In the mid-1990s, when Kimbal Musk was 22 years old, he began working on a new and untried technology called the Internet. Along with his brother Elon, he helped develop Zip2, a city guide that was one of the first online versions of the Yellow Pages.
This article is part of Road to Consensus, a series that features speakers and the big ideas they will discuss at Consensus 2022, CoinDesk's festival of the year, June 9-12 in Austin, Texas. Learn more.
Not everyone got it. One man, perhaps 50 years old and deeply skeptical, picked up a copy of the current Yellow Pages and tossed it to Musk, saying, "Do you think you'll ever replace this?"
Musk was taken aback. He couldn't speak; he just had to leave the room. In his mind, he knew the paper directory industry was already dead. "It was a $10 billion business, and it was just gone," he says today.
Rewind 28 years. Now Musk is about the same age as the man who clung to the paper directory business, and he sees parallels to Web 3. It's true that "blockchain is now where the Internet was in the early 1990s" and has become an almost embarrassing cliché in the crypto space. But it's also true that Kimbal Musk is one of the few people who have what it takes to back up that claim. "I can participate in this revolution as an older person," Musk says. "And I just want to be a better older person."
His credentials as a "better older person" are nearly impeccable. He doesn't talk about it often - almost never publicly - but in 2010, Musk had a serious tubing accident that nearly took his life. He landed on his head at a speed of 35 miles per hour. Blood seeped into his spine, leaving him paralyzed for days. He told my colleague Christine Lee at ETHDenver, "I'm not a spiritual person, but I received a message from God." And the message was very specific. The voice told him to work with children and expose them to real food.
Musk listened to that voice.
He launched Big Green, a nonprofit organization that established "learning gardens" in 650 schools across the country, teaching 350,000 children every day. "I believe growing food changes lives," Musk said at ETHDenver. "It improves food security. It improves mental health. It gets you out in nature. It opens your eyes to the volatility of weather that comes from climate change." (Musk has a close relationship with food - he owns a restaurant group in Colorado, he co-founded an urban agriculture group in Brooklyn, N.Y., and he's a chef. Oh, and in his spare time, he sits on the boards of his brother's companies Tesla and SpaceX. The Musks aren't lazy.)
Then came COVID-19. Thanks to safety guidelines, the Learning Gardens were suddenly put on hold. Musk pivoted. He was intrigued by the idea of decentralized autonomous organizations (DAOs) and their potential to help nonprofits distribute their funds more efficiently and equitably. The idea was simple: frontline nonprofit workers typically know other frontline nonprofit workers. They know the room. Maybe they should be calling the shots.
So in the fall of 2021, Musk founded Big Green DAO. Here's how it works: first, he put in $1 million of his own money as "skin in the game." DAO donors then selected six eligible nonprofits, and each of those organizations received $50,000. Those six nonprofits then voted on which group of recipients should receive the next round of funds - and more money is distributed each quarter. Rinse and repeat.
The Big Green DAO is up and running; funds are flowing to those who need them. The DAO has raised a total of $6.5 million. More than 1,700 people have donated. There are now 16 nonprofits - generally with a penchant for food justice - that vote with donors on how to distribute the funds.
The ethos of cryptocurrency is "power to the people." It's usually only theoretical. Abstract. Here, in this one (big green) corner of the world, it's actually happening. There's less overhead now. Less bureaucracy. Easier applications. More community building. Most importantly, nonprofits can really control where the money goes - something that, as Musk puts it, "has never, ever, ever, ever, ever, ever been done."
The interview has been shortened and lightly edited for clarity.
Bring us up to speed! How has the Big Green DAO performed in reality, compared to your expectations?
Kimbal Musk: It's very different than we imagined. We had envisioned that there would be a small number of big donors who would vote alongside the nonprofits.
I put up $1 million to start the experiment. The first week we got a couple hundred thousand dollars, and I thought, "Okay, this is just right. That's what I expected.
But then we started getting a lot of smaller donations ... There is no minimum donation to participate. You have to donate at least one ETH to vote, but if you donate even 1 cent, you can join Discord. We are now at over 1,700 donors. And the average donation is $900.
Awesome.
That's really extraordinary. We've also learned that the nonprofits really care about voting because it's the first time in their lives they've had the opportunity to vote. By the way, they don't vote with their own money. They can't vote for themselves, they can only vote for others.
Can you explain a little bit about the mechanisms of the DAO? How exactly did this get started?
