I came across the concept of VUCA while reading General Stanley McChrystal's book Team of Teams. And I was immediately intrigued.

According to McChrystal, when evaluating the conditions of the 21st century social scientists "use slightly different terminology from the optimistic 'interconnected.' They use phrases like 'discontinuity,' 'disruption,' or the recently minted military acronym VUCA." pg. 64 (kindle edition)

VUCA is an acronym that stands for:

  • Volatility
  • Uncertainty
  • Complexity
  • Ambiguity

The central idea of VUCA is that, because of unprecedented leaps in technology, our world is more interconnected than ever before. And with that increased interconnectivity comes more unpredictability. The old "command and control" managerial methods of the past are outdated, with more dynamic, flexible models needing to step in to replace them.

McChrystal writes about the world his granddaughter, Emmylou, will grow up in:

"The world in which Emmylou will grow up is not just marginally different from that of previous generations; is is vastly faster and more interdependent, and thus essentially complex in entirely new ways. She lives in the wayward swirl—a totally different place from the clockwork universe. We get in trouble when we try to use tools designed for the latter to tinker with the former."  pg. 64, kindle edition

Here's a visualization of what that world looks like:

The world wasn't necessarily "predictable" pre-internet. But it was slower and slightly more predictable. If you wanted to start a social movement in the 1700s, you essentially had to go around knocking on doors and talking in the town square. You maybe commissioned some messengers to try to spread your ideas to the next town. But you certainly didn't have the lightning fast spread of information that we have today.

Now, someone with an idea can send one tweet and ignite a movement. Maybe someone on the other side of the world sees that tweet and makes a Reddit post about it. The idea spreads so that it takes an entirely new life. The idea could change and morph in ways the original sender had not expected or intended. Maybe, just a few hours after the first tweet was sent, the idea is totally different than it was when you sent it.

That's just one example of a VUCA world at work.

So, how does this apply to DAOs?

In many ways, it turns out.

Here, I'll propose three ways in which DAOs are uniquely suited to dealing with our VUCA world, and three ways that DAOs are brittle in VUCA contexts and must build resilience.

Advantages DAOs have for navigating the VUCA world

DAOs can have VUCA resiliency in three ways (this list is not exhaustive, and I'm sure there are more areas of resiliency):

  • Distributed leadership
  • Open information
  • Token non-dependency

Not all DAOs have these qualities, but a healthy, well-functioning DAO theoretically has these qualities.

DAO Resiliency: distributed leadership, open information, token non-dependency
These three aspects of DAOs make them more resilient to a VUCA world.

Distributed leadership: DAOs don't rely on a single CEO

A traditional corporation is entirely reliant on a CEO or small board of directors. But the nature of a DAO is leadership distributed over many, rather than centralized within one.

This concept distributed leadership is essential for being resilient in VUCA contexts. Various leaders will spot different problems to tackle and recognize new threats to the health of the DAO. Not everyone can see everything—many are needed. So, the leaders are like the scouts getting information on where the VUCA world is taking their DAO, and what they should do next. And, without the oversight and red tape of a management stack, they can theoretically move faster.

I say "theoretically" because DAOs often move slowly when they need to go through a lengthy consensus process to make a decision. But, if contributors are given a reasonable amount of leeway to steer their teams in the direction that best responds to their changing environment, DAOs will emerge as the most resilient organization type in existence.

DAOs can spot more threats and opportunities because the leaders have diverse viewpoints.

In this chart, the light teal circle is a threat, opportunity, or other thing "outside" the DAO that is seen by a leader. The darker blue circle is one that is missed.

In a traditional organization, the CEO sees only one threat/opportunity/thing, and misses five. In a DAO, the leaders see all six, because there are multiple leaders with diverse perspectives who are doing the scouting. The more key contributors with diverse viewpoints leading the DAO, the more threats and opportunities they will spot, and the more flexible the DAO will be to volatile situations.

Challenges of fostering distributed leadership:

  • Having a variety of leaders with diverse perspectives who are still united under a single mission.
  • Determining what level of decisions can be made without needing to take to a vote or get wider DAO approval.
  • Ensuring the DAO doesn't act on too many opportunities and exhaust both contributors and resources.

Open information: everyone can access the information they need

One of the problems of centralized decision-making that McChrystal described in Team of Teams was that many teams needed information they couldn't get. When the higher-ranking generals thought a team didn't need a certain piece of information, they didn't get it. But that backfired when operating in the ever-changing world of modern war.

The reality is that there is no "all-seeing" CEO or manager who can predict which teams need what information in our VUCA world. So, the information must be open to all, rather than open to some.

Open information means that everyone in the DAO can access all the information at any time. They don't need permission from a higher-up, and they certainly don't need to go through a long, tedious process to hunt something down. Instead, all the information is right there at their fingertips.

