From Talking Sticks to Blockchain: Revolutionizing Governance Through Collaboration

A conversation with Charles Hoskinson, CEO of Input I Output and Co-Founder of Cardano

In this episode of the Facilitation Lab podcast, host Douglas Ferguson engages with Charles Hoskinson, CEO of Input I Output and Co-Founder of Cardano. They delve into themes of facilitation, collaboration, and governance, particularly focusing on Charles’s work in developing a decentralized governance model for Cardano. Charles shares insights from facilitating workshops across 50 countries to draft Cardano’s constitution, emphasizing the importance of communication, trust, and consensus-building. The conversation also explores the impact of historical governance models and modern organizational design on decentralized systems, offering valuable lessons for fostering innovation and collaboration in diverse groups.

Show Highlights

[00:01:56] Talking Stick Artifact
[00:03:13] Decentralized Governance Insights
[00:06:03] Challenges of Governance Creation
[00:8:44] Building Consensus Across Cultures
[00:13:28] The Role of Trust in Transactions
[00:19:32] Failure and Leadership
[00:33:06] Objectivity and Trust
[00:35:00] Working Groups and Community Input
[00:39:35] Future of Decentralized Governance

Links | Resources

Charles on X

Case Study: Facilitating the World’s First Blockchain Ecosystem Constitution

Cardano on the web

About the Guest

Charles Hoskinson is a Colorado-based technology entrepreneur and mathematician. He attended Metropolitan State University of Denver and the University of Colorado Boulder to study analytic number theory before moving into cryptography through industry exposure. His professional experience includes founding three cryptocurrency-related start-ups – Invictus Innovations, Ethereum and IOHK – and he has held a variety of posts in both the public and private sectors. He was the founding chairman of the Bitcoin Foundation’s education committee and established the Cryptocurrency Research Group in 2013 .His current projects focus on educating people about cryptocurrency, being an evangelist for decentralization and making cryptographic tools easier to use for the mainstream. This includes leading the research, design and development of Cardano, a third-generation cryptocurrency that launched in September 2017.

About Voltage Control

Voltage Control is a facilitation academy that develops leaders through certifications, workshops, and organizational coaching focused on facilitation mastery, innovation, and play. Today’s leaders are confronted with unprecedented uncertainty and complex change. Navigating this uncertainty requires a systemic facilitative approach to gain clarity and chart pathways forward. We prepare today’s leaders for now and what’s next.

Subscribe to Podcast

Engage Control The Room

Voltage Control on the Web
Contact Voltage Control

Transcript

Douglas:

Hi, I’m Douglas Ferguson. Welcome to the Facilitation Lab podcast where I speak with Voltage Control certification alumni and other facilitation experts about the remarkable impact they’re making. We embrace a method agnostic approach so you can enjoy a wide range of topics and perspectives as we examine all the nuances of enabling meaningful group experiences. This series is dedicated to helping you navigate the realities of facilitating collaboration, ensuring every session you lead becomes truly transformative. Thanks so much for listening. If you’d like to join us for a live session sometime, you can join our Facilitation Lab community. It’s an ideal space to apply what you learn in the podcast in real time with peers. Sign up today at voltagecontrol.com/facilitation-lab and if you’d like to learn more about our twelve-week facilitation certification program, you can read about it at voltagecontrol.com. Today, I’m with Charles Hoskinson, founder of Cardano, co-founder of Ethereum and CEO of Input Output. He’s also a bison rancher, runs a healthcare clinic in Wyoming, serving over 11,000 patients, owns a construction company and takes a keen interest in synthetic biology. Welcome to the show, Charles.

Charles:

It’s great to be here. Doug, how you been?

Douglas:

I’ve been great. I’ve been really looking forward to this conversation because I’m really kind of wowed by the project around the Constitution, and as I was reflecting on this, it brought up some memories for me along the way. Specifically it was, I remember my first visit to the IO offices and you were leading a really engaging tour and at some point you showed us this Native American artifact. I’ve viewed it as a primitive technology for improved conversations. And I’m just curious if you could start off maybe by sharing a little bit about that artifact and what it means to you and how it connects to your philosophy on communication.

Charles:

Yeah, so I got that right here. This is a talking stick, it was used by the Sioux amongst other Great Plains Indians, and basically how it works is whoever has a stick gets to talk and if you talk out of band, they hit you in the head with a stick. That’s why it’s got a bone on it, but I always love having it in the office. I’ve only had to use the talking stick once. I have a lot of artifacts and what’s really cool is that when you come in the office, we have everything from hyperdimensional spaces here that are kind of compressed in a cube to Samurai armor over there. We have the talking stick and a lot of paintings, a lot of sculptures and all of these things. I pick them up because they connect to something that I’m interested in. I have an ant hive in the office where they poured molten aluminum into an ant hive and then they dug it out and cleaned it off.

And it shows you power of complex systems where simple rules apply again and again can actually result in these amazing structures. But the Native American art is some of my favorite. I collect Kachina dolls and I have a lot of various things throughout North America. When you look at governance of the Iroquois or the Cherokee Nation, especially the Iroquois, they had this decentralization about how they made decisions and consensus building behind how they made decisions and almost like a participatory democracy. And it was just really extraordinary that you could think, wow, these guys had to find a way to get along and they had to find a way to communicate even though they would only meet maybe a few times a year, and there was a lot of challenges and difficulties there and no modern technology, yet they were still able to build a stable government.

So there was a lot of lessons there about how do you build a decentralized government? How do you build a government of equals? You don’t have a king or a president, more like a council of elders. And that was something that stuck with me when I learned about it as a teenager and throughout the years I kind of learned all the upgrades and updates to these types of things. And the Maori people over in New Zealand, for example, have a very sophisticated system, they also have a very sophisticated reputation system that’s concept of mana, which is like the amount of credit that you have in society in many different senses. So having traveled through Africa extensively, I also picked up a lot of tribal traditions there. And there’s a lot of really cool interesting things in Asia, especially Central Asia. You spend some time in Mongolia and you see how they made decisions and they pull these things together.

