Organization and personal reputation – from first principles to distributed autonomy

Singapore harbour at night
I'm no etymologist but it seems the verb organize appeared in the 15th Century a few decades before the noun organization. Sometimes we forget that the organization, in terms of the institution or firm, is merely a means to an end, and putting legal entities to one side for the moment, an organization is simply a group of people organized around a common purpose.

Reminding ourselves of such first principles is useful when considering how we might create and nurture new forms of organization and how we might improve the current dominant ones.

Jumping forward over 500 years, let's get bang up to date on so-called social business, aka Enterprise 2.0, aka Responsive Organization, aka Future of Work. The question that concludes Attenzi - a social business story exemplifies the new vista:

Do you help all the individuals associated with your organization (employees, customers, partners, suppliers, shareholders, etc.) build worthwhile relationships with each other and others, coalescing by need and desire, knowledge and capability and shared values, to create shared value?

The verb coalesce conveys the facility to combine, and so the facility to recombine, and re-recombine. The coalescence remains for just as long as shared value is created, and created faster than a new combination might afford. Such process appeals to free marketers for whom efficiency and utilisation are front of mind – after all why should resources be tied up in one combination when they can add greater value faster deployed in another? And there's equal appeal to those on the left of the political spectrum who champion self-management and occupational autonomy.

Relationships

Sometimes I define social business as relationships at scale, and not just in the CRM 1.0 way:

Good business is about cooperative and interdependent relationships, always has been, yet the humanity was lost when organizations scaled way up during the 20th Century. We want to make those relationships more human again, but the answer can’t be to scale it all back down. We have to scale something else up.

More on relationships at scale later. Earlier in the story, one of the main protagonists asserts:

In mapping the continually changing relationships in an organization – and I don’t define the organization as stopping at the payroll – we can distil a picture of the real organization. I guess you could call it the unofficial or real org chart if doing so didn’t still conjure up outmoded ideas of hierarchy and bureaucracy.

In other words, we are free to consider an organized group of people in ways largely ignored by today's corporations, an ignorance that might well be costing them (ie, their stakeholders) some of that shared value creation. We have become so blinkered by the payroll and the org chart that it has appeared revolutionary to many in recent times to consider the customer-as-collaborator for example, even though the concept is as old as trade.

The dominant 20th Century thinking left a stubborn legacy when it comes to those relationships. It's quite simple and incredibly dumb. Relationships are governed by your job title, your role description, and the teams you are instructed to work in. Your worth is judged by superiors based on what you were asked to do a year ago when market conditions and related organizational contexts were quite different; and even where that's exaggeration it's definitely emblematic. It's noteworthy that so-called employee engagement only really emerged in the 90s. And when it comes to building relationships beyond the four walls, we've seen the development more recently of the rather uncomfortable and somewhat forced concept that is employee advocacy.

Having derided 20th Century organization, I should dispel any idea that the Century interrupted some agrarian utopia of team work and egalitarianism. There may well be an invented tradition of teamwork, one based on romanticized and mythical depictions of preindustrial work, but that shouldn't dull our enthusiasm to design something better.

Organization, noun: esp. a business, society, association

Ronald Coase was the first economist to ask a fundamental question – why do we have these organizations-as-legal-entities / business firms at all? Why don't we just have a bunch of self-employed people providing services to one another? He asked this in his Nobel prize winning work, The Nature of the Firm.

It's a testament to his insight that the question he identified in 1937, in his mid-twenties, still catches people by surprise today. He identified that transaction costs, or in his words "costs of using the price mechanism", make the freelance extreme uneconomical:

  • the cost of finding out about each other and working out if the corresponding product or service fits the bill at the right price
  • the cost of negotiating and doing the deal
  • the cost of making sure all parties do as they said they would.

It appears it's more economical to form a legal entity and get people on a payroll, although the question about what exactly to do internally and what to outsource has spawned many management texts and academic papers and occupied many long hours of management analyses and debate.

