Introducing Continuous Organizations

Economics
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Hi everyone,

After spending the past 3 months exploring an idea that obsessed me, I finally finished writing down my thoughts about it in a document that I just published on github:

I would be extremely interested in getting your early feedbacks.
Here’s the abstract:

Abstract
The digital economy has radically changed the nature of the relationship between customers and corporations. Today’s individuals have switched from being passive consumers to being an essential force in creating value, either by their actual work (think Airbnb, Uber, Apple’s App Store, Amazon Marketplace…) or through their data (Facebook, Google…). By leveraging their users’ work, organizations in the digital economy have the ability to create products with personalized user experiences that can sustain increasing returns to scale, thus providing investors with large returns on investments.

Unfortunately, today’s organizations have no simple and efficient way to strongly align the interests of their workforce of users with the financial success of their organization. This is mostly due to today’s securities’ laws that impose constraints and frictions when it comes to selling and distributing securities, especially to non-accredited investors.

To solve this issue, we propose a new paradigm: the Continuous Organization (CO), a new type of organization designed to align the stakeholders’ interests significantly better than in traditional organizations. A Continuous Organization is any kind of organization that issues fully digital securities called FAIR Securities ( Frictionless Agreement for Investments and Returns securities) by funneling part or all of its cash-flows to a Decentralized Autonomous Trust ( DAT ). A DAT is a smart-contract that automatically mints, burns and distributes FAIR Securities ( FAIRs ) according to the organization’s cash-flows and predefined rules.

Continuous Organizations present very beneficial properties for all stakeholders:

  • Founders get a simple and efficient mechanism to strongly incentivize their community with regards to the financial success of their project, enhancing their capacity to create strong network effects without affecting the organization’s governance.
  • Employees advantageously trade alienable illiquid stock options for inalienable liquid FAIR Securities (which can vest), truly aligning their interests with those of the organization.
  • Early investors receive their fair share of the upside in the case whereby the organization is successful, without having to fear disproportionate dilution in later, bigger rounds.
  • The community of users, customers, suppliers and partners of the organization can be rewarded or simply able to invest in the organization in a friction-less and permission-less manner, thus aligning their interests with those of the organization.
  • Regulators can better protect citizens from risky ICOs due to the ‘security’ nature of FAIR Securities while also having the ability to tax revenues generated by Continuous Organizations.
  • The environment benefits from the decoupling of governance and financial interests proposed by the Continuous Organization model, allowing founders and their organizations to be more focused on the long term.

Even though the “security” nature of FAIR Securities prevents organizations from creating Decentralized Autonomous Trusts today, we are confident that the Continuous Organization model provides a strong enough value proposition that forward-thinking jurisdictions around the world will be quick to adopt this new model.

The full paper is available here.

To give you some context, this idea started to germ in my mind after deep diving into token curated registries, token bonding curves (thanks to @simondlr for the all your inspiring and thought-provoking articles!) and filtering it through my own experience as an entrepreneur (2 companies, 1 non-profit & 1 political party for which we developed an ethereum-based voting platform implementing the majority judgement). The current legal entities suffer from many problems that force you to make difficult trade-offs (governance vs fundraising, trust building vs profit making etc…). By decoupling governance from financial incentives and proposing a new kind of fully-digital securities that is better than traditional securities, I believe the Continuous Organization model provides many benefits that have the potential to make it the go-to model when starting a new venture in the coming years.

I’d be thrilled to have your feedbacks on this!

Also, I am flying to SF this afternoon to attend ETHSanFrancisco this weekend (with the objective to implement/hack a 1st Decentralized Autonomous Trust). I’d be very happy to meet and discuss with anyone interested in the concept.

Thanks a lot for your interest… and for creating Ethereum of course :slight_smile:

Thibauld

4 Likes
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Hi again,

I just published a much more digest article on the Continuous Organization model with a concrete example with financials. I am still just scratching the surface of it but I truly think it has the potential to change how today’s organizations (for-profit or non-profit) are governed and funded.

Given the current state of the ICO market, many crypto projects could advantageously adopt the Continuous Organization model to fund their project rather than going after an ICO:

I am extremely interested by all sorts of feedback, so please do not hesitate to comment if you have any.

2 Likes
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The Continuous Organization whitepaper has been updated to v1.0 following many feedback from the community (obviously not from here :sweat_smile:). Now that the model is finalized, I’ll now focus on implementing a technical reference implementation. I’ll be in Berlin for AraCon to speak about Continuous DAOs (thanks Aragon!). I am looking forward to meet and discuss the Continuous Organization model with those interested. Cheers!

2 Likes
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The core of cryptoeconomic mechanism design is defining strong game theoretic incentive models that align interests towards a goal. In the abstract you posted here to the forum the benefits of such a mechanism are discussed, but how the organization decides to report/measure cash-flows and/or the “predefined rules” are not. Those rules are what define the cryptoeconomic mechanism, and thus reward distribution, and as such are a huge attack/oversight vector. Is that addressed in the paper or elsewhere?

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Is there a specific community you’re referring to?

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One of the most vexing problems in asymmetric information and its attendant forms (adverse selection, moral hazard) is the longitudinality problem: the value of a consumable good or a venture are only realized over time, while the payments (and correspondingly, the price signals) come in lumps.

Economists somewhat surprisingly have a hard time with this bc economics doesn’t do longitudinality well.

So I’ve seen a lot of proposals recently that try to mitigate this problem by stretching out payments over time (@vbuterin had a similar proposal on venture financing a couple of months ago).

I’m still unconvinced by most of those proposals, since they mostly operate out of an often tacit “price signals are perfect” assumption. There’s simply no empirical evidence that this holds in early stage venture financing (or experience goods).

There is a lot of good stuff that can be done in this direction. But this looks like another attempt to put a lot of organizational burden on a fundamental mechanism that is still only half-understood (viz. The DAO).

So I am much more interested in an expose on the economic problem such a construct tries to solve, and drill down from there to really understand it rather than already put a complex superstructure on top of it.