It’s really sophisticated for the technology that they had. So I always wanted to put that into a system and build it. And with Cardano is a great example is Cardano has no executive function. Most governments, they have a judicial branch, a legislative branch, and an executive branch. And you have one group of people make the laws, one group of people that execute everything and one group of people interpret it whether everybody else is being honest. Well, with Cardano, we have a pseudo judicial function, it’s the Constitutional Committee and we have very strong legislative function, but there is no president, there is no executive branch, there are no bureaucracies or things. You have members-based organizations, these other things, but they’re voluntary and they have no monopoly over power and they can be fired at any time and these types of things.

So it’s an interesting experiment because if you don’t have a strong executive function, then everything has to come from the bottom up instead of the top down in the way that the system operates, which is not really what people tend to think when they think of effective governance or they think of a strong government or a government that’s highly efficient. But yet there are many examples like Switzerland for example, with its Confederacy structure or other countries where this has worked. And there’s organizational design examples where that works. Like Holacracy is probably the most prominent example of that, and Sociocracy is another where that could work.

So we were highly inspired by a lot of these different concepts and we worked through them and we tried to put something together and the single hardest part is bootstrap, which is why you guys came in because we had this issue of how do you build consensus and consent when you have no incumbent decision system. In America, we have this concept of a vote and we have a concept of a voter, and it’s pretty clear how to do that. So when you want to elect a president or elect a senator or a congressman or a governor, you know how to do that. Well, what if you don’t have a concept of a voter and you don’t have a well-established consent system or a Constitution, how do you get to America from nothing? And that was kind of where we were at.

So we thought workshops were a super cool idea and we needed facilitators, and that’s how I met you guys. And we had workshops all across the world, 50 countries, 65 workshops just for the Constitution and a lot of other workshops for CIP 1694. And the first one was here in the office. And I remember that day very clearly, because everybody’s very skeptical. They’re like, “You’re just not going to pull this off. It’s going to descend it to chaos and everybody’s going to vote against it and it’ll get bike shedded.” And it was a tremendous exercise and building of consensus.

Douglas:

Why do you think there was so much skepticism?

Charles:

Well, because it depends on your philosophical beliefs about humanity. And unfortunately, when you have a strong executive function and you live in a very cynical society, and we are in the age of cynicism, when my grandfather was growing up, my grandfather lived in a very optimistic time in America. And so when John F. Kennedy said, “We will go to the moon.” Everybody believed him because like, “Oh yeah, the government always does it. They’ll figure it out.” Because this is the government that when FDR said, “Hey, I need you to go build the world’s largest office building in a swamp and you have six months to do it.” Leslie Groves said, “You got it, sir.” And he went and built the Pentagon. So there was this can-do spirit of, “We don’t really know how to do it, but we’re just going to figure it out and it’s going to get done.”

And people had a great degree of confidence in the government’s ability to deliver. And then over time, this postmodernism kind of leaked its way into society and now there’s a skepticism that no matter what, it’s never going to be as good as you think it is. It’s probably not going to happen. Even if it does happen, there’s something wrong with it. So a great example is that when William Shatner went to space, this was like a Rorschach’s test for generations. So the older people who grew up watching him on Star Trek, they were like, “That’s the coolest thing in the world. That’s so amazing. Wow, Captain Kirk finally made it to space.” They felt some pride because it’s like a hero that they grew up with. And he finally got to go to space and do that thing. And then the younger generation said, “Oh, global warming this, and it’s a waste of that. And why did you send a 90-year-old fat guy to space and just a marketing stunt and…”

It’s the exact same set of facts, exact same set of people and two radically different interpretations of that event. So when you look at the Cardano governance to work, what you’re really saying under the hood is, “Okay, well, here’s what’s going to happen, people who have never met each other from all over the world, different languages, cultures, different perspectives, different socioeconomic classes are going to come together and those people who have never met each other from all those differences are going to find a way to set those differences aside and collaborate without compensation on a common product, somehow agree and then produce something that other people get to use, perhaps not them.” And most people when they hear that, they’re like, “Yeah, I don’t think so. We’d have peace in the Middle East if you could pull something off like that.”

But it turned out we had the right thread and it was one of the most challenging things I ever did in my lifetime to kind of come up with some methodologies to bring those types of people together and act as a peacemaker and deal with fights and also just educate people on missing skills of collaboration. It’s very easy to work with people who have been trained to collaborate, even if they’re competitors, even if they’re philosophically opposed to you. There’s ways you communicate, there’s ways that you, there’s a respect behind the communication. So it’s like you think ahead, what do they need to know to do their job? There’s an understanding of how to negotiate and how to disagree without being disagreeable. There’s a lot of moving pieces to people that are well-trained in negotiation and communication and collaboration skills. If people aren’t trained that way, then what ends up happening is the minute that they feel like it’s not going their way, they immediately take all their toys, go home, go to Twitter, complain about it and try to burn everything down and get upset about that.

But if they’re trained in that way, then they use the process and together you kind of eventually get to where you need to be. So a big part of the process was just education and teaching people collaborative skills and teaching people iterative skills and teaching people the art of negotiation and growing people up and managing expectations and saying, “Look, just the very fact we came together and wrote a Constitution, even if it’s not a perfect Constitution, is a monumental achievement because people from 50 countries had to come together and get something done.” And that’s a consensus of those people. And if that process is reused, we can write a significantly better one because everybody has confidence that we can do that, because we know we could come together and get these things done. So the very first one is really a minimum viable product and it’s a trust building product, but once you have that, you have this great foundation to stand on and you can grow from there.

