The following is a video and transcript of a talk I gave at Digital 2015 on how blockchains can enable new forms of crowdfunding, enabling society to allocate capital to new ideas in new ways.

Transparent Future at Digital 2015

I want to basically talk about how we might see an interaction between these technologies and political power. Most of the time, that conversation is very much about “We’re going to go around the state, we’re going to do this, that and the next thing,” and it’s very much phrased in the frameworks of pre-existing political power. We’ve already got all these stories about political power, that it’s something that is generated at the ballot box, that it’s given by the will of the people, it’s concentrated inside of these feudal democracies, we have a centralisation of power at the centre and then everything kind of radiates back out from there; that dialogue that we’re going to interact with this somehow by issuing our own currency is the standard discussion about political power when it comes to cryptocurrencies.

I’d like to posit a different way of thinking about this, which is the state has no power, the state is completely useless — it’s a chocolate teapot. The set of problems that face humanity today are completely out with the scope of a state to address. A classic example of this is polio eradication. Through this very, very long and slow process we get really close to eradicating polio, another one of the world’s great diseases is stamped out. Then polio catches a new lease of life again, because the American security establishment dresses up a bunch of people searching for Osama bin Laden as polio vaccinators, and now large parts of the Muslim world have completely lost faith in the polio eradication process, because it’s been used as a cover for an intelligence operation, and as a result polio is alive again.

That’s a really small example of a very specific kind of critical incompetence, where the battle of nation states for power results in their inability to effectively solve global issues. Once you see this as a pattern, that the struggle of the nation state against other nation states for power or for security or for gain, for the standard of living of its people, once you see that that mechanism is fundamentally preventing us being able to solve global issues, you begin to frame the problems that we face in a different light. It doesn’t really matter whether or not something like Bitcoin is an effective challenge to the power of the state inside of these narrow definitions; what matters is whether something like Bitcoin or Ethereum or any one of these blockchain currencies, whether it has the ability to solve global problems that the state is currently incompetent to solve. Once you frame this as being about identification of competence and application of competence to problem solving, you begin to understand that there is in fact an enormous, uncharted wasteland of the stuff that the Westphalian nation state is simply unable to solve, because it’s the wrong institutional vehicle. [03:00]

Once we accept that there are a whole bunch of critical problems in the world that the state is simply unable to solve, because it’s the wrong institutional vehicle, what you see is that we’re in fact not surrounded by encroaching powers that are telling us what to do; we’re surrounded by incompetent powers that are refusing to take effective action. Once it is framed that way, the notion that you could be building a political power base that was solving problems the state was unable to solve, while at the same time delivering real human benefit, to me begins to look like a much more rational way of discussing why it is that things like Bitcoin are important. Fundamentally, it’s not about competing with the state for the territory the state already has; it’s about going to the unsolved problems that face humanity and solving them independently of the state. Because if the state can’t get to this stuff, and has failed to get to this stuff in the period from say the end of the Second World War to now, if they’ve been ignoring a problem for that long or struggling with it and never actually delivering, I think we can reasonably assert that the state is not going to be able to solve that problem, which means that that territory is free for any enterprise that’s able to get there and take it. This is a pretty radical way of looking at these things, but let’s just play that out and see where it goes.

I’m going to very quickly scoot over where this whole blockchain thing comes from in a kind of deep history of technology to get to the interesting stuff at the end, which is what happens when we start to finance technology development in a different way. Ronald Coase: Nobel Prize, The Nature of the Firm (1937) suggests that the purpose of a company is to take the expensive, difficult project of making a decision, and then spread the benefit of that decision across as many people as possible, all of whom are essentially paying a little bit for the decision. You work for IBM, IBM has to decide whether they’re going to develop the future in C or in Java, they get a whole bunch of smart people to sit down and think about that and eventually they pick Java. You benefit from that decision, because you were basically going to just pick a language out of a hat; they had an analytical team that made the decision for you, you therefore take a salary rather than a contracting rig. This is Coase’s fundamental theory, that companies exist to make decisions on behalf of their employees, and that that service is worth enough that the employee does better that way than if they were an independent contractor. It’s certainly not the whole truth about why companies exist, but it’s a huge part of it.

