The 2017 World Values Survey documented a worrying shift in attitudes toward democracy. While in the 1930s and ’40s about three-quarters of Americans said it was essential to live in a democracy, less than one-third of Millennials believe this today. In 1964, 76 percent of Americans had faith in the government to do what is right “always or most” of the time. In 2015, that figure fell to only 19 percent.

The decline of faith in democracies parallels another trend: a 15 year decline in the global spread of democracies is the first significant reversal in this measure of engagement with democracy since the Warsaw Pact invasion of Czechoslovakia in 1968.

All told, it’s clear there is a growing crisis of faith in our democratic institutions and their seemingly limited capacity to address society’s social and environmental challenges. However, the maturing field of “eDemocracy,” once seen as a fringe endeavor, is revealing its depth and potential to address this crisis. eDemocracy (also known as digital democracy or Internet democracy) uses 21st-century information and communications technology to extend community engagement, expand suffrage and citizen agency, create real time decision making, rapidly aggregate opinion data, and pave the way for a shift from representative to more direct forms of democracy.

This emerging movement holds many opportunities for impact investment to support a renaissance in political participation. eDemocracy has the potential to “refresh” and deepen democratic practices and systems of governance. Although we see five major challenges to overcome before an Internet-based, democratic system can take root, we have identified some promising solutions. We also propose an “ecosystem approach” (by which we mean holistically supporting a variety of related yet diverse investments) for impact investors to deploy capital at a systems change level to optimize multiple returns for shareholder and stakeholder alike.

The Opportunity

The world’s current democratic institutions came into being about the same time as the telegram. But while Information and Communications Technology (ICT) has evolved, our systems of governance have not.

We believe new forms of government decisionmaking processes will play a critical role in addressing our world’s many challenges. While the enormous reach and computational capacity of the Internet and the development of global-spanning social networks spur visions of a better democracy, these new forms of governance remain largely aspirational.

Five main challenges to eDemocracy remain. Here, we outline each challenge, as well as recent developments that suggest that integrating eDemocracy with impact investing and innovative public policy may be the best method for overcoming many if not all of them.

There is one caveat for the impact investor: No single organization or initiative—either public or private—has solutions to all five challenges. In fact, few touch on more than two. Therefore, we must view eDemocracy through the lens of an ecosystem that will, in time, integrate solutions across each of the following challenge areas. In the absence of a central organizing body or defined market demand, impact investors must deploy capital in a manner that best supports this integration.

The effort to redesign democracy is a high-risk investment. However, the rewards to communities, societies, and our world may be exponential, offering a compelling impact investment opportunity.

Five Challenges for eDemocracy

1. Participation

One of the big promises of eDemocracy is universal, real-time participation in political process. Currently, only 55 percent of the eligible voting population in the United States participates in elections held every 4 years. By comparison, more Americans (58 percent) use Facebook on a daily basis. Imagine if democracy was as easy and fun to engage with as the world’s leading social network?

Martin Luther KING Jr. leads a group of marchers from Selma to Montgomery to fight for black suffrage, 1965. (Photo courtesy of Bruce Davidson/Magnum Photos)

However, Facebook is not universal and neither is Internet access. In the United States, 84 percent of households have computers, and about three-quarters of US adults (77 percent) say they own a smartphone, up from 35 percent in 2011. More than 92 percent of Millennials own a smartphone. Globally, the number of Internet users has increased from 738 million in 2000 to 3.8 billion in 2017. More than half of the world now uses the Internet.

