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Pet3rpan — Minimizing Governance

Pet3rpan is in an investor at 1kx, an early-stage crypto fund. DAOs have a strategy problem, conflating decentralization with structurelessness. In practice, Pet3rpan sees an opportunity to start with governance constraints and then build toward governance minimization. Decentralized coordination and community building are developable skills. And yet there is no replacement for the experience of running and failing experiments.

Show Notes
& Relevant Links

Pet3r Resources:
https://twitter.com/pet3rpan_
https://twitter.com/1kxNetwork

Links & People Mentioned:
Andre Cronje
Gelato network
MolochDAO
Ethereum DAO hack
James Young
Collab Land
DAOhaus
Kickback
Raidguild

Compound
AAve

Superfluid
Matchbox DAO
Index Coop
Codearena
Nouns DAO

Time - Stamps:

0:00 - Intro
2:28 - Peter
6:15 - What’s a DAO For?
8:16 - The Initial DAO Thesis
18:31 - Getting Early Parts Right
24:56 - Clarity On Strategies
29:00 - Good Game Design
34:59 - What Builders Need to Focus On
43:06 - “Join Another DAO?”

Transcript

Jess Sloss 0:00
Peter, welcome to club.

Peter Pan 0:01
It's a pleasure.

Jess Sloss 0:01
Really started jumping this conversation for you. And you know, as we were talking before, it was sort of thinking back to the first time we met as maybe a good way of getting into your history. And the first time we met was in Berlin in 2019. I think we talked a bunch before then. And I remember walking into this lovely venue in Berlin. And seeing you herding cats, basically, for the very first MetaCartel Demo Day. I very distinctly remember this lowly Keurig coffee pot that was there serving the 200 or so members that were there. So the chaos, the excitement, the vibes there at the end of the sort of middle of the bear market for very, very fun memories. So my way of saying Peter and OG in the DAO space, and really excited to jump into this conversation with you.

Peter Pan 0:46
Yeah, that was a fun event. We all like, you know, getting quotes from how to get coffee. That was like an off the floor. That was like the first time running like any sort of conference like thing. Yeah, Willy was organizing the food and drinks and stuff. And yeah, it's just like, $5,000 5000 euros for fucking coffee. Are you kidding me? No, we're ordering a coffee machine for like, 150 euros, and we're buying 100 bucks worth of coffee pods, and then we're just serving everyone pre made coffee for a machine.

Jess Sloss 1:13
I love it. It's sort of like a, you know, I think for so many folks coming through their first market cycle, you can kind of see like, the tops and the bottoms and sort of like the change in vibes. And I think, you know, this idea of like, bear markets for builders does seem like maybe a off the cuff remark. But truly, like so many of the best relationships that I've built, were at things like MetaCartel Demo Day. And I think I can trace so much of like the insight or at least early connections for even for Seed Club to those sort of smaller pockets of true believers. And so I think the first time I came into contact with you is through through the idea of MetaCartel, maybe if you could just give people a brief introduction on who you are, what you're doing right now, and maybe some of those early days.

Peter Pan 1:52
Yeah, I think back in 2018, the thesis in the space was your watch will come in and solve everything. Right. And I think we created this working group that worked in meta transactions. For those who don't know, it's like a transaction. Well, user doesn't pay for gas, it's abstracted by third party. But after working on that, and solving a lot of problems, we were like, Who the fuck are you building this? And I think quickly, the group realize that like, hey, we actually need to, like build use cases that are compelling that a Web3 native, you know, not just supply chain on the block, you know, supply chain blockchain bullshit, you know. And yeah, but we sort of became a group that went and sort of built this community folks and just end user applications. The whole message was like, stop focusing on low level infrastructure, we need to figure out use cases, well, not stop. But we need to focus on use cases. Every Sunday, I would go through DappRadar list of like applications listed, and I would use them all of them every Sunday. That's how little it was. And I wrote about it. And it was just like doing looking at everything and realizing, yeah, that was what we needed to head into. And I think that was unique because we presented a different message saying, we care about end users, we care about end user value, let's figure out use cases. Let's experiment really quickly. Let's be scrappy. let's iterate let's be fast. Let's move quickly. And yeah, that was and we had a dancing chili as a logo, of course, right. So that's what sort of made it unique. And we experiment with different DAOs as well back in 2019. And really enjoyed the process of bootstrapping all of this, you know, we sort of incubated things like Zapper. Collab.Land, like early, like, incubated, helped and support like, from granted, right, like Zapper, collab.land, catalog, even gave a grant to Andre. And then he just like went off the face of the planet before coming back and doing your own. Yeah, really interesting projects, gelato network, fascinating stuff. And yeah, I really enjoyed this person supporting these projects. And I feel like through grants, I learned how early stage investing walked, at least, not the investing bet. But understanding how real innovation happens in the majors, right? I was going through every hackathon applicant like sort of hackathon submission going through all that, and supporting the journeys. And that sort of led me to one key extra, you know, like doing this, I wanted to go full time and make this my day to day and then with one kicks for two years. And I would say one kicks is special, because we really leave that like what creative mental models are really revolutionized all aspects of our world from gaming to a low level infrastructure to data availability to social tokens, and tokenized communities, music, everything, every area in which we see distributed ownership models, really revolutionising incentives and ownership structures.

