The idea of autonomous corporations has become increasingly interesting to me lately, especially given the recent news about Reddit and the on-demand labor issues. At first, ‘autonomous corporations’ sounds scary and something straight out of a science fiction novel. If you stick with me though, I promise to explain how this isn’t such a far-fetched idea and how it might work.

What is an autonomous corporation?

An autonomous corporation is exactly what it sounds like: it is a corporation that functions entirely on its own. Instead of having human beings decide how to allocate capital in an organization, a piece of software is created to do this. The software would have rules in place for deciding things that a traditional corporation usually decides, like how much to pay employees for work, how much to charge for the service/product being offered, and what future features should be worked on.

A thought experiment

Let’s go through a thought experiment together since I believe the best way to wrap your mind around this concept is through an example. Let’s take Uber. It is a widely known, used, and understood business. Imagine that when you woke up tomorrow Uber didn’t have a board of directors, a CEO, or any full-time employees. What would remain? You might want to say “nothing”! But think about it, even if you removed every person from the company, you would still be able to use the actual service. Driver’s would still be able to log into the Uber app and find passengers, and passengers would still be able to request a driver. The actual product would still be there, just without any individual or group of people controlling it.

Without anyone building new features, fixing existing bugs, answering support questions, and recruiting new drivers/users, however, the service would gradually get worse. But what if you could create a software program that could address these problems? The program wouldn’t actually have to do each task itself, it could just hire people to do the tasks, maybe even the same people we just got rid of! It could hire developers to create new features and fix bugs, it could hire people to respond to customer support request emails, and with a full product and service, users and drivers would happily join. It’s also not a huge leap to envision software that had rules in place where it could decide who to pay and for what tasks.

Movements making this possible

Alright, now that we have a basic understanding of what an autonomous corporation is, you still might be wondering, “ok, even if I do believe this is possible, it still sounds like something 50–100 years away”. However, there are a few movements currently happening that are making autonomous corporations a realistic possibility in the near future.

The Rise of the On-Demand Economy

Having just talked about Uber, I don’t think I have to explain this one too much. Almost everyone by now has used a service where you pull out your phone, tap a button and something comes to you (car, food, cleaning, mechanic, etc). These types of services are creating an on-demand workforce, people who are now able to pull out their mobile phone and find work. This workforce is the exact kind needed to fulfill the jobs created by autonomous corporations.

Open Source’s Popularity

More and more of the world’s software is being created for free. Popular examples are Linux and Android but there are many, many more that help run the applications you use everyday. It’s also becoming much more popular to contribute to open source software projects. In the past, software that was written was done behind closed doors in large organizations. But now, thanks to git (also open source) and companies like Github, it’s easy to create and contribute to any open source project. What this means for autonomous corporations is that the tools to build software without a central authority are already in place.

Peer-to-Peer Fundraising

By now you have probably heard of, if not participated in, a peer-to-peer fundraising platform. The explosion of these platforms has created a new funding model. You no longer have to seek money from the wealthiest of the population, instead, you can raise money from anyone. This is changing the way companies and projects get started. Instead of having to build a product and then gauge whether or not people are going to want it, you can now gauge the demand before you build anything. Peer-to-peer fundraising also helps eliminate the risk of starting something where founders don’t receive a lot of the benefit.

Bitcoin/The Blockchain

Bitcoin, and more specifically the Blockchain, is the final piece of the puzzle enabling autonomous corporations. There no longer needs to be a central authority deciding how to allocate resources. Software can now be written to automatically allocate resources. Bitcoin enables this to happen in a currency-like fashion but the Blockchain allows it to happen in any number of ways. Projects like Ethereum, are trying to take this a step further and develop application layers that are completely de-centralized. Bitcoin can provide a platform for payments to the workers who perform service tasks, as well as those that develop the software to keep the service running.

How it all comes together

Hopefully now you better understand how something like an autonomous corporation could come about. There is an available workforce to perform requested tasks from a service. The tools needed to build software without a centralized authority are in place. The ability to make money on projects that have no central beneficiary and avoid the Tragedy of the Commons also exists. And finally, the means to allocate capital and financially incentivize workers through software has been created.

What does this mean for the future?

At this point you might start believing that something like autonomous corporations can actually exist. But so what? What difference will it make if a few current companies get replaced by automatic ones? Won’t everything stay pretty much the same? What if we’re actually worse off with software making the decisions?

We are already seeing the beginnings of autonomous corporations. Recently, Reddit has come under fire from its users sparking a debate about how much control users should have over product decisions. You should now be able to see how a platform like Reddit could become an autonomous corporation. Not only could you provide payment to the developers who helped maintain the site, but you could also pay users for the content that they provide, as well as pay the moderators that oversee the content. This would have the effect of not only creating a decentralized platform but also incentivize users to provide more content, which is the heart of the service. Following the thought experiment earlier, every current on-demand service could be transferred into an autonomous corporation as well.

But why are autonomous corporations potentially better than what currently exists? Autonomous corporations have another added benefit of not having to maximize profits. Sure, the software written would want to be created in such a way that the service didn’t lose money but it could be created in a way that it doesn’t need to maximize profits. This would have the potential to significantly drive down costs. And because it would be easy to clone a corporation made entirely of software, competition would be high, further dropping the costs of the product/services helping to bring about more abundance to the economy. They not only have the potential to significantly lower costs of goods and services, but they also have the ability to create the ultimate middle-class society: a society where the middle class (aka the workers/producers) more or less eliminate the upper class (aka the managers).

Finally, using a protocol like Bitcoin would enable these services/products to be available worldwide, instantly. The restrictions that you currently have for services that are only allowed in certain countries would be eliminated. Further, you wouldn’t have to worry about many of the labor issues with hiring people from all over the world like work visas, payroll, etc. If the service or product could be purchased using one of these decentralized payment platforms, even more people could be potential customers, regardless of whether or not they have a bank account.

So although autonomous corporations at first sound like science fiction, if you break down everything that is happening in the world right now they all of a sudden don’t seem like such a fantasy and actually seem very practical.

I am really fascinated in exploring these ideas further, so if this topic is of any interest to you as well feel free to contact me!