This article introduces and examines some of the key points in the academic publication by BlockScience researcher Eric Alston titled “Governance as Conflict: Constitution of Shared Values Defining Future Margins of Disagreement”, published in the MIT Computational Law Report.
The paper begins with the claim that an organization’s resilience depends on how well it can accommodate the different governance preferences of its members and manage conflict. Building off of this, the paper thoroughly explains why conflict is inevitable, and gives an analysis of organization design levers for managing conflict, categorized as either ex-ante (to prevent conflict) or ex-post (to resolve conflict).
“Sufficiently shared values lead to a common purpose that constitutes an organization, and this choice of constitutive purpose itself constrains constitutional choice. But collective action costs increase in an organization’s members’ heterogeneity of governance preferences, and are also partly determined by an organization’s constitutive purpose. Given that these costs of collective action are never zero, this makes mechanisms to accommodate conflict optimally present in impersonal governance contexts above a certain scale. Because of this ubiquitous institutional need, a variety of institutional mechanisms to accommodate heterogeneity of governance preferences have emerged in formal organizational governance. These mechanisms can be separated into ex-ante and ex-post solutions that respectively mitigate and resolve conflict among heterogeneous governance preferences. Mitigating and resolving future conflict are therefore both design priorities for collective action organizations, and the animating purposes of decentralized autonomous organizations (DAOs) present both conflict accommodation priorities with positive probability. Just as shared norms and accommodation of future conflict are interlinked and integral inputs to resilient organizational constitutional design in general, they are essential protocol design considerations for DAO designers as the complexity and magnitude of these organizations’ purposes increases alongside their user bases and assets managed.”
Why is conflict inevitable?
An organization forms when a group with shared norms and values aligns around a purpose. Simultaneously, that organization adopts structures and governance mechanisms that reflect member preferences (which are baked into the norms, values and purpose). Ideally, the structures and mechanisms that emerge will help that organization effectively achieve its purpose.
Since all collective action has costs (i.e., discussing, voting, coordinating), the structural and mechanism designs that emerge naturally when an organization forms are those that minimize the “costs of collective action”. Under these conditions, organizational structures that support "Delegated Decision-Making" tend to emerge most frequently because delegation has proven to be efficient and lower the costs of collective action, especially compared to the alternative "Democratized Decision-Making" which has much higher costs.
As the organization grows to achieve its purpose, we typically see two common consequences: 1. Loss of individual autonomy to more layers of delegation (especially in delegated decision-making structure) and 2. An increase in the diversity of member preferences as more people join. Together, these two outcomes mean more and more individuals ultimately bear a cost when organizational decisions are not exactly aligned with their preferences. This cost materializes as uncertainty, disagreements, and debate - in other words - conflict.
The diagram below roughly summarizes this dynamic: that conflict is an inevitable outcome of an organization that grows to pursue its purpose
Design levers to mitigate conflict (ex-ante)
Today’s public institutions are one starting point to understand design levers that mitigate conflict. Because there are generally more barriers to “exiting” public institutions (i.e., a nation state) than private ones (i.e. a company), public institutions naturally evolved to find ways to help their members “get along.”
From analyzing today’s organizations, we can already identify structural designs that help mitigate conflict. The paper mentions the following:
Constitutionalizing shared norms and values is also a step in initializing an organization. What ideas and rules make it into the constitution is a design choice that can have major effects on mitigating conflict. For example, minimizing the constitution to only what is necessary, and protecting specific areas of individual autonomy from being impacted by collective decisions.
Subsidiarity means dealing with conflict at the most appropriate local level, which implies system division. In the paper, Alston discusses many types of system divisions such as parallel systems, horizontal and vertical systems, subsidiary units, and more. Each triggers further questions about representation and reconciliation. The flexibility in the structure of DAOs, paired with new functions of Blockchain and smart contract technology, makes the design space here huge and particularly ripe for innovation.
Design levers to resolve conflict (ex-post)
No matter how long organizational designers spend predicting conflict and mitigating it ex-ante, it is impossible to design out completely. The nature of dynamic systems will lead to unpredicted circumstances that require conflict resolution ex-post. Starting points from the paper include…
Courts & Rights
Again, starting from modern-day organizations, the court system is a notable example of an ex-post mechanism to resolve conflict. A court system can resolve differences between actual outcomes and what individuals would prefer to see (i.e., the “cost of collective action” mentioned earlier). And, when combined with articulated individual’s rights, it can protect the interests of individuals from the effects of collective decisions.
A court system also relates directly to the open questions of representation and reconciliation mentioned in the design of system division above.
Of course, the goal is not to simply recreate the ex-post mechanisms prevalent today, but to innovate on them with the new design space enabled by technology. In the context of Blockchain and DAOs, the door opens to Computer-Aided Governance solutions. From algorithmic assessment of risk factors to automating dispute resolution with Machine Learning.
DAO Design Challenges
In summary, the analysis presented in this paper leaves institutional designers working in the DAO space with two key challenges:
- Designing innovative organizational structures for DAOs that mitigate conflict
- Designing innovative ex-post mechanisms leveraging new tech like machine learning and AI to resolve conflict
If successful, Alston predicts that the reduced conflict would compensate for some of the inefficiencies inherent in democratized decision-making, and ultimately give DAOs a competitive edge against traditional organizations in aligning member preferences while pursuing a purpose.
An exciting time to be a DAO designer!
Thanks for reading, and don’t forget, this article is only the highlights & high-level points from the thorough analysis presented in the paper. To dive deeper into the topic of conflict in organizations and the design levers available to build resilience, check out the full paper.
Article written by Peter Hacker from “Governance as Conflict: Constitution of Shared Values Defining Future Margins of Disagreement” by Eric Alston with feedback and edits by Alston, Jessica Zartler and Lila Langsford.