The Methodologist Negotiation Process [Sept 2021]

[setoshi]

Authors: @setoshi @BigSky7 @scott_lew_is
Reviewer: @Pepperoni_Joe

Edited October 6, 2021

Situation

Following up from The New Path Forward for Index Coop’s External Relationships post, we are proposing an explicit process for achieving a mutually agreeable outcome where we embark on a 2-week process to 1) gain common ground / understanding and 2) explore deal terms / generate a proposed solution.

We propose a process that we hope exemplifies our core values (compliance with the code of conduct / is inclusive), creates a safe space for discussion, and gives the best possible chances of generating a fair agreement (one where the other party will justifiable take the other side).

Specifically, we define the following terms:

• Fair Agreement: A deal where the other party will justifiably take the other side.
• Code of Conduct: Discourse must be respectful, without blame, judgmentalism, etc.
• Inclusiveness: Conversation is open and community members feel heard.

Ground Rules

• All parties will have signed the Index Coop Code of Conduct.
• All parties commit to being present for the agreed upon meetings.
• All parties commit to working together productively to find a solution.
• If no fair agreement is reached by the deadline or ground rules are violated, parties may choose to terminate any engagements with working with one another.

Clarification and Justification

These meetings will take place on the following dates to gather the necessary inputs to reach of fair long-term resolution

• [Week 1] Build Empathy and Common Understanding (Therapy / No numbers or terms discussed): Sessions to allow each party to share their perspective to help clearly define. Deliverables include:
  • Ideal end state of the relationship between DFP <> Set <> IC. What does winning look like for all parties?
  • Issues list for DFP, Set, and IC
  • Positions List (Must Haves, Can’t Gives, Strong Relative Desire, Strong Relative Indifferences) for DFP, Set, and IC
  • These will be consolidated and posted to the forum (Index 2.0 example).
• [Week 2] Problem Solve, Generate Deal Terms, and Close: Sessions allow parties to discover potential deal terms / ideas, discuss value-creating solutions, and consolidate them into a single set of terms. Deliverables include:
  • New deal terms are agreed upon and laid out to the community in a public forum.
  • New deal ultimately drafted and to be ultimately voted upon via IIP (hard process).

Proposed Meetings and Attendees

Date	Attendees	Topic	Deliverable
Week 1	Building Empathy / Common Understanding
9/29/2021 Complete	Negotiation Kickoff Event [open community call via Leadership Forum]	Explain the methodology negotiation process. Community brainstorm key non-negotiables and questions for DFP	IC non-negotiables. IC questions for DFP
9/30/2021 Complete	Set’s perspective Scott (DeFi Pulse) / Set Representatives Facilitator: Felix & Simon	Building empathy and a common.	Consolidated list of Set: issues, positions list and Ideal end state
9/30/2021 Complete	Simon Perspective Scott (DeFi Pulse) / Simon	Building empathy and a common.	Generated positions list
10/1/2021 Complete	Product WG’s perspective Scott (DeFi Pulse) / Alex Cavalier (Product Working Group Representative) Facilitator: Felix & Simon	Building empathy and a common understanding.	Consolidated list of DFP: issues, positions list and Ideal end state
10/4/2021 Complete	Index Coop’s perspectives Scott (DeFi Pulse) / Nathan Howard (Working Group Leaders Representative) Facilitator: Felix & Simon	Building empathy and a common understanding.	Consolidated list of IC: issues, positions list and Ideal end state
10/5/2021 Complete	DFP’s perspectives Scott (DeFi Pulse) / Felix, Simon, Nate	Building empathy and a common understanding.	Consolidated list of IC: issues, positions list and Ideal end state
Week 2	Deal Terms, Problem Solving and Closing
10/5/2021 Complete	Scott (DeFi Pulse) / Simon + Felix + Nathan Howard (Community Representative)	Consolidate common understanding and confirm all existing positions	Synthetized / reviewed issues list
10/6/2021	Scott (DeFi Pulse) / Simon + Felix + Nathan Howard (Community Representative)	Brainstorm Major deal terms	Draft of suggested deal terms
10/7/2021	Scott (DeFi Pulse) / Simon + Felix + Nathan Howard (Community Representative)	Discuss Deal Terms	Iterated deal terms
10/8/2021	Scott (DeFi Pulse) / Simon + Felix + Nathan Howard (Community Representative)	Finalize outcome	Forum post of outcome

Representative Decision Process

• No later than 9/30/21 Product Working Group and Working Group leaders will select one community representative to take part in the process.
• Nomination form will be circulated to Product and WG Leaders.

