AirBnB was saved by a box of cereal.
I’m sure you are familiar with AirBnB, which in the course of a decade went from being a ridiculous idea of couch-sharing to becoming a company with more room listings than the top 5 hotel companies combined. But did you know that a box of cereal was the difference between success and early failure? The story goes like this…
Brian Chesky, Joe Gebbia, and Nathan Blecharczyh had run out of money while starting AirBnB and had the great idea to sell 2008 US Election themed novelty cereal (Obama O’s and Cap’n McCains). The stunt raised $30,000, which sustained them long enough to pitch their idea to famed Y-Combinator founder Paul Graham. Paul was not impressed with their idea and the AirBnB idea looked to be dead in the water. While leaving the Y-Combinator pitch, the AirBnB founders presented Paul Graham with a box of their novelty cereal and, realizing that someone who could sell cereal for $40 might also be able to sell the public on a crazy house-renting idea, Paul accepted AirBnB into the incubator program. The rest is house-sharing history.
History could have easily regulated AirBnB to the trash heap of ideas that never took off. In that alternative history, who knows how long it takes for humans to embrace house-sharing. While AirBnB ended up on the right side of success, its origin story points out two failures of the current way humans foster and promote new ideas:
- All ideas, regardless of whether they are business ideas, government policy ideas or societal ideas, usually need to pass through a small group of gatekeepers who have the ability to decide whether an idea can move forward. In the case of AirBnB, these gatekeepers were VCs and incubator programs.
- These gatekeepers are highly likely to suffer from groupthink and stereotyping, resulting in a narrow range of ideas that are promoted and resourced. In the case of AirBnB, the audience of their pitches were almost exclusively wealthy male investors, geographically located in San Francisco and New York. Tech ideas that fall outside the groupthink of those individuals are unlikely to be successful.
What does any of this have to do with DAOs?
As discussed in the previous post, DAOs are a digital organization of people who are aligned around a common goal and focuses on a bottom-up approach to decision-making. DAOs also have the following characteristics:
- Accessibility - Membership in DAOs tend to be accessible to anyone who aligns to the intended goal of the DAO and can meet a minimum threshold of commitment.
- Geographical disbursement - DAOs are online and thus tend to be geographically disbursed, unless the intended goal of the DAO is geographically-based.
- Voting Efficiency - The nature of bottom-up decision-making requires efficiency in voting. DAOs solve this typically thought liquid democracy, a topic for another blog post.
- Voting Legitimacy - Approved proposals are executed automatically at the conclusion of voting, without the need for middlemen who could circumvent the DAOs vote. Vote results are binding.
- Digital Ownership - DAO ownership of digital assets, like NFTs, Intellectual Property, stocks and cryptocurrencies, is possible through tokenization. This results in complete control of the digital asset in the hands of the DAO. More on this in a future blog post.
- Security - Blockchain technology provides security for DAOs, limiting voter fraud and digital asset hacks.
To highlight how DAOs could change the process of funding and executing a new idea, let’s use the AirBnB example. Let’s imagine an alternative history where Y-Combinator passed on AirBnB and the idea died in 2008. Imagine in 2023 the AirBnB founders discovered DAOs and decided that perhaps the time was right for trying the AirBnB idea again. Here’s one way that could work (notice the lack of gatekeepers in this process):
- AirBnB founders build a prototype website and successfully test out the idea on a few friends and family.
- AirBnB founders utilize social media and other online means to identify other people who share in their vision and believe in the idea. The founders identify the resources they will need to execute the vision, including capital funds and talent needs.
- The AirBnB founders launch a DAO, selling a token that provides ownership and control of the AirBnB app (including its code and all digital assets). The AirBnB founders keep a minority of the token supply and an additional amount of tokens are placed in a treasury for the DAO to use for funding operations. At this point the DAO now owns the AirBnB product.
- The DAO votes to authorize continual payment to the founders (or other suitable developers) to continue developing the product, as well as perhaps additional personnel to conduct sales, marketing and legal work. As the organization grows, the DAO operations grow to ensure efficient execution of the vision.
- At some point the product becomes profitable and the DAO’s treasury begins to grow.
There’s a lot of permutations to the above steps, and there are a lot of ways the above steps can go wrong (I’ll address some in future articles), but for now I want to emphasize the importance of DAOs in providing a mechanism for ideas to be executed without gatekeepers and in a way that is accessible to huge portions of the population. This mechanism will be a much more efficient way to organize humans, foster ideas and reward persons based on contribution, merits and risk-tolerance. It is these efficiency gains that will usher humans into the 4th era of human organization and will super-charge the speed and breadth of human progress.
In the next two posts I’ll go deeper into the topics of liquid democracy and tokenization. After that I’ll go deeper into the pitfalls of current DAO structures and how I believe DAOs will evolve to solve some of those pitfalls. Finally, I'll finish up this series with my prediction for what society will look like after DAO-ification.
By Kyle Langham, Director of Data & Analytics @ DFINITY Foundation