Simone Cicero:
So, welcome back, everybody to the Boundaryless Conversations Podcast. Today with me there is my usual co-host, Stina Heikkila.

Stina Heikkila:
Hello, everybody.

Simone Cicero:
And we also have Ethan Buchman. Ethan, welcome to the show.

Ethan Buchman:
Hello, thanks for having me.

Simone Cicero:
So, that’s really great to have you actually. And we are not just excited, but I would say also full of questions and ideas that we wanted to share with you. So, hopefully, we’re going to make it on time for everything we want to discuss. But let’s start from one initial point. So, we have been listening to some of your shows that have been hosting you. We have been reading your writings and you seem to have this idea that we have to leave a transition between what I would call a naive idea of industrialism. So, something that it’s based on control, essentially, delusion of control, I would say, and planning and mass scale and so on, into something that you called embed cooperativism, which maybe you can explore a bit in this first answer. But I would like to ask you to maybe double click, especially on why this idea of the blockchain, and especially your idea of plural, I would say, blockchain as a role in this transition.

Ethan Buchman:
Sure, yeah. There’s a lot to unpack there. I can start with the second part, why I think blockchains are important, or why many blockchains are important. The way I understand blockchains, in some respect, they’re a natural evolution of databases and computing. And you can think about blockchains as the natural step in moving from architecturally decentralized, architecturally fault tolerant systems that we’ve had for decades towards more politically decentralized or multi-stakeholder systems. So, moving from fault tolerant databases running in a single administrative domain by a single company, towards fault tolerant databases that are run by many entities or many participants.

And that’s really sort of where blockchains fit, I think, in the context of the history of computing, and that’s important as we move towards a more interconnected and complicated world where people are less likely to want to trust single, large entities or corporations who have abused our trust over and over and over again. And so, arguably we should be moving towards something that is a bit more multistakeholder. That provides more reasons and more guarantees for why people should trust the systems that they build and rely on.

Simone Cicero:
So, to some extent, you’re talking about the fact that it’s not just a technological advancement, it’s something that is due to the political reasons, so essentially destruction of trust that needs to change, and an institutional architecture as well.

Ethan Buchman:
Yeah. I mean, I think that’s why blockchains are having their moment. The impact and the use case is political, but there are underlying technical advancements. There just wasn’t historically the kind of impetus, let’s say the socio political or socio economic impetus for those technical solutions to be deployed into production. So, for instance, Byzantine fault tolerance, which is the kind of fault tolerance that we say blockchains provide. And that’s it a word that goes back to the early 80s, when Leslie Lamport coined it to talk about systems that are resilient to arbitrary kinds of failure, not just a machine crashing, or going offline, or being delayed, but to it actually behaving arbitrarily potentially maliciously. You call that Byzantine fault tolerance. And that’s really the kind of fault tolerance that blockchains provide, but there was never really an impetus to deploy those kinds of systems. Even though the technology and the theory is decades old, it wasn’t until, let’s say, post 2008, that the trust in kind of institutions had eroded sufficiently, that it actually made sense to deploy these kinds of Byzantine fault tolerant systems in production, and now we’re seeing them explode across the world, essentially. So, that’s one sort of way to think about blockchains and why they’re sort of having a moment currently and understanding them to the historical landscape.

Another way I like to think about them is we had this personal computer revolution 30 years ago or whatever, which changed the relationship between the individual and technology and create new ways for people to connect with each other, and provided a new kind of sovereignty to individuals over their computing needs. And the way I think about blockchains is they are like community computers. Each blockchain is essentially, logically a single computer. Sometimes people make fun of them, they’re like, oh, they only have as much processing power as a calculator which is true to some extent.

But nonetheless, the idea that they’re a single computing machine, logically, a single machine, even though they’re distributed across many physical machines, they all comprise to make a single machine that is owned and controlled by some community, usually a community of token holders, however, it’s structured. But that phenomenon of the community computer, I think, will have a similar kind of impact on society as the personal computer did, which was obviously massive. And you could argue whether it’s been a force of good or force of bad. There are, of course, many negative side effects of personal computers and our obsession with our devices. But that’s the kind of framing that I like, for thinking about what blockchains are is that they’re this kind of community computer with the same kind of revolutionary potential that the personal computer had.

And then the same way that the personal computer was kind of a revolution on a previous conception of mainframe computing, obviously, computing in itself was a very powerful concept. And all these massive mainframe computers were built. And when people started making personal computers, the sort of common notion was, oh, that’s silly. Why does everyone need a personal computer, that doesn’t make any sense? You have this mainframe, all the world’s computing needs can just be taken care of by the mainframe in IBM’s basement and that’s enough. And, of course, that’s not the direction we went. We ended up with this proliferation of devices. Now everyone has a personal computer or multiple of them. And they all connect to each other over this interoperable network that we call the internet.