This could look like a searchable database that all contributors can add to. Or, it could look like a well-built, easy to navigate Notion database.

Challenges of opening up all information:

  • Determining who is "in" the DAO (Who has access to this information? Just the contributors, or the entire internet?)
  • Cataloging this information in an easily-searchable way.
  • Building simple workflows for DAO contributors to update information so resources are not out of date.
  • Keeping personal data and highly sensitive information (anything on individual contributors) behind closed doors, and deciding who has the keys to it.
  • Not opening up everything to the entire internet (such as sensitive documents and plans that aren't ready for public viewing), but ensuring people within the DAO have what they need.

Token non-dependency: a diversified treasury with diverse payment options

DAOs with a diversified treasury can be resilient to the VUCA forces that cause those token prices to change and inflation to skyrocket. Think of a traditional corporation that holds fiat currency, which is susceptible to inflation. A DAO can hold a mix of Bitcoin, Ethereum, small cap coins, and (some) stablecoins. A hetergenous treasury makes the DAO more resilient in VUCA scenarios.

Resiliency is further built if contributors can choose what types of tokens they'd like to be paid in and how much of each. This creates significantly more overhead for secretaries, treasury managers, and anyone doing the books in your DAO. But a resilient DAO is one where contributors can be paid in tokens that represent the level of volatility they are comfortable with.

Not everyone should have to ride a high-volatility token wave in order to work for a DAO. I've argued that the "required volatility" of DAO payments actually keeps women out of crypto, and the same could apply for other currently under-represented groups in DAOs. Having the option to pay people in different tokens makes room for a more diverse set of contributors and a healthier DAO overall.

Challenges of building a diverse treasury:

  • Generating revenue in a variety of tokens, not just a few.
  • Having trustworthy treasury managers who operate in the open.
  • Paying contributors in their preferred token stack, and keeping track of that.

Where DAOs can work on building resilience to the VUCA world

Here are a few areas that I see in DAOs today that cause them to be more brittle, and thus less resistant to a VUCA world. This list is non-exhaustive:

  • Contributor "personal uncertainty."
  • Information storage and access.
  • Homogeneous treasuries and token dependency.
DAO Brittleness: Contributor "personal uncertainty," closed or hard-to-find information, token dependency
These situations make DAOs more brittle in VUCA contexts. 

DAOs won't be resilient to VUCA situations if their contributors are constantly worried about picking up that one extra bounty so their paycheck is high enough to pay rent, or wondering how they will pay for their next trip to the doctor because they don't have health insurance. Or, if they need to worry about the liability they'll be held to, and the safety of all their assets, if their DAO gets sued.

All of these "personal uncertainty" questions can eat into a DAO's resiliency and contributors' mental health. Because most DAOs today don't have any legal structure, it's difficult to find a quick fix for these personal uncertainty questions. This is a thorny problem that will take a long time to address.

When DAOs find a proper way to operate in a legal framework, they can give long-term contributors the peace of mind they need. This also helps a variety of contributors enter the fold, such as parents, people of color, older individuals, and anyone who isn't comfortable taking the financial and personal risk of contributing to a DAO.

Making information storage a priority

When no one is in charge of updating, storing, and maintaining the DAO's information, it could quickly become out of date and not very useful. That's why I'm in favor of DAOs having an Information Architect role to steward digital information in a way that's useful to everyone. Because outdated, incorrect information can do more harm than good.

The good thing about this step is that a small team of contributors could make massive improvements on their DAO's information storage in a just one work week. The updating of information would be a constant task, but huge improvements could be made with a simpler Notion linking structure. More to come on information organization in DAOs in future newsletters.

Moving beyond the homogeneous treasury

Some DAOs are more susceptible to market dips, which is a prime example of a VUCA concept at work to chip away at the success of the DAO. This is a situation in which a DAO is less VUCA-adapted than a traditional organization (and is feeling all too real at the time of writing).

We know that many DAOs are dependent on one or two tokens, and that the VUCA world of May 2022 is causing significant pain. Will we see an explosion of treasury diversification efforts in the coming months? Maybe a move of less-risk-tolerant contributors back to traditional work structures? The questions remain open.

Resiliency trumps efficiency in a VUCA world

I like this quote on efficiency from Team of Teams:

". . .all the efficiency in the world has no value if it remains static in a volatile environment." p. 80 (kindle edition) Team of Teams

The corporations of the past century have relied on efficiency to make profits and outlast their competitors. But corporations and DAOs of the 21st century will need to rely on resiliency to make profits and outlast competitors.

Efficiency is out, resiliency is in.

How are you building resiliency in your DAO, and how do you think DAOs should build resiliency? Let me know in the comments of this post or tag me in a tweet. I'd love to know more about your own strategies!

Thanks to Cosmic Clancy for the header design!