The Things We Forgot

Speaker 1

James Wigginton practices law at Downey Brand LLP in Sacramento, California. He advises clients on a wide variety of matters, including corporate and cooperative business structures. federal securities law, acquisitions and commercial transactions. In twenty twenty one, James dove into Web three by working on projects to lead Dow governed buyouts of professional sports teams and to create Dow friendly business entities in collaboration with a Northern California Native American tribe. James previously worked at Sullivan and Cromwell LLP and the United States Court of International Trade. He graduated with a BA in international relations from Brigham Young University in 2009. And a Master’s in Philosophy in International Studies from the University of Cambridge in 2011 and a JD from Stanford Law School in 2013. James Wiginton.

James Wigginton

Hello, good uh good afternoon, good almost evening, everybody. Again, my name is James Wigginton. I’m really glad to be here and to see so many friendly faces. And there are definitely some pros and cons. To speaking close to last at the end of the conference. The con is that I’m one of the last remaining hurdles between you and dinner, which is always a problem. One of the pros is that my remarks can synthesize and incorporate some of the concepts that others have discussed today. And I’ve really appreciated all the remarks today. They’ve been wonderful.

James Wigginton

Tom Bell spoke about Indian tribes. I’m going to speak a little bit about tribes today. Ali Isom spoke about human connection. I think human connection is a really important part of what I have to say. And Sarah Wiley, you spoke briefly about the frustration of the current regulatory environment for decentralized finance. I’m a securities lawyer. I feel your pain.

James Wigginton

My talk today is called The Things We Forgot, or how digital communities can unload the baggage of modernity and keep the good stuff. And let me just get right down to the thesis. As we seek to deploy the tools of Web3, blockchain, crypto, decentralized finance, to create a better world, we may be kind of intimidated about how we are to do that. Decentralization can be hard. But I want to emphasize today that we are not alone. Much of the information that we need to succeed was pioneered by our ancestors. And we’re all going to be better off if we study, implement, and honor their contributions.

James Wigginton

So let’s go ahead and get started with the bad news. We don’t really have to talk too much about the bad news because I feel like a lot of prior speakers have already talked about the bad news. The bad news is that In order to build a better world, we need good examples, and we don’t have very many of them out there. It seems in business, there’s a widening gap between the haves and the have-nots, especially in the last forty years. We’ve heard people talk about the great resignation. Employers don’t seem to understand what is important to their employees. As you can see up in this graph, I think this was done by Bain Management, Bain Consulting. Employees are looking not just for money, they’re looking for meaning, they’re looking to be valued, they’re looking for trust, and they’re not getting those relationships at work. It’s a big problem.

James Wigginton

We also have a disconnected polity. We see an erosion of trust, and we’ve talked about that today in public discourse, which perversely seems to be mitigated only when we’re in the middle of an existential crisis. If you’ve been looking at the news on the right and on the left, they look a lot more similar about the war in Ukraine than you might see for topics about domestic policy. So we don’t have very many good examples to figure out what decentralization can mean for us. It can be disheartening, especially for those of us who have been taught to have hope for a better world.

James Wigginton

And I think my thoughts can be summarized in a book that I recently read called The Dawn of Everything by David Graeber and David Wengro. By raise of hands, how many of you have seen this book or read it? Thank you, Carl Youngblood. I hope that, oh, Austin, Craig, thank you very much. I think more of you, if you can get your hands on this book, should read it. It’s very thick, but it’s very good. Here’s a quote from it. If something did go terribly wrong in human history, and given the current state of the world, it’s hard to deny that something did. then perhaps it began to go wrong precisely when people started losing the freedom to imagine and enact other forms of social existence. I think that’s really important. Sometimes in this world where everything seems to be going wrong, it’s hard to imagine anything better than what we’ve got. But I think part of the reason that we’re here today is because Web3 gives us some hope that maybe we can loosen the shackles. maybe we can begin to act new forms of social existence on this wide open digital frontier.

James Wigginton

So here is a description of a DAO straight from Ethereum’s website. And it compares a DAO to a nondescript traditional organization. So here you have a DAO which is usually flat and fully democratized versus a traditional organization which is usually hierarchical. And then you’ve got a DAO which has activity that’s transparent and fully public. And then you have the big bad traditional organization where activity is typically private and limited to the public. So, I think in the Ethereum conception DAOs, they really can create a new and better world where we all interact better together.

