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== Background == The most important attribute for a DAO’s long term stability is its values. Values are what determine a DAO's membership, which are far more affecting in a decentralized group than a centralized group. A centralized group’s members are less independent and more subject to the dictates of leadership, due to the hierarchy of control. A decentralized group, especially one which is ''open'' (meaning no barriers to entry or exit), must embody the values of its membership, or else its members will quit and the group will collapse. The values of a group ''are'' its goals. The goals of a group tell you where it’s going. A decentralized group is necessarily less nimble and more plodding than a centralized group. A centralized group can change course as soon as its leader decides. A decentralized group must convince a majority of its members before any major changes are made. And that majority must be near unanimity, lest the group lose members through conflict, which weakens it significantly because of the [[DAO#Openness|network effect]]. Therefore by understanding the values of a DAO we have a strong chance to predict its behavior, farther into the future than the centralized corporate analogs. There is an inherent tension in the idea of a DAO. On one hand, a DAO is necessarily decentralized. A DAO must be decentralized in the ownership or control of the power of the group. This allows it to incorporate diverse perspectives and talent and knowledge, to incorporate [[DAO#Weighted Democracy|information at the edge]]. On the other hand, to remain coherent—to stay organized—these diverse individuals must be united in a common purpose, a common goal. Members must share a common set of values. A DAO's values are ''not'' diverse. The members must agree on a set of acceptable behaviors and standards. A DAO's protocols must be centralized. The protocols around which the DAO is centralized will be extremely explicit, rigorous, formal. In fact, these rules are encoded in programmed smart contracts. The regulation and execution of the protocols are automated in implacable programs. [[Code is law]]. The reason these protocols must be so crystalized in a [[DAO#Primary DAOs|primary DAO]] is that justice for a group of pseudonymous participants from diverse backgrounds requires extreme objectivity. Under the circumstance that we don't have intimate knowledge of members' backgrounds, fairness requires that everyone's actions must be judged equally regardless of their idiosyncratic motivations. The primary<ref>A secondary problem with making the letter of the law the ultimate dictate of control is that it necessarily ignores the motivations of the actor, which are crucial for determining any fitting reward or punishment. A tertiary problem is that it ignores the background of the individual in the explanation of their motivations.</ref> problem with making the protocols perfectly rigorous is the inevitable potential to [[wikipedia:Gaming_the_system|game the rules]]. Experience with various repeated games from game theory, which culminate in the [[wikipedia:Folk_theorem_(game_theory)|Folk Theorems]], suggests that whenever a group makes formal rules for acceptable behavior, an adversary can follow those rules to the letter and profit at the expense of the majority. When rules are rigid, players will push the limits of those rules. Competition within the organization then saps the power it gains from cooperation. Therefore the letter of the law, though necessary, is not the ideal protocol to follow. Following [[wikipedia:Letter_and_spirit_of_the_law|the spirit of the law]] is more important for maintaining long-term cooperation in a primary DAO. Thus [[DAO governance]] cannot merely consist of a static set of programmed rules. There must be an evolutionary structure of [[governance]] that allows review of past behaviors, to reward behaviors which help the DAO and punish behaviors which harm the DAO. The very existence of the ability to reward and punish serves to motivate healthy, collaborative behavior and prevent harm to the DAO. "Harm to the DAO" is often a subjective judgement which requires referencing the values of the DAO. To know whether something constitutes harm requires us to know what is bad, which requires us to know what is good, which requires us to know what we value. Thus a DAO must express their values so its members can achieve harmony. However, if they formally express their values, that is equivalent to explicitly setting the rules, which again promotes competition and allows adversaries to game the system. Therefore, to maintain long-term stability, harmony, and collaboration, a DAO needs to have a common set of ''informal'' values, values which are not capable of being made rigorously explicit, values which transcend any formal rules. This is why we make reference to the philosophical concept of [[wikipedia:Transcendence_(philosophy)|transcendence]]. There are many examples of transcendent values used by different groups throughout history. The [[wikipedia:Neoplatonism|Neoplatonists]] singled out Goodness, Beauty, & Truth, which informed early Christian thinking. Stoics valued Wisdom, Courage, Temperance, and Justice, similar to the Islamic values of Submission, Charity, Temperance, and Justice, which are values shared by many clan-based societies throughout the world. Buddhists identify the [[wikipedia:Threefold_Training|Threefold Training]] of higher virtue, mind, and wisdom. In nearly every religion there is a fundamental assumption that the highest representation of the good, or God, transcends the formal knowledge of human categories of understanding.
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