The current technology revolution – social / mobile / analytics / cloud – has changed this cost equation. The same technologies powering hundreds of thousands of real-time ad auctions every single second can surely erode those transaction costs by a magnitude or two. If the social graph betrays our relationships in the big wide world, surely similar technology can illuminate the nature of our relationships in the narrower work context. In his post this week, The social graph of work, Esko Kilpi concludes:

Instead of the topology of organizational boxes that are still often the visual representation of work, the architecture of work is a live social graph of networked interdependence and accountability.

We can think of social business in terms of influence flows and in terms of mutuality – building mutual understanding to enable mutual influence to pursue mutual value. But unless mankind suddenly converts en masse to a state of altruism, which I consider extremely unlikely, giving more value to create greater mutual value will still require some sort of ledger. No-one likes free-loaders. No-one wants to be taken for a ride. And it doesn't matter whether this concern is real or simply perceived.
Singapore harbour at night – camera shake

A ledger

How might such quid pro quo be recognised in the long run?

We shouldn't forget of course that the same question embitters more than the odd employee today, so, as I write up front here, such exploration can benefit today's dominant business forms as well as help inspire new ones.

In a recent blog post, Organizational performance – a private conversation that should have been public and is now, Adam Pisoni responded to my reference to influence flows in this context:

You suggest using "influence" as proxy metric for contribution. I'm assuming you think one could do network analysis to determine one's influence and reward accordingly. Theoretically it could all be automated. No bosses needed. Of course, the problem with applying proxy metrics to humans is that they tend to optimize for the metric as opposed to what actually provides the most value.

And as I wrote for The Guardian in February 2012, The complexity of influence is a challenge – and an opportunity, in relation to so-called influence scores such as Klout:

In my opinion, complexity and network science will continue to unearth insights of important commercial and societal value, but I'm considerably less enamoured about seeming to translate today's analytical capabilities into some kind of a score of an individual's influence. Right now, we have no scalable facility to ascertain or infer who or what caused someone to change their mind or behaviour, without falling into some kind of last-click attribution trap, so how then can we pretend to score an individual's likelihood to exert that influence, and as if they did so with apparent Newtonian simplicity? We've barely even attempted to correlate proxies for influence, assuming that universal correlates even exist.

So I agree with Adam, but offered this in reply:

... but fortunately, we're pretty well evolved to make this assessment ourselves. It's part of what makes us social animals and helps our communities prosper.

Or to put it another way, I believe aphorisms such as "what goes around comes around" emerged from experience rather than simple vain hope! (See A Theory of Indirect Reciprocity in Networks, PDF.) It seems we may have evolved behaviours whereby net takers are shunned and net givers are celebrated. This doesn't appear to square immediately with survival-of-the-fittest evolutionary theory, but Darwin himself recognised animal cooperation and our subsequent understanding is labelled cooperative evolution.

However, we're concerned with a different scale here. Relatively small groups of people in pre-industrial working environments and communities might have been able to keep tally, so to speak, but we're now exploring the potential of relationships at scale – many more relationships and significantly greater flux. So how might we employ modern technology to lend a hand, to represent this quantity and quality?

Money?

Economists consider money to serve three purposes:

  • A "medium of exchange" that can be swapped for goods and services reliably
  • A stable store of value, holding its purchasing power over time
  • A unit of account against which economic value is measured.

I'm not sure any of these are requisite to our needs here. I don't know if our ledger needs to be a medium of exchange itself necessarily, or have purchasing power, although it may impact an individual's earning power. Fundamentally, monetary wealth does not proxy for reputation or worthiness in a relationship context, and it only proxies for influence in the narrowest financial sense.

If, for our purposes here, money sits in the quadrant marked practical but not very suitable, then perhaps we might appraise Whuffie as appropriate but impractical to the point of impossible. Whuffie is a reputation currency described by Cory Doctorow in a science fiction novel and serves the purpose of scaling the ability to score acceptable and unacceptable, appreciated and unappreciated behaviours. One's total Whuffie then signifies the esteem with which one is held in the community. I say it's impossible however for the simple reason that it requires everyone to have a brain implant, and this isn't the blog post I'm afraid to consider aspects of transhumanism!

