Decentralizing Governance: Pia Mancini's Vision for Open Collective and the Challenges of Digital Democracy
In the second episode of the Ownership Economy podcast, Martin Smith and Jahed Momand, discussed the future of financial institutions and the role of digital governance with Pia Mancini, a renowned political scientist and co-founder of Open Collective.
Mancini, renowned for her work on alternative systems to existing political and economic institutions, shared her vision for a more democratized governance structure that reflects current societal realities. She critiqued our inherited institutions, arguing that they were designed for a fundamentally different society and that their continued application creates friction in our current socio-economic landscape.
As per Mancini, the status quo exacerbates apathy among the public. She suggests that a governance system solely interested in professional politicians without inviting public participation breeds detachment among citizens. She advocates for a more participative political process that invites citizens to shape decisions rather than a binary 'yes' or 'no' vote every few years.
Tracing her journey from studying political science, through active involvement in politics to co-founding the Net Party in Argentina, she stressed the importance of building new institutions to align with 21st-century society. However, she pointed out that any attempt to change the status quo has to confront the existing legal structures, which are often resistant to such changes.
Her experiences led to the birth of Open Collective, an open-source financial management platform that enables groups to fundraise and spend money transparently. It addresses the problem faced by many decentralized communities who, in order to access capital, are forced to assume a legal identity that doesn't reflect their fluid and borderless nature.
Open Collective, pairing with a legal entity, provides a flexible solution for these global communities. It offers a platform for transparent fundraising and financial management, while also providing a legal vessel for their funds. Essentially, it delivers instant access to a legal entity anywhere in the world that fits with the decentralized structure of these communities.
As the world becomes more interconnected, with communities forming across digital spaces, solutions like Open Collective could offer a new way to democratize financial systems and governance. However, the path towards this kind of future isn't without challenges, especially when confronting established institutions that were not designed with these new societal norms in mind.
Pia's organization offers an intriguing alternative to traditional bureaucratic structures. Open Collective enables decentralized communities, such as open-source contributors, to operate in a way that's more natural to them, allowing for more fluidity in contribution and less rigidity in roles. In this setup, individuals who don't wish to hold titles like "president" or "board director" can simply contribute to projects they care about without the additional burdens that formal roles entail.
Pia Manchini points out that many DAOs (Decentralized Autonomous Organizations) are starting to recognize the need for connecting to the real world. While they have been successful in creating a highly decentralized way of sharing value, the necessity of engaging with real-world entities, such as regulatory bodies and tax authorities, is becoming apparent. Open Collective stands as an interface between these two worlds.
How Does the Collective Work Legally?
In response to questions on compliance, Pia explains that Open Collective operates as a constellation of different entities, with the platform layer and the legal entities acting independently but in concert. Open Collective Inc., the for-profit company that she runs, provides the virtual layer where fundraising, spending, and management take place. Meanwhile, a network of 700 non-profit fiscal hosts around the globe ensures local legislation compliance.
Discussing the learnings from DAOs, Pia admits that Open Collective has room for growth in terms of governance and communication. The platform currently organizes around admins, a power dynamic that she feels needs rethinking. To this end, Open Collective has started collaborating with Metagov, a platform that provides decision-making tooling for online communities. She expresses a desire to think of Open Collective as infrastructure that can plug into different systems.
Pia Manchini's conversation underlines the important transition happening in the world of online communities and organizations. While the DAO model offers many advantages, it also highlights the need for an interface with the existing "Fiat world". The Open Collective model, which has been honed over several years, could provide a bridge that allows DAOs to interact with the real world while preserving the decentralized nature of their operations.
Challenges with DAOs
Pia Mancini elaborated on the Sybil attack, a situation in which a single actor controls multiple nodes or accounts in a network and disguises them as independent entities. This kind of attack presents a significant problem for DAOs, which operate on the principle of distributed governance. If an individual can manipulate the system by controlling multiple voting personas, it undermines the democratic basis upon which these organizations are built.