And once people got that in their head that this is a long goal, it’s a long game and it’s not about winning every round of the game, but rather it’s about participating and playing the game and learning and growing from the game, then they got substantially more collaborative. The learned helplessness went away and the cynicism disappeared almost overnight, and then people got excited to roll up their sleeves and get to work and get it done. And boy, it was challenging to get it done, because it’s just so many meetings and so many communications. There was, wee tallied it up, over 5,000 man hours of just deliberation on the Constitution.

Douglas:

There’s also the phenomenon when people build things together, it connects them, it draws them closer, it becomes their artifact. They’ve had some say in some participation in it, so they own it.

Charles:

Yeah. And that’s the most fun of it is that once people get over that hostility and they start working together, then they actually come up with interesting things and they enjoy working together so you don’t have to twist their arms and force them. They’ve made lifelong friends and those delegates that went to the Constitutional Convention, they’re still talking to each other. They’re still friends with each other, they still have those relationships, and a lot of these people are like, “Hey, I grew up in Norway. I never thought I would be best friends with a guy in Senegal or somebody in Cameroon or somebody in Argentina.” It’s not a common thing, and yet now it’s there and you’re on a first name basis. It was really like the United Nations, when you walked in and saw those flags. It was a truly remarkable thing.

Douglas:

It was amazing to see so many groups come together. Pretty impressive really to think about hitting on 50 countries and bringing that much voice to so many people.

Charles:

And you can’t rest on your laurels. The most important part of it is just saying, “Hey, how do we structure this in a way so that we can continue the collaboration?” So if it was just the end all be all, and once we sign the Constitution, we’re done, we all move on, that’s a great achievement. The bigger achievement is an iterative process where year by year people continue to come together, it gets larger and more meaningful, and then you treat it like an open source work project. And what’s really cool is that in a very short period of time, like three to five years, you can probably have the best Constitution ever written because people just keep working on it, they’ll keep thinking about it, they’ll keep beta testing it and adding new capabilities to it, and you can build a lot of sophistication. One of the things that I think modern society has lost is the value of trust.

And I’ll give it an example. I talk about this often. So let’s say you’re doing a real estate transaction and you and your neighbor trust each other. Okay, you have a ranch, they have a ranch, 100 acres, whatever, and you go over there, you talk to them, you have dinner with them, say, “Hey, I want to sell you these 100 acres. I need the cash.” And you’re like, “Yeah, okay, yeah, I’ll buy that. That’s fine.” So you handshake on it and you start putting all the paperwork together and it turns out there’s some issue with it. So how do you solve that issue? Trust the guy. So you go over and say, “Hey, I have this issue, blah, blah, blah.” He say, “Oh yeah, don’t worry about it. I’ll fix that for you.” Okay, you shake hands, you’re done. Buy the land.

Okay, so then let’s say you hate your neighbor. You absolutely detest this person. You have no relationship. Same piece of land, same transaction. So the facts and circumstances are identical, but when you go to buy the land and first thing that happens, you get a lawyer, because you don’t trust him, he gets a lawyer, because he doesn’t trust you, you negotiated out this contract, takes a lot of legal work. Then halfway through you run into that same issue. Then all of a sudden you’re in litigation and you’re suing each other. It takes two, three years to resolve a litigation. Hundreds of thousands of dollars, if not millions, depends on the nature of the litigation. And then at the end of the day, you close the deal, you get the land, the outcome is the same. The difference is I had beer and steak with him, shook his hand and we got it sorted and I spent $100,000 or whatever you bought the acres for.

And the other one, I hate his guts. I spent two to three years to close the transaction and millions of dollars. And the only difference, the only delta between those two realities is trust. That’s it. So when you build systems that over time produce trust, what ends up happening with that is you create a momentum where you can do remarkable work quickly and get things done quickly. And you’ll notice that the ratio of organizational design to trust, the historical ratio of this, where high trust things tend to have low bureaucracy and low trust things tend to have high bureaucracy, because you don’t need the bureaucracy. The bureaucracy’s purpose is to de-risk. And if you trust everybody, then you know that even if some mistake happens, that person’s got your back and he or she’s going to go and take care of you and figure that out. So you don’t need layers and layers and layers of accountability and audit and oversight and this department and this manager and this manager and that.

So look at NASA in the ’60s versus NASA today. So NASA in the ’60s, there was a political mandate, move fast and break things. So even when astronauts died, like when that terrible Apollo disaster happened and the astronauts burnt to death in the capsule, there was an understanding that NASA was going to get this done, and so they just let them be NASA and they moved forward. Then after Challenger in Columbia, it badly damaged the reputation of NASA and it changed the culture so that we can never have a failure, which meant they had redundancy after redundancy, redundancy after redundancy, and that culture was so restrictive, it’d take 20 years to do anything and it’d always be $5 billion. Then SpaceX comes along and you have a culture where people are like, “We trust the leader. He’s going to take us to Mars. Everybody’s aligned with the mission and if we break some things along the way, it’s encouraged.”

So when the rockets blew up, the Falcon 9s and Musk was right there on the beach with these guys collecting pieces of rocket right off the beaches. And Starship is a phenomenal example of that where you see blow up all the time and they make this exponential progress on the platform, because they’re totally comfortable as a culture losing two or three Starships a year or four Starships a year, but they know that within five years that’s going to be a productized platform. You tried this with NASA, they’ve tried it for the last 20 years, they haven’t been able to match it. So culture of trust is what gets you there. When I went to the SpaceX facility in Hawthorne, they’re building a rocket every two days, a full rocket every two days. It’s just, I’ve never seen anything like it. And everybody just works as a team, they communicate extremely well. It’s very horizontal and structure, so there’s not this high vertical bureaucracy, just everybody has a domain and there’s a lot of admiration and respect there.

