make a similar type of change. So that's definitely the direction we're taking here.

Gareth: 21:12

Great, yeah, absolutely. So I'm going to dive straight into some of the objections that people have when they initially hear about self managing structures, and we're going to start by examining flat hierarchies. Right, so in a self managing structure it is effectively kind of like a flat hierarchy. It doesn't have that pyramid of powerful decision makers at the top, and so one of the immediate objections that people have to that is higher decisions actually made in a decentralized structure. That just sounds like people are going to have endless discussions and you get the nightmare of having to reach a consensus decision across a lot of different people. And so when we look at specific structures of self managing organizations, there are some organizations that have created structures already. One of them is sociocracy, another one is HALACRICY, and if we look at sociocracy as an example of one of those self managing structures, they use a decision making technique known as CONSENT.

Gareth: 22:21

Now, in the context of a small group of people, a small team, say six to 10 people who are looking at a proposal to see if they're going to pass that proposal inside the company or not, imagine if it required consensus. Consensus means that everyone has to agree 100% in order for a decision to be passed. Now, obviously there there is a danger that this will result in endless discussion or political coercion to force people to make that 100% decision, and so this is very slow and ineffective. Then, at the other end of the spectrum, you have a kind of democratic vote where the majority rules. This isn't great for a small group of people either, because, although that can be quick, it requires the majority to suppress the minority. So if 51% of the group vote in favor, the other 49% of the group are not heard, and so it's not a great way.

Gareth: 23:23

They say that democracy is the best of a bad bunch, but in the context of a small team making a decision, it's maybe not the best way, and so in sociocracy they use the consent model, and what that means is that in order for a proposal to pass, each member of the circle needs to give their consent.

Gareth: 23:44

The consent means it's safe enough to try and good enough for now, which means there's no major risks that they see in passing the proposal. If there's an objection in the circle, then the reason for that objection is given in the circle, and then the proposal is modified to integrate the objection, to modify it, to see if that will result in that person or persons changing from an objection to giving their consent, and if that doesn't happen, then the proposal is shelved and decided on later. But the beauty of this process of consent-based decision-making is it can be both fast, thorough and fair. So it's a very rapid way of making decisions in a group where there isn't some of the problems with endless discussion by consensus and the tyranny of the majority that you get with a democratic vote in a small group.

Daniel: 24:42

That's so important because I hear this all the time what happens if there's too many people involved in a decision? There's going to be some sort of paralysis with too many different opinions and so on, and it doesn't have to be the case. So we can have a system that is fair, that is decentralized, without having the bottlenecks of just having to spend countless time on a single decision. Because, exactly, we're not looking for perfection, we're looking for the best next step at any given time. So we're talking about people being able to consent. So consent versus consensus is key distinction not obvious to many. Once this becomes clear, just like you perfectly explained, garth, it becomes very, very obvious that the system does not need to be slow. In fact, it's actually potentially extremely fast. It can really adapt very quickly to external perturbations as well. So definitely a system that completely addresses this type of objection that I hear all the time.

Gareth: 25:50

Absolutely, and another major objection that people have when we talk about self-managing structures is the size. Ok, it's easy to make decisions in small groups of six to ten people, but how does that scale up to the size of, say, a multinational company? Now, some of these companies that I've mentioned are actually very big companies Morningstar as the example. Newcore is not a small company either, and Burt's Org is a very big company too, and so it does work at scale, and again, I'm using sociocracy as one example of a self-managing structure that's used. These structures are in small teams, and the teams are known as circles, but how does that translate into decision-making for a really big organization if there's no, you know, all-powerful decision-maker at the top?

Gareth: 26:43

And the way it is arranged is that each circle is connected to lots of other circles in the structure, and so the key thing is, of course, it has this decentralized decision-making, and so the structure itself is decentralized.

Gareth: 27:00

You can, however, have a board of directors circle where major executive decisions for the whole organization are made, but this circle is connected to the other circles, and those other circles do have significant power to influence that board of directors circle, and the way this is structured is known as a double link mechanism.

