The Decentralization of Corporations

Scott Webb on Unsplash

The author of Sapiens and Homo Deus, Yuval Noah Harari, writes that humans have become the most powerful species on Earth because they can “cooperate flexibly and at scale.

This becomes clear when we contrast humans with other species. For example, bumblebees can cooperate at scale (in large numbers), but they cannot collaborate . If there is some sort of crisis, bumblebees cannot lead themselves to adapt. Alternatively, many types of monkeys can work together, but not in large groups (at scale). Humans are unique because they are able to do both. Our society is flexible and scalable.

When’s the last time you saw bees have a revolution? Massimiliano Latella on Unsplash

Throughout human history, governance has become more decentralized which leads to larger scale and more flexible collaboration. When humans first started to form together, a small group of people or a single person governed a small tribe. This eventually became kingdoms, which have many people and are led by another group of people (king and advisors). Today, most successful countries are governed through a democracy, which is the most decentralized governance system we’ve used so far.

If the trend continues, more and more countries will turn to democracy. Even large religions have become somewhat decentralized. The world’s largest religion, Christianity has make branches (forks?) and chapters which prevents leadership centralization. However, one institution that has not trended towards decentralization has been corporations. There are publicly traded companies, which sort-of functions as democratic governance but this does not scale well (not many shareholders compared to consumers) and isn’t very flexible (shareholders rarely vote and have very little input on day-to-day operations). The centralized governance systems that businesses use face the same issues as monarchies and dictatorships. There are no infallible leaders. Every leader (even if they have 100% good intentions, which again, almost never happens) make mistakes and have biases. The wisdom of crowds lessens these mistakes and biases. In order to reduce harmful decisions caused by biases and thinking errors, corporations should decentralize.

The stock market is a flawed form of governance. Rick Tap on Unsplash

By allowing consumers to govern the corporation, businesses will make more ethical and intelligent decisions. It’s unlikely that a sufficiently large group of consumers will vote to make changes that harm themselves and many studies have shown the efficacy of crowd wisdom. A good way to handle this governance system is to use blockchain based platforms such as Aragon. Blockchain governance platforms have important features. These include censorship resistancy, transparency, and failure resistance.

Also, our economic system is the most powerful cooperation tool we have. By tying economic incentives to governance, we create an even more powerful tool. With corporate governance, a token system would accomplish this.

By looking at human history, we see the steps that companies can take to become more profitable, powerful, and ethical. Thousands of years of history show a clear path for our future.

Follow along as we try to create the future at Ardent United! We’re creating a crowdfunded and crowdgoverned esports organization. 🙂

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The Decentralization of Corporations was originally published in Hacker Noon on Medium, where people are continuing the conversation by highlighting and responding to this story.