The reason this is relevant is Coasean constraints typically bound an enterprise. Things don’t get any bigger than Coase will allow them to be, because when you get an enterprise which is too large, it begins to make wrong decisions. They’re generating an insight into what it is they want to do in the future, they apply the insight, but the organisation is so large that the cost to making the decision is now higher than the domain you can apply it to. [06:00] Really big companies try and make smart decisions, but actually the decision doesn’t apply to one part of the company because the thing is just too sprawling. The more regular and monocultural a company is, like Wal-Mart, the easier it is to make these decisions across the whole thing, but the more specialised and technological and fast-moving it is, the smaller the enterprises tend to be.

Once you begin to understand that the domain of power that accumulates inside of an organisation is related to how far its decisions are valid, what you begin to understand is that the political power embodied inside of the leadership of an organisation is directly backed by its ability to make good decisions; this is another way of saying that things get big because their governance is wise. If you can begin to pull this thread out and say, “Right, so what gives political legitimacy to an enterprise is the wisdom of the decisions that it makes,” that’s a different notion of where the political legitimacy comes from, than the idea that you get political legitimacy by running out and getting your hand on a piece of land first. I think you could begin to see that when you begin to reframe the political debate in these kind of terms — effective decision making is the political mandate, not possession of land; these things grow based on their ability to make effective decisions for everybody that’s subscribed to them — you begin to get this little smell of that smells like blockchains, that smells like bottom-up organisation, that smells like something interesting.

The second thread on this Y Combinator: a very successful investment house in the States, they give tiny amounts of money to small enterprises, to try and see whether they’re going to turn into a big thing. The classic model is three college students over the course of a summer, three months for three people — 50 grand, off you go. What they’ve discovered is that they’re really bad at picking winners. They’re one of the best investment houses in the world, and 90% of the time the things that they think will succeed simply fail, 10% of the time they make back about 10 times their money, which covers costs, and roughly one time in 1,000 they get some enormously spectacular thing like Airbnb. So with the best access to data in the world, and tons and tons and tons of human hands-on experience, they’re still in a position of basically having a magic chicken that pecks out proposals.

Once we understand that even the most skilled human beings in the world are unable to assess a new business idea accurately — they might be able to pick out a few things which are certainly going to lose, but they are definitely not able to pick out the things which will win — you begin to understand that this is essentially a random process; it doesn’t have enough information in the proposal or from talking to the founders to be able to tell whether or not the idea will work. [09:00] I think that there’s a revolution waiting here, which is if we know that the VCs with an n of 600 or 800 or 1,000 are unable to tell the difference between winners and losers, it’s almost certain that an individual entrepreneur will never be able to tell whether their idea is a good idea or not. If we accept that an entrepreneur that is certain they’re going to win is batshit insane, but an entrepreneur who says, “I don’t know whether this is going to work or not, but it seems worth a shot,” is rational, I think we could see a kind of post-optimism entrepreneurialism. Entrepreneurs that really understand statistical odds of failure, that really understand how unpredictable success is, and have methodical, chopping block approach… “You give me a bunch of money, I’m going to go out there and fail. If by some chance I leap out the window and fail to hit the ground, we will all be rich.” This notion that you could have a different emotional positioning of the entrepreneur — that was less about arrogance and enthusiasm, and more about rational estimation of the odds — begins to hint at a kind of scientific, rational entrepreneurial activity.

Quality of decision making is where institutions draw their authority from, and there’s this essentially random walk through the success space, where the entrepreneurs and the VCs are basically throwing money at a random system, with some ability to steer maybe but not much of a quantitative basis for knowing for sure. Out of this comes this question: what if what we need is to fund an enormous amount of innovation relatively randomly, because nobody is actually smart enough to know what’s worth doing and what’s not. We all feel that technological change has slowed and has more or less stalled since the 1960s; we are chipping away at technology incredibly slowly, because it turns out to be really hard to fund stuff, particularly important crazy new stuff, and we can’t get really big funds moved into things like global warming or finishing the job on polio, or nanotech and biotech management and all this kind of stuff. Right in the middle of that mess, what we see is this incredibly broken landscape where we’ve basically forgotten how to spend money to get technological progress. I think that we can solve that with blockchain technology, so that’s what I’m going to be talking about. Ambitious enough?