So I really admire organizations that figure out how to inculcate that, develop that, and I think good systems produce trust over time. People just believe it’s going to work. Chinese people trust the Chinese government. It’s a really weird thing. We Americans, we look at it, we say, “Well, China’s a dystopian hellscape because, they have social credit and these other things.” Well, when they look at the approval rating of Xi or these other people from people rank-and-file China, most of them believe in the next 10 years, China will be more progressed, more prosperous and more powerful than the last 10 years, and that will be shared adequately with the people of China because gone from nothing in the 1970s where people would starve to death on a pretty regular basis to one of the world’s greatest superpowers, and they did this decade after decade after decade.

So whatever they’re doing in that system, it’s producing trust in its citizens for that. And so trust doesn’t necessarily equate to our notion of honesty and our notion of morality or our notion of ethics. Trust just basically means that for whatever the system is intended to do, you over time start believing it’s probably going to do that and it’s going to do it well and efficiently and it’s going to do it more likely than not to my satisfaction. You might disagree with that system or disagree with the methods, but that’s the thing. And blockchain is much the same. It’s a high trust system, and the number one thing for blockchains is not market utilization and TVL or any of the things, it’s the trust in it, which is why Bitcoin is still number one. It’s the most trusted asset on the planet, even though it has seven transactions a second and it takes an hour for finality, and there’s not really strong smart contracts or any of these things. It’s the trust that makes Bitcoin so powerful.

Douglas:

Yeah, it’s interesting. I think you hit on something that is a little in my mind, differentiated from trust, which is the ability to allow failure. Leaders that when something goes wrong, freak out and treat it as a anomaly and something that’s really, really bad, you create a phenomenon where no one wants to mention that things are going poorly and then that leads to more catastrophic failures because we can’t even surface the small ones.

Charles:

Yeah.

Douglas:

And I think this gets into Amy C. Edmondson’s work around psychological safety. It’s like, are we fearful to even talk about things that are not going to plan? Because teams that can talk about these things and surface stuff and fail forward, to your point, they move a lot faster, because they’re making big, bold discoveries.

Charles:

But that’s the trust issue at its core too, because at the end of the day, you don’t trust the leadership to protect your interests. You know you’re going to make mistakes and if the response to mistakes are find someone to blame and kill them, that’s a very different environment than these leaders historically, they might yell at me for it, but at the end of the day, they’re not going to fire me or prevent or destroy my career. We understand part of the business is failure, and when you’re a leader, you have to clearly understand and articulate what your tolerance is for your product and for your endeavor to failure, you have to put those rules out there. And there are some cases where failure is not an option. The aerospace industry is a great example of that. Failure translates to what we just saw in Washington, D.C. with a Blackhawk helicopter crashing into a passenger jet. That’s somebody’s children. It’s one of the most tragic and horrible circumstances, and every single person, they feel sick to their stomach if they’re connected to it and they say, “This is the worst day of my life.”

That’s failure where it’s not an option and you can’t have a culture that says, “Well, that’ll happen every now and then, but in general, we’re getting it done.” But in other systems like agile prototyping or aerospace prototyping or other things, when you’re dealing with a group of people where they’re deeply inspired and they’re willing to encumber risk and they sign up for that, like the test pilots testing supersonic aircraft or these types of things, and they died all the time, it didn’t matter because they signed up for that and they were all in the same boat. They were explorers in a certain dimension and that culture permitted that to exist. So really you have to ask what tolerance for failure do you have and how does the organization respond to failure? I think the Navy did a phenomenal job with the submarine programs. They had the Thresher and the Scorpion, and both of those were lost because of poor design and accidents.

And so they responded by saying, “Look, we’re not going to go and punish every admiral and go and yell at the submarine companies or anything. We’re just going to create a program of excellence.” It’s called SUBSAFE. Actually, the Navy had to go and teach NASA after Challenger how to build stuff. So after Challenger happened, the Navy came in and they say, “If you’re actually going to build spacecraft, this is the program you have to follow.” And SUBSAFE is a really rigorous way of constructing submarines. Since the Navy did it, I think they’ve only lost one submarine the entire history and they had hundreds before, and that was the one. So every system has to be upfront with those expectations and then you build a culture accordingly. And then there’s, what do you do when failure occurs? Because failure does happen and do people feel like they’re going to be treated fairly or do people feel like the exercise is more about subscribing blame?

And this is the dark side of NASA. When failure happens, especially with Challenger, the game was not to admit it, but rather hide it and find ways to bury it in the guts of something. And Feynman and others had to dig it out with a presidential commission, but eventually they figured it out. But bad cultures, they tend to hide enough and make things oblique, whereas good cultures, people proactively search for the truth and they bring it on up and they don’t care about the consequences of the truth, they just want it out there, because they think it makes everybody’s life better and they have the capacity to say they’re sorry. It’s a two-way relationship. Every society has a forgiveness mechanism, a lever of forgiveness that they pull. And in some societies, it’s quite easy. In other ones it’s quite draconian and harsh. Like in China, anytime there’s a financial collapse, they’ll just go execute some of the bankers.

They have these trial, they pull them out and they’re like, “Oh, this guy, mortgage crisis, whatever.” They go execute them, makes them feel better. I guess in other societies, they don’t punish people at all. Like in ours, 2008, there was too big to fail and these guys robbed us of billions of dollars and they got to retire with hundreds of millions of dollars and there was no consequences for anything that they did. So that’s the other side of the pendulum is what a society’s response to these types of things and both a personal liability and a professional liability, and what’s the organizational response to these things? And then there in that structure, you start thinking about, well, how do you build psychological safety if it’s even possible at all? In some cases it’s not.

Douglas:

How do you view building this trust that’s so essential and the safety that’s so essential when you’re talking about distributed teams and you look at the Cardano community, all the folks that were involved in drafting the Constitution, coming from wildly different backgrounds with different interests and goals in mind, different careers. What does trust building look like there? How did that even happen?

