Picture this future scenario. It’s a busy Monday morning, the streets are buzzing and the robo-taxi you called has barely found some space for a temporary stop. Wow it’s real: no driver, as your friend Mark told you. You jump in the back seat and shout your destination out loud. The taxi speeds up slowly and you are on your way. Just 15 minutes later you hop off, you check your phone: payment confirmed, all good. Then a message from Mark: “Ride complete, thanks for choosing us! :) See you soon buddy!”. Mark does not actually own the robo-taxi, but he receives a small payment for each ride. You don’t remember exactly, but Mark said something about making a loan to the robo-taxi owning itself. And what was the other bit…? Oh yea, just by loaning a percentage of the full taxi cost he gets a say into where the taxi should roam and even a 10% discount on a ride! Now you are too busy, but you promise yourself to look more into this. As a user yourself, investing in robo-taxis sounds like a no-brainer.
Your future-self just interacted with a Robotic DAO. In this article I want to cover 3 simple points: Introduce the novel concept of Robotic DAOs, why they are interesting and what is missing to actually see one live.
What is a Robotic DAO?
A robotic DAO is a Decentralised Autonomous Organisation which funds, oversees and profits from a fleet of revenue generating autonomous assets. The assets are physical entities, often robots, which after an initial loan become economically self-sufficient and can repay the initial loan plus distributing extra profits to the original funders. Operational autonomy is not a strict requirement, but autonomous assets need less resources to operate and have a more predictable behaviour, which in turn make them more attractive as an investment.
Let’s keep it concrete and examine an hypothetical scenario with robo-taxis, from original funding to daily operations. A DAO is established and a target asset class is decided: robo-taxis. The economic behaviour of the taxi is set in advance: location of the fleet, pricing, hours of operations, interests on loan repayment and so on. Crowdsourced decision making is hard, but robo-taxis behaviour is simple enough that consensus is achieved quickly: the first fleet will be deployed in San Francisco, charging the average market rate and operating 20hrs with a night maintenance session. The DAO strikes a deal with a robo-taxi manufacturer for 1000 taxis, with a heavy discount due to the large order. Similar deals are secured with a company orchestrating and servicing the taxis, a software firm that will manage the booking systems, insurance companies and law firms. All agreements are provisional to a successful fundraiser. The opportune licences and authorizations are agreed with the city council. It’s time to fundraise and the news is all around the web. A community owned fleet of taxis is going to be deployed and contributions of any size are accepted, simply owning a share of a robo-taxi is enough to obtain some perks.
Few months pass by, the fundraiser is oversubscribed, and a year later the first taxi is operational. Each taxi operates as an autonomous entity, a SubDAO, collecting revenues from rides and buying services to maintain itself. Sophisticated SubDAOs will be created with a budget for marketing and premium navigation software, but the first SubDAOs are very simple: wait around the busiest city streets to find customers and use the default manufacturer navigation. The ride experience is indistinguishable for any other private robo-taxi service, but the profit from the rides is distributed back to the original funders through the DAO. Actually a small percentage is accumulated in the asset treasury wallet, to shield the asset from unexpected charges and eventually upgrade it for increased profitability.
Robotic DAO Perks and Specs
Some thoughts about what makes Robotic DAOs interesting.
Robotics DAOs reward communities twice: they provide financial returns to the funders, but more importantly offer a useful service to the overall society. The service is created bottom-up and is tailored to the needs of the majority.
Robotics DAOs redistribute the benefits of automation to the society at large, as opposed to few large companies: the robots are self-owning entities economically programmed with the ethics established by the DAO voters. DAOs profits can be reinvested into the most profitable and effective robots, in a self-fulfilling loop.
Thanks to crowdfunding, DAOs can leverage economies of scale which others cannot and take bold risks which individual companies would struggle to justify. Some DAOs will fail, leaving the investors with nothing. But the failure will not been due to fraud or corruption; society at large has tested an autonomous entity on the free market and it did not work. A new learning about what will work next.
Robotic DAOs have a powerful built-in incentive mechanism to use the service and marketing given by the community, which will give a competitive edge versus any privately owned automation company. There is a very direct sense of ownership in buying a fraction of a robo-taxi and seeing a small microtransaction hit your wallet when a friend of yours rides it.
Robotic DAO assets need to be as simple as possible so that their behaviour is predictable and easy to automate. At the same time good robotic DAO assets are relatively expensive, to justify the DAO overhead. Candidates are robo-taxis, public transports, vending machines and automated shops, mobile robots and robot manipulators, humanoid-robots, smart grids and real-estate.
Finally, Robotic DAOs will de facto become a financial asset class on its own. Contrary to other financial instruments, this would be a solid class backed by physical entities, with direct and measurable benefits for the overall society. Any successful Robotic DAOs would contribute to increasing the global productivity thanks to automation, but without increasing inequality and in fact raising the living standard of anybody benefiting from the robot services.
How to De-Risk a Robotic DAO and What’s Missing
Robotics DAOs need to mitigate 5 main risk areas: Market, Operations, Product, Tech, and Legal.
Market: This is the easiest one, make sure to provide services that are in demand. To be on the safe side, target an existing market such as urban car rides.
Operations: Robotic DAO have decentralised decision making and as such are inherently less agile and efficient than private companies owning fleets of robots. The advantage coming from the community involvement will eventually fade if the unit economics are not competitive. As such, Robotic DAOs need to target highly automated and predictable assets which require little decision making. Dealing with daily operations such as complaints and user feedback should be highly automated too.
Product: Choose an asset which will provide solid recurring revenue overtime and with long obsolescence time, both in terms of functionalities and appeal. Easier said than done, since most robotics assets are still iterating in search of the best designs.
Regarding market, operations and products, vending machines appear to be an established and battle-tested asset that satisfy the above criterias.
Tech: Keep the overhead from decentralised decision making at minimum. Current DAOs are still iterating on fair voting mechanisms, architecture best practices and scalability.
Legal: Tricky. The purest form of Robotic DAO would be self-owning SubDAO assets being allowed to enter into legal agreements, with the DAO participants able to loan to SubDAO or sell the loans rights to other participants. Having SubDAO behaviour formalised in code makes the assets attractive, since they are independent from any third party, similarly to the status of Bitcoin in the cryptocurrency space. An easier formulation would be to have the DAO own the assets instead, but this could in principle trigger liabilities to the DAO contributors in case of assets bankruptcy. In any case, the whole area around DAOs owning assets and entering into legal contracts is still uncharted.
Robotics DAOs offer an alternative to privately or government owned automation at scale, but to be feasible and competitive they will require advancements in asset autonomy and DAOs scalability. In the near term, hybrid structures with LLCs behind DAOs and SubDAOs and/or partially centralised decision making offer an intriguing route to experiment with Robotics DAOs.
Many of the concepts introduced are early and still hard to articulate, I hope it made some sense to you! Would you participate in a Robotic DAO? Would you build one? Let me know in the comments or reach out privately!