Historical context: in the 1970s we invent the database, all businesses of any size wind up with a big database in the middle of the shop, the database is an expensive piece of software which manages data that lives on tape, it’s all about managing data on tape. [12:00] This is fundamentally what databases were: it was a set of software for running tape drives — unbelievable. We get to the 1990s and we do the entire thing again for computer networking, we build a whole bunch of technology around Ethernet cables or token ring or whatever it was, and we gradually start to connect all the world’s stuff to the rest of the world’s stuff. This is really fairly successful, the project goes really well, apart from the fact that we never succeed in getting the databases to talk to each other properly over networks — it just never works. Every five years there’s another attempt to standardise all the world’s stuff so that the databases could talk to each other — XML, EDI, JSON, AJAX, JSON-RPC, SOAP, you could probably name another couple of these things from over the years — but they all break on the same problems. The first is the N-squared problem: every time you want two systems to talk to each other, you have to verify manually that the two systems connect properly; the more things you have trying to connect to the more other things, the more interconnections they have and it grows as a square of the number of systems that want to talk. You just wind up with intractable costs, because the larger your collaboration is, the more expensive it is to add each new player, and this is disastrous.

The other problem is this philosophical problem, that when you begin to put two things into connection with each other that are backed by a database, the databases usually have fundamentally different understandings of how the world works, and when you connect them, you wind up with a piece of software in the middle which basically translates one set of philosophical understandings to another. Is it about the customer or is it about the invoice? Well, the bank will always think about it in invoice terms, the warehouse will always think in product terms, and the front end will always think in customer terms, and when you get to the point of exchanging data, the different companies’ assumptions make it impossible to get it across the bridges without additional software. We’ve been stuck at that for years, which is why every time that you try and get two enterprises that are both working for you to talk to each other, you wind up taking the data yourself, mashing it with a hammer and then handing it to the other guy. There’s almost no seamless way for me to give an instruction to Amazon to give an instruction to my bank to give an instruction to somebody else; you just can’t get flow-through connectivity across the organisational landscape, because we’ve never figured out how to get past this idea that organisations have a database with a network and the network exists to connect the databases. The databases were never designed to be interconnected, they don’t work at all when you try and do that to them, and as a result all of our lives are in these broken-up organisational silos with database systems that don’t really talk to each other, and we’ve all got the experience of that any time we try and do anything complicated with our stuff. [15:00]

The same problem exists in government, but it’s magnified a thousandfold. The government doesn’t have a single database where it stores everything about you — maybe the intelligence databases, but certainly not the operational ones — so every time you get different parts of the government trying to cooperate to do something, everything breaks down, because each department has its own silo, the silos don’t technically connect to each other, and as a result the government is basically a balkanised, fractured framework in which different databases are failing to interoperate, so you can’t get a common operational picture of what’s happening in your society to make changes. It all goes back to the fact that the SQL database was never intended to be an interoperable system, and we’ve never solved the philosophical problems that prevent it from being one. There is no fundamental, axiomatic schema that all databases share right down on the basis that would allow you to have a philosophical interoperability between them — it just doesn’t exist. As a result, everything that runs through big organisations is fractured. Does this make sense? Have you all had this experience? It goes right back to the database technology.

We get up to the present, you get to the 2010s and you get these blockchains. The thing about the blockchains I think is most philosophically important is the ability of a blockchain to force everybody to work in the open: we take a whiteboard, we take turns writing something on the whiteboard and everybody can see that we’ve written. If we are having a transaction and we go backwards and forwards a bunch of times, and somebody else wants to learn the standard that we’re using, they can look at the history of past transactions, infer what constitutes a valid transaction and join the club. Once you begin to think of this ability to examine the total transaction histories as a way of learning how to do a transaction, once you look at that as you mess something up and you can then go and look at what happened and everything is there, rather than having it lost on a wire because they just went over in a millionth of a second, you begin to understand that there’s this possibility that you could begin to fix the organisational bureaucracy problems around database interoperability using blockchains to bring everybody onto the same page.