Charles:

Well, first and foremost, you have to be willing to let people express themselves without beating them down even if they disagree with you. That’s a huge component of it. And it’s hard at times because sometimes they say things that are just materially not true, and I sometimes struggle with that or they don’t give you the benefit of the doubt when you’ve earned it. If somebody, I’ll give you an example, if every day for two years a person finds someone’s wallet and it’s got some money inside of it and they go out of their way to return it to that person with the money inside of it, and then somebody leaves their wallet in front of you and then they immediately snatch it and say, “Oh, thank God I took it, because you would steal my money.” You’d probably get a little off about that because it’s like, “Well, my track record here indicates something very, very different and you know that I have this track record and you know how I act.”

So you get pretty offended when people accuse you of things like for example, some people with the budget process say, “Well, the only reason Charles is doing this is just to loot and steal all the money from the budget.” And deep down inside they know that that’s a lie, and they know that that’s not what we’re doing. And they know that if we were going to go down that road, we had many opportunities before to structure it in a different way where we could have achieved that end and probably not had any consequences for it. But instead, we acted as good citizens and built a collaborative process and bring people together. So if you respond the wrong way and you respond negatively and harshly, unfortunately those people say it in today’s society, they have no accountability and then they immediately clutch their pearls and play the victim and they make it a David versus Goliath thing.

The very powerful person is picking on this very weak person and they go and try to create sympathy from people who aren’t intimately connected to the situation. So that is one of the issues, and you see that a lot. So many people, they get very panicky or flighty when an event happens. Like we’re having a budget issue right now where the budget process has always been broadcasted roughly the same way, and we say, “Look, the Constitution first, then the product roadmap, then the budget. And the budget’s going to be a proposal and there’s going to be competing proposals and there’ll be a reconciliation step.” So give Intersect and IO some time to put a coalition together and figure out some basic principles and a basic sizing that needs to be done. And by the way, we’re going to do that under NDA or under private groups, because we don’t want intermediate work products to be leaked because it would be an unfair representation for intermediate products to go out there because some of those things are stubs, some of those things, there’s no intention.

Other things, the price of ADA was 25 cents and it just hasn’t been updated, and people think it’s now four times more expensive. And if every single time you do an intermediate work product, it immediately goes to the internet and people freak the hell out and they get super upset and then they take sides and judge you based on that, then nobody will contribute because they don’t want to get attacked and they don’t want to be part of that toxicity. So unfortunately, somebody in that group leaked it, or at least I guess an early draft of things that wasn’t accurate. And now we have a whole bunch of people dogpiling on Twitter doing that, and it diminishes the credibility of the process and then it makes everything we do thereafter look reactive. So even if we do the right thing, “Oh, they only did the right thing, because we went to Twitter and criticized those people.” As opposed to. “They were planning on doing this all the time.”

And I’m not sure exactly how to resolve that. It is a deeply frustrating modern phenomena in politics. Two generations ago for the really serious stuff, nobody thought that the people in Washington would just be so blatantly against the American people. Let’s say there’s nuclear weapons crisis with the Soviet Union like the Cuban Missile Crisis, for example. Eisenhower and Kennedy were talking to each other every day, Republican former president, Democrat president, and 100% of Washington was aligned. And they’re like, “What can we do? How can we help? This is a national security issue. We’re all in the same boat.” Now in Washington, every national security issue, they look at it through the lens of, “How can I gain political power as a result of manipulating this event to my own interest?”

So there’s zero trust in these types of things. If you ever have a meeting with a person who’s politically opposed to you, they don’t have your back. Even common decency’s out the window now. Like Bernie Sanders for example, and Tulsi Gabbard, she gave up her career in the Democrat party. She was a rising star. She could have been president one day as a Democrat. She gave up her career by backing Bernie Sanders over Hillary Clinton and criticizing Hillary Clinton and how she kind of strong armed the 2016 nomination against Bernie. And Bernie’s probably going to vote against Tulsi running for DNI. It just shows you how far partisan politics have gone. If I know that this person gave up their career to support me and they had integrity and fought hard for something that was important to me, I wouldn’t betray that person, stab them in the back for a job that I knew they were qualified for, but I’m only voting against them because it’s a party line thing. Where’s the good in that?

So when you see a system behave that way, you tend to just lose all trust in it and you start doing pretty extreme things. So it’s a delicate thing and it’s a hard thing and events happen and they make you a little angry at times. And then you’re very disappointed in people and their conduct, especially when they do things a certain way. And at the end of the day, if you have benefit of the doubt, then you realize that even if it’s not a perfect work product, the person’s heart is in the right place and you can work with this person. So if somebody’s heart’s in the right place and they produce something you don’t like, your first response should be just pick up the phone and call them and have a conversation with them because they could be persuaded and you’re both on the same side. You both want the same outcome.

What you do as an adult, you explain, “I think you’re trying to achieve this and this and this is that, right?” They say, “Yeah, that’s exactly what I’m trying to achieve.” Say, “Okay, well here’s the problem with what you’ve proposed, if we go down this road, we’re going to run into A, B and C. And I think if you do choose this alternative, you won’t have A, B and C, but you’ll still achieve the same end.” And then they hear it out and they say, “Oh yeah, actually that makes a lot of sense. I think we’ll go with the thing you’re doing.” Or they’ll disagree and they’ll say, “I thought about the thing you’re doing, but here’s this other thing you had no idea about that I know about and I’m going to tell it to you and that’s why I was forced to do the proposal that I had.” And people say, “Oh yeah, that does kind of make sense.”