James Wigginton

I think, however, that we don’t always achieve the ideal. As we try to use new tools to implement new forms of governance, there are going to be bumps in the road. And we’ve seen some high-profile problems, right? Constitution DAO was a big one. It struggled to return funds to its members after it failed to buy a copy of the Constitution at Sephibes. Olympus Dow was accused of being a Ponzi scheme. And the co founder of SushiSwap said, and I quote, SushiSwap was formed from a wild spectrum of people worldwide without relation between all parties, the vision and direction being different for each group. it was never fully decided internally which was a mistake. Decentralization can be hard.

James Wigginton

And this brings me to a key takeaway in my talk today, which is that History and anthropology can be a fountain of ideas about how to make decentralization work. and to amplify our efforts using technology. People have been thinking about the same problems that we’re talking about today for literally thousands of years. And I like what Graeber and Wingro say, they say that the answers to our problems are often unexpected. They suggest that the course of human history may be less set in stone and more full of playful possibilities than we tend to assume. So again, history and anthropology can be a wellspring of ideas that we can apply to the decentralized world.

James Wigginton

So today, I’m going to talk about two lessons from the past. We’re going to focus on two lessons that could help us make decentralization work. One is the cooperative, and another is consensus building. And we’re going to go ahead and start with the cooperatives first.

James Wigginton

A cooperative, according to a Google definition, is a farm business or other organization which is owned and run jointly by its members who share the profits or benefits. I’m going to do something a little unusual. I’m going to ask you to shout out an answer. Who can tell me of a famous cooperative? Has anybody ever heard of a cooperative that you know that’s a household name? Go it. REI, fantastic. What else? I’m sorry, I have a bad ear. ZCMI, thank you. We’re going to talk about that. Good job.

James Wigginton

So, cooperatives are not just for hippies. Okay, sometimes we think that cooperatives are like the corner grocery store. where, you know, nobody nobody shaves, um, you know, they’re buying organic produce. Uh that’s not really the Realm of that’s not the sole realm of cooperatives, right? I come from Sacramento. Sacramento is the global headquarters for blue diamond almonds. How many of you have had a blue diamond almond before? That was produced by a producer co-op. You talked about REI. How many of you have shopped at REI? A lot of us have. That’s a consumer co-op. There are 20 million members. It’s one of the largest in the United States. How many of you have money in a credit union? There are a few of us out there. Credit unions are cooperatives. Ace Hardware is a cooperative. Sunkissed Oranges is a cooperative. There are many cooperatives out there, and they fly under the radar.

James Wigginton

Now one of you or some of you mentioned ZCMI. Co ops have a very long history in Utah. In the early days, in eighteen sixty eight, vendors from outside of Utah were charging exorbitant prices. To members of the church who lived in the area. And Brigham Young founded the Zion’s Cooperative Mercantile Institution as a response to provide affordable goods to people. And over time, the cooperatives diminished in prominence, and Hume Nibley in one of his books Well, rather, one of his essays called We Will Weep for Zion said, During this period, astute businessmen, this is in the late 1800s, astute businessmen gradually. gained control of the cooperatives and replaced cooperative methods of retailing with methods closer to pure private enterprise. In the process, these news owners completely changed the character of the companies, though they often kept the name. So cooperatives started strong in Utah, and they’ve gradually disappeared over time.

James Wigginton

So we’ve established that cooperatives can facilitate a kinder, gentler approach to business, but how? I think it’s important to start with the alternative. And the alternative is a corporation or an LLC. They’re basically the same thing. This is what I do all day, every day as a corporate and securities attorney. According to the Milton Friedman School of Thought, a corporation is really designed to maximize and extract profits. In general, corporations are owned by shareholders who may or may not have any involvement whatsoever in running the business or in consuming the products of the business. and really their sole interest is in receiving a return in the form of a dividend or capital gains. The profit in a corporation flows from the consumer to the top. It’s a straight line.

James Wigginton

A cooperative is different. In a cooperative, the owners are not passive shareholders. They are the people who produce or consume the product. So instead of profits flowing upwards to the shareholders, they flow in a circle because the consumer and the owner are the same person. It takes away, to a degree, the incentive to gouge prices, right? It takes away the incentive to misuse data. Because if you cheat the customer or the worker, you’re only cheating yourself. Again, it combines the profit ownership with the profit generation into a circle.

James Wigginton

And so, it seems like cooperatives could be a perfect structure for DAOs. They’re democratic, they prize distributed ownership, and for anyone worried about the Supreme Court Howey test, how many of you know the Howey test? If you haven’t heard of the Howey task, ask your neighbor. Cooperative memberships are not securities. So you can avoid a lot of the problems of security regulation if you form your entity as a cooperative.

