A Brain Capital DAO - MVP for Capitalism 2.0...?

LF20 | An investment DAO could help develop much-needed 'brain capital', and at the same time offer clues for how to reshape a broken capitalist system.

AI Prompt: A crowd of people. Source: Stable Diffusion

Houston, we have a problem

There is, in most quarters, a recognition that our society is trouble, and our neoliberal based economic system is not fit for purpose. With oil companies making record profits, a timorous ESG movement in retreat and the world’s largest economy looking more like a Handmaid’s Tale than humanity’s saviour, we need to do things differently.

Two fundamental problems with today’s capitalism

First, we need new societal objectives. For a start, our economy should serve society, not the other way around. We need new measures. Not just GDP growth, but measures that matter to people, such as health, quality of life, and the quality of the planet. And second, we need new ways of working and rewarding people. Today’s economics is based on scientific management, a blip in the history of humanity when factories were dominant and the schism between capital and labour was started.

Brain Capital as a new form of capital and societal objective

The words ‘Brain Capital DAO’ won’t mean much to most people, and that’s ok. It’s not a particularly elegant phrase, and a future organization would likely have a cooler name. Taken in parts though, Brain Capital addresses our first challenge, and the DAO addresses the second.

Brain Capital is a concept popularized by a number of people, in particular Harris Eyre, who kicked off this chain of thought at a workshop I hosted with him in December. A recent Brookings piece summarizes the concept:

Brain capital is a new economic asset which prioritizes, integrates, and optimizes for brain health and brain skills (e.g., resilience, creativity, wisdom).

The article points out the interrelated nature of brain capital and democracy: democracy is dying as people are becoming increasingly distrustful and despairing. This situation is both exacerbated by, and compounds, climate crises and conflicts. We can regenerate both civic society and our global ecology by recognizing the value of brain capital as an economic asset. This complements the movement to recognize social, human and natural capital. These deeper understandings of ‘capitalism’ go far beyond ‘traditional’ measures of capital i.e., manufacturing and financial, which have often been grown by depleting human, social and natural capital.

This global debate points to new measures and indices of things that matter. There are already some excellent explorations of this subject, such as the ‘mental wealth of nations’. Recognizing and building a new capital class around brain health and brain skills would be a major step forward. What’s missing from the discussion, as far as I can see, is a better way to organize how we work to build that new capital asset.

A DAO as a new way to organize and reward work

Enter DAOs. Instead of a top-down hierarchy, DAOs are emergent networks, coordinated and managed by members whose efforts are rewarded by ‘tokens’ (mutually agreed units of value), which may or may not then convert into ‘real’ currency. They’re in their infancy, but at least in theory are more aligned with managing multi-faceted stakeholders needed to build brain capital.

In many respects this is just new labels on old bottles. Cooperatives have been around for centuries. During the 20^th century these were largely replaced by the corporation, which gave owners the advantage of limiting their liability. [Much has been written comparing DAOs and Co-ops (some even by me)].

There are good reasons for the dominance of the Corporation in a world in which the objective function is maximizing shareholder value. There are fewer good reasons in a world in which societal objectives are more divergent, and in which the social and environmental consequences of 'externalities' are ever more apparent. The Corporation is a drag racing car when all that matters is the quarter-mile sprint. Member-owned cooperatives aim to serve their members, not remote and often disconnected shareholders (resulting in moral hazard). Society is often better for it; no member-owned bank was hauled before Australia’s Royal Commission, for example.

Unlike co-ops, DAOs are digitally native, with the potential to radically lower the costs of coordination and communication. And they’re also global, and not dependent on the structure and whims of any one jurisdiction. Consequently they can be based in the jurisdiction that most aligns with their objectives.

How it would work: A marketplace for impact

The most logical way to structure a brain capital DAO would be as an investment DAO - a two-sided marketplace that connects those with capital to invest (VC, impact investors and philanthropists) with those needing financial capital to build brain capital (researchers, projects, cities, and startups).

Unlike traditional investment funds the investment DAO does not rely on a single investor with a big brain, contacts book, and salary. Instead, it leverages its network to find interesting projects, vet them, decide on investment and then support the organization in the field. Those doing the most work are then rewarded by tokens, which could for example, equate to equity in the startups.

The DAO is designed to operate transparently when finding and sharing deals, and those that get funded would result in rewards for the scouting team. Any number of tools could be used to ensure a fair match between effort, skill and outcomes that are not possible in today’s model of VC; granular voting and sharing of tokens is how DAOs operate to get anything done.

VC3 has built a decentralized investment network for existing investors, and Molecule has developed a ‘IP-NFTs’ technology to allow DAOs to not only share rewards but jointly share ownership in IP.

Funders would have transparent access to projects and what they are developed to achieve, and be able to see clearly the impact that their investment is having. Crucially, funders could move from purely financial donors to active investors. They would receive  tokens in return for their gifts that may in turn have financial value a reframing that is an evolution of venture philanthropy,

A Brain Capital DAO - a new model of capitalism?

Creating and managing a brain capital DAO would both articulate a new objective for our society - building up brain capital - but also introduce a new way to do it, through a shared ownership and management structure. It would operate as an impact marketplace where projects were funded based on their impacts they were feasibly generating, and held to account for them. This novel operating model would recognize the power of competition and leverages Adam Smith’s invisible hand but - one hopes - share the rewards more broadly than in today’s winner-take-all society.

Next steps for achieving this would be the building of a community of people interested in the topic, which would itself self-organize into a DAO and develop the mission, objectives, and processes most suitable for the members. Folks like me can have opinions and voices and catalyse movement, but it needs a network of aligned experts, investors and innovators to share and build on the vision.

To this end, a network of interested people is coming together to explore opportunities for establishing a Brain Capital DAO. Whilst many of us are based in Melbourne, Australia, we are all part of global networks. If you’re interested, follow this newsletter for more updates and shoot me an email with your reactions and ideas.

Thanks to Iain Butterworth for prompting this discussion and edits to the draft.