Yes. To start, we found six outstanding nonprofits from around the country that we already knew.
What's one example?
An African American woman in Atlanta named Wande fought the city of Atlanta to allow farm stands in South Atlanta. That's a black neighborhood. You're allowed to do it in white neighborhoods, but you're not allowed to do it in black neighborhoods. That's really messed up. She fought for it for years, and she got it done.
We have an African American woman from Minnesota who, after George Floyd was killed [in Minneapolis], held garden parties to bring the community together. Or a Native American woman working with reservations across the country to promote philanthropy.
These are all wonderful people who really understood that not only do they have the power to make grants, but they also have the responsibility now on their shoulders to do good work, because it's never been done before.
What exactly has never been done before?
That nonprofits can determine for themselves where the funds go. That has never, ever, ever, ever, ever, ever, ever been done. And when I say control, they have total control. So donors have a voice, but the way it works is really interesting.
We gave votes to six nonprofits. I personally chose not to have a vote because I really wanted it to be run by the nonprofits.
They are required to donate at least 20% and no more than 30% of their revenue each quarter to other nonprofits. (So if they have $1 million in assets, they would have to give $200,000). And if they don't like the way the DAO operates, they are not required to stay in the DAO. They can leave at any time.
So was money actually distributed?
In the first quarter of this year, $300,000 was distributed to 10 great nonprofits, and the DAO grew to 16 members.
And then they were going to release some donor funds this quarter. [Available donations] were about $2.9 million, which is amazing. Now they have $900,000 [30% of $2.9 million] to distribute this quarter, and they have 16 nonprofits that will vote.
That's right. The six original nonprofits plus the 10 new ones. Can the donors vote, too?
That was something I didn't expect. Most donors don't really want to vote. They think the nonprofits really know more than they do.
What went differently at DAO than you expected? Were there any surprising challenges?
Well, I would say that the implementation process has been much more difficult than we expected. Now, I'm a techie. I thought it was pretty difficult for me, but doable. When you talk to people who aren't techies, these are people who are working in the real world, who are planting gardens in their communities, who are working for food justice. They don't even have a Twitter account. I mean, they live in the real world, and getting them to understand how a wallet works, getting them to understand why you even use this technology is so hard. It's hard to describe.
What I like about it is that we're introducing these people to the Web 3 world and showing them these amazing opportunities, and they appreciate those opportunities. But onboarding is so much harder than it needs to be.
One of the reasons you launched the Big Green DAO is to give frontline food workers grantmaking authority, which hopefully will have a greater impact. Has that happened? What does it look like?
Well, it's important to understand how grantmaking works. If you're a nonprofit, 25% of your time, resources and staff go into fundraising - 25%. Brutal.
And if you're a foundation and you're awarding money, up to 15% of your resources go to the staff that provides the grants.
I can imagine how that adds up.
Let's say you're spending $100 million. And you do that per year. You take $15 million and you allocate it to the staff that finds out who gets the grants, and then there's reporting and all that stuff.
Now you have $85 million. And you give it to nonprofits that spend 25% of their time fundraising. That means a maximum of 65% of the money goes to work on the ground. You start with 65% going to the actual work.
And what about at the DAO?
At our DAO, we have a 5% overhead allowance. So you start with 95% of the money, as opposed to 65% of the money. Even at the beginning, you have fewer headaches for the nonprofits. You don't need to work for a foundation, so that's amazing.
I'm a philanthropist. I have a group of people that help me give money away, and it's very frustrating that it takes so much money and time to figure out how to give money away. So you already have almost 50% more money available than you do with traditional grantmaking.
What other benefits have you noticed?
It's also amazing that grantmaking takes a lot of emotional effort for nonprofits. It's exhausting.
What they really want is to do good work on the ground. And they work very hard. The ones we work with are just so good at what they do, but there's this emotional burden of, "Oh, I still have to fundraise." That's really not what they want to do. But they have to do it.
That's right, nobody likes asking for money!
And suddenly, with the Big Green DAO, there's a place where your grant request consists of a few sentences on Snapshot and a link to your website or a link to your Instagram page. You get accepted into the DAO simply by knowing another member of the DAO. By the way, you don't have to know a member of the DAO to join Snapshot, you can do it that way - but [most people] just don't know.
Now you have the ability to raise funds with no strings attached or anything restricted. The better you build a relationship with the DAO, the more likely you are to get money [in the future]. But that's relationship building. It's fun, especially because you're working with other nonprofits, right?