Jess Sloss 4:25
So I think you sort of have this really interesting seat where you both have, you know, really early experience in building some of the early DAOs. Right, no matter cartels, the grants giving DAO was very novel than that it was very active and a thing and building a moloch, you know, so there's this sort of like, hands on deep experience with both like the benefits and of course, like the challenges that kind of come from that. And then in moving into 1KX, you know, you're sort of sitting at a table where you're involved in an incredible portfolio of projects, where you start to get to see those benefits and challenges applied in many different ways. And so, what's exciting for me about this conversation is getting to tap into both the longevity and this sort of the insights that I think have been generated over time, but then also like the breadth that can come from it, because I think it's very easy for folks to, it's hard to sort of understand the full breadth of what's being built in this space. Generally, it's probably impossible right now, the big difference from two years ago. But the value of at least being able to tap into that insight is that there's so many lessons, and you can sort of see patterns. And you can also see sort of like the, the right or left turns that are kind of maybe interesting to continue to pull on. So that's really where I want to get to with this conversation. The questions may be very, deceptively simple, but very difficult to answer. And maybe we'll kick it off here is, what's a DAO for?

Peter Pan 5:37
It's a great question, I sort of see it as a social and economic coordination layer. So people sort of see it as a container for activity, which it is, but I see it as like really as simple. It's a set of like, you know, social contracts and economic contracts that enable collaboration and trust business and economic activity to be like, very high level, right, right, that wouldn't really exist. And I think the difference between sort of a business entity with a DAO, right is really the fact that DAO is a lot more programmatic and a lot more flexible, and more nuanced in its ability to reflect ownership. And I guess, like, reflect incentives as well, in terms of incentives and ownership structures, you have a lot more affordances at play, right, like possibilities with design, that were really traditionally be possible with just like rigid structures based on just pure paperwork, honestly, you know, like, it's just pure paperwork, until it all settled in price funding rounds, or IPOs. Really, these are the various real milestone checkpoints of a traditional equity business entity, right. So and I think that you can sort of apply this distributed ownership structure and these tokenized incentives across all these industries in which they are sort of traditionally middlemen that everyone depends on, but because they depend on them, like ruthlessly through value capturing and monetizing at the cost of the network around them, right. And I think that idea of a DAOs, you know, the idea that you can take much more flexible, much more fair sort of attribution values function and apply them in which everyone wins. And because everyone wins your app, able to aggregate the best participants of the network and aggregate even more participants in aggregate more resources, I have a supply side and demand side, right, through a shared, you know, sort of, I guess, token.

Jess Sloss 7:21
I love that answer. And I think it gets out a bunch of the nuance here that is maybe built on a lot of the experience you've had. And so I'm curious if we sort of go back to the early days 2018 2019 ruthlessly and what you're working on there. I'm wondering what like the initial thesis or intent or principles that were being built with back then. And I'm curious to see if those sort of sustained today if there was any big lessons that were learned in those days versus where we are today.

Peter Pan 7:44
I really honestly didn't care about decentralization, decentralization but decentralized coordination and organizations until I would say Moloch, even slightly, right. So I think Moloch DAO, for those who don't know, was really the first DAO that launched after the DAO itself, like after the DAO hack, right, that really inspired everyone made DAOs cool again, so the funny story is that James Young, another sort of co-creator of MetaCartel DAO and MetaCartel, as an ecosystem, right, really was trying to push me to look at Moloch DAO before was launched, kept on saying a bunch of stuff, I want to see I'm like, I'm someone who like filters out 90% of the woods, people generally frighten me, if it doesn't make sense to me, I'll just like not get it right. So this was one of the cases, I only really started painting Moloch launch, because it was able to do something that no one was able to really do elsewhere, what Moloch was Pool funds from about 20 to 30 people initially with 100 ETH commitment, so really come together to find if you're in public goods, and back then the only source of funding for if you're in public goods was the Food Foundation, which as much as the great work they've done, they are generally slower to pull funding out of as someone who was really work in public goods and your infrastructure and tells me team that was a source of frustration. I wanted to fund public goods and see the you know, really great projects that's funded regardless of the economic outcome, right. And I saw Moloch really instantly funding things promotional thing. And I realized that Moloch without the Moloch structure in which you can like it's a DAO structure, but the key point is you can put your funds in and also ragequit leave anytime with your Puranas show funds. And I realized that was a structure that made a group of people that didn't really trust each other too much. Ameen was someone I knew Valley, everyone's come together. But even then, no one really knew each other to come from organization to fund things together. And I realized that was like initial reckoning moment of like, wow, this is actually super powerful. And I still didn't think too much beyond that. I was like, I want to do this. But with the application layer, you know, we always like really struggling to race. I guess we tried to get like a UX open source UX like sort of Software Foundation off the ground that didn't really work out. We try to get a gap right or decentralized application accelerator and incubate off the ground. No one knew who the fuck it was absolutely no way of getting that off the ground and raising funds for no money from investments, no money in the space in general for apps back then no real track record, but I was like, Hey, let's like do a grant DAO. And I was like, let's do the same thing they did. But with us. And that was an inspiration for MetaCartel DAO. I think, honestly, I didn't really think too much about DAOs. I didn't really form a thesis beyond realizing just like what they could meaningfully make an impact with. And the next three, six months, you know, there's a ton of like, sort of thought leaders around DAOs and shit out there. But I would say I'm much more of a pragmatist. How can you know, decentralized structure make an impact and what you're working with three months out six months out? Yeah, rather than thinking like very open sky, big picture from day one, right? So initially, it was just to get funding pulled together from different parties. And then we started giving grants funding apps, but then I think people started wanting to experiment with DAOs. And I was like, like, I'm not sure if the use case is, really or not. But let's do it anyways, to please, you know, some DAO on these . And I think that's when we really started going down the rabbit hole of like, Hey, what are DAO? What can DAOs be like in the next six months? What can they what can they go and I think we really express our questions through the grants and the projects we funded. We were like, could we build a DAO Launchpad, you know, there is Aragon and DAOStack back then, but there wasn't one for Moloch DAOs, which was getting sort of traction. So we built DAOHaus, right? We built things like Orochi DAO summoned by Makoto from kickback shout out, he wanted to create, I guess, a DAO tool initially come together fund event sponsorships together. So it was like literally like 10 15 persons coming together pulling several 100 bucks, or maybe like couple 100 bucks, nearly $1,000, maybe, maybe more, slightly more, you know, to just like fund sponsorships together. And I think that quickly developed in some moloch DAO funding whiskey parties and spending all the money on booze in one go. But we were like doing things like could we create DAOs for services organization that became Raid Guild the services DAO. And then, you know, at the later end of 2019, when we like funded a bunch of applications and realize that we were really amassing a great community of builders and attracting great builders. We really started question like, how do we like commercialize this grants program? That's been funding a lot of cool stuff like gelato network, we funded things like Adi was like the first idea where we're like, let's tokenize the revenue from interest earned of like, you know, savings position and compound or Aave and like, let's direct it elsewhere. Like we're funding things like that. That became super fluid. Yeah. And let's like fun DAO operations tools. Collab Land, everyone knows is token gating. But it was really just like a telegram bot, that query people on the sentiment of different grants while they were excited, No, not right. That has like, you know, 40,000 active discord communities now it's like just wild to see James Young and like that perfect. Go the length, right, the distance until a bunch of other stuff. But yeah, MetaCartel ventures was born out of that sort of traction and belief, right. And back then still, there wasn't any investor that was focusing on the application layer. And we wanted MetaCartel ventures to be, I guess, the first investor or community to come together to focus on that, right. Yeah, right out of the gates, we launched in early 2020, raising only $400,000 from 40 odd people putting in checks from $2,000 to $45,000, 50 $70,000. Right. So it's like Jay, the angel tracks, right. But that's all we could scrounge up. And the grand scale was barely $100,000, as well. And so we tried what we could. And I sort of saw DAOs as a means to an end for very tactical objectives to push the application space forward.