The trend is clear. Driven by the commercial efforts of companies like Facebook and Google, as well as the social missions of NGOs such as Geeks Without Frontiers, the time of universal access for all will be upon us in a matter of years. If current trends continue, we will approach 100 percent Internet access by 2035. However, there are two important issues we must address before this access is democratic:

  • Equality of access: A major reason people do not use the Internet—even when they have access—is cost. If political participation is a right, and the Internet is required to participate, it follows that Internet access for that purpose should also be a right. The movement for net neutrality, which is currently under threat by the Trump administration, holds that all data on the Internet should be subject to the same rate structure irrespective of user, type of content, or device. However, given income disparities, sameness of price is not equality of access. Increasingly, society is seeing the “right to Internet access” or “freedom to connect” as a right on par with the right to shelter or free speech. In June 2016, the UN Human Rights Council passed Article 19, a nonbinding resolution that condemns intentional government disruption of Internet access. Some of the organizations leading this rights-based effort for Internet access include the Electronic Freedom FoundationAccess NowInternet SocietyOpen Media (Canada), and Article 19 (UK). Supporter donations also fund all of these organizations.
  • Right of participation: 55 percent of eligible voters in the United States voted in the last election—lower than any other democratic country. But this percentage conceals a more concerning statistic: Approximately one third of all adults in the United States are not legally eligible to participate in the political system. This includes immigrants, temporary workers, and residents of US territories, as well as prisoners and convicted felons—the vast majority of whom are black and brown. While not a technology issue, the extension of suffrage to all adults is one of the fundamental principles of eDemocracy, and organizations involved in this effort are rightly viewed as part of the eDemocracy movement. Some of the organizations leading the effort for universal suffrage include the ACLU, Brennan Centre, League of Women Voters, Project Vote, Florida Rights Restoration Coalition, the Election Protection Coalition, and the National Commission on Voting Rights. Supporter donations also fund all of these organizations.

2. Validation

After the spectacle of the electoral process in Florida, the American Dialect Society declared “chad” was the word of the year in 2000, due to the intense debate regarding whether half-punched holes on ballots constituted “valid” votes. This electoral experience was a pointed reminder of how much our democracy relies on the technology of vote counting. And these concerns will not go away.

In July 2017, hackers at the DefCon conference took less than two hours to break into 30 different election machines. In September 2017, the US Department of Homeland Security informed 21 states that their voting systems had been the subject of hacking attacks, possibly connected to Russian efforts to subvert our nation’s election on behalf of the current president. Voting machines are secure only when they do not connect to the Internet; anything connected to the Internet is a target for hacking.

Voters at the polling station in Wyoming Indian High School’s Tech Center in Ethete, Wyoming. (Photo by Lindsay D’Addato)

However, in this context, validation is not merely about developing a hack-proof voting machine. An eDemocracy must match or improve on a whole range of protections our current voting system has evolved over the centuries, including:

  • Identify verification
  • Data security
  • Vote privacy
  • Duress protection
  • Auditability

There is broad consensus among experts that online voting processes—at this stage of their development at least—simply cannot replace our current electoral system.

However, solutions to these challenges are beginning to emerge.

The private market will likely provide the solution to identity verification, as an outcome of the demand for device security and verifiable payment transactions in the commercial sector. Most likely it will be an interlocking constellation of solutions, including fingerprint sensors, face recognition, PINs, and physical artifacts. Once a winning standard has emerged in this sector, it will be easy to integrate into eDemocracy.

Data security, vote privacy, and count auditability are tougher nuts to crack. However, in the last four to five years, a new standard for online data security and auditability has emerged in the form of the blockchain, a decentralized and almost unhackable ledger system. The technology that underlies Bitcoin and other cryptocurrencies has been applied to many areas that require secure, decentralized data storage. Developers are already exploring impact implications of blockchain, as well as creating blockchain-based voting systems and ways to ensure the privacy of this data while respecting blockchain’s requirement for transparency.

Validation challenges remain. For example, technology cannot yet match the physical privacy of the ballot box in preventing coercion, bribery, and vote-selling.