It's a very different psychological relationship to fundraising. It's joyful and community-oriented, and you spend time with other amazing rock stars.
How do the DAO meetings work? Is everything handled through Zoom?
We are not a virtual DAO. Every quarter we bring the DAO together and they meet in person to discuss what they want to do in the next quarter. Last quarter, we hosted 10 nonprofits and a few donors. They all met for two days in Atlanta and got to know each other personally.
This quarter they will be providing funds to, let's say, maybe 50 nonprofits. They will meet sometime in July. So the idea is to build a real community and get nonprofits to collaborate with each other and share their knowledge. This community building is just magical.
For those who are curious about DAOs: What did you learn about how DAOs work that you didn't know before you started?
That's a good question. And now that we're in a bear market with Web 3, some people say, "Oh, DAOs aren't really about decentralization." I say, "It's in the name, guys. Come on." They're backpedaling, and I think that's wrong.
I think the power is in the decentralized vote. The power is in empowering the community to vote together. The challenge is that it takes a tremendous amount of time and effort to administer, and I put my 10,000 hours into administration.
How.
We studied the U.S. Constitution, how it came about. We're not the same, of course, but the amazing thing about the U.S. Constitution, Congress, Senate, etc., is that it's structured to prevent any one person from accumulating too much power. And that lesson is really important. A lot of the DAOs out there are not really DAOs. There's one person with seven million votes and then 5,000 votes for the rest of the DAO. That's not really a DAO.
In our case, we are actually true to the spirit of a DAO. And we're not 100% sure if it's going to work or not - it's an experiment - but it's going quite well. It's an experiment with human nature; most people are designed to accumulate power. And we can't really do that in our government structure.
For people interested in DAOs, the most important lesson I've learned is understanding governance.
What is the most important governance principle at the Big Green DAO? And how do you prevent one big donor from making all the decisions? You are a generous donor who has put in $1 million. Could you simply decide to impose your will?
That's definitely a good question. No matter how much you donate, you only have one vote. So if you want to support decentralized grantmaking and give us a billion dollars, you have one vote. You're on equal footing with the nonprofits. (Musk recently tweeted to share the DAO's newly ratified constitution].
It sounds like you've been really encouraged by the Big Green DAO so far. You're obviously a guy with a lot of other interests, from restaurants to big corporations. Where do you see DAOs playing a good role elsewhere in the world?
I like to think about when decentralized decision making makes sense in a very practical way. The world we have today is hierarchical. It's top-down, it uses capitalism. The other system that has been tried many times is communism, also a top-down system.
But DAO is really decentralized. It's really different. I've been working with another group that's working on a DAO to reduce deforestation around the world. And that works really well for a DAO because you want to decentralize decisions, but you also want to decentralize accountability. You need both decentralized accountability and decentralized decision making to be effective.
Why is that so important?
Because it's common in the deforestation world to pay someone not to destroy a piece of land, and you have no idea if they're actually doing it - both in the for-profit and non-profit sectors. So that's a good example where a DAO would be very useful.
Where else would a DAO work?
In police reform. For example, if you're doing police reform in Atlanta, North Atlanta is very different than South Atlanta. You need a different angle for each community. And that's a different group working on a DAO.
One of the examples that people keep coming to me with is climate change. And I struggle with setting up a DAO because it's a global problem. How can decentralizing decisions make a difference? And they have their ways of doing that. But I'm much more concerned with, "Does decentralized decision making help or not?" And I think it depends very much on the problem you're trying to solve.
You have your tools: there's capitalism, there's communism, there's philanthropy. There's traditional hierarchical philanthropy, and then there are DAOs. DAOs can be for-profit or non-profit. You should look at all the tools in your belt to see which is the best tool to solve the [problem].
For example, I would never run Tesla as a DAO. It's just not appropriate because you're managing a supply chain. You can't decentralize that. You can't run that as a DAO.
Have you had a conversation with your brother about this? He's obviously been very curious about cryptocurrencies in the past, and he's clearly an innovative thinker. Have you talked to him about DAOs and have you seen any interest from him?
You know, honestly, I haven't. I'm just very cautious when it comes to my brother.... Because he's such an important man, it's better if he finds out for himself. And whenever I cough in that direction, people would take it seriously. So honestly, I didn't.
Smart man. And don't worry, we're not trying to make you cough.