This approach makes a lot of sense and the collectives parachain is the perfect place for groups of people with different skills, interests, etc. to gather, make decisions across the ecosystem and do useful things like manage their assets.
As Rich mentions there can be different kinds of collectives, but whether domain or direction based it’s hard to know beforehand what “system collectives” do we ultimately need. The current system is rigid and limiting, it requires the cumbersome process of runtime upgrades to allow for new collectives to be formed and there’s a limit on how many instances a given pallet can have, we should have a simpler dynamic way to create new collectives and let the community organically arrive to that set of system collectives(if we need such status).
So what I’m missing is a pallet(or group of pallets) that allows for people to form their own collectives(simple or ranked) in a permissionless way, similar to how assets pallet can be seen as the permissionless version of multiple instances of balances pallet, in other words we need an XCM enabled DAO factory in the collectives parachain which has tons of uses beyond the need of multiple treasuries for the core system.