Jess Sloss 13:13
And I think there's a lot of insight in that story there. I love thinking about, like, just the amount of money that was being played with back at that time compared to right now is just like, I mean, both like it just crazy to see the growth in the space. But also, there's so much value coming out of that sort of scrappy, bootstrapper builder network. And it allows folks to not have to have this big overarching world changing thesis, but instead to say, okay, what are the tools and things that we need to go do? How can these things be useful? And from starting to that place, I think you'd get two new novel ideas versus starting from sort of the idealistic or like, the big vision that's going to get the VC check in the door. To me that's like, you know, succeed, lots of deals come through our world looking at folks playing the narrative to get the money versus folks that are like, I have this problem, and I need to go solve it, like, it's pretty stark difference between worth I think, in the future, you'll see like a very big difference in where the ladder ends up versus the former, the two trends that I sort of see in your story that are this idea of sort of social capital and financial capital, like the value of being a part of MetaCartel early days, what's not because you're gonna go 10x your money goes because you get to go A) have an impact and B) you're a part of this amazing group of people who share the similar values. And the focus on that early on actually positioned you to be in a position to actually create financial value in the future. And I think like the trying to flip that around both sounded like very impractical in the approach you're trying to take. But also we probably wouldn't have ended up in the same sort of brand and notoriety and impact that you're having right now.

Peter Pan 14:38
Yeah, definitely. We all lost money. We spent our own money on experiments and in hindsight, I realized that it's like you don't actually need a ton of capital to really experiment and explore the idea made the community walk because the community was needed. I think people you people think communities that just like, set up a discord and you like personal events and Twitter spaces you have a community. No! like, communities become special when they're needed. When there's no one else coming together, that's what makes our community special and powerful, right? And that's why you achieve things that you can't do alone. And yeah, like similar to Seed Club, like MetaCartel was sort of like running experiments of like one to $5,000 grants. Meanwhile, I had not a desk, but like, DAO side had like 20 million or something back then I was gonna have $50 million. And we had less than around $100,000, right. And we just experimented a lot more, we learned a lot more during that period. And that was a stark contrast. And that was like I take that that's at the very core of like, a fundamental belief of what I take to investing is sort of got like a special front row seat to how real innovation happens, right. And innovation always happens, whether social or technological, that always preseeded right? By vibrant, Vision driven, mission driven, values driven communities that are iterating, quickly, often, and sometimes sporadically, as well. And that's needed, experimenting in a way that is nonlinear to trying things, the MetaCartel Demo Day, we use NFTs for the first time ever crypto as tickets for conference tickets. Why the fuck not? You know? So, like, that was the question. And I think to innovate, you sort of need to like run the t shirt and say, why the fuck not. And you don't need a lot of money to do the small insurance only like dedication and division, right? So that's what I saw with Seed Club. Once he called it emerge. I was like, okay, like all these smart people coming around to support the community to create this community to support us well, but I felt like that was a special moment that was like, okay, 12 to 18 months from now, very special things will come out of this. And that's been a heuristic I've followed in all of the space Matchbox DAO molocule, Matchbox will like Onchan gaming molocule for DeSci, YGG for gaming, many others, so let's honestly but you have these like mafia, or DAOs, if you will, but emergent sort of collectively explore the idea maze. And I'm like privileged to like just had grinded and I just like, you know, eaten some shit on us through those days just to like learn play by play entry and what that looks like on a very microscopic scale.