If we had 50 organisations that were cooperating and every step in the cooperation was done on a blockchain, it becomes very, very easy, because there is no centralised schema inside each organisation; you actually have a database technology that was built from the ground up for interoperability, and all of the organisations are sharing that working space together. I think that this could potentially be the end of the silo problem that causes organisational balkanisation. We could actually wind up with an easy flow of tasks and structures between organisations, because we finally have a database technology which is network-native, and I’m incredibly excited about this. It’s easy for me to imagine 50 years in the future that when you have extremely large, complex collaborations between multiparty entities, it flows easily and it works, because we finally got a technology that makes it look like we could get over the bureaucratic hump. I don’t think it’s going to take 50 years to implement that; I think it might be 20 years, it might be 10 years, it might even be five years, because the technology is coming along really quickly, and the societies are desperate for better ways of solving these problems. [18:00]

Smart contracts. Raise your hand if you understand a smart contract. Kind of, sort of? Let me give you what a smart contract is in just really, really brutally simple terms. A smart contract is a Perl script that lives inside of a blockchain, it’s just a little piece of code that lives inside of a blockchain, and it’s got access to sum amount of value, it assesses a set of conditions, and if it agrees that those conditions have been met, it moves the value somewhere else. I say Perl, but it could be written in any language, Ethereum uses a thing called Solidity — it doesn’t matter what you’re using.

The fundamentally useful thing about smart contracts is there are definitionally visible to all parties of the deal, so there’s no ambiguity about how the contract will operate. It’s a chunk of code, you look at the chunk of code — your text, their text — agree what the chunk of code will do when it’s actually run, everybody loads their value into it, and even third parties can look at that and completely understand the behaviour of what’s happening. So you get to these organisational interfaces where the silos meet, and rather than having my middleware and your middleware guessing what will happen when we send messages back and forth and praying that it actually works, we both agree on the text of a smart contract, we agree the smart contract, we put the smart contract in the blockchain and the deal is committed. At that point, the resources are committed, the evaluation metrics are completely clear, you get this potential for organisations to interoperate, because you have these little snippets of code which are sitting in the blockchain and they’re essentially a transaction which we’re all committed to perform, and exactly what happens will be decided by the code on the day that it happens.

The smart contract is not magic; it’s just a little computer program that has access to some value and authority to spend. But when you start thinking about what happens when you put smart contracts into an environment where the inability to cooperate is crippling every single aspect of our existence, you begin to look at that and be like “Wow, I could actually have a smart contract that made it possible for my phone company to actually correctly communicate to my bank.” Think of the direct debit as an instrument — it’s absolutely archaic, it’s terrible! You give massive authority to some institution that can make a billing error and just whack you for £1,500 because you let your phone accidentally turn onto roaming. We’re giving enormous amounts of authority over our bank balances and into our payment instruments, and all of that could potentially be fixed with smart contracts. [21:00]

The same thing is even more true when you start thinking about things like mortgages. Transferring a piece of property like a house from one place to another could be as simple as a smart contract that accepts “When this escrow account has a value of more than £300,000, transfer the ownership to this other person,” and all of that conveyancing and that half percent of your house value gets charged to you by a bunch of middlemen, all of that stuff evaporates. If you want to rent a car, it’s a smart contract: there is a chunk of code, there’s a human translation of the code, it’s all signed-off that the human translation of the code is completely valid in the court of law, you put some value into that, and there’s your insurance, there’s your this, that and the next thing. Automated enforcement of contracts for simple transactions is one aspect, the other aspect is complex collaborations between big organisations, because the code which runs the collaboration is not buried inside of the middleware of each organisation independently.

What I’m pointing at is the possibility that blockchains are the organisational gubbins necessary to re-plump the world into a system that actually works for people. This is all about fixing bugs in 50-year-old technology that nobody except enterprise data architects ever really directly confront; those guys get paid the big bucks, because they really understand at a philosophical level why SQL just isn’t working. This is a little esoteric, but I figured it was the right crowd — you are getting the fully esoteric version.

Right, so let’s get to the fun stuff: equity crowdfunding. Does everybody have a pretty clear idea of what this looks like? You get a bucket, everybody puts in £20, everybody gets a tiny share of equity in the company, if the company turns out to be the next eBay you get £2,000 back. Regular crowdfunding is you put the money in and nothing comes back; equity crowdfunding is you put the money back, you get a tiny little share of the company and you could actually make some real money.

