Self-driving corporations

20.56, Tuesday 17 Nov 2020 Link to this post

I’ve been thinking about how companies could be automated, and what we would use them for if that were possible.

Starting point

Think of something like Stripe Atlas: Spend 10 minutes filling out a bit of information, and then we’ll create the legal framework for your company… including legal docs, paperwork filing, getting a tax ID, issuing stock, and so on. All for $500 and some form-filling.

This is for company formation – what if it was that easy ongoing?

I have a couple of basic use cases in mind:

  • A small Shopify business. I have a friend who has just started a neighbourhood soup delivery business.
  • A boutique agency. The kind of business that performs design or consultancy work, maybe subcontracts a little work, and has a few expenses like buying laptops.

The second is close to my heart because it’s what I do right now.

I reckon I could write an operations manual for a micro agency pretty simply. We had a “choose your own adventure” style operations manual at BERG in the form of linked checklists. Like, “is it a Friday? Do bank reconciliation. Is it the last Tuesday of the month? Then process holidays, process employee changes, run payroll,” and so on. It built up over time.

But what if the “agency in a book” could be software? What if the checklist was actually a set of forms, and the forms actually filed the paperwork?

The challenge

Forming a company is the easy bit. The challenge is running it, because

  • There’s a lot of drudgery, which takes you away from the actual work
  • If you get the drudgery wrong, you’ve broken the law and can get struck off as a director, or get a fine.

For example: for Mwie Ltd, now is the time I have to file my Confirmation Statement which declares the current shareholders of my company. It’s easy to do because my accountants have made a screen to look at and a button to click… but if I forget to visit the website before 24 November, I’ll be in a ton of trouble.

This ongoing form filing is called “compliance.”

Automatic filing

Right now, there are a ton of tools to help you manage the output of your company (Shopify, Trello, PowerPoint) but very few to manage the compliance.

Okay, so there are tools to make form-filling easier. I can employ a payroll company to file on my behalf. Or I can employ an accountant to ask me questions once per year, and prepare my yearly accounts.

What I want is to flip the model.

The automated corporation (which is software) should always be in legal compliance, even if I do nothing. So the forms should, behind the scenes, be printed and sent off; the accounts submitted; the quarterly VAT returns made and paid.

This requires automation of my bank account, I know.

But what I’m saying is that my self-driving corporation should, once formed, stay on the road, whatever forms and robot phone calls it takes.

Compliance guarantee

But if I forget to reply to the email, or forget to log a benefit, or accidentally pay someone below minimum wage, or run out of cash, the company will be operating illegal. This should never happen.

Think about a desktop computer. I can’t drag a folder icon inside itself and break the file system. The computer doesn’t let me.

Or, more technically, consider databases. Databases confirm to the ACID properties: ACID (atomicity, consistency, isolation, durability) is a set of properties of database transactions intended to guarantee data validity despite errors, power failures, and other mishaps.

In short, no matter what you ask a well-designed database to do, you won’t end up with broken or illogical data.

What would it mean to have such a guarantee for a self-driving corporation?

So, for example:

  • it simply wouldn’t be possible to spend money from the corporation without it also registering it as an expense, or a dividend, or whatever. (The current situation is that I can transfer money out from my company bank account, and then I reconcile it later in the accounts. The “compliance guarantee” would prevent me from making such ad hoc payments from the bank.)
  • it wouldn’t be possible to spend money if that would mean there wasn’t enough cash in the bank to pay the end of quarter/year taxes.
  • at 30 days before payroll, if there wasn’t enough money in the bank, all employees would be given a month’s notice (or whatever the parameters are to avoid being insolvent or breaking employment law).

What I mean is that the self-driving corporation would only allow actions that can be guaranteed to be downstream legally compliant.

That would mean that this company wouldn’t be as flexible as a regular, human-driven company. It would have more limited contracts, for example. But it would be impossible to crash it.

(One question is about how to implement this. One mechanism might be to require, in the incorporation legal, that all contracts require two directors. But one of the directors is a robot who will only sign off on provably compliant contracts.)

Exception handling

In any complex system, there is always the possibility that things go off the rails. What if someone sues this autonomous corporation? What if the tax laws change radically?

Rather than the company “crashing” (which, in this situation, means that it ends up operating illegally and the shareholders risk a fine or worse), there would need to be some kind of exception handling:

  • either the company can have a safe way to “halt” – that is, pause all operations so at least things don’t get worse
  • elevate the problem to a human handler.

I think of this a little like early evolution of computers. They ran raw machine code. The core insight of the interactive computer was the event loop. And every so often, it would crash. So then there were friendly ways of crashing (the blue screen of death) and then of isolating crashes (this application is not responding) and then ways of catching errors so that the app can be improved for everyone (would you like to share the crash report with the developers).

What are the applications?

This is a bit of a thought experiment.

I talked back in 2014 about a little bottle-city company … corporate governance as executable code – and what I’m talking about here is implementing the minimum viable version of that: a guaranteed compliant, self-driving corporation, implemented in software, a layer that sits between (a) the world of banks and government departments and paper, and (b) the human owners and employees.

I suspect it would be both cheaper and simpler (I spend perhaps 5% of my time and 3% of my income on the Red Queen’s race of company compliance, and I know what I’m doing) so that increases the number of people who would be operating independently, or starting companies, but can’t because of the existing hurdle.

But more interestingly, an autonomous corporation is interoperable with software. So Shopify could form and run a company for you, accounts and contracts and all, guaranteed no shooting yourself in the foot. Or maybe a blog could be its own company, and registering a Wordpress account would automatically register it? Or a vending machine?

What would it mean to buy a “Dummies Guide” to starting, say, a roofing business, and the book is code and you can just boot it up?