Here are the leaders in eDemocracy validation:​

  • Votem is a mobile voting system that supports both voter registration and voting using end-to-end blockchain-based encryption. It has a fully working product and has conducted several commercial engagements, including the selection of inductees to the Rock and Roll Hall of Fame in 2017, which captured nearly 2 million votes. Votem is funded through equity investment.
  • Votewatcher is a voting system that uses paper-based ballots with a QR code that the blockchain system scans and stores. It has a working product and has conducted several engagements using its technology, including two Libertarian Conventions. In 2015, Votewatcher was acquired by Global Arena Holdings, a publicly listed company and the owner of Global Election Services, which coordinates labor union elections across the United States and Canada.
  • The blockchain voting space is growing quickly; we discovered more than a dozen earlier-stage efforts in researching this article. Some to watch are: Democracy.Earth (a graduate of Y Combinator), Horizon State (which just raised $1.4m through an Initial Coin Offering), Boule (which conducted a pilot vote on Scottish Independence), Polys (a subsidiary of Kaspersky), and Voatz (which recently partnered with online election company ClearBallot).

3. Delegation

Democracy has many forms. In essence, according to philosopher John Rawls, it means that each person has an equal seat at the table when it comes to negotiating a social contract. This level of participation is the ideal of direct democracy. However, the practical limits of participating in every conversation of public significance means that voters delegate their democratic power to representatives. This act of delegation marks a dividing line between “direct democracy” and representative democracy.

The weakness of representative democracy lies in the disconnection between voter and representative, infrequent elections, high voter-to-representative ratios, and the limited choices of a two- or three-party system. Moreover, the concentration of power in the hands of the executive branch of government makes democracy vulnerable to the lobby industry. It’s hard to escape the conclusion that our electoral system supports a market trade of money for influence. Therefore, reducing our democratic system’s reliance on current models of representation may in fact be one of the great opportunities of eDemocracy.

One solution is to decentralize power. Some advocate for a full direct democracy that eliminates delegation and calls on every person to participate in every decision. This creates its own set of problems, including the time and expertise it would require of everyone. However, there are hybrid proposals (known as “delegative democracy” or more commonly, “liquid democracy”), which enable people to delegate their influence to trusted representatives on an issue-by-issue basis, while preserving their ability to participate directly on other issues.

(Image courtesy of Direktdemokraterna, formerly Aktiv Demokrati)

In current democracies, representatives have broad jurisdiction restricted only by the constitutional limits on the power and term of their office. In a liquid democracy system, a voter may select many representatives, each with issue-specific knowledge and a jurisdiction limited to those issues. Moreover, the delegation is revocable at any point in time; it is not bound by a term.

Liquid democracy would require a highly sophisticated technological infrastructure. It would, however, be more effective at accessing the “wisdom of crowds” by providing people with a broader range of representation choices, backed by data and background information.

Here are the notable efforts in the area of liquid democracy:

  • LiquidFeedback is an open source implementation of liquid democracy created for policy development by political parties and led by the nonprofit Public Software Group. Various parties at a local and national level—including the German, Austrian, and Italian Pirate Parties, and the Italian Movement Five Star—have adopted it. It is supported by donations, and its founders also provide consulting services through partner organizations.
  • Adhocracy is an open source implementation of liquid democracy for decisionmaking processes, primarily for civil participation projects, but also by political parties and the German Federal Parliament. The Liquid Democracy eV society, which is funded by donations and earns revenue by providing consulting services, leads it.
  • Other notable approaches to liquid democracy are Democracy Earth, which enables delegative voting on the blockchain, and Ethelo, which combines delegative voting with multi-scenario aggregation.

4. Deliberation

Traditional processes are single channel—one person can speak at a time. This is workable for small group communication, but the number of potential conversations grows exponentially with the number of participants. If there is only one microphone—a traditional town hall or assembly meeting, for example—things quickly become unmanageable due to the bottleneck in communication. This is one of the greatest challenges to group decisionmaking.

Information technology and social media provide multi-channel communication, but the power of those solutions has, in itself, created other challenges. We are now grappling with the impacts of “siloization” and the spread of fake news through social media.