Jess Sloss 17:08
So I think the conversation here is sort of framed around DAO governance, or at least a part of the series that we're doing. But I think that insight, there is actually truly an important insight for governance, because I think a lot of the time, we sort of start thinking about the management or decision making of these organizations after the fact, or at least as like a separate part to the founding or creation. And I think a through line through all these organizations is this idea of trust and social capital, and that there's definitely this trustless base layer that we're building on, that sort of enables some social coordination to scale. But there's still this immense amount of your description of DAOs. early on was sort of this idea of, of it being this sort of social layer that exists there. Interest hearing your answers, it's a sort of last question, it seems to me that like getting that early part, right is probably a bigger part of getting governance, right, than running the right template or mechanism or proposal format. You have thoughts on that?

Peter Pan 17:59
This is a great question. I think that, I would say that there's two spectrums, and two things are balanced, right? I think you need open source creativity, or the community to really, you know, explore idea mazes properly, to have the energy to, you know, to create an ecosystem right out of nothing. But I also see that the other side well, you know, governance really fails when you don't have like, a clear vision, understanding of what people coming together to build when you give a decision. And when you give strategy, right to strategy is really a set of optimizations and trade offs that you make. It's why you do X OBO is that end Y , right? And those need to be harsh trade offs, you know, like a strategy is not a good strategy, or powerful one. If you don't, at least somehow feel some little pain over the optimizations, oh, privatizations that you've made. And when you give that to a group of 80 to 200 people or more, you're going to end up with a shitshow. Right? So there's two sides, right, I think for DAOs is really work, I think you need to have a clear understanding of what you're trying to build. And you need to also understand the game that you're playing, I think, you know, for Index Coop, for example, as an example of a DAO they weren't sure what they were right, where they, you know, a business that serves methodologists, like strategists that had unique index ideas, or were they going to be a product house or product incubation house that built indices in the house, right. And I think there was this sort of confusion and clash between these two models, and plus more sort of confusion around governance as a result of not understanding the market well enough. And I think when you don't understand the market well enough, you're just spending money, right? And spending resources, allocating resources, have no fucking clue what you're doing. And not to point the next example, but that was more of a decisional point, right, a pivotal point, which I had to make and I would say most DAOs in the space haven't found that clarity of what they want to become what is long term sustainable what makes sense, what can be repeatable? And this is stuff that like really is done traditionally by a CEO, CTO is head of product, right? And that you know, this is these are tough, tough questions that take a year to slove. Often times projects need to find product market fit or find out repeatable revenue models at scale long term before they really want to scale and productionize what they've have. But then there's the other side, which is like when you're building a token network, or you're finding a model for checking network, you can't just build a community from scratch, like, oh, we have a token network bottle, let's build a community. No, it takes years to do that. So the bell balance, and you need to have like to build a context within that group had them in bulk to some extent, or to a great extent, depending on where you are at. But you know, you have these two, like needs, clashing, and really conflicting. And that's where the lack of delineation between the two, I think, you know, or at least clear expectation setting for different operating models fall out with each other. And that's where you end up with, like kumbaya DAOs, right? Where I remember it was on the Seed Club podcast that I sort of really coined the term kumbayaDAO and it's just been using it so and when I'm trying to make it a meme, I'm trying to make it a thing, just it's this idea of like these DAOs just holding hands, saying everything's great holding AMA's doing everything, but like finding product market fit and finding sustainable business models, offen finding not even business models, even just like building efficient processes for building and exploring product development or other means of sustaining themselves. Right. And they're just lost and trying to, like, be friends with each other. Originally, I've been on the far end infrastructure of like, communities are about vibes. Yes, they all I still believe in that. But having realized actual numbers, you know, I'm the reality and the outcomes of what kumbaya DAOs lead to, I've realized that, you know, DAOs are places where you come together to get shit done, you can be friends, and you can have those circles that you sit on the grass and hold hands with, but you hit archieve something, you're here to make impact. And if you don't care about that, or you're not working towards that, you're not going to make it basically. Right. And I think that's what kumbaya DAOs are, as much as they talk about vibes and the mission and vision of what they're trying to do. They get lost, and they lose sight of what they're trying to achieve.

Jess Sloss 22:09
Yeah. And I think that's very much a product of the market cycle that we were in there and sort of allowed folks to avoid the tough questions. And I totally agree this idea of like, like, what's more important, it seems existing into the future, or holding on to ideological or memes of the day, which I think, yeah, I agree. vibes are maybe more of a memes to an end and themselves. So that's obviously there's edge cases there as well.

Peter Pan 22:31
To your point, I think people are prioritizing their own ideologies and their own egos of actual impacts, like you're supposed to identify what you want to achieve. And once you found a way to get the ideology and law and everything around, it isn't mean to like scaling the social, social capital and social fabric of the community to get that more efficiently. It's not supposed to be a barrier. For MetaCartel DAO, the grant DAO, it was a simpler DAO, it's a lot more basic. But I think the example was, like, I just knew that if we experimented with enough grants, God would collect enough builds together, we would succeed and discover really cool use cases. That's it, nothing else, nothing more. It's just $100,000 grants DAO, not meant to be anything more, right. And the culture was then sort of cultivated and designed around maximizing man, a lot of communities that just, they want to feel good. And it's like, you know, there's an investor, a shark ish, sort of investor term of, do you want to feel like you're right, or do you want to feel smart? Or do you want to make money? I think the DAO version is like, do you want to, like, be friends with people? Or do you want to create impact? Something to that way? I don't know.