Mancini mentioned an ongoing project called 'Proof of Humanity' — a protocol that aims to validate humans on the blockchain and potentially resolve the issue of Sybil attacks. Such an innovation would be significant because, as Jahed Momand suggested, the Sybil attack problem is one that needs to be addressed if DAOs are to successfully scale.
Nevertheless, while technical barriers like the Sybil attack were discussed, the guests also highlighted a different, equally important issue – accessibility and user experience within the crypto and blockchain space. Despite Open Collective's best efforts to be accessible, Mancini admitted that there's still an uphill battle when it comes to onboarding people onto the platform. Momand agreed, stating that "accessibility is user experience" and that there are multiple facets to this issue, such as understanding how Metamask wallets work or how a screen reader interprets a long blockchain hash.
Their conversation underscored the fact that while crypto and blockchain technology have the potential to revolutionize various sectors, there are still significant hurdles that need to be overcome in terms of user accessibility and experience. For DAOs and similar systems to become more mainstream, it's imperative that these challenges are addressed.
Exiting to Community
The second part of the conversation focused on Open Collective's future, particularly its transition to the "Exit to Community" (E2C) model. E2C means transitioning ownership and governance of the platform to the community it serves. Mancini noted that this transition requires establishing a structure that ensures multi-stakeholder governance, liquidity, progress towards its vision, and purpose-locking.
The conversation then shifts to a critical examination of rapid decentralization strategies employed by founders to achieve network effects. Manchini warns against diluting control too early in the business lifecycle. She underscores the importance of establishing a product that people genuinely want before considering transitioning to a decentralized, multistakeholder governance system.
Manchini, drawing from her experiences, posits that there's an inherent risk in pursuing growth for growth's sake. This approach may lead to a company losing control over its vision and purpose. The conversation touches on the complexities of governance in decentralized systems and the potential pitfalls that can befall businesses that move too quickly to acquire a large network through tokenization.
Here the model of "progressive decentralization" was discussed which proposes viewing the community as a customer and co-designer, building a fiercely loyal community first, decentralizing sufficiently, and then aiming for product-market fit. This idea is a novel approach that rethinks the traditional roadmap towards decentralization.
Manchini notes the power of having a committed group of early adopters and underscores the importance of walking the talk when it comes to involving the community in multistakeholder governance. She suggests that companies should be actively engaging and building alongside their communities rather than presenting them with a finished product.
Mancini shared that Open Collective's employees are enthusiastically supportive of the transition, appreciating the organisation’s new direction from its inception. Interestingly, a diverse array of collectives have responded differently, with tech-focused groups expressing greater interest in DAOs (Decentralised Autonomous Organisations), while those within the Solidarity Economy have shown a keenness for traditional cooperative structures.
The conversations revealed a critical understanding of the challenge posed by the transition to democratic governance, a point Mancini illustrates with her experience in politics. Momand added that DAOs and coops require a significant amount of collective decision-making, often overlooked by those new to these structures. He highlighted that decision-making in these structures goes beyond mere voting; it involves shaping the options that end up on the ballot, making it a demanding and often exhausting process.
Addressing the roadmap for Open Collective's transition, Mancini explained the need for a dual approach. One involves a continuous learning and public conversation series to include different stakeholders' perspectives, while the second requires determining the financial feasibility of the transition. Mancini recognised her lack of expertise in the financial area and expressed the need for external help to delineate a plan that balances investor offers, company valuations, and sustainable revenue share agreements.
Asked by Momand about her takeaways for founders looking to implement community ownership and governance, Mancini laid out three vital points. Firstly, she recommended starting as early as possible, as people need time to learn and adapt to governance responsibilities. Secondly, she stressed the importance of clearly defining and aligning with company values, as any discrepancy between actions and values could hurt community buy-in and overall progress. Lastly, she reminded founders not to get entangled in complex, buzzword-laden structures. The solution could be as simple as a traditional co-op, a DAO, or something similar.