And in a very similar way, with the Cosmos project and sort of the approach that, that we’ve been following to blockchain philosophy is really about is, is a similar kind of conception of community computers. So, you have these blockchains, they’re powerful in their own right, they’re this sort of natural evolution of database designs, if you will, but there are people, you know, for a while people thought, oh, we only need one or some small number of blockchains. And that will take care of all of the world’s computing needs or blockchain needs. So, like Ethereum initially was pitching itself as the world computer, as if the Ethereum blockchain would be somehow sufficient for all of the world’s blockchain needs. And of course, that’s not the reality we’re in today and Cosmos has played a significant role in that. We felt that for the same reason that mainframes weren’t sufficient for the world’s computing needs and we have this proliferation of personal computers connected over an interoperable network, that is the internet, and that was really the sort of key ideas behind Cosmos to really enable every community, every group, every set of people, or organizations that wanted want to have one of these shared computing devices, what we call a blockchain, to be sovereign over them, that’s the word we use, to be able to control their their fate and determine you know, what programming languages use, what applications are there and so on. And yet, for all of these sovereign, independent blockchains, to still be interoperable with one another.

Simone Cicero:
So, I would take the chance to maybe give you a spin in the conversation a little bit before Stina jumps in with one other question. You spoke about sovereign computing platforms, let’s say. So, this idea that we are entering this moment where you have this local systems that are sovereign that have their own shared computing around a shared trust system, let’s say. And I’m interested to understand a bit more of what is the relationship between your idea around multi-chain interoperability that is central to Cosmos essentially. The inter-chain idea. And this idea of multiple local systems that interact with each other. Because if we speak about — On one side, you speak about embeddedness and sovereignty. So, how does it connect with interconnection and exchange and global discussions and so on?

Ethan Buchman:
Yeah, that’s a great question. A lot of this comes out of my background studying biophysics. That was sort of where I got my start and my training, thinking about the thermodynamics of organisms. And how it’s possible that organisms emerge and sustain themselves in a hostile, adversarial universe that’s always running down. We have these thermodynamic laws, you would expect entropy is always increasing, you have all this dissipation, how is it possible that organisms run themselves up in the face of that? And it turns out, if you sort of investigate this, it turns out organisms actually, they don’t contravene the second law of thermodynamics at all. They are a direct consequence of it. If you understand them in terms of their ability to better dissipate the energy that is sort of driving them, then it will be possible without them.

And so you can start to develop a notion of organisms as sustainable systems, by the way in which they capture any energy and cycle it within their structure. And so you get this very significant structural patterning, where sustainability ends up being intimately tied up with how the organism or the system captures energy and recycles it internally in these sort of local flows that are coupled together. And so the growth happens by finding new ways for energy to flow in a closed loop that sort of reinforces the other closed loops. And so you get this sort of sustainable growth pattern that you can contrast with an unsustainable growth pattern, which looks more like a tornado or a hurricane or a sort of vortex where you just have energy sort of spinning out in all directions, rather than closing in on itself in a sustainable loop. And so it was that sort of structural localism, we could say, and the information, an understanding of the information that is carried within such a structure about the environment.

And so in order to store energy, effectively, you actually have to have a representation of your environment and its dynamics and the sort of patterns of energy flow that you were responding to and storing too. And that structural representation is a local representation. I mean, you’re responding to your sort of local environment. And so that sort of biophysical framing of the meaning of sustainability, I think, really, really set me up for thinking in terms of localism and information theory and the ability to process information and the bandwidth necessary to process information and sort of turn me against, or maybe very suspicious of large centralized bureaucratic institutions, that just from a purely information theoretic standpoint, don’t possibly have enough or can’t possibly have enough bandwidth to adequately or accurately you know, process and respond to information in a complex dynamic changing environment.

And so if you study ecology or theoretical ecology or just living systems, in general, you find this profound localism, where you have species or structures within an organism responding in very particular ways to the driving signals around them. And so that sort of motivated me to try to apply that reasoning to our socio-economic systems and looking at — I started to find certain thinkers who sort of resonated with that. Nassim Taleb, for instance, and his ideas on anti-fragility and localism. And obviously Elinor Ostrom and her husband, they thought a lot about localism, and local practices for governing the Commons and the sort of polycentricity. this idea that that thing should happen at the appropriate scale. And that reality is a multi-scaled phenomenon. And you have many different scales of experience, and many different scales of patterns. And the structures we form ought to be sort of scale aware, aware of the right scale.