Equity crowdfunding is obviously a good idea. It is very, very hard to find any rational argument about why equity crowdfunding is a bad idea. The only objections that you’ll typically see are what if the public get conned, and that coming from governments that actually operate national lotteries. Right? “Pardon? What are you talking about?! You allow people to sell cigarettes! What are you talking about the public will get conned?! You’re mad!” Right? Yes, there are some quality control problems with equity crowdfunding as a model, you need some way of communicating to people the level of risk in an appropriate way, you might want to talk about reputation or rating systems, a Moody’s or a Standard & Poor’s for equity crowdfunding might be a good idea, there’s all kinds of stuff you might want to do, but the basic idea is obviously sound. You sit there with a credit card, you swipe it, you own a tiny little share of a company that’s manufacturing some weird-looking device that you equip to a golf club, and if tens of millions of people like it then you make a lot of money back. It’s just not done. [24:00]

But, right now the regulatory frameworks around equity crowdfunding cripple it, and this is I think the key fight for the development of technology for the 21st century. If we win equity crowdfunding, I think we’d get pretty much a flying car each; if we lose on equity crowdfunding, I think that we are potentially in a long cycle of decline into a kind of neo-feudal patent, barren landscape. Bold stuff.

Here’s what I think you’d get, if you get equity crowdfunding right. In all probability, if equity crowdfunding becomes a norm, and you might go as far as to have companies which must be equity crowdfunded so that you wind up with a distribution of wealth right from the first step — I think that’s an interesting prospect — if you get a large company that winds up with enormous growth, to the point where it’s got hundreds of millions of users, at least it’s probably got 20,000 or 50,000 or 100,000 owners, and the probability that most of the owners will be people that are regularly using the company’s services actually changes the dynamics. If Twitter was owned by 100,000 different Twitter users that had bought in early, I think you could be fairly sure that you wouldn’t have promoted tweets, you wouldn’t have all of this spam that you’d have to shovel out; you’d have a privacy policy that actually worked. If Facebook was majority-owned by 25,000 early Facebook users, who were now worth $200,000 more than when they started, I think you can be fairly sure that they would be doing a lot less of the kind of intrusive and annoying stuff that everybody hates about Facebook.

The prospect that you could begin to have the owners of a service and the users of a service be substantially the same people, the simplest way of getting to the first rung of that ladder is enabling equity crowdfunding. I think that it will provide better services for everybody, because nothing is worse than having an absentee landlord. Nothing ever gets fixed, and if you get a hole in the roof, the roof is going to say with a hole in it for as long as it bloody well takes — just nobody cares. The vast majority of the technical services that we use every day are run by absentee landlords, so it’s not at all surprising that they’re actually a big shit.

Equity crowdfunding gives us this ability to imagine a user panel of 25,000 Facebook users that have the ability to appoint a board that will represent the interests of ordinary users like them. I think that we would all be much happier if we lived in a world in which companies were run by people that were picked by the users of the services that they provide, rather than by a bunch of people that were there to squeeze the maximum amount of shareholder value out. [27:00] This seems like a reasonable prospect, and I think that this notion that you could decentralise asset ownership, particularly of high-tech assets that were being developed very quickly, using these kind of models… If you go all the way back to the beginning and you think of this kind of venture capital magic chicken, the venture capital randomness suggests that we’re not going to lose much economic efficiency by having crowds do the work rather than companies. If a company’s expertise actually turns out to not help very much, giving that capital allocation job over to the crowd… Yes, you’re going to get fashions and you’re going to get stupidity, but I think you get those things in venture capital now. I’m not suggesting that we’re going to be shovelling money into a furnace in some completely inefficient way. I think we’re already shovelling the money into a furnace, but we should let more people shovel more money into the furnace, as long as everybody understands that these things are fundamentally non-deterministic and that an investor pitch is basically just a brightly-printed bingo card.

If you’ve got blockchains and smart contracts and all the rest of this kind of stuff, equity crowdfunding with the ability for people who have bought a share in a company to vote on who the directors will be becomes operationally really fairly simple. You could take a really fat, complicated Ethereum smart contract, and you could represent the entire equity crowdfunding process right the way through to board elections on it. I would not want to be the person writing that contract, but I’m confident it could be done.