So maybe there’s something on your side that you had considered, because you’re not God. You can’t step into somebody’s brain and trust works in both directions. Does the person talking to you respect you enough to listen to you? Does the person talking to you respect you enough to acknowledge that you’re a human being with your own independent ideas and maybe just you have more knowledge about this than they do and that’s the reason why you’re proposing the type of thing. And it goes back to that benefit of the doubt. We live in a society now where people have a hard time conceiving that certain people have access to other information. Like when Trump said COVID was made in a lab, that’s a pretty credible source.

I understand a lot of people, all politics, he’s an evil orange monster and all this stuff. Whatever you think, he is the President of the United States and maybe just the President of the United States is given information we don’t see. He was arrested for that. The whole classified information Mar-a-Lago thing. So the president gets to see stuff we don’t get to see. So if the president says something, especially something very significant like that, it’s a credible source in more cases than not, but we just let our politics get in the way or our personal distaste get in the way, and that’s another big problem. So you have to have objectivity is I guess what I’m getting at and you have to divorce the names and your reactions to the names and the people and where they come from from the conversation, and you have to objectively look at these types of things and then you have to say, “Okay, objectively does the argument and the data make sense?”

And if you are taking things on faith, you have to look at the totality of the person’s track record and say, “Historically in these contexts, have they been reliable or unreliable?” There is no secret in the world that I do not get along with Vitalik Buterin. He has very little respect for me. He thinks I’m less than a piece of dirt on the ground, and there’s a rule in the Ethereum Foundation, they are never allowed to mention Cardano. But let’s say somebody accused Vitalik Buterin embezzling money from the Ethereum Foundation, I wouldn’t believe it unless there was overwhelming evidence for it because I know from his track record, he’s had hundreds of opportunities throughout his career to steal money, to take the easy road, and he’s not motivated by money at all.

I’ve seen it myself working with him, so I’ll give him the benefit of the doubt and say, “Unless there’s overwhelming evidence for that and circumstances for that, it’s probably made up rumor and it’s probably not true.” That doesn’t mean I agree with him or I like him or we even get along, but I can objectively separate the person from the event and say, “Well, what’s my lived experience with it? And also what have I seen through his conduct over the last 10 years?”

Douglas:

I was thinking about the working groups that I observed and how there was this interesting tension around the need and the value for transparency and also this notion of getting content to a point where it was consumable. And so if we wait too long until we perfect it, then the community is getting concerned. It’s hard for them to extend the trust long enough for folks to get things to be presentable and ready. Curious what your thoughts are on this idea of like, “Well, if we want to be transparent, but we also need to get things to a shareable state.”

Charles:

Yeah.

Douglas:

Tell me about that tension there.

Charles:

It depends on the work activity that you’re behind. So if you are doing something that everybody agrees on the outcome, it is really good to share that as soon as humanly possible. Like Ouroboros Leios is a great example of that. It’s a protocol we’re implementing for Cardano, and if we’re successful with it’ll make Cardano probably 100 times faster than what it is right now. That’s awesome. Very, very happy about that. So everybody agrees about the outcome. They say, “Oh, we want it.” Where they disagree is about the process, how to get to that outcome, the resources required, the design, these types of things. So what you do is create a working group, bring as many people as you can together and then publicly broadcast the intermediate work products and then everybody grabbing a shovel and they want that to happen. When you have a process where there are winners and losers in that process, and budgets by definition and political campaigns by definition are winners and losers because if somebody got funded, it’s seldom the case that everybody got funded.

So there’s somebody who eventually gets left off and for that particular person, that’s existential and it’s the most meaningful and important thing in the world and they feel cheated and they feel like it was an unfair process and the process has to be torn down, they were a victim of that process. So when you know ahead of time that people have that type of reaction, the problem with intermediate work products is you’re debating winners and losers sets sets, and the problem is you haven’t made your conscious choice of which one of these you want to bank on, and because of that, you’re going to get the worst of all worlds where you get basically prejudged for things you didn’t even do. What if it’s as simple as Bob just put in a stub for $100 million for development and just left in one company because he hasn’t gotten the final list of it?

Then if I saw that and I was on the other side, “Oh, that one company got all the money and none of us got anything, these guys are terrible and they’re planning on stealing from all of us.” That’s why you got to keep that secret until you’re absolutely certain that you can live with the consequences of the red button, the launch button. And you say, “Okay, it is what it is. We just have to live with it.” The other circumstance is competitive and in some cases your intermediate work products can be stolen by your competitors, and when they get taken, they can be used for their own products and that’s less of an issue in an open source decentralized ecosystem. But it could be an issue if you have a fork of the chain.

Let’s say that there’s a Cardano and a Cardano Classic, or there was Ethereum Classic and there was a Bitcoin Cash, and let’s say you’re working on a new protocol that’s super awesome and you want your ecosystem be first to launch that protocol so that you can basically not lose the fight between these two competing chains that are going after each other. So in those circumstances you don’t share, even though perhaps sharing would be better if you didn’t have a native competitor. The nice part about Cardano is it’s so technologically different from the EVM ecosystem, we don’t have any of those concerns. Nobody’s trying to steal eUTxO or Plutus or Ouroboros.

We’re kind of living in our own world, and even if they want to like Haskell, it’s a weird language what’s going on? It’s not easy for them to do that, and that’s actually means that we can be far more collaborative and far more open with people. And that’s why we have 168 scientists we’ve worked with for the 230 papers we’ve published, and that’s why our code is so open and all the protocols are so open and the prototyping process is so open, there’s just no interest in espionage for that. Whereas maybe you’re a layer two on Ethereum and you’re just exactly the same as all the other layer two neighbors, you’d be a little bit more careful with that and you want to try to create some first mover advantage.

Douglas:

That’s fascinating. I want to come back to the convention and the workshops leading up to it. What impact do you think the facilitative approach made to the final outcome?