Open Questions to Explore

• Terms-Related
  • What are the rules of exclusivity between the Index Coop and methodologist?
  • What is a fee split methodology that works that includes labor / work inputted, costs, etc?
  • What type of contribution does the methodologist bring to the table?
  • What type of contribution does Index Coop (the sponsor) bring to the table?
  • What type of contribution does technology providers bring to the table?
  • How do we deal with unforeseen circumstances once an agreement has been made?
  • How do we decide if a product needs to be shut down?
  • What will Index Coop and Set do to protect the brand / quality of methodologies?
  • Does Index Coop have a subsidiary license to pursue additional opportunities?
  • What is the definition of how revenue is split? If fees are split after gas, how is that calculated and performed?
  • Who can decide whether or not changes are made in the product?
  • How can parties exit if they cannot honor the agreement anymore?
• Business
  • If Index Coop fails, why did it happen?
  • If Index Coop succeeds, why would that be the case?
  • If Index Coop succeeds, what is the greatest accomplishment?
• For Set
  • Does Set want to diversify away from DeFi Pulse?
  • Does Set feel unfair about the implied fee split they are receiving?
  • How much transparency does Set provide to enable monitoring of products?
  • What does Set look for in a partner it seeks to engage with?
• For Index Coop
  • What are the rules of IP protection Index Coop needs to enforce to attract and retain the best methodologists? How broad can IP protection be?
  • What does Index Coop look for in a partner?
  • How do we set the long-term strategy for IC
• For DeFi Pulse
  • What role does DeFi Pulse want to play in the business process?
  • How much ongoing maintenance is DFP expected to provide for a product at various stages?

[fallow8]

An update from myself and @setoshi, @BigSky7, @scott_lew_is , @Cavalier_Eth

TLDR: So far, everything is largely going as planned.

• For the first time, community members and DeFi Pulse were able to directly engage, share frustrations, and communicate core issues within the relationship.
• All the important stakeholders including Scott (DFP), Felix (Set), Simon (IC), Alex (PWG) and Nate (IC) attended their respective meetings (which lasted 0.5-2 hours each)
• Logistics were executed well, as we were able to get the proper representatives quickly and have them prepared for all the meetings
• Details on transpired events / schedules, and interview transcripts / positions can be found in the updated post above.

Some of the key insights are:

1. We are all growth focused

• Each organization is highly focused on the long-term and exponential growth of Index Coop.
• We see the opportunity to become the clear market leader for the global crypto asset management sector.

2. We all want Index Coop to win the market and do things the right way - setting a generational example that defined the best in the rise of DeFi.

• Throughout the course of the individual interviews one thing became abundantly clear - everyone involved in Index Coop is committed to making the world a better place: (i) We do this by making crypto investing safe and accessible for everyone and (ii) There are a lot of bad actors in crypto - we all strive to be a force for good
• This commitment leads to the high level of passion across all parties

3. We are all frustrated by zero-sum games, conflicts of interests and misaligned incentives

• Everyone across the board highlighted their frustration when previously collaborative situations became antagonistic

• Designing a game that allows all participants to collaborate instead of competing was continually raised as a key focus

Next Steps

To be able to drive towards a new arrangement and set of deal terms, three meetings will be held this week between Scott, Felix, Simon, and Nate where we discuss roles, responsibilities, values, and agreement terms.

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Points of Agreement

The Coop needs to be a reliable partner and must have reliable partners

• “We need confidence that you can scale a business around this relationship.” Scott
• “Committed engagement from Methodologists to negotiate and/or problem solve as arrangements wander from expectations.” Nate

Of the time spent working with partners we spend significantly more time managing inter-organizational relationships than actual building.

• “Signal to noise ratio is too high. Lots of takes, vs accountable decision-making.” Alex

We need to do a better job assigning things priority and scrutiny

• “Basically there should be a high-scrutiny to addressing new things and giving them scrutiny. Fair may be the goal but equitable is fine.” Scott
• “People working together to make a vibrant community a reliable partner.” Alex

We want to do things the right way

• “Being part of the effort in building a good steward institution. Winning a market as the good guys. Building something that is done the right way. Needs safe and effective ways for people to invest.” Scott

• “A plausible path for Index Coop to be a major financial institution that does things the right way and viewed as a generational example that defined the best in the rise of DeFi.” Simon