Jess Sloss 23:37
Like, hotcakes, I like it. So the framing that I shared with you earlier for this conversation is sort of based on the number of conversations we've had offline over recent months, it's sort of like, where do you DAOs go wrong? Or what do we get wrong in governance, and I think this piece around strategy is actually really, really important and maybe highlight some of like, the main friction, which is sort of expanded upon there a little bit. I'm curious, you know, the, if you think about like, how organizations work really well, it's a vision, its objectives that are moving towards that vision. And there's measurables, to ensure that we're actually moving towards that vision and, and the mechanisms for doing that, you know, I think, popularized in corporations. But there's insights from that, and hard lessons learned that I think really need to be applied to DAOs as well. I'm curious, like the method of being able to get clear on strategy in a DAO, I think it's a pretty big open design space. And there's extremes, right one is like, let's call it kumbaya DAO and we can say it's maybe efficient or effective once in a while, but probably generally not effective. And then the other is maybe, you know, Corp founding with a CEO, they have a big vision, they're gonna go build all the things in the products and sort of launch it and then sort of exit to community, et cetera. Is there a middle ground there? Or are you sort of suggesting that like, the right way is to actually really lean into that small team and clear leadership?

Peter Pan 24:45
It's funny that everyone's trying to build onboarding tools, but no one's trying to build strategy forming tools or product clarity tools or whatever the fuck that looks like, you know, honestly, it's like, most DAOs 99% of all DAOs in the space. Just haven't found long term strategic clarity and understanding and yet, the onboarding more and more chefs the kitchen DAO onboarding, let's let's wait on more members. Yeah, you know, like, let's sing songs and let's spend more money. Hi everyone, right. And in the interim, while we are missing a lot of maybe like the DAO native or community centric like strategy or formation, doctor, maybe the methodologies like traditional product leadership methodologies that exist in traditional setups, I think it's more about just like going slow, you don't need, like, if you can't figure out how to effectively leverage and deploy five DAO countries effectively to work towards a coherent vision and strategy, you're not going to be able to deal with 30. And so it's like, it's just like, stepping down, like moving a lot slower, right, and wasteful, like 10x slower than what people think they should be moving at. And I think a building down introducing more members and more contractors is one thing, but then I think people mistake for building a community, they all areas in which you can open sources of community and get involvement and participation. But there is a level of which you do need to curate out very loud voices that don't do very much right, and just get shit done. You know, it's like, get shit done. Tools are like gonna be big. probably have heard of them. It's called Google Docs, Google Calendar, Gmail, and Trello. You know, and maybe more crypto native tools will merge, right? Like Snapchat is a great one. There's a safe, like fade into the background. Right? I definitely have some PTSD here.

Jess Sloss 26:26
And I think that image is sort of like, you know, adding more and more cooks in the kitchen. Like if you sort of made that very clear to builders that are really focused on talent. I totally agree. It's, it's very much if you're building the space, that is not the challenge you have the challenge you have is how do we put people to useful work. And I think the mechanisms we're using right now are grossly inefficient and ineffective. And I think, to your point, maybe even detrimental to the ultimate goals teams have. And I think when we've experienced this within Seed Club, like the working group structures that we have rolled out have been successful, to some degree not successful to other degrees. But really, the lessons learned there where people want to be effective, people want to be good at their jobs, and without structure around that, so that people know where they want to be where they go, or should be going, what the the outcomes are driving towards are, it's very, very difficult for people to actually feel comfortable and bring their full selves to do it. And so instead of being in this place, where we're actually unlocking this hive mind of human potential, and you end up in this sort of muddy, messy sort of uncomfortable space, where most people who feel like they're not being effective and and aren't actually driving towards the outcomes that are trying to drive to So the lesson that we've internalized here is like decentralization, but not structurelessness and a focus on structure. And I think you can use a term that I've been using a lot, which is like, most DAOs are people in DAOs don't understand the game they're playing. And I'm curious, I totally agree with that. And, and sort of one of the thesises that I have coming out of that is that our job as sort of people who are tasked with standing up these networks, is about not only defining those games, but building the rules and the structures of those games. And that for us to actually be able to tap into that next level. There's just such a massive difference between and a huge gap in information. So information asymmetry is just the biggest challenge that people can't keep up with all these things. And yet, we're asking folks to come in and vote on very, very important subjects, you know, Index Coop, I'm a token holder, I see all the proposals, there's just not have remotely enough context to make any meaningful decision are so curious, like when we think about the games to play here or to design, have you seen good examples of that? Or am I on the right track here?