And so not everything that this isn’t to say, for instance, that there’s no role for the nation state there certainly is a role for the nation state, but it’s a particular one that is attentive to the scale that the nation state operates at. And there are certain things that make sense at the scale of the nation state, and there are certain things that don’t. So, for instance defense is sort of a very common feature of nation states. And that may be something that makes a lot of sense to operate at the level of the nation state. But there are many other aspects of society and of our lives that probably don’t make sense to be governed and operated at such a large scale, and would be much more effective if they were handled at sort of a more local scale, perhaps with standard set by the nations. And we see that somewhat in sort of federalist systems and provinces and states and so on, but even those provinces and states tend to be quite large. And we could probably take this further towards cities, and even individual communities having more say, more control, more — for a sovereignty over their own social economy.

Simone Cicero:
I mean, there aren’t many layers. So, you can think of the nation state, and then you can think of a city, maybe a neighborhood, maybe you can think in terms of equal — bi-regions. You can think in many ways. I think the interesting and fascinating aspect of this reflection that I don’t take many get is that, I would say if we agree that organizing needs to have this kind of multiscale variety you’re talking about, and we agree that because essentially we’re seeing or we’re saying sorry, that at the moment, we are just organizing at one scale basically that is the industrial scale. And thus I would say we are failing, because we cannot deal with the other elements and processes that are not at the scale of the industrialism. Then, if we — just I would say accept that reality, we start to organize at a more embedded and cooperative way like you say, we have to agree, and we have to accept the fact that we just have to leave this idea of industrial control that is just an illusion that we cannot control. We can have crashes, we can have collapses at this value scale. So, we have to have this responsibility to organize actively. What do you think about it? And then maybe Stina you can jump in with your question.

Ethan Buchman:
Sure. Yeah, I think that’s right. I think the sort of industrial mindset that we can control everything, obviously has its limits. I mean, it seems to derive from the advancements in physics and sort of like Laplacian determinism, the idea that if only you could just measure the position and velocity of every particle in the universe, then the future would be entirely deterministic and predictable. And then we had this sort of quantum revolution, where we realized there may not even be a defined position and velocity for every particle in the universe, let alone our ability to measure it. And physics has been sort of reckoning with that revolution ever since, but that conception hasn’t quite percolated into the rest of society and our consciousness, and there still is this very strong conception that, oh, we can control things. And we can have large institutions of experts and technocrats who understand the whole economy and can, by manipulating interest rates or whatever, can solve all our problems. It’s obviously ridiculous.

And so there’s a kind of complexity theory, complexity science that is critical here to appreciating and understanding and that recognition, actually, of the sort of complex nature of reality, and the complexity that is everywhere, also forces you into a more localist approach, because you realize that, the best you can do is kind of tinker and experiment at a local scale and build on your wins, and only take risks, that sort of won’t be catastrophic. So, if it doesn’t pay off, then that’s fine, you can sort of start again, but it won’t significantly set you back. Whereas if you do things at a very large scale, you’re potentially taking much bigger catastrophic risks, and it’s much harder to control things and measure things, and actually process information about the real world.

So, that kind of complexity oriented thinking, which physics had been very well aware of, since the early 20th century, and it percolated into ecology and certain other kinds of thinking. And now there’s a broad discipline of complexity science, and you have things like the Santa Fe Institute, and this kind of stuff, but it hasn’t quite got into the mainstream, let’s say, of economics and political economics and the way we think about structuring society more broadly. So, I definitely think that that’s important and that’s also had a pretty significant influence on my own thinking.

Stina Heikkila:
Yeah. And I’m curious to hear your thoughts on some things that might seem a bit like contradictions, I don’t know. I mean, that’s more or less what I want to ask. I totally understand this multi-scalar view and how your community computer, which is how you framed the blockchain can help to enable that local scale, let’s say, the community scale of organizing, in order to respond to signals and so on. But do you see a risk also, that this is very also quite technocratic, in a way? Like, are we then sort of building protocols and things that are too strict? Or how do you see that seeming paradox?

Ethan Buchman:
Yeah, absolutely. That’s a great question. Sorry, I didn’t connect back to the Cosmos thesis. And that’s exactly right. The idea is that we should be able to build community computers at every scale from the hyper local to the global, and the same technology can kind of work at least sets of the technology, but there is a real risk, and we do see it — I think there is a lot of technocratic thinking in the blockchain space as much as they claim to be inspired by some of these ideals in the way that certain blockchain designs are approached, they are very — they try to be sort of globalist, and one size fits all kind of solutions to some extent. And there is a lot of risk that the people building these systems are only thinking about the technology and not thinking enough about the social political reality that all this stuff is embedded in. And so I think that’s actually probably one of the bigger risks to the space today is that people aren’t really thinking enough about the sociological aspects of everything, and are a little bit too prescriptive about how things should be and they’re doing, let’s say, the crypto economic research and trying to figure out exactly how the system should be structured to work for a global censorship resistant ledger, and that’ll be sufficient for all without really finding out what people on the ground might actually need to benefit from these things.