For a democracy to function effectively, it is not enough to have communication—even multi-channel communication. We need deliberation. There must be exposure to and exchange of different ideas—reasoned debate and argument. What distinguished Greek democracy from other forms of government was not merely voting, but also the oratory and rhetoric that preceded voting; this then served the purpose of informing and influencing citizens.

A woodcut of Greek statesman and orator Demosthenes.

The collective search for truth includes sharing, discussion, debate, acknowledgment, and—hopefully but not necessarily—agreement. However, while that search ends with the collective, it begins with the personal: individual access to research, learning, and reflection. To support the emergence of collective insight, the Internet must be an open and free space, without censorship or coercion. Privacy of communication, including accessible encryption, must be available. There must be ways to verify the accuracy of information and solutions to the problem of fake news.

The comment tools of social media platforms such as Facebook are not conducive to deliberative dialogue. However, in recent years there has been considerable innovation in supporting online debate-style communication. Here are two promising examples:

  • Kialo is a deliberative discourse platform designed to present hundreds of supporting and opposing arguments in a dynamic argument tree. Launched in August of 2017, it has already attracted hundreds of debates and significant participation. Kialo earns revenue through sales to large enterprises and is funded through equity investment.
  • Intelligence Squared US (IQ2US) hosts online videos of live debates on a variety of topics, and enables the audience and visitors to vote and post pro-con arguments. It has been hosting debates since 2006 that regularly attract tens of thousands of viewers. IQ2US is a nonprofit supported by donations, as well as ticket sales and memberships.

Efforts in this space are notable for the diversity of their approach. Other innovations include Debategraph (a graphical representation of hierarchical debates), Micgoat (which allows users to debate using video clips), Reddit/Hacker News (which enables highly nested conversations), Debate.org (a simple but popular pro-con approach), and Pol.is (which provides visualizations to show broadly supported statements). New machine learning approaches to summarizing comments will also make an impact in this space.

5. Aggregation

The final stage of decisionmaking is, of course, making a choice; our systems generally reduce this to measuring the support participants have for different alternatives. Problematically, the traditional process of reducing decisions to either-or choices loses the texture, interconnections of multiple variables, and range of potential outcomes associated with deeply rooted and complex problems.

Our current parliamentary procedures are not conducive to complex decision making. They allow us to evaluate only a small number of proposed outcomes at a time, usually just one or two. There are strict rules regarding how legislators may modify those proposals; factions within the larger group, who can control the modifications permitted to the proposals before they are voted on must generally support amendments.

This process results in outcomes that have majority support, but that substantial minorities may nevertheless oppose—sometimes quite adamantly. This gap in satisfaction levels across groups is the tyranny of the majority. The consequences are polarization, resistance, destabilization, and often, oppression—results very much at odds with the principles of democracy.

This occasional oppression is generally accepted as an unfortunate but inevitable outcome of democracy. However, it is not inevitable. The same principle that guarantees an equality of influence in democratic participation also argues for an equality of satisfaction with outcomes. It is only because of limits in our traditional processes that we see such unequal and polarizing outcomes. Majority tyranny is not the inevitable outcome of democracy; it is just the result of a pre-technological approach to the mathematics of opinion aggregation.

(Image courtesy of Ethelo)

It is no longer necessary to oversimplify complex problems as a limited set of alternatives. Rather, we may refactor them as a framework of simpler problems that we can evaluate discretely. Presenting such frameworks with Internet technology, it is possible for large groups of people to focus their collective intelligence and collaboratively evaluate vast numbers of potential outcomes. Algorithms can then identify those outcomes that receive similar amounts of support from all parties.

One the greatest contributions of information technology will be new ways of aggregating opinion data to liberate eDemocracy from the tyranny of the majority.

  • Ethelo is an online collaboration platform that enables groups to solve complex, multifactor problems and identify decisions with broad support. Ethelo earns revenue by providing licenses to consulting firms and large organizations doing stakeholder engagements. Ethelo is funded through equity investments.
  • 1000minds provides an online suite of tools and processes to help individuals, groups, and organizations make decisions based on multiple objectives or criteria. Established in New Zealand in 2003, they earn revenue by providing licensing and consulting services to organizations.
  • Other notable efforts include Loomio and Democracy.os (which support alternative voting with blocks and abstentions); Decisiontree and D-Sight (which use multi criteria decisionmaking); and Opavote, Modern Ballots, and Condorcet.vote (which use ranked choice voting).

