Proof of Work

The hard problem of cryptocurrency is negotiating trust between many parties with opposing incentives and no centralization. Every large organization faces the same problem: how do you advance the state of the company without perfect central supervision?

The majority of companies today run on something analogous to a proof of work system. I think there is a better alternative.

proof of work

In the absence of trust, the only admissible evidence something got done is visibly burned effort. Proof of work secures a network by making participants waste resources to demonstrate this. In a company, the wasted resource is other people’s attention and your own time.

This is the equilibrium of large, impersonal organizations. When no one owns outcomes, the incentive is to do as little work as possible while appearing to do a lot. Verification replaces trust, demonstration replaces delivery, and the kind of thinking required to accomplish ambitious goals is never practiced.

You can see the training for it start early. From the first years of school, at every step, we are told to show our work. The score on your test or essay holds minority influence over your grade compared to homework, rough drafts, and participation. You are rewarded for producing artifacts that show you are in the process of doing work more than for actually completing it.

The best kid in the class is always the one going “above and beyond,” doing too much. But since the actual goals of education are limited by the median capability of the class, going above and beyond looks like doing a bunch of fake work. You never calibrate on how much understanding and efficacy is enough to accomplish the goal (or even really establish an ambitious goal). Trying super hard is worthless if you are pointed in the wrong direction.

So it’s no surprise that interns and newgrads arrive overzealous. They overshare, they do too much. Effort should be rewarded, but it must be intentional, and simplicity should be massively preferred over complexity. Newgrads don’t yet have the scars from committing to something marginally better that vastly increases cognitive load. The most precious resource, especially on a small team, is cognitive load, and every claim you make on it is taken from someone or something else. Everything new thing you start now will encumber you in the future. The marginal utility of focus and freedom is much higher than people think.

You must look for high leverage[0] opportunities.

proof of stake

Proof of stake extends trust against collateral and verifies only outcomes. Here, the collateral is you: you stake your reputation in service of outcomes.

It looks like this. Once you are given a task or a general direction, you disappear until it is finished. You don’t need to be told twice. You understand the intention behind the task, how it adds value to the business, and you make all the decisions you are allowed to make (and perhaps some you aren’t) to get it done.

You only reach out to other people, only spend their cognitive load, when you are blocked on them: you need access to something, or permission.[1] In that case you tell them exactly what you need and why, with concision. And you never block other people when they reach out to you.

Being blocked is rarer than people think. My favorite idea that crystallized when I was coding robots in high school was that anytime you faced a problem you could just go deeper, all the way down to atoms and bits.

Why are you making an issue in that library’s GitHub? Just read the code and figure it out. Ok, it calls a C++ hardware abstraction layer? Read that. Oh the firmware does something weird? Desolder it and dump it. Get the oscilloscope out.

Someone had to write it and build it. It’s not some sort of organic mystery. Everything is fungible, nothing is given, the people who created your reality were no smarter than you and so on. At least, that was the spirit of the hardware hackers who originated Silicon Valley.

I find that this specific mode of working makes you highly favored among your peers.

The next evolution, once you are trusted, is to stop being assigned tasks at all. You come up with your own. You understand the organization’s needs and how you can provide value, and you just start executing. One of the hardest parts of onboarding employees or interns is creating legible tasks for them. The structure of school is to always be given tasks, always ask what’s next, never propose your own.

Ostensibly, you can find someone somewhere in the world to do any given task at some market rate. If you simply eat tasks all day, no matter how well, you are replaceable. But if you can come up with unusual value-adding ideas, your value has no market rate–it’s unclear whether anyone else on the planet would have come up with those things. That is how 8 and 9 figure equity comps are negotiated and paid for.

In any startup or organization executing hard, there are a million tasks to be done, most of them menial or doable at market rate. If you are new, it’s a good idea to start with the highest leverage one, just to get a feel. Then, as soon as possible, start on your own big-outcome work. Do it in secret alongside the menial work if you have to.

Of course there is risk here. That’s the point of collateral. You are betting on your own ability to be effective, and if you mess up, there is no one who told you it was okay. If you fail, or your task drags on, your lack of communication will look sloppy in hindsight. The degenerate way to never increase cognitive load on anyone is to do no work at all. Proof of stake doesn’t remove the cost of trust, but it concentrates it all on you. That is exactly why it’s compensated.

There is no free lunch. You stake your reputation in service of outcomes.

[0] Leverage is roughly like total impact divided by cognitive load summed over time. It’s best if you define what metrics you want to measure impact by upfront.

[1] There is a difference between respecting people’s time and being anti-social. You should probably have a high level of familiarity with the people you work with day in and day out. Talk about new ideas, etc. just don’t bother them. Don’t formally take time out of their calendar.