Charles:

Everybody entered in with trust, and that’s why the convention worked. It was hard because there was strong disagreements, but because they trusted each other, they were able to converge to a compromised state. If people didn’t enter in with trust, it would just be physically impossible. There’s too much to go against the tides, the cultural stuff, the language stuff, the asymmetries and experience and knowledge and power and money. There’s just too much there, but everybody entered in with trust and that’s the thing that made the difference at the end of the day.

Douglas:

When you think about the future developments around community-driven governance within Cardano or other broader blockchain spaces or contexts, where is it headed? What is the future?

Charles:

We see it. We see it with Metagov over in the Ethereum space. We see it with Tezos, we see it with Polkadot, we see it with Dash and Cardano, and all of these are examples of decentralized governance. In real time, you’re really asking three things. Does the system have three properties, integrity, efficiency and effectiveness? Integrity means you start with a founding intent and does the system preserve that founding intent? So the Constitution is the founding intent of Cardano. Then you have the efficiency, which is how quickly can the system converge to make a decision? Is it a day, a week, a month, a year? And it could be different for different types of decisions like hard forks versus protocol parameter changes or treasury withdrawals. But how quickly does that take? And effectiveness is how good are the decisions you’re making? So if you set an outcome, can you make that outcome?

So for example, we say something like, “We think this budget for 2025 will double the size of Cardano as measured by transaction volume and TVL.” Did it happen? If it did, it’s an effective system because those were the measurement criteria. That’s the outcome we wanted to achieve, we achieved it. So typically you have a governance trilemma where you only get two of the three if you’re good. Sometimes you get all three, but it’s hard. So China is a great case study in efficiency and effectiveness, but no integrity. What I mean by that is from a western perspective, integrity to me means that you don’t persecute minorities. Integrity to me means you protect human rights, integrity to me means you value freedom of commerce and expression. But when I see Jack Ma be disappeared because he disagrees with the government or camps set up in Western China because they had belonged to an ethnic minority or eminent domain used to basically just take people’s land and if they complain, shoot them, that’s not a preservation of human rights and integrity.

On the other hand, gone from a backwater to a superpower in five decades. So it’s a very effective, efficient system upon that optimizing function. Then you have places like Switzerland, which are high integrity. They have rule of law, they protect human rights. No one Swiss thinks, “God, is the government going to purge me?” In fact, they’re more about some of these rights than most western nations and they’re very effective. So effective translates to when they make a decision, it tends to have a good outcome. That’s why they’re one of the richest countries in the world. They’re horrendously inefficient. It takes a long time to make a decision in Switzerland, and Zurich is a great example. If you go to the basement of one of the buildings, they have this beautiful large wooden model of the city of Zurich, and you have to go through these stages of steps.

Whenever you want to build something in Zurich, you have to actually, they’ll add it to the wooden model and the account council will debate it and talk about it. It’ll take 20 years to get a permit to build a skyscraper or to modify something inside Zurich because they say, “Oh, we have like 800 years of legacy with this city. We don’t want to squander it because you’re going to make some pretty building, but it won’t fit in.” So everything in Switzerland operates this way. They think in terms of decades and centuries, and Japan is the same way in certain places where everything is deliberate and takes a long time to get done, but it tends to be very effective. So efficiency goes away. So you typically get two of these things and really bad systems, you don’t have any of them. You’re inefficient, you’re ineffective, and you have no integrity.

A lot of dictatorships end up this way. They start highly effective and highly efficient, and then the dictator gets old and crazy and he has sycophants all around him, and then the efficacy disappears and the efficiency disappears inside the system. We see that with Russia, with Vladimir Putin where he was thinking, “Oh, I have this badass army and they can do all these incredible things.” And they were just straight up lying to him. They were fake armies on paper and fake training on paper and equipment. So when he made a war plan to invade Ukraine on four fronts and try to take the whole country in two weeks, he’s thinking, “Oh, this will be easy because everything I was told is this way.” And it turns out it was a disastrous decision for him because, because they didn’t actually have what they said they had, and that’s why they’ve gotten mired down in this three-year meat grinder, which has killed about 800,000 Russians and 600,000 Ukrainians, 1.4 million people.

It’s a remarkable loss of life. So bad bureaucracy has those types of consequences. It kills people, it slows things down. It’s ineffective. So we’re now assessing Cardano on those three criteria. Once the Constitution’s in place, we have a litmus test for integrity and we have a point to measure and we say, “Did the government ever try to make or make a decision that violated the constitutional intent?” If it did, we lost integrity. If it didn’t, we preserved it. And then you look at things like the budget, the roadmap, and other events like protocol parameter changes, hard forks, and you say, “How long did it take?” That’s your efficiency. And then you look at the outcome of those events and say, “Is the system making good decisions and is Cardano consistently growing in these types of things?” So that’s your efficacy inside the system, and we can measure it year by year.

And what’s cool is you can measure your neighbors too. Like Ethereum for example, when they did the DAO hack, the bailout there, I would argue it broke the integrity of a blockchain. They’re supposed to be irreversible, code is law. They don’t agree. But that’s after they did, that meant that Ethereum now has the option to do that. The same with staking discrimination where they’re getting some other people who approve transactions to be OFAC compliant as validators, and so they can censor the Mempool to remove transactions that are on the OFAC list. So now there’s transaction discrimination. So I remember in the early days at Ethereum, we put up “censorship resistant” out the door, “immutable” out the door. So for me, it’s not an integrity system, but people love that ecosystem. They seem to think that way and they don’t value that. So that can be like China, I guess there’s no coincidence that Vitalik speaks Chinese.

These things are okay. They have a different viewpoint of these types of things. Where Bitcoin, that will never happen. We all know that. They’re hard hardcore people. They have one view, it’s called maximalism, and there’s only one God, it’s Satoshi, and they follow that to the core. So the most important of the three for Bitcoin is integrity. So much so they’re willing to sacrifice any notion of efficacy and efficiency. It takes three to five years to put a major upgrade into Bitcoin with Taproot being the last one in 2021, and they’re debating all these upgrades. But it takes years for those types of things to come in. It takes us months.

