This month's Frame: Mary Douglas explains how DAOs are disrupting finance

A framework for understanding how DAOs work and why they are so disruptive.

The world of finance, apparently stable for so long, is being disrupted. The most headline-grabbing of these challenges comes from crypto currencies. Understanding what is happening is not just a matter of appreciating the technology involved. It requires understanding the organisational form of these innovations.

A case in point socio-technical movements, such as Decentralised Autonomous Organisations or DAOs. A DAO is collectively owned and managed by its members, and its rules and interactions encoded on a blockchain. The first DAO was created by members of the Ethereum community, but they exist beyond the world of finance. 

Why are DAOs so disruptive? How might we understand their relationship to the wider world of finance and how can we square the organisational form of DAOs, the worldviews of their members and their underlying infrastructure? One answer to these questions is to be found in a model first developed over fifty years ago: Group / Grid. 

The framework

Anthropologist Mary Douglas was fascinated by the relationship between social factors and people’s beliefs. Her group / grid framework, first outlined in her 1970 book ‘Natural Symbols’, emphasises the way in which humans seek congruence across all dimensions of their experience. Put differently, she wanted to show how symbolic worlds align with the structure of social life. 

Douglas posits that societies vary according to the strength of their group ties, which she plots on the horizontal axis. As we travel from left to right, social groups become more permanent, inescapable and clearly bounded. Anything that structures the organisation of a group, be that activities performed in common or the strength of a feeling of “us versus them” combines on this axis. 

The second dimension is grid—a measure of individually-oriented aspects of social structure. Grid relates to the degree to which people are constrained not by group loyalties but by the rules, norms and conventions which engage them in reciprocal obligations or transactions. 

Together, group / grid express two elements of the control that society exerts on individuals. Group-centred social structure and ego-centred social structure vary independently of each other, creating a two-dimensional field on which different societies might be mapped.

Using the framework 

Douglas’s group / grid framework helps disentangle the different organisational forms that exist within the world of finance. In doing so it draws out contrasts between DAOs and other financial institutions. It illuminates what makes DAOs distinctive and potentially disruptive. 

A – Individuals are not part of a bonded group but still constrained by relations with others: a central banker occupies this quadrant. 

B – Here organisations are cut across by grids and groups of various kinds: classic financial institutions—high street or investment banks—characterised by complex bureaucracy and hierarchy, and focused on internal machinations, not the world of their customers, can be placed here. 

C – A social context free of constraints, in which obligations to others (and groups) are largely absent: freewheeling, commission-driven and often self-serving Independent Financial Advisors sit here. 

D – All statuses are insignificant compared to the status that comes from strong group bonds: a DAO, without a typical management structure, is strong on group and organised and operated with equality of its members in mind, therefore low on grid. 

Douglas’s group / grid framework has the potential to help us understand DAOs, because its two vectors help us to think through how different forces of control and constraint are exerted over individuals. It draws attention to how these are manifest in the symbols and rituals, and in the case of DAOs, the infrastructure that governs how its members interact. 

DAOs are not just communities defined by their beliefs but also by the infrastructures on which they are built, the blockchain. The power of DAOs lies in their creation of incentives and a framework for large numbers of people to organise without the need for formal roles or hierarchy. They derive their symbolic appeal by both offering an alternative to traditional, hierarchical organisations with a very different orientation to their customers and the way they are organised, as a collectivity of equal members. There is clear congruence between the beliefs of their members, the ideology of the organisation, the structuring principles of the community and the infrastructure they run on. 

Thinking through DAOs in terms of group / grid helps us understand them as entities and how they define themselves relative to other organisational forms in the world they seek to disrupt. In the process they illustrate the enduring value of a model that emerged over half a century ago. A framework that helps with the task of comprehending the relationship between how humans organise and what they believe.