Observe

In the context of socio-economic systems, the first step is to understand what is being governed by whom, and how. Even the choice to have "no governance" is a type of governance, it's just informal governance. As you explore you'll find a lot of information. Some will be true and some will be truthy. Knowing the difference is key. Some common resources that can help you figure this out are a white paper, documentation, source code, maps/models, research reports, system data, and community chats. Each of these sources has a perspective on the system, but only by combining multiple perspectives can you start to understand what's really going on. When in doubt go to the source of the data and build up your thinking from first principles.

After doing some research you'll start to understand how things work at a technical level, how people think they could/should/would work at an emotional level, and how people's actions (based on their perceptions and preferences) shape the system's fundamentals in a reflexive loop. If it seems like incentives are actually aligned, there's a common ground of knowledge, and power structures are transparent - then you might want to engage in Computer-Aided Governance. If not, however, be warned: there be dragons.

Concepts

Facts vs Opinions

Socio-economic systems, being made up of both people and resources, have both subjective and objective elements to them. Both are valuable, but they're very different. Facts are true regardless of whether or not you believe in them, but opinions are only relevant as long as people believe in them. This sounds simple, but it's not. People will often state opinions with such confidence and conviction that they feel like facts. People will also question facts to better understand them within context, which can make them feel opinionated. This can create cognitive dissonance. While the dichotomy between logic and emotion is unlikely to be resolved anytime soon, knowing the difference between facts and opinions can help establish common ground. If you're arguing about which direction to go, it helps to at least be looking at the same map.

Stakeholder Analysis

A stakeholder is an individual, group, or organization, who may affect, be affected by, or perceive itself to be affected by a decision, activity, or outcome of a project. This often focuses on financial stakeholders who directly impact or interact with an organization in an economic way, but it doesn't have to. Stakeholder analysis is a process to understand who impacts decision making in a system as well as who would be affected by a decision. In other words, who holds a stake in the outcome?

Whenever performing stakeholder analysis it's important to think about who can influence decision making, but also what might be their incentives to do so. While many stakeholders can advocate for their interests, there's often a primary group of stakeholders that determine the outcome of decisions. These primary decision makers often have additional incentives beyond those of secondary stakeholders. If incentives are aligned that's great. If not, however, this can create problems.

Misaligned incentives are like dry tinder for conflict and deception. Without shared incentives moral hazard might incentivize decision makers might take on more risk than they would otherwise because they don't bear the full costs of that risk. This could lead to decisions that disproportionately benefit a few if they succeed, but leave the majority of stakeholders holding the bag if they fail. This becomes more complex in political systems. Often politicians claim to act on behalf of the greater good, but don't have incentives to do so. This leads to principle agent problems where politicians tell simple emotional stories to get votes, but then enact complicated legal policies that favor special interests (such as bailing out risk taking institutions). This is especially complex when small/large game dynamics come into play and incentives might be aligned within a system, but external influences override those incentives.

Aligned incentives can create a foundation for cooperation. It doesn't guarantee cooperation, but it makes it possible. A simple way to do think about this is to ask if all stakeholders have skin in the game and incentives are shared between primary and secondary stakeholders. Another is to think about feedback loops and if the consequences of a decision will occur soon enough to impact the decision makers. If these things are true then there is a higher likelihood that decisions will be made in a way that aims to maximize stakeholder value. The key word here is aims. Even if incentives are aligned and people have the best of intentions sometimes things do not work or cause unintended side effects. Governance is hard.

While exploring the incentive dynamics of political economies in more detail is beyond the scope of this guide, it's highly recommended. If incentives are aligned cooperation is possible, but if incentives are misaligned conflict is inevitable. There's an infinite number of ways that incentives can be misaligned, but only a few ways that they can be aligned. Creating organized and resilient low-entropy systems that don't devolve into chaos is difficult, but it's possible. A few questions you might ask yourself to start to think about stakeholder dynamics are:

• Who can make decisions?
• Who can affect decision making?
• What are their incentives to do so?
• Who is affected by those decisions?
• What are the incentives of various stakeholders?
• Are incentives misaligned, vague, or aligned?
• If incentives are not aligned, where might there be conflict?
• Have there been any conflicts between stakeholders in the past that might recur in the future?

Resource Management

Here resources refer to the thing that is being governed. There are many types of resources. Some are tangible and some are intangible. Some are renewable and some non-renewable. Many of these resources are formally accounted for, but some are not.