And so, this is a direction that we’re hoping to push a little bit more to actually try to understand what communities at different scales actually need beyond what we might think they need, and try to start building towards that. Or at the very least, part of the goal of Cosmos was to empower people to be able to build the systems themselves to make the technology as accessible and general purpose and un-opinionated as possible, to enable any community to start to adopt it and to build whatever works for them without imposing any kind of political, economic structure on top of them, other than the idea that they should be sovereign over their own, political economy.

Stina Heikkila:
Yeah. And I think you also mentioned in some of your writing that one problem that you have seen in some political theories is that labor and land is seen as commodities. So, maybe this also links to what you sort of get to a little bit that everything cannot be programmed and, in a way turned into an algorithm or like, a code or something like that.

Ethan Buchman:
Absolutely. Last year, I read Karl Polanyi’s book, The Great Transformation, which is probably one of the greatest books I’ve ever read, and has had significant influence on me since and sort of aligned with… help synthesize a lot of sort of prior ideas, because it has a very strong historical element to it, and basically explains the great transformation that took place, more or less over the course, or leading up to the Industrial Revolution, where these factors of production land, labor, and capital or money essentially, became commoditized and that these things aren’t actually commodities. Commodities are things that are produced for sale on the market. And land was not produced for sale on the market. And neither was human labor. I mean, that’s like, the essence of human activity that’s something kind of sacred that wasn’t produced for sale.

And the same with money, money is a tool for coordinating and for exchange. It’s also not a commodity, but over a sequence of really political events, over a few 100 years, each of these things was, both in theory and in law, effectively commoditized and we’ve had the last couple 100 years of market society, since where we still propagate these conceptions of what Polanyi called the fictitious commodities, and I really like that framing, and there is a real risk that, and you see it in sort of blockchain communities that we’re continuing with this kind of hyper commodification. And it’s increasingly important that we take stock of that and sort of look back to how do we actually respect these things for what they are and develop proper sociological theories of land and of labor and of capital and money, and even energy. I like to include energy as a factor of production, kind of distinct from everything else. And understand the reality of them, the physical and social reality of them and build our economic system on top of that, rather than just assuming everything is a commodity, everything has a price in a single unit of account, and go from there.

And that was a major contribution, I think that Polanyi has made and we’re seeing various movements to decommodify these factors of production. You have things like land trust’s trying to take land off the market permanently. And you have things like cooperatives, which I’m sure we’ll talk about here, trying to effectively decommodify, labor a little bit more and re-empower laborers or owners over the means of production and Polanyi was also a sort of huge fan of that kind of approach. And there are some approaches to decommodify money, but that one’s a little bit harder, I think, to articulate or think about, but yeah.

Simone Cicero:
Yeah. Well, one thing I was thinking about what you were talking is, you spoke a lot about decommodification. And I was thinking that maybe we can dive a little bit into the difference between standardization and commoditization because Cosmos, to some extent, is doing standardization in a way that allows you to interoperate between different economic systems, essentially. I’m wondering since a while now that if there is the need potentially to raise the bar in terms of standardizing, in terms of — in the interest of cooperation, essentially, in the interests of no competing. Because commoditization is essentially standardizing through competition and destructive behavior approaches, let’s say. You make a commodity because you asked basically everybody to compete, everybody to compete into a standard.

So, I was thinking that maybe we will need in the coming years to standardize also the application and protocol layer when it comes to the ontologies and taxonomies we used to describe how we trade for example, or how we produce certain stuff, agriculture or education or whatever. So, I’m wondering if you see these kind of evolution from the Cosmos SDK, to integrate the higher level of the stack to, for example, let two schools in two different education systems in two different provinces, whatever, or bi-regions to interoperate with each other, or two different energy producers to interoperate with each other in some ways in terms of knowledge, or I don’t know, abstraction of whatever.

Ethan Buchman:
Yeah. So, there’s a few things there. One is the relationship between standardization and commodification. I think that’s a really interesting question. Off hand, it might have something to do with the dimensionality of the standards. And I guess one way to think about commodification is sort of like you’re saying it’s standardization on competing on price. And that’s it, it’s very low dimensional, there’s a single dimension for the standard, which is just like the price of the thing. Or you think of it as the cost of the thing, and competing over that. And everything gets standardized in terms of well, it’s all just for sale on the market, that is the standard. And that’s commodification. But, of course, you can have higher dimensional standards as well that aren’t just about selling things on the market, but are about other kinds of more, maybe more complex activities.

