This report looks at the future constraints for the shareholder model in its current form, and why decentralized autonomous organizations (DAOs) will be superior to today’s corporate firm structure. For investors, DAOs will eventually become a less risky investment class compared to shares in a regular company, offering more predictable ROI and better passive returns than most stock dividends - while also minimizing two of the greatest risks in corporate operations - human error and executive self-interest.
Information Age. With meritocratic governance that better aligns stakeholders’ interests, DAOs have the potential to reduce the social, economic and ecological fragility in our systems perpetuated by the shareholder model.
A DAO can be summarized as an organization of people who communicate with each other via a "network protocol," communicating with one another through an online ruleset but reaching governance consensus with offline diplomacy. DAOs are the end-point of the ‘gig economy’ which to date has been championed by platforms like Uber and Airbnb, but will be truly global cooperatives and their value distributed to stakeholders – not just shareholders and executives.
Facebook has also just announced it intends to turn its crypto project ‘Libra’, into a decentralized autonomous organization utilizing a native governance token (the Libra Investment Token), which is a huge aboutface for a company notorious for its centralized control.
As nature of ‘the firm’ is rapidly changing in the Information Age intangible assets are now regarded as the most important driver of corporate value as opposed to tangibles accumulated in the industrial model. This poses problems for those still operating in the ‘old model’ including:
- Difficulty in valuing intangible assets in digitally native organizations
- A continuing decline in corporate accounting and auditing standards
- New forms of fundraising, such as Security Token Offerings – less costly than IPOs
- Security tokens offerings which can blend equity rights and debt with governance
- Growing social responsibility for corporations to account for ‘external costs’
- Mounting social costs for corporations such as climate change value-at-risk.
- The concentration of share value and corporate earnings in growth and tech stocks invested through passive strategies increasing systemic risk in the stockmarket
- In this report we look at the future constraints for the shareholder model in its current form, the game theory behind mass scale decentralized cooperation and why organizations operating this way will be superior to today’s corporate firm structure.
For investors, we see DAOs eventually becoming a less risky investment class compared to shares in a regular company, with more predictable ROI as they minimize two of the greatest risks in the running of a company – human error and self-interests. They also offer better passive returns than most stock dividends in the form of coin-staking and running of masternodes.
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