Coining reputation

Can we look beyond old forms of money then?

The obvious place to look is new forms of money, and given its wild market swings in recent times alone I'm sure you'll have heard of bitcoin. The Bitcoin system powers the distributed, peer-to-peer digital currency called bitcoin, and the total value in circulation has risen to $7.9 billion, from just $490m a year ago according to The Economist. Its mathematical foundation is the eponym for this new class of currency – cryptocurrency.

While the fascinating mathematics is beyond the scope of this post, Bitcoin has some fascinating qualities that might be of value (no pun intended) to us here. These qualities are quite opposite to traditional money.

  • At the heart of Bitcoin is the blockchain – a giant ledger of every single transaction ever
  • The blockchain is public – everyone can check it
  • It's permissionless – no one needs to approve a transaction or facilitate it (ie, banks)
  • It's programmable – so, for example, a transaction might only proceed by quorum
  • It's supply is finite – so it cannot be devalued by "printing money".

Are these principles conducive to building a new reputation currency for organizations-as-networks, for circumvision (as opposed to supervision), for wirearchies and holocracies and a world full of freelancers? I particularly like the idea of knowing how much reputation currency has flowed to someone, and that this amount isn't then eroded should they give it away.

Such a prospect might not be so giant a leap compared to the vision expressed September 2013 by Stan Larimer, President of Invictus Innovations. He describes Distributed Autonomous Corporates as having the following characteristics:

  • They are corporations – they are free and independent persons (but don’t have legal personality)
  • They are autonomous – once up to speed, they no longer need (or heed) their creators
  • They are distributed – there are no central points of control or failure that can be attacked
  • They are transparent – their books and business rules are auditable by all
  • They are confidential – customer information is securely (and incorruptibly) protected
  • They are trustworthy – because no interaction with them depends on trust
  • They are fiduciaries – acting solely in their customers’ and shareholders’ interests
  • They are self-regulating – they robotically obey their own rules
  • They are incorruptible – no one can exercise seductive or coercive influence over them
  • They are sovereign – over their digital resources (but don't have legal capacity).

I prefer the label Distributed Autonomous Organizations if only because the word Corporate has way too much baggage in legal and everyday lexicon. He goes further and describes three laws:

  1. A DAC must always obey its own published business rules
  2. A DAC must never change its rules without consent of its stakeholders, except where such change would conflict with the First Law
  3. A DAC must protect its own existence, as long as such protection does not conflict with the first two laws.

You'll note the similarities to Asimov's Three Laws of Robotics. Could such a thing exist? Well, in fact it does. Bitcoin.

(I've done some brainstorming informed by the organization-as-software metaphor in the past, but it was always just a metaphor. Now we can contemplate the actuality. Imagine how that software might communicate more broadly in the pursuit of its organizational vision and in line with its community programmed values. Plugged into Cisco's Application Centric Infrastructure for example, might we solve the thorny and controversial question of ICANN and Internet Governance by programming a distributed autonomous organization to take up the reins?)

Crossing boundaries

Anyone interested in the value of social business will be familiar with the advantages of Enterprise Social Networks over email. ESNs help employees to 'work out loud', to multiply serendipity, to forge new relationships and knowledge share, to create value together faster than otherwise. But email retains the advantage of being open, distributed and interoperable.

Imagine being a supplier to eight companies who have, between them, adopted Yammer, Chatter, Jive, Connections, Socialcast, Tibbr, Atlassian and Sitrion. Now they chose to extend this functionality to you as a so-called external network. Not very helpful.

Not only do we need interoperable ESNs to really cement the vision each vendor champions, but we need a common reputation currency as the "enterprise" increasingly becomes an "organization" of the non-corporate form, and the corporate forms borrow the best bits accordingly. Perhaps built on the nascent Etherum platform?

Fancy joining me in forging the founding policies?

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