So, that’s on standardization, commodification. So, I wouldn’t say that all kind of standardization is commodification, per se, at least insofar as the commodification we’re talking about here is about the definition of a commodity as something produced for sale on the market. Just because you’re standardizing something doesn’t mean it’s strictly about it being for sale on the market. And I think actually the internet protocols are a pretty good example of something where standards proceeded not in order to make the thing necessarily for sale on the market, but just to enable some new kind of activity or coordination. And that’s really what Cosmos has been focusing on with kind of IBC, that’s the Inner Blockchain Communication protocol. That is the heart of the interoperability between Cosmos blockchains, but not just Cosmos, it actually works more generally speaking, and we’re seeing some other projects start to start to adopt it. But you can certainly build higher level standards as well, on top of sort of at the application layer, like you’re suggesting between schools or energy. That’s obviously going to be a lot more complex and would require better models of education and energy use and things like this. And that’s not something we started thinking about yet.

Simone Cicero:
What would you say that Cosmos is actually standardizing?

Ethan Buchman:
It’s standardizing I want to say, like clients. But what that means to your audience, is it standardizing the way that you read data from a community computer, that you read and write data to and from a community computer. And that standard allows you to create connections between these two computers so that you can write kind of arbitrary data to and from each side and have it be understood with the minimal amount of opinions imposed about the structure of the computers on either side. So, in the same way, the internet standardized reading and writing between two different physical machines. So, my computer and your computer can sort of talk to each other over the standard protocols of the internet. Cosmos is doing something similar, standardizing a communication protocol between two blockchains, community computers, whatever you want to call them.

And the way it does that is by abstracting over the underlying consensus algorithms so that it doesn’t matter what kind of consensus you’re using, as long as it can sort of fit into this standardized interface and provide some assertion some guarantees about what was written to the blockchain, then it can be read by another blockchain and vice versa. So, that’s the kind of essence of the standard is this ability to read and write between two potentially different chains running different applications or even different consensus algorithms. So, it’s almost directly analogous to TCP, which is the sort of core internet protocol, transmission control protocol that allows us to communicate sort of over the internet and standardize the reading and writing between two different machines. So, IBC standardizes reading and writing between two different blockchains.

Simone Cicero:
I was thinking about, let’s say, the relationship with localism. So, that’s something that I think I am interested to explore in the lack of other filters that I can use to think about this transition actually happened. Because we are talking about this now since decades and we’re riding with making tools and so on. But still, most of what we consume, and most of what we — Well, actually, we don’t produce much, in general. Everything that we consume basically comes from the industrial behemoths and people do not care, do not engage with economics of fundamentals, they’re not active on a local scale. So, what is your thinking about that? So, how does this actually happens?

Ethan Buchman:
That’s a good question. I think it’s going to take decades to get there. I mean, it’s possible that there will be a series of shocks to the system that will sort of motivate us to get there sooner. And potentially COVID and this pandemic was one where it really just highlighted the sheer fragility of the global supply chain. And it’s sort of prompting a lot of countries to rethink their ability to supply for themselves, the necessities that are required to keep humans alive and civilization afloat and to not depend on remote potentially adversarial jurisdictions to provide those things. So, it could just be that it requires a series of shocks to get us there. And that’s the sort of — maybe that’s the kind of coercive path. I think there may be another path, which we’re hoping to apply some pressure on, which is more incentive oriented. And so we’re starting to explore the relationship between the monetary system and the supply chain. Maybe people don’t really think about these things as sort of part of the same system. Obviously, you use money to lubricate trade in the global supply chain.

But the way I think about money in the monetary system, it’s like a representation of the supply chain, of the sort of resource usage patterns and so on. And so the international hyper globalized structure of the monetary system sort of reflects the same thing in the supply chain. And so if we can find ways to support more local forms of money, and more local monetary systems, we may actually be able to directly encourage and incentivize more local supply chains as well. And so there’s a little bit — Maybe it’s a little bit of a chicken and egg, but there could be ways to actually motivate that that aren’t just purely through the kind, of course of action of responding to a shock, but are more through a kind of voluntary, more pre-emptive, let’s say.