Gareth: 27:24

So each circle is connected to another circle and a representative from that circle represents that circle in the other circle and a representative from the other circle represents that circle in this circle. So there's a double link through the entire structure, which means that there is a key decision-maker from each circle that is able to represent the interests of that circle in the other circles that it's connected to. And this is a real key piece of the structure that enables that power to be decentralized. But also power going from the bottom although there isn't really a bottom per se in a flat hierarchy like this, but from maybe the peripheral circles to the board of directors circle, there is a direct link of power and a sharing of power through those links to all the other circles, and this also enables very fast communication across the system, and so it can be very large and it can make decisions very fast.

Daniel: 28:31

That's awesome, because this really enables what's really missing in the other systems, which is the speed of implementation, while maintaining, at the same time, the quality of the decisions and the fairness of the process as well. It really feels like this really combines all the advantages and everything we're looking for from a decision-making system. This effectively addresses these other major objections as well. We've addressed key objections already speed and the way the system works. We also addressed the fact that, yes, for people at the top, for people that are currently at the top of a hierarchical system yes, we mentioned that before it does require not just letting go, but really the understanding, the deeper understanding that the top might just not be able to make the best decisions all the time.

Daniel: 29:30

So it's not only about that being unfair, because it isn't fair if many people's voices aren't listened to, but what's really problematic is that being at the top right now only gives the illusion of power. There's a lot of things that the people at the top of the pyramid don't really have the power to do. Anyway, we think they have the power to do that, but they actually don't in practice. Or if they do have that power, those things might not be best, and there might be other things that could become apparent as soon as everyone else's voice is listened to. So, psychologically, letting go of that perceived sense of control is critical, because control is instrumental.

Daniel: 30:18

Having control over a system is not really an end in itself. It's related to the idea that the more control one may have, the better that system may fear in the future, and it's really proven that it's not the case. So understanding that there's better ways is something that is going to ultimately improve the direction the whole system is taking. So I feel we've addressed the main objections that we hear pretty much all the time. So give an explanation of how the systems can also play out in practice. So, regardless any additional thoughts you want to share on why this self-managing or self-coverning systems for teams, for communities, can really shape the future in a much, much better way, and what can be done in order to see the change that we want to realize in the world, yeah, absolutely, dan.

Gareth: 31:20

I mean, I think the key thing is trust. Once you start trusting people and being brave enough to let go of some control, then amazing things can happen. And we've seen the sorts of amazing things that can happen in those companies some of the examples that I've given where you trust the workers and the staff to make decisions and you give them the power and then magic happens. Innovation can happen very rapidly. There are some great ideas on the shop floor in a lot of companies and the structures are just not there to let those ideas percolate up to the top. Big companies classically have a big problem with innovation and that's why startups come in and disrupt their markets, because they just simply cannot adapt quickly enough. So I think trust is the key and being brave to give away that power and decision making and allow people to take responsibility, and also for the staff to be brave enough to take on that responsibility and to make decisions.

Gareth: 32:23

There are some safety net mechanisms inside these self-managing structures where you might be scared to make a decision that blows up the company. You don't need to worry about that in most circumstances because the way that decisions are made, you will often seek counsel or get some sense, check from your circle on whether a decision is a good one or not, and so be brave and take on that responsibility. It's going to be a big part of making it happen. Take the leap of faith, and that's what we're planning to do here at Co-Living DAL. And also, it's not a utopia, right, we're not claiming this is a utopian way to organise companies or organisations, so what it probably represents is a big paradigm shift to the next stage, something that does potentially work at a much higher level and is much more effective, dynamic and quick acting to face some of the challenges that we have today.

Daniel: 33:25

Awesome. Thank you so much, gareth, and yes, we are indeed very excited here at Co-Living DAL to be part of this paradigm shift, and everyone who's listening right now. You're all part of this paradigm shift, so make sure you participate, subscribe to this podcast if you haven't yet, and we'll be back, as usual, next week with more. So, thanks everyone for being here and I'll be again with you, take care, gareth, next week as well.