Peter Pan 28:26
Yeah, no, I think you're on the right track. I definitely resonate. Yeah, people are building incomplete games. It's like, imagine that was a game in which you could like, only drive one car in a little city. And you know, and then like, never designed like the monetary system. Like imagine Uber was like a video game. And people like you never designed the actual system to make money, just like had a little car that people drove around. And like, everyone just jumps into the world and does the same thing. Like people tend to copy right? Most countries will be followers, to what you've done, whatever you've done, people are going to do over and over again. So you need to be careful about what you're letting people into what type of game you're letting people into right? They're just going to repeat the same thing over and over again, to better for worse, and it can be a powerful thing because if you've built the right models, it's a beautiful system that can flow and I think one of the best DAOs I've seen out there is definitely Catarina people who don't know a ko Davina is a DAO that facilitates code audits. What they do is they run audits for code. Typically, they're done by private auditing firms. And effectively they have a gamified system where people review code and the put up exploits or bugs that they find and it's ranked, and it's scored based on the severity of the bugs found and there's wardens who are curating those and they have amazing system that flew super well. And I think maybe it's security engineers who are non political, but it just fucking works and just scales something that it has done incredibly well. And that gives me hope that you know, other DAOs definitely able to design similarly effective systems, right. But I think that for crude auditing, I think the key there is that the game loop of auditing code is a lot more straightforward. And it's simpler. But I think it proves out that these like, complete loops can be built. I think that product development and idea maze navigating and strategy building. These are extremely, extremely complex loops. The question is like, how do you build a game for that, right. And I think that's why all these DAOs are completely struggled is that first thing is that many DAOs don't have the right people who are capable enough of actually formulating and working on this thing. So you're just having people who aren't fit for the build step up and very senior on high stakes decisions, right, without the right background capabilities, roles without the right skin in the game, as well. And then secondly, by itself, it's just hard. And then to not even have properly designed sort of game boop for that, it just becomes chaos. And I think that's the part of like, the tension between figuring things out and then building a community that is following the journey and collaborating with you, right. And I think the middle ground is building DAOs with governance constraints, and evolving towards governance minimization, as you figure out what works. But the key in the beginning, I think, with governance is not to have an open ended, like do whatever you want, when you haven't figured things out, it's more about slowly opening up the scope. And then it's not about opening it up to whatever is game, it may be yes, long term for most DAOs, because they are self sovereign communities with tokenized governance, zeroing in on what matters, that is the end goal, doing whatever you want is not the end goal. That is like the failure mode for DAOs. It's when it doesn't know what it should be doing. And what should it be doing. That's sort of the challenge i think.

Jess Sloss 31:45
That's super interesting, because I think there is like a very fundamental difference in belief system, or, like the value of crypto and Web3, generally, is the power of the meme and the WAGMI And that's very, very, I think, important in sort of breaking through into the more massive attention. And also, in this conversation, this is very, very clear that, you know, if we see DAOs as products, which I believe we need to look at them as prizes for building these networks, that there isn't a very good process for finding product market fit for those things. And it's complicated by the fact that, you know, depending on how you structure your organization, you can kind of have ton more noise than signal in it. And so I think like separating these two things out, though, I think there's a danger of just solely using this model, but separating it out between sort of those building the network and those participating in the value creation of the network as being very separate both phases, and maybe teams and personalities or talent pools, I think the lesson is just very important to say that those can be separate and maybe shouldn't be separate, and obviously supportive of each other, but trying to do both of those at the same time. Because I think that the challenge when we talk about this idea of governance, which is maybe it's sort of decision making, it's like over what, and the failure mode, as he said, is sort of like over a whole lot of nothing. And what really people want to be a part of is something that's successful, and it has impact creates financial and social impact. The models we're using right now are really truly not supportive of that, because of this failure of being able to get clear to do the hard work and make the decisions to say no to things, which I think is just like, the biggest challenge in this space generally is very, very easy to say yes. And it's very, very hard to say no.

Peter Pan 33:19
Yeah, there's saying what's like, there's nothing more permanent than a temporary government program. I think possible. It's a temporary government program. And now Holy shit, you know, it's just like, everywhere, it's can't get rid of income tax in the United States. Yeah, I mean, you know, that's a marketplace transaction fee, right. But yeah, it's incredibly tough to fight that bias, just do things and get out of patterns. Like governments have a clear example of this bureaucracy. I think one thing that I was surprised, I've managed to see, like, government level bureaucracy, at like, 1000 person level of discord, it's like, like photo is going to be easier. But it's actually like, much harder, it's just as high.

Jess Sloss 33:59
Okay, so there's a number of people listening to this podcast that are early in the formation of their DAOs or participating in their DAOs. And the issues that we're sort of talking about here are ones that are probably much easier solved upfront, and much harder to solve down the line, because so much of it is cultural, and, you know, part of the metagame that we're trying to design for, what do you sort of see as like the maybe just put your advice getting hat on which I know you're very effective at what should early builders be focused on today? What do we need to be thinking about building that will make the ultimate challenge of governance and decision making in a growing community much easier down the road?

Peter Pan 34:35
I guess, my whole tone has been very critical, but I think it's also like the context of of this stuff is that everyone's trying to do stuff that's never been done before. That's like another added layer of complexity. So it's like, the DAOs face is eating shit right now. But I would say it's not necessarily anyone's fault with like, it's not like, you know, we live we live right, but like, there are things that can be done a lot better and parameters, right? It's not just like chaos happens out of nowhere. We are into total control of what happens. And we just need to dissect things more closely. Right? So my advice is, if you're building a network, try to figure out as much of it out as you can without building a community. Yet, to be honest, you know, I think there is a point in which you're going to need to get community involvement. But then there's that point in which there's a question of like, how do you grow that community or get help? Why do you build the country to base and I think my advice is like, figure out how to get stuff done with just five contributors effectively, if you're not happy with the efficiency and output of these five contributors, don't go any further figure this out. And then if things are working, well add and add another costume, make it six, make it seven, make it eight, one by one, get this from five to 50. And if you can hand curate this community, then you've probably been figured out the mappings of what watch the game to design. And that's when I think you scale right skill for tokenized incentives, and effectively implement a protocol that coordinates everyone. But I think that this is a much later stage and state than what most DAOs think they are. And so my advice is start super small start super slowly, make sure things work, ask why for everything, and how it relates to the goals of the community, or goals, or the network that you're trying to build, if it doesn't have a direct impact, which is hard, because people like to extrapolate, this is important, because this achieved this and then that achieves that if it doesn't have a direct correlation, and it's it's probably something to backlog, you know, and you want to build super, super slowly, super carefully, not to say slowly, but it often, you know, there's another thing and my quotations a book is fucking ruining right now, you know, in this podcast, but you know, like, it's a martial arts, like saying is when it's like, slow, is steady and steady is fast. And that's really what you want to aim for, the worst thing you can do is go fast, make a bunch of decisions that are irreversible, not know where you went wrong. And in a state of complete confusion, also in a position where you've given up all your power as well, to fix and course correct, you know, that's a real danger, right?