Simone Cicero:
I mean, I don’t want to think about these happening as an effect of a shock. Because really, I don’t think we can organize a blockchain-based system for education, for example, through a shock. So, I’m much more interested into this kind of natural transition in terms of peaceful, let’s say, transition. And, of course we know that what the hell is going to happen with the climate and so on. But hopefully, we can still manage to have this transition inside the system. So, I guess, it also, and I think this is part of what we are also practicing. There is some kind of personal level to this. And you quote Wendell Berry, if I’m not wrong sometimes. I’ve heard you speak about that if I’m not wrong. But in general, we quoted several times his position around the importance of the individual in transition, So, you cannot delegate all these transition to an organizing model. It’s not that we adopt an organizing model and we change. So, it’s really about also what we expect from the economy and what kind of posture we take towards the economy. So, are we actually there to run our schools? It’s boring. So, what do you think about that?

Ethan Buchman:
Yeah, I mean, I think that’s right, we certainly can’t delegate this. At the same time I just want to be cautious of the — there’s almost this like gaslighting going on where people make it about oh, you have to recycle. And it’s all about this individual action to protect or prevent climate change, when in reality, it’s really about what the much larger institutions and companies and multinationals are up to. I saw a funny tweet the other day that was just like a map of all the private jets that were leaving the Superbowl and flying back to wherever they were going in the US. And then the caption was, remember to recycle just like poking fun at the idea that individuals recycling could have any kind of impact in the world that structurally isn’t changing. And so the question is, well, how do individuals participate in that kind of structural change? And I think that’s actually really important. I think that’s what you’re getting at.

For instance, looking at starting with the schools and finding ways to change the structure of schooling and education, and how kids are brought up and there are certainly ways for people to participate in that sort of more locally, and that’s certainly important. But it also feels like it will simultaneously require larger institutional changes, things like more sovereignty for smaller jurisdictions, more sort of bi-regional organization, and probably a revolution in the monetary system. To be frank, we continue with the structure of money the way it is, and sort of the patterns of development that it facilitates. I’m not sure there’s going to be any hope no matter no matter how much clean energy you create.

Simone Cicero:
So, it’s certainly not just consuming more ethically, it’s much more about enterprising, right?

Ethan Buchman:
Yeah, exactly. Like, some people think like, oh, we can solve climate changed by moving to clean energy, and all this stuff. But I don’t think that actually solves the problem, it just sort of maybe punts it down the road a little bit, because you’re still engaged in the same kinds of patterns of production and consumption that are damaging the biosphere. And it’s not just about the amount of carbon we emit, it’s about the way we actually organize ourselves on the surface of the planet, the destruction to natural habitats, all these… And not just nature, but also our social relations, we’re also corrupting our souls in a way by continuing to perpetuate the kind of utopian sort of market society as one, you would call it, that was sort of the legacy of the last few 100 years.

So, we actually need to change something about the structure of the organization of, let’s say, the monetary or economic system to not just be targeting that infinite exponential growth of whatever 3-5-7 percent GDP growth every year, but actually looking at — And it’s not necessarily about de-growth either. It’s about sustainable growth. And again, getting back to that sort of theoretical ecology, it’s about finding ways to keep energy flowing in cycles, and to grow through increasing the number of closed loops, that are sort of compounding and feeding each other. And there are ways to do that in economics, and even directly through the monetary system, by encouraging closed loops of Credit Clearing.

And so this is something that we’re starting to explore and hoping to use sort of the Cosmos technology for. If I owe you money and you owe Stina money, and she owes me money, none of us need to actually come up with any cash. We can just clear all those obligations just by surfacing the fact that there is a closed loop there. And so by looking for those closed loops all throughout society, and potentially finding ways to incentivize them we can actually start maybe, to make some progress towards a sort of more circular economics, let’s say. And those are the kinds of structural changes, I think, that are necessary to actually deal with some of these more existential issues.

Stina Heikkila:
That’s super interesting. And if we go down a scale and like, come back to your organization, and I mean, we know that you are very much into cooperativism as a way to sort of embed activities and probably creating a bit of those close loops that you were talking about. So, do you want to talk a little bit about your experience with building informal systems? And how are you thinking at that scale, how do you build an alternative to the existing system, let’s say.

Ethan Buchman:
Yes, I would love to. So, I have been, let’s say, disenfranchised with the standard models to building companies for quite some time now, especially the kind of gap between the shareholders and the operations. Not only do you have like, the principal agent problems – blockchain people love to love to write about and talk about it – but there’s just like, a fundamental mismatch in representing the stakeholders in the state machine of the corporation.

So, I like to talk a lot about this talk on stakeholders and state machines, where you can look at sort of the history of humanity, and look at the ways that stakeholders over time, people who have stake in whatever system, are always vying for better representation in the state machine, in the rule set, in the laws and the institutions that represent them. And the corporation is the dominant way that we organize society today. And the major stakeholders of, you know, the activity of a corporation, the employees, the vendors, the clients, the environment, other social organizations, and so on, have virtually no representation whatsoever, in the actual structure of the corporation in the legal state machine, it’s all just about really, the shareholders. And the shareholders don’t even have anything to do with the operations. They’re just some external financialized abstraction that provided some capital, and that’s it. And somehow everything is beholden to that.

