Ethereum ushered in one of the great innovations in decentralized governance with the creation of DAOs. Decentralization encourages models that emphasize networks over hierarchy to organize human coordination, but that requires effective cooperation among individuals.
In reading Laura Shin’s “Cryptopians: Idealism, Greed, Lies, and the Making of the First Big Cryptocurrency Craze,” I was surprised at the amount of dysfunction between the Ethereum co-founders and the Ethereum Foundation. Here are 5 key lessons every leader should learn from the mismanagement at Ethereum:
Good tech < good people
I’ve spent an entire career in technology consulting, starting as a software engineer and eventually moving into management. I came from a school of thought that people should get out of the way so engineers can solve problems. And I can tell you from experience, this is a naïve point of view.
Technology is consistent, but people aren’t. If a machine is programmed to do something, it will do it without the messiness of emotion, bias, or irrationality. Until code starts writing itself, it’s humans who have to coordinate to create technology, which makes people the most important part of the equation.
We can’t take the emotion and bias out of people, so we have to learn how to manage despite our collective fallibility. The central players at Ethereum did a terrible job at this. Gavin Wood (co-founder of Ethereum) thirsted for money and recognition because he grew up with neither. Ming Chan’s (Executive Director of the Ethereum Foundation) sabotaging behavior likely came from a place of deep insecurity. Charles Hoskinson’s (co-founder and CEO of Ethereum) mischaracterization of his academic past is hard to explain. These are three examples of the messy yet fascinating code of human behavior.
Solving the human coordination problem is much more challenging than engineering a technology solution, precisely because it is more unpredictable. Decentralized governance models can establish unique ways of working together to help solve this problem. It’s ironic that Ethereum — the platform enabling decentralized coordination — was built by a group of people that struggled to work together.
I often tell my staff the key to good teamwork is aligning motivations. That means everyone on a team needs to find their role and have a shared understanding of the goals in front of them. In Ethereum’s early days, motivations were anything but aligned. Most striking was the rift among the founders between the “devs”, who wanted Ethereum to be run as a nonprofit foundation, and the and “business” people who wanted to set up a for-profit entity.
When motivations aren’t aligned, it is hard to discern the agenda-driving behavior. I sat in the audience at the 2018 Consensus conference in New York and listened to Joe Lubin wax poetic about the ethos of web3 and his desire to see power taken out of the hands of corporations and given back to the people. To find out he wanted to set up Ethereum as a for-profit company calls into question his true motivations behind closed doors.
Despite the unpredictability of human behavior, one thing remains remarkably consistent — greed will often overpower other motivations in individuals. We shouldn’t be surprised that greed abounds in crypto because the whole idea from the very beginning was to create a decentralized trustless system based on economic incentives.
In my opinion, the most egregious example of greed in “Cryptopians” was the actions by Andrey Ternovskiy (DAO token whale and key figure in the DAO hack) during the DAO attack. When he concluded a hard fork was going to happen, he posed as the potential hacker to keep the DAO token price low so he could buy them cheaply and watch them rise after the hard fork. He also sued the White Hat Group (a team working to make investors whole after the DAO attack) to try and gain additional value from ETC once it was created after the hard fork.
Outside Ethereum, we see plenty of examples of greed at work. Justin Sun, the ICO crazy, rug pull schemes, and old-fashioned smart contract hacks. Although it seems like bashing the SEC is a national pastime for crypto natives, and the SEC has done themselves no favors with their lack of regulatory clarity, it is hard to argue with their desire to protect against the blind greed inherent in a system built on financial incentives.
Great Founder != Great Manager
We idolize founders because they turn their brilliant ideas into successful ventures, but we’d be wise not to equate great founders with great managers. In reading “Cryptopians,” it is clear Vitalik Buterin, someone I greatly respect for his unique vision, was an ineffective manager. Time and time again, he avoided tough conversations with Ming Chan (Executive Director of the Ethereum Foundation and controversial figure for her unstable behavior) and others, and he shied away from administrative accountabilities that are often not fun but nevertheless very important as a manager.
Why? Vitalik lacked maturity, and he’d probably be the first to admit it. Unless you’ve had mentorship and experience with things like workplace empathy, servant leadership, and emotional intelligence, you’ll often stumble through workplace conflict. And Vitalik did, with damaging results. Several people in his orbit manipulated him because they knew how much he avoided conflict. “Cryptopians” gives several examples of Ming Chan having 1–1s to shape Vitalik’s views simply because he has a hard time saying no to her.
//Attention is addictive
If social media taught us anything, it is the lengths to which people will go to get noticed. Attention means power, and power is addictive. Trying to understand all the bad behavior exhibited by key Ethereum figures like Ming Chan, Charles Hoskinson, Joe Lubin, Gavin Wood, and many others, one possible explanation is they simply got caught up in the hype.
Think about the massive amount of interest and attention these key Ethereum players were getting. Flights around the world, speaking events, wallets full of exploding wealth — these are all the hallmarks of fame. Hollywood gives us a good blueprint of what fame can do to otherwise rational people. It skews reality and increases the stakes. Is it any wonder there are so many examples of bad behavior in Laura Shin’s book?
Most of the time, you can build a solid business with a mediocre idea and great execution. The case of Ethereum was the opposite — the founders had a great idea with lackluster execution. In many ways, Ethereum succeeded in spite of the leadership efforts of the founding team. While it would be easy to point to Ethereum’s first-mover advantage and simple chance to explain this juxtaposition, perhaps Ethereum was decentralized enough to let the broader ecosystem drive its success and limit the impact of the founders’ dysfunction. Chalk one up for decentralization!