James Wigginton

So the question is, why are there not more of them? If they’re such a miracle entity, why are there not more cooperatives? And this is my personal view. It’s because law schools and business schools don’t talk about them. And why don’t they talk about cooperatives? Well, they don’t talk about cooperatives because cooperatives are terrible at amassing wealth. You’re not going to find a sponsored chair at a law school sponsored by a cooperative because the cooperatives just don’t concentrate wealth. They distribute them to their members. And the people with wealth write the agenda. Just so you know, these are some DAO cooperatives currently in existence, but there aren’t many. Just a second here.

James Wigginton

So, okay, question for you. How many of you have heard of Buy the Broncos? Have any of you heard of Buy the Broncos? I see a few hands. All right, I’ll get into this just a little bit.

James Wigginton

So I am currently working On a project to buy a stake in the Denver Broncos that would be owned by fans in the form of a cooperative. And to put it mildly, there have been very strong responses on both sides. Some people have been very excited and supportive, and some people have not. My favorite headline was, A group of crypto bros wants to buy the Denver Broncos, an idiotic idea. That was my favorite.

James Wigginton

So the benefit of turning a sports team potentially into an entity partially owned by a cooperative is greater engagement. greater profits for NFL owners, greater opportunities for people who go to games to accrue benefits from their fandom. And it would be an opportunity for the NFL to reach a new demographic, a crypto demographic, which in our experience is 30% outside of the United States, and 50% of our following speaks English as a second language. So projects like this, where cooperative ownership is embedded in the business model, I believe could help provide the legal and social framework. For decentralization to work at scale, we need bold projects where we are implementing really old ideas but in new forms.

James Wigginton

All right, let’s move on to the second idea. This will be our final lesson from our ancestors today, which is consensus building. It’s a way of making group decisions. The current default rule, if you’ve ever run a business or been part of, participated in voting for any measure at the state or federal level is majority rules. The default rule in the United States is majority rules. And this is actually a snippet from the Delaware Corporate Code, where majority voting is ensconced in the law. It’s what we’re used to. It’s what we know. We know that if you need to make a group decision, you can always reach an efficient outcome by a vote.

James Wigginton

Now, how many of you have been on the winning side of a vote before? Okay? How many of you have been on the losing side of a vote before? How does that feel? It doesn’t feel very good to be on the losing side of a vote, but voting is efficient. The problem is that voting and majority rules can produce unstable outcomes because a large portion of people involved in a vote may not accept the vote. Over the last six to eight years, we’ve heard a lot of not my president from both sides, right? A disenchanted minority can make a decision unstable.

James Wigginton

There is an alternative to majority rules voting, and that is consensus building. Cultures around the world have been doing this for thousands of years. Here you see a picture of a Buddhist Sangha, basically a monastery of Buddhist monks, and you also see a Quaker meeting. Buddhist monks and Quakers have been making decisions through consensus building for a very long time. Consensus building, to be clear, is not unanimity. It’s simply a solution that everyone can support, even if it’s not their first choice.

James Wigginton

You might think this sounds really inefficient. It is slower on the front end than voting. But the Consensus Building Institute at MIT and others have worked on a pattern that people can follow. That allows people to reach a consensus decision in an organized way. And you save a heck of a lot of time on the back end. if you have a stable solution rather than a disenchanted minority. And so what does this have to do with Native American tribes?

James Wigginton

Well, that is what I will do at the last minute of my talk. I’m currently working on another project, not just by the Broncos, but working with a Native American tribe called the Wilton Rancheria Band of Miwok Indians. This is kind of similar. To the Catawba project that Tom Bell discussed, but it’s not quite the same. The Native American tribe is inviting Web3, or is exploring the possibility of inviting Web3, to collaborate on a law that is specific to DAOs. And they are They are characterizing it as an open source law project, where Web3 would help to write the law for DAOs, either in the corporate or the cooperative form. They would come to a consensus on how to implement those changes, and then the tribal council would pass the law. I hope that many of us can participate in that, and I see my time is done.

James Wigginton

So I’ll just come back to where I started. We sometimes feel stuck, but we’re not. We are not stuck. We dishonor our ancestors when we dismiss their contributions. We need to study them. And we talked about two of those examples today in cooperatives and consensus building. And I hope that we can choose new social structures from the wellspring of the past, because that is, after all, what makes us human. Thanks.