The type of resource being governed will inform the governance process. For example, hierarchical corporate governance works great for stocks, but less so for public goods. Democratic governance might be good for shared public infrastructure, but less ideal for an early stage startup that needs to move fast and decisively. One size does not fit all. The type of resources being managed will impact the efficacy of the process used to govern those resources. What governance structures are best to manage various resources is beyond the scope of this guide. The main point here is that just because a governance process works in one context does not mean that it will automatically work in others.

A few questions you might ask yourself to start to think about the resources being managed:

• What are the tangible resources that are being created and/or managed by the system?
• Are there intangible resources that are also in play, and if so, how do those relate to the tangible resources?
• Are these resources renewable or non-renewable?
• Are all of the resources being managed taken into account by the governance system?
• Are there resources that are not formally considered in the governance process, but still impact the process (this often involves cultural norms, knowledge, etc..)?

Governance Process

Governance is an important and vague word. It can mean a lot of things to a lot of people in an lot of contexts. Here when we say "governance" we're referring to the process of making decisions. This includes the constitutional rules that constrain the power and actions available to various actors within a system as well as the political process that actors can engage in to change rules.

A few questions you might ask yourself to build intuition around how governance within the context of a complex socio-economic system:

• Is the governance process explicit (set rules and procedures) or implicit (rough consensus)?
• What is the process for stakeholders to advocate for their interests and collectively make decisions (aka what is the political process)?
• What is the process to make changes to the way changes are made (aka can you change constitutional rules)?
• Is there a history of stakeholders engaging in the political process to change rules or to change how rules are changed?
• What is the average speed at which changes happen? Ex: does something take a week or a year to discuss and put to a vote?
• Is the system governed by rules or rulers?

Tools

White Paper

A white paper is a report or guide that informs readers concisely about a complex issue and presents the issuing body's philosophy on the matter. It is meant to help readers understand an issue, solve a problem, or make a decision. This will often explain the motivation, goals, and general design of a system.

Be aware that the white paper is not the system itself. It's a sketch of the system. To understand how the system works in practice you need to read the documentation and/or source code for a specific implementation.

Docs

Documentation is any communicable material that is used to describe, explain or instruct regarding some attributes of an object, system or procedure, such as its parts, assembly, installation, maintenance and use. This will be much more specific than the white paper. It should provide the information you need to use, contribute to, or integrate with a system.

Often documentation is incomplete or outdated. This is often due to the bandwidth constraints of the development team. That being said, software that is easy to understand and contribute to is likely to have less bugs. It's also more likely that stakeholders will be able to engage in governance productively if they understand how the system works. Documentation can help with both.

Source Code

The source code is the actual code that implements a system/protocol. There are various definitions of open-source and/or free software. Paraphrasing from the GNU Foundation definition of free software, it is:

• free to use
• free to inspect
• free to modify
• free to distribute

Even if you can't read the code yourself, you can at least check that the software implementation of a system is free and open-source. This does not guarantee that it is bug free, but it does increase the probability that users who can read the code will find bugs sooner than later. This also puts more power in the hands of users. Anyone can fork the software if they disagree with a change, somewhat reducing the likelihood of contentious changes happening in the first place.

Maps and models

Complex systems will often use maps and models to communicate how they work. A map or model is not the system itself, but a representation of the system. They choose to exclude some information to focus on others. This way you don't have to understand every detail to understand the key points of how the system works. Many maps and models are interactive so that you can explore the system in more depth than a static document.

Activity

Digital systems do things, and the things the do are often measured. If so, then having access to system activity can help you understand what the system is doing and if it's doing it well. For blockchain based token systems the data is on-chain and cryptographically verifiable. For server based digital systems the there may be a data you can plug into or the company running a service might publish statistics, but you have to trust the source of the data as it often has no cryptographic verifiability.

Independent research reports

Looking at primary sources is often recommended as the first step to understanding a system. That being said, the information produced by a team building or maintaining a system might be biased (even if they're doing their best to be objective). Independent analysis is likely to also be biased, but potentially in a different way. Multiple perspectives will give you more data to help you form your own opinions about a system.

Community Chat/Forum

Beyond looking at technical specifications or external research, you can sometimes engage with system users directly. Many open source software projects have community chats or forums where people can ask questions and share information. Be aware that accounts on forums are often not verified to see if they actually use the product/project. In addition, the team building/maintaining a product/project might also moderate content or censor information available on official community channels. Community feedback and information can be helpful to build intuition, but, as always, take everything you read with a grain of salt.

Notes

MOTIVATION
- maps are useful
- more information better decisions

CONCEPTS
- facts vs opinions
- stakeholder analysis
- resource management
- governance processes

TOOLS
- white paper
- docs
- source code
- activity
- maps and models
- research reports
- community chats