And the power of an on-chain government is it allows you to move trade-off windows. So what we’re banking on is we can preserve an integrity like Bitcoin has, but we can move as fast as Ethereum does in terms of upgrades and be that efficient. Then we’re also banking that the wisdom of the crowds will make the decisions we make over time more effective. So over time the budgets will get more effective and over time the product roadmap will get more inclusive and effective for what we need and we’ll see. But if it works out, it’s a great case study in governance models and it’s something to learn from.

Douglas:

So thinking about the community-driven approach to drafting and voting in the constitutional draft, what challenges do you foresee in scaling this approach as you think about bringing in more community members, more ADA holders, more voices?

Charles:

I think that the thing is designed to scale, and we know that because we’ve gone from nothing to 780 DReps. We’ve gone from nothing to 108,000 people participating in governance in some form or fashion, and we’ve done all of that without the network collapsing and actually having to spend hundreds of millions of dollars. That’s a really amazing thing. The workshop is the single most expensive artifact, and I’d like to have it as an ongoing concern, but really for a representative sample of the world, you’re talking about seven of the order of magnitude of about five to 10 million per year. And not just for governance workshops, but also product and budget workshops. So I think they have a place and purpose, especially in areas that are very disenfranchised, that just don’t have native access to the ecosystem and they don’t have the money to travel.

So that’s a model that you pull out and you use. And also when people start developing their own communication channels, like the DReps are starting to all talk to each other and they’re forming coalitions and they are in the same Discord and they have regular meetings and these types of things, that is an organic bottom-up coordination. And once it occurs, then it becomes very efficient. So if you want to percolate information through the entire ecosystem, it’s very straightforward. You just do three, four things and then boom, you’ve talked to half of Cardano. Now innovation also can help. One of the things we’re working on in terms of technology is I really want a Pub/Sub mechanism that when you go ahead and delegate your ADA or your vote to a stake pull operator or to a DRep that you also auto-subscribe in your wallet to their comms channel so those people can push messages to you.

I really think that that would be an amazing feature. And we’ll probably roll something like that over into LACE and then hopefully gradually get into the Cardano protocol. Well, minute you have that, if you’re a DRep or if you’re a stake pool operator, you now have a button to click to talk to every person who trusts you. That’s really powerful, because you don’t know those people. It’s a permissionless system. They could be in Nigeria, they could be in Vietnam and not speak English. They could be anywhere in the world when you really think about it. And when they delegate to you, they’re not giving you their name, their email, or any of these types of things. So having a comms channel where those messages can be pushed, super valuable, because then you know how to reach everybody.

But wait a minute, if everybody, like 70% of the Cardano users are delegating to SPOs, and about 20% right now are delegating to DReps, and that’s growing every day. Once we have those systems in place, just by talking to a few hundred DReps and a few thousand SPOs, you literally can talk to every person in Cardano. That’s the power of networking. So that’s awesome. So you just create a horizontal communication channel for that. And even if you want to coordinate and scale at a level of 10 million people or 100 million people, you now have an effective way to do that. So part of the game is just making sure you have the right comms channels and the right collaborative media workshops. Their primary thing isn’t information discussion. You can do that over Zoom. The primary thing is trust building, because when people actually meet each other and they spend time with each other and they get to know each other, that creates a reality where they’re like, “I now know this person. I now understand where this person is coming from.”

And everything that seemed dramatic and weird, it evaporates away and we’re all reading from the same hymn sheet now. So it’s important that you have in-person touch points on a regular basis in a decentralized thing, because there’s what we call relationship entropy. And so if you don’t meet up, the opposite thing happens over time. You start becoming more suspicious of people, you start having fights with people, and then you stop giving them the benefit of the doubt. So workshops pull people together and they restore the relationships, and then people pull apart organically. So you have to do that on a recurring and regular basis, and we’re trying to figure out how to do that as an ecosystem in a cost-effective way because there’s just a lot of people and there’s a lot going on, but I think it is one of the most important things you can do to keep a decentralized ecosystem cohesive.

Douglas:

Incredible. Well, Charles, we’re coming up on the end here, so just want to say thanks for joining today and really enjoyed the conversation and look forward to seeing you again sometime soon.

Charles:

Absolutely. You’re a permanent member of this ecosystem now, whether you like it or not, because you were part of there at the beginning of governance, and we’re going to do as an ecosystem is keep learning. Minimum viable governance is so exciting because it’s a foundation, it’s not an end, and you can build on that. So now that we have great dirt work and we just put the flat work down, we got the concrete down, we can build one hell of a structure on top of that, because it was pretty thick pad that we poured. So I am real excited and real happy and thank you for everything you do. And I love talking about these topics.

And usually when I do interviews they’re like, “When is the price of ADA going up?” Or, “How do we win against Solana?” Or these things. And getting to talk about the actual collaborative models is phenomenal. And I’d highly recommend you interview Tam Haasen, the president of IO, because this is what she does. She’s super, super good at these things and she’s in love with the idea of building better collaborative models, and it’s always fun to talk about them.

Douglas:

Ooh, yeah, I’d love to. Fantastic. Well, thanks for the recommendation, and again, thanks for coming on the show.

Charles:

Thank you, Doug. Cheers.

Douglas:

Thanks for joining me for another episode of the Facilitation Lab podcast. If you enjoyed the episode, please leave us a review and be sure to subscribe and receive updates when new episodes are released. We love listener tales and invite you to share your facilitation stories. Send them to us on LinkedIn or via email. If you want to know more, head over to our blog where I post weekly articles and resources about facilitation, team dynamics, and collaboration. voltagecontrol.com.