Jess Sloss 37:10
I think that's a very important thing to underlie. And I think there's an intuition that you can feel when you're building these things, that they're sort of like a decision that you maybe make that all of a sudden is out and starts to run rampant. And you realize how easy it is to open things up and how hard it is to step back from those decisions. And when you feel that as a builder, and you sort of feel the intensity and momentum and craziness, there's an excitement in it, that's a very different thing to start to emerge once you have a lot of the things figured out versus in day one.

Peter Pan 37:37
Not to say that the impact of going wide and getting a lot of people involved is a footnote, that creates a ton of energy. And that sometimes is needed. I guess, like my point is like, these are all operating modes, where we're going is like probably DAOs, figuring out how to head into different operating modes, maybe it's a governance, minimize operating where it's wartime, and there's a smaller group, maybe it's peacetime and you want to go wide, you want to get a lot of participation in. And maybe that's like different levels of participation, different types of members, right? Or different operating modes, right? Even right, it's like you have a save battery mode where you like maybe downsize and convert the different states of community old vehicles for different networks of leverage. It's just any one state is not likely to be the right state for long term all the time. And that's what a nuance is. And I think if someone's a skilled enough Tchibo, they can bounce and ship acuity in between. But I think when most if you've never built a community before never build it on coordinated in a decentralized way. Keep it simple, stupid walk before you can run, you know that stuff in which you're balancing and evolving and between operating modes, that's for sort of the people who have been surfing for 10 years, and then just like riding the waves, for others, you know, you can achieve a lot by just being simple.

Jess Sloss 38:54
I think the challenge is that there hasn't been a lot of discernment around these operating modes that we're grabbing on to and there's a lot of like what has worked before. And so I think to your earlier point, like, the challenge is that this stuff hasn't been done before. And there's going to be mistakes made. And that's good. That's how we find the edges of things. And so, you know, I think this general theme of of the work we do at Seed Club, and this podcast is really about highlighting those things trying to add more color to those decisions, not because obviously we're hugely DAO bowls and community bowls, etc. But the number of people that really want to suggest is giving you the framework, what is the token framework? What does the community building framework and I, I refuse? I absolutely think it's because these things need to be built from not even first principles. There's like this primordial ooze that you're bathing in that these things need to emerge from. And no two projects emerge the same way. And there is a level of intuition and Kismet that kind of exists in these things that if you try to just say I'm gonna copy this and bring it over, it's just it's not going to work. And I think that's to our point earlier. I don't know if we were saying this before we started recording but this idea of like web2 web2.5 web3, why I'm such a bowl on web three native organization. because they are starting in this place. And yes, there are many reasons why it's going to be harder for people to use. And yes, it's gonna be harder to manage, etc. But the innovation is what creates value. People who are innovating in this new world, I think are going to create the most value. The difficult thing is trying to understand when and where to apply those things. And it's more art than it is science and will probably reach out that way for a while. I mean, think about companies, right? There's a lot of great insights on how to go build companies, but you cannot go take the lean startup and all of a sudden expect you're going to have a successful company and all the time.

Peter Pan 40:27
These are all skills, right? I think people forget that decentralized coordination and community building are skills piece. Some people suck at it, some people will begin it some people much more experienced some people, I wouldn't say there's like another way of framing expert or it's just like people learnt a lot, right? And I think like for people to really, yeah, it should a lot. And you know, once you're at the skill level, you can sort of really try to do new things. Beginners, it's like imagine the game solidity engineer trying to build the world's most complex, smart contract. That's what beginner decentralized coordinators are trying to do sometimes. And that experimentation really works. Sometimes not saying everyone needs upfront experience, but it explains a lot of failures and a lot of struggle is that there's this like, overzealous attempt to just like, do too much without recognizing their own condition and their own capabilities. You know.

Jess Sloss 41:19
I see myself in that statement. Future and I see myself in different versions of that statement. I think that's sort of an ongoing process. You know, we frame this conversation here in terms of governance, and yet everything we're talking about would not traditionally be considered governance, or at least in how people talk about governance. And I think that's really important, right? Because I think as we've gotten into more of a conversation here, both of us are coming from this perspective of like having hands in the dirt, trying to build these things. And what you start to recognize is, it's like, it's not another technology tool, it's not a governance framework. These are not the things that are ultimately the biggest difference makers, in the very least the earliest stages of these communities and, and DAO projects. So I think that's a pretty big insight, the next step of like, okay, well, how do we make that actionable, right? Because it is much easier to just say, I'm gonna take this process or platform or tool off the shelf, and it's gonna solve my problems. But what we're suggesting here is that actually, you kind of just need to get punched in the face a bunch on your mission to to the thing, you know, we say we want to be on like, what's the big adventure that you're on and adventures are filled with risk and excitement? And, and all those things are essential to not only personal journey, but also, I think, a group's journey? How do we advise people who want to step into the space to go and get useful experience? I feel like a lot of the advice is just go join another DAO. But my concern there is that you might learn the hard lessons, but you're not maybe learning the best practices are great about doing things.

