"Rule of Code" or "Rule of Man"? How Assumptions of Human Nature Impact the Design of Blockchain-Based Algorithmic Management Systems

Algorithmic management systems, and especially those systems that are based on blockchain technologies, are often discussed as an alternative organizational governance mechanism where the “Rule of Code” replaces the “Rule of Man.” Moreover, blockchain technology-based systems are vaunted as an alternative to centralized governance potentially enabling the creation of fully decentralized organizations. This paper reports on a qualitative longitudinal field study investigating how software developers strove to design a blockchain-based algorithm aimed at governing a decentralized collaborative working community. The algorithm’s design was heavily influenced by ideals of decentralizing power using the “Rule of Code.” However, as the algorithm was developed, the core assumptions about human nature that underpinned these ideals became increasingly called into question. The designers openly acknowledged their ambivalence toward these core assumptions, and implicitly allowed for a degree of recentralization of authority and “Rule of Man” back into the design. When they realized that the system that they were developing fell short of their original ideals, the designers struggled to minimize the compromises without wholly giving up their prior values or assumptions. The designers exhibited a high degree of cognitive dissonance as their design choices depended on switching back and forth between contradictory assumptions of human nature. By examining the process of design of an algorithmic management system, this paper illustrates the importance as well as the limits that ideals and assumptions about human nature have for algorithmic governance designs.