The Unknown Variables

A sixth-seventh-eighth set of challenges is sure to emerge, perhaps replacing other challenges we resolve. The history of technology shows it is often very difficult to see problems until someone from left field proposes a solution. And so we must maintain an open and flexible position as we explore and invest in the future of eDemocracy. Some of the technologies that may prove themselves important include:

  • Artificial intelligence (AI): How can AI assist with supporting validation, deliberation and aggregation? Some see AI as an enemy of democracy (fears of big brother), but with the right approach it may be a liberator; what if each person were represented by an AI delegate that they personally train and that negotiates to advance their political interests in whatever system emerges?
  • Machine-mind interfaces: Smartphones are currently the bleeding edge of our interface with the Internet and each other. But they are merely interfaces and clumsy ones at that. We may see new, far more intimate integrations through mind-machine interfaces.

Other eDemocracy Investment Criteria

Other considerations and criteria investors need to keep in mind include:

1. Inter-operability

None of the initiatives listed above have the whole solution. They are pieces of the picture, and we must build a fully integrated system based on that picture before we can truly upgrade our current democracy. Investors therefore should support and encourage strategies for integration with other technologies, perhaps through open source licensing and public application program interfaces that allow software platforms to talk to each other. At some point down the road, these various technologies will consolidate into a few front runners. Strategies for growth through acquisition of complementary technologies will be important.

2. Financial viability

The journey to the new democracy is a marathon, not a sprint. It may take 10 or 20 years or more before the various pieces come together into a package the public is willing to put its faith in. Tech innovators that survive till to that point must find ways to sustain themselves financially while they grow. This does not necessarily mean a commercial business model; nonprofit models have certainly shown a capacity for growth. Or perhaps a hybrid may emerge. New market tools for fundraising, such as crowdfunding and Initial Coin Offerings, may also play a role.

3. Market validation

A multitude of websites, apps, and academic papers are proposing technology-based solutions to the challenges of eDemocracy. To be successful, they will need to establish a customer base, a value proposition, and strategies for creating traction that will enable them to hone their tools. They will not be able to build a business solving the problem of democracy; there isn’t much of a market there at the moment. They will need to find a corollary application in an adjacent market, something close enough to democracy that the learnings will transfer. These could include education, public consultations, smart contracts, human resource management, and business analytics.

4. Factors of success

In addition to the above, the traditional factors of success that the investment market is so good at identifying will be relevant here as well. Do they have a good team? Do they have unique technology and role in the ecosystem? Do they have a competitive advantage and means to defend it?

Conclusion

We have sketched a framework for how the impact investment community—through execution of a coordinated strategy for capital allocation that draws on everything from philanthropic to market-rate capital in a “total portfolio approach”—may plant and nurture the seeds for a fundamental re-engineering of our democratic system. It is long-term and carries various levels of risk, but it entails a high-reward strategy.

Consider the possibilities: If such a system proved significantly more effective than current models of government, given the global integration of the Internet, it would not take long to sweep away and out-compete other forms of government. One may envision the emergence of a new global smart network that connects every person on the planet to a new system of democratic government. Just as the Internet will blur the borders between traditional nations, these efforts will redefine the traditional boundary between “public” and “private” sectors. Public policy development will be as responsive and dynamic as the markets they are called upon to regulate and monitor. Such a system would potentially mark the emergence of an integrated human identity, a collective human voice.

Think of the problems eDemocracy could address. Climate change, economic inequality, military conflict, population growth: each of these are failures of public policy and international relations. A global, citizen-based system of governance based in democratic principles could prove to be technology’s greatest innovation and most profound benefit.

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