This order is accompanied by an advance donation in the amount of 33 EURMTL.
Not long ago, I received an order from Rinat Enikeev for a review of the Onym messenger, and now he has asked for a review of a set of documents called “Founders’ Agreements.” He is primarily interested in how “orthodox” these agreements are from a libertarian perspective, as well as any other thoughts I might have on them. For roughly the same purpose, he even passed them to Stefan Kinsella. Stefan noted the document’s flowery style and the lack of definitions in the text, but mostly analyzed the points that were personally closer to him, i.e., those concerning intellectual property.
To start, I will provide links to the documents under consideration in the order that makes the most sense for reviewing them:
1. For whom and why the hell. Here, Rinat explains that the proposed agreement will not be of interest to just any potential co-founder, but only to those who are prepared to invest only labor and time into the common cause, but not money.
2. Principles. This outlines the main idea: to build an agreement that excludes any hierarchy and coercion among the participants. The only source of obligations is ongoing consent, not any kind of external order.
3. Agreement for two. The actual text of the agreement for two participants.
4. Agreement for three. The text of the agreement for three participants. It differs from the previous version by a slightly more complex procedure for the division of property.
I would say that what we have here is an ambitious attempt to make a smart contract function in the real world. As long as there is consent among all participants of the agreement, they act together in some way. As soon as disagreement arises, they have procedures in place to express it, and then ultimately arrive at some new agreement, even if that agreement manifests as the termination of their joint activity.
However, just as blockchain is not the Internet of Things, a smart contract in the physical world is only implementable as long as the objects it regulates behave according to the logic of the contract. As long as the founders operate with certain information objects that either represent knowledge (and are therefore freely copied) or can be cryptographically restricted—as long as the proposed agreement describes something close to reality. But when an enterprise’s property is a certain physical object, it can be, say, taken, appropriated, and sold, and then the person simply ceases to communicate with the co-founders. What should the co-founders do in response according to the agreement? Wipe their hands of it, leave all the property on the balance sheet of the old company, and found its fork without the runaway co-founder.
Another problem associated with such agreements is the extreme difficulty of dividing profits in any way other than equally. Theoretically, of course, the one who made the decisive contribution might suggest they would like to receive a more significant share; however, in a situation where a partner can freeze all proceeds simply by refusing to communicate, the producer will have to contend with the free rider and pay them simply for the status of being a co-founder.
In other words, despite the nobility of the premises behind their drafting, such agreements scale very poorly. As long as there is consensus, a written agreement is not required. As soon as consensus disappears, anyone can violate any clause and disregard any procedures, especially if it reaches a serious conflict rather than just resulting in a loss of interest in further participation.
To put it aphoristically, such agreements prioritize freedom over property and, therefore, in essence, do not protect property at all. But we are talking about creating a commercial enterprise! And such an enterprise is generally created to convert time, effort, and entrepreneurial talent into property. If following the agreement creates systemic threats to such conversion, it is unlikely to be actively applied.
However, I do not consider the work done to be useless. It’s just that I feel we shouldn’t push the codification of life to extremes. Rather, I would find it useful to frame the individual mechanics of the proposed agreement as recommendations on how to protect freedom within the conditions of contractual activities. For example, it is useful to use multi-signatures. It is useful to divide equally under conditions of uncertainty regarding individual contribution. And if it is difficult to divide incomparable sets of things equally, it is not necessary to monetize them first; one could use the “one divides, the other chooses” mechanic, or in the case of N participants—”draw lots to see who divides, and then draw lots to see who gets what.”
In my view, the very striving to minimize coercion in the sphere of voluntary transactions is quite commendable. But the higher the initial trust, and the more details one can neglect, the shorter the contract will be, and the better it will be in my eyes. “We live together until one of us gets tired of it.” Or “I contribute this much money and a little help with labor, you make the main labor contribution and a little bit of junk, we split the profit in such-and-such a proportion, and you can kick me out, but then you must return my investments.” Or “I write as I see fit, you donate as much as you see fit.” Or even “We try to avoid each other, but if we run into each other in public, we tolerate one another and do not express dislike.” In my eyes, these are all good agreements that are easy to remember and easy to follow. However, I absolutely do not rule out that some people will find them completely unsuitable because the nuances and procedures are not specified.