And so that obviously seems like a very chronic misrepresentation of reality, and from the perspective of my views on sustainability being about accurate representation of reality in order to be sustainable. In order for our society to become sustainable, we need organizations that better reflect and represent the actual stakeholders and the actual world around them. And, of course, one of the most, if not the most important stakeholders in an organization are its employees. And the fact that employees have so little representation in this restructure and ownership of the companies seems like a huge issue. And obviously in tech companies and startups there’s like employee stock options and all this stuff, but it’s usually a very small percentage of the company and options don’t even have voting rights.

And often the founders and the investors will maintain a massive amount of control if not all of it. And so you really still don’t, you know, while employees might get some exposure to the upside, the financial upside, they still aren’t really represented in the sort of ownership control structure of the company. And this is where coops come in, especially worker coops, which is the kind of, you know, there’s different types of cooperatives but worker coops is really what we’re talking about here where they directly represent the interest, the controlling interest of the employees in the structure of the entity of the corporation. So, each employee effectively gets one vote, and therefore has the right to elect a board of directors, which appoints the CEO and so on.

So, for years, I have been frustrated with corporate structures and with Silicon Valley, and all this. It feels tied into this hyper growth unsustainable exponential growth and sort of lack of representation, and all these issues and sort of wanted something better and always kind of knew about it, was interested in coops and felt that one day we would have the opportunity to create a new company, and it would be a cooperative. And we had that opportunity with informal systems a couple years ago, which spun out of the interchain foundation, which was the nonprofit that was set up to fund Cosmos development. And so we structured informal as a worker’s cooperative, essentially, where each employee after they’ve been with the company for nine months, that’s the gestation period for human beings.

So, after they’ve been with the company for nine months, they’re issued one membership share. We call it the informal share. And that gives them one vote in the governance of the corporation in the sort of major corporate decisions. And I may be the CEO of the company, but I am effectively serving the stakeholders who are the workers, the employees. And so I remind them all the time that they can, whenever they want, call a shareholders meeting, where they each have one vote and appoint a new board, elect a new board and appoint a new CEO. And we’ve even joked about running what I call a fire drill where I would fire everyone, but because everyone has a notice period within the notice period, they would call the shareholders meeting and replace the board and elect a new CEO and rehire themselves. And if they wanted to reelect me they could. So, that’s kind of the power that should embed in the workers but in almost all organizations in society today don’t.

Simone Cicero:
Do you have many remote workers or they are mostly co-located?

Ethan Buchman:
No, it’s pretty remote. We’re sort of all over the world. In Toronto, Vienna, Lausanne, Berlin, the UK, the US, yeah, Serbia, all over.

Simone Cicero:
That’s interesting, and what are the strategic benefits that informal system gives to the members, the workers, so in terms of beyond, I would say, salary and equity?

Ethan Buchman:
The fact that each individual is a full voting in a uniform way owner and controller of the organization, changes the flavor and the cultures and the guarantees that the organization provides. And what we’re trying to do is build an organization that someone could be happy at, for the rest of their lives. That is like, where they don’t feel like they have to jump around again, it’s a place that is there for that. It prioritizes the people. It’s there to really take care of and look after people and make sure they’re sort of getting as much value out of the organization as the organization is getting out of them. And at the end of the day, they retain control. And while that control me, it’s not exercised day to day, it’s not like every day, the whole company votes on everything we do.

In fact, it may not have to be exercised at all. And that’s kind of the magic of rules and the legal system is just like, having a credible threat might mean you never have to actually use it. And blockchains take advantage of this kind of thing, and sort of the legal system in general. If there’s a rule in the contract, there’s higher chances that you won’t violate the contract, because then you know, you’ll end up in court and so on. And so just having that sort of in place provides additional guarantees and comfort to employees that make it sort of a safer space for the long term that they feel like they can depend on.

Simone Cicero:
What is your decision making system, so how do you make decisions? Do you use a sociocratic decision making consent? What is your style? Do you have internal circles how are the team structure?

Ethan Buchman:
Yeah. So, there’s a lot here. We don’t quite have a name for, let’s say, decision making that fits a common mold. We have been adopting what we’re calling a workflow or this sort of comes out of the work of Fernando Flores’ Conversations for Action. And we just put up a guide at workflow.informal.systems that describes the approach we’re taking to organizing ourselves internally. And this is really about recognizing that almost everything that happens in an organization can be boiled down to a promise, what you can call a promise between two individuals. And a promise is really nothing more than a consensual expectation. If you have an expectation of someone, and they consent to that expectation, effectively, there’s a promise there that someone is making a promise about how they’re going to behave.