Peter Pan 42:36
Yeah, it's a really, really good question. Yeah. But joining a DAO thing, I think I would send them to a horrible rundown and like, give them a heads up of like, go feel what it's like to like, be an owl, like, experience governance, hell, I think what to do is fuzzy and getting properly understood, to be honest. But what not to do, yeah, we're forming solid data points. So if someone wants to learn about this, or build a DAO, tokenized community or build a token network, it's, again, it's like, start really small, and iterate and experiment incrementally in ways in which you can identify what is success, what is failure, and then revert, if possible. It's like software development, right. And you write tests, first of all, to make sure the code works. But then you also have testing or staging where you launch the code in a test net version, effectively, and you play of it, you see if it works, actually type all those fields in, do every click every button, make every interaction on website, sometimes automated, sometimes manual, and then if that works out, but you want to then formalize it right? You know, that's how you should be trying new things and experimenting, I think less copying what someone else looks like they're doing and seems to be temporarily working, maybe not know, actually knowing the numbers and just copying them, that doesn't work, right, that's, you want to fork the get up of like, you know, bootstrap.js or something like that. And then start incrementing on the code line by line, the coordination rules, one line by line of responsibilities one bit at a time, as opposed to just copying and pasting, like entire stack overflow piece of code and be like, Yeah, this might work, you know, TBD.

Jess Sloss 44:12
And often think about sort of launching token networks similar to like the user generated content revolution, or like Blogger launching, right? Like it went from this thing where the publishing of ideas was a very paper driven big deal, right? Like there's resources getting put into it to something that anybody could do and which I think is the kid I mean, it's very easy to go on to tokens are easy to launch an NFT, etc. In crypto, there's actually like a still a lot of fear around making something that is immutable and therefore unable to be changed. And there's sort of like this actual barrier to that freedom of testing and experimentation that I think is so essential to the creative pursuits or innovation pursuits of many organizations. And so I think to me, that's maybe the advice that comes out of my brain here is my dogs are barking at the garbage man behind me, but this idea of like, it's not different to launch something as long as you're not putting ridiculous promises associated with it, like go, go mint a token, go create some art go bring a telegram group together, like these things are not, you know, maybe they're not seen as you're building a DAO that's gonna get raised, you know, hundreds of millions of dollars. But that's where most of these really interesting things started, or at least a learning starts.

Peter Pan 45:20
For sure, I would say of the counter argument, every sort of maybe piece of advice has a counter equally, like valid counter. And I think the counter to what I just said, is the fact that like, new zero to one, ideas and structures and mechanisms are iterative, like the Nouns DAO community, for example, is not something that was iterated, but people did try it in a, I would arguably say, a low risk environment, right, nothing was necessarily being rescued, started organically from day one, and then picked up steam, and then maybe for other existing organizations with more risk, obviously Nouns that has a lot of riskes right now it's built up something very special, right? But for new organizations, they may not be able to take those risks, but now there's a data point in which they can like learn from. So it's like a balance between, like, if you have an idea and something like go experiment with it, really do it, you know, but like, really set the expectations properly, like you said, and then also understand, you know, sort of how to, like, incrementally improve upon what's already existed, right, not only on DAOs, but just organizational design and management in general.

Jess Sloss 46:25
Yeah, I love that I have all these sorts of questions that I've furiously wrote out just before a call, and that we didn't even get into because I think the insights of like, even just where the energy in this call went to was really around stuff that I think is absolutely foundational to the bigger challenges of, of governance, etc. And while this is maybe not the most useful thing for folks that are managing, you know, huge protocol DAOs as well, I think the the most exciting pieces, for me, at least right now are in the space of emergence and the new ideas that get created. And it's truly the insight that we had at Seed Club, like how do we go be pragmatists in the space and get more DAOs not more tools into the world. And I think there's hard earned lessons and deep thought here, it's very apparent in sort of how you carry yourself in this conversation that I think is incredibly important and promised to your listener that definitely chunks up into some of the bigger hairy or decision making governance type conversations or decisions that you'll have to make as you continue to build that success. But I think the three line I see here is like, we need to level up our talent and understanding our skills, we as leaders need to better understand the game we're playing the things that we're building, and that getting that early culture and connective tissue, right actually gives us a ton of optionality to get the other things right in the future. But if we don't do those first pieces, the likelihood of us being able to solve the bigger challenging challenges as they emerge is a lot lower.

Peter Pan 47:43
Yeah, I'm only generally being political, because I feel like no one's voicing that side of the narrative, right. But in reality, I'm a very centrist. I'm a true centrist in the sense that like, both of these sides really matter. It's an old redundant, that is a reason why directionally people have gone while we've gone and explored where we've explored. But yeah, you know, that's what makes it hard. It's not a black and white sort of reality.

Jess Sloss 48:06
I think that's what makes conversations like this super valuable, like there isn't a framework or bullet point list of things that will lead to your success. And I think this idea of being able to tap into these sense making networks are absolutely essential to being able to figure out these things. And you know, as the suit, I sit in here at Seed Club, trying to help navigate us through in into this uncertainty, there isn't a month period that goes by where I don't feel like something new has happened that might be existential in some way for Seed Club. And I think, you know, being able to have conversations with folks like yourself, and the broader network of Seed Club is just absolutely essential. So appreciate you taking time at the end of your day to come and share these thoughts. Glad that we can have you on as a repeat guest here. And I hope folks find this valuable in at least maybe resetting some of the base assumptions that maybe are going to solve some of the challenges they'll face. Should they be more successful in the future.

Peter Pan 48:54
But sure, it was awesome chatting to you again. It's always a pleasure.

Jess Sloss 48:57
Thank you, sir.