The Intersection of DAOs, the Iron Law of Oligarchy, and Substack's Writer Model

The Intersection of DAOs, the Iron Law of Oligarchy, and Substack's Writer Model

Introduction:
The rise of decentralized autonomous organizations (DAOs) in the web3 era has sparked discussions about the potential of democratizing ownership and governance. However, history has shown us that even the most well-intentioned democratic organizations tend to evolve into oligarchies, as described by the Iron Law of Oligarchy. Similarly, Substack's unique writer model seeks to address the broken business model of journalism in the digital age. In this article, we will explore the common points between DAOs, the Iron Law of Oligarchy, and Substack's writer model, and discuss the challenges they face in maintaining true democracy.

The Evolution from Democracy to Oligarchy:
The concept of direct democracy, where every decision is made collectively, is impractical due to the time-consuming nature of consensus-building and the information problem faced by voters. This leads to the gradual dispersal of power from members to an elite few, resulting in an oligarchy. The Greeks termed this cyclical theory of governance as anacyclosis, and it holds true even in the context of modern democratic organizations.

Understanding Different Forms of Governance:
To comprehend the challenges faced by DAOs and Substack's writer model, it is important to examine the different forms of governance. Monarchies, although efficient, are dependent on the capabilities of a single individual. Oligarchies, on the other hand, are more stable but tend to prioritize the interests of the elite few over the entire population. The closest form of governance we have today is representative democracy, which balances the need for efficient decision-making with the distribution of power among elected representatives.

The Dilemma of DAOs:
While DAOs strive to emulate the benefits of democracy, the inherent tendency towards oligarchy poses a significant challenge. Despite attempts to incorporate financial incentives and pre-programmed rules, the default trajectory for most democratic organizations is to trend towards oligarchy. This raises questions about the long-term viability of pure democracies in the web3 era.

Substack's Writer Model:
Substack, a platform for independent writers, offers a unique solution to the broken business model of journalism. Through the Substack Pro program, writers are provided with financial security for a year, regardless of their publication's performance. This approach aligns the success of Substack with the success of its writers, fostering trust and reliability. However, it also raises concerns about the balance between editorial independence and the platform's business decisions.