And the idea behind this sort of workflow language and we call it a language rather than a model because it’s not really prescriptive. It’s not like a model of how your organization should run. It’s a language for describing work and for understanding each other and the work you’re doing together and really for describing and talking about promises and accountability, that’s really the heart of it. And by thinking about everything in terms of workflow, you can sort of get a better understanding of what promises people are making to each other over what time horizons and of what scope. And so you can start to understand that everyone in the company is making promises of different scope, broader or narrower scope, and over different time horizons smaller or larger.

And the whole thing is a big negotiation between consenting adults, on what kind of work they want to do, and what kind of work can be done with the constraints of essentially whatever the financial constraints are for the company, the budget, and so on. And so we think about all that structure, less about sort of a particular decision making framework, and more about the kinds of negotiations that are happening and the results that people are promising to each other of varying scopes and varying time horizons.

Simone Cicero:
How do you manage hiring?

Ethan Buchman:
How do we manage hiring? Well, what do you mean? Or in what level of detail?

Simone Cicero:
I mean, somebody takes decision to hire someone else. In general, I think the hiring question is I can also ask, how do you manage budgets? Who decides the important things? Is it an informal structure? Is it a formal one? Do you have attached P&L to these decisions? How do you approach it?

Ethan Buchman:
Yeah, somewhat. So, we do actually for some decisions, we do adopt the RAID model, R-A-I-D, where different roles, different people in the company have different sort of decision authorities for a particular decision. And RAID is, I think, quite popular and standard. R is recommend, A is approve, I is input and D is final decide. And so, for instance, in hiring, I actually don’t have any decision authorities, even though I’m CEO of the company. So, I can’t, according to our internal logic, force a higher or veto a higher, because I actually haven’t been granted any authorities in the hiring process. The authorities are granted to whatever the participants are, there might be a hiring manager, and interviewers and so on.

So, we do try to use the RAID, but in certain aspects. But as much as possible, we try to boil it down to the promises people are making. And if you’re making a certain kind of promise about delivering certain results for the organization, in order to execute effectively on that promise, requires certain decision authorities that sort of come with making that promise. And effectively as the CEO, I am making the longest term and the broadest scope promise to all of the employees who are my — who I’m accountable to effectively. And thus everything can kind of flow out from that basic relationship.

Simone Cicero:
Distribution of decision making and roles, let’s say, are they my consent? How do you set these things? Is there somebody that decides? I’m just curious just because it seems like a so fascinating organization. So, I want to understand as much as possible, also for our listeners.

Ethan Buchman:
Yeah. So, it’s not all formalized. But a lot of it, we’re still kind of discovering as we go. And we’re a bunch of good-natured, well-intentioned, high-trust people. So, it’s sort of working so far. There are things we have been trying to formalize to preempt any kind of serious contention. But you always need to navigate this sort of boundary or the tension between formal and informal systems, hence the name of the company Informal Systems. But we write about it. So, we put up this guide, workflow.informal.systems. I encourage you to check that out because that so far has the most detail we’ve published about how we’re working internally. And we’ll keep updating that as we learn and discover and sort of roll out more say processes and organizational structure and so on.

Simone Cicero:
I mean, Ethan, it was a very long, a very deep, a very fruitful, very interesting conversation. I must say, I really enjoyed it.

Ethan Buchman:
Thank you so much.

Simone Cicero:
I wanted to give you just a chance to share a little bit about where people can find your work. And if they can reach out for what reasons I mean, that’s now the moment to share, let’s say, how to get in touch.

Ethan Buchman:
Yeah, absolutely. So, we are online, informal.systems is the website. And you can check out our blog there where we publish about what we’re up to and about our organizational structure. We’re also on Twitter, Informal Inc. Of course, there’s the whole Cosmos project that’s cosmos.network. And then myself, I blog about political economy, ebuchman.github.io. I’m also very active on Twitter @buchmanster, B-U-C-H, and you can generally get in touch with me there. And a lot of what we’ve talked about, I’ve blogged about. And there’s a lot of writing about Bitcoin and political economy and local money and all this kind of good stuff.

Simone Cicero:
Yes, yes. I really encourage people to do that, because Ethan is one of the most interesting thinkers who have been and doers that we have been in touch with lately. So, thank you so much, Ethan, again. Thank you, Stina, for being with us tonight. And to our listeners, catch up soon.

Ethan Buchman:
Thanks so much.