What you get out of that is an ultra-low transaction cost platform that allows people to buy shares in companies, sell the shares in the companies to other people if they want them, and the current owner of the share can vote in a company election to pick the directors that will then run the company on their behalf. That as a single-platform system could potentially become the way that we do the vast majority of innovation funding right across the landscape, in the same way that Kickstarter has rapidly come in to dominate new product development. Go all the way back to grandpa Coase. Mattel toys exists to manage the capital from previous generations of toy sales and to invest it in new toy development, but that’s only an efficient process if they’re able to make decisions that are better than random. All the evidence is that for high-tech funding stuff, like venture capital does, the ability for VCs to accurately pick is extremely low, at which point the natural size, given authority flows from wise decision making, is extremely small. In a domain where it’s really hard to get a lot of the decisions right, it’s natural for lots of small entities to just try random stuff, and some of them prosper because it works. [30:00]

What I’m suggesting is that the way to fundamental economic efficiency, given how hard allocating venture capital is, is towards tons and tons and tons of small enterprises doing it, and the only obstacle to that is transaction costs and regulation. If we could cut the transaction costs using blockchains and we could get somebody to okay the regulation, what comes out of that is the potential that you could begin to massively accelerate global technology development on a largely democratic basis using equity crowdfunding on blockchains, and I think this is amazingly exciting. It is quite hard to get me genuinely excited about something that isn’t like a water filter or a solar panel, so for Gupta to get up in the morning and think, “Yeah, equity crowdfunding!”… This is a real, real slow thing for me, but I’m actually getting to the point of thinking this might actually be a big fix. Not a little fix, not like Sugru connecting to little bits of plastic; I think this might be how we re-democratise the means of production at a global scale. I’m wildly enthusiastic about this!

Obstacles — I’ve talked about this already to some degree. Fundamentally, for this model to not just be rampant fleecing of the public, we have to accept that most of the investors are just random guessing or a little better. If you actually believe that an investment house is three times the probability of making a correct investment than a grandma from Iowa has, then equity crowdfunding is simply a way of causing the public to burn their money for things that will never give them a return. It’s extremely important that we’ve got to put this as a method that is used in situations where it’s extremely difficult for anybody to make a good decision, because otherwise the lack of access to high-quality information means that there’s an information asymmetry and therefore a power gradient between the investors and the equity crowdfunders. If the investors just get really much higher returns on investment than the equity crowdfunders, the equity crowdfunders would be exploited. But if the return on investment is roughly equivalent for equity crowdfunders and for VCs — and for that you’ve got to include all of the unsuccessful VCs, all of the unsuccessful angel investors and all of the unsuccessful friends and family members that put money into young cousin Cho’s company — if you include all of those failures, I think that what we’ll discover is that equity crowdfunding and venture capital have very similar rates of return, but it’s an incredibly important point that the argument has to be that they’re not getting a worse return on their investment than you would typically get from anybody else in the field. [33:00]

With that said, on the other hand, given that we’re dealing with governments that sell lottery tickets, the other approach that you could take is you could say that an individual can only equity crowdfund up to some limit of their wealth, kind of like the US accredited investor system, you could basically say, “It’s their money and we don’t care what you do with it. As long as the bets are small, we don’t mind. $100 limit per crowdfund,” there could be many, many different ways of managing that risk. But if we don’t find some really coherent way of measuring the effectiveness of equity crowdfunding models versus VC, it’s hard to make the argument that the equity crowdfundees are not actually being taken, and that’s a very important thing that we’re going to have to think about at philosophical, practical and regulatory level.

I’m going to basically skip this branch and I’m going to talk a bit more about how we fund the future using this model, but I’m just going to float over the surface of this. Equity crowdfunding is one of probably 58 different things I could have talked about as “My God — blockchains will change everything!” Tomorrow I could talk medical records, the day after that I could talk land registries, sometime after that I could talk carbon trading — it’s just everywhere you look. If there’s an SQL database involved and a computer network, I guarantee you could apply a blockchain to it and something magical will happen. The publishing industry: you could kind of equity crowdfund the books and you could wire it all the way through to delivery and then you could have people compete for printing and you could… You could just hand-wave your way through. Anything that currently runs on SQL databases and computer networks, you could talk about the blockchain revolution and it will almost certainly fit.

Now, strap in — we’re about to get to the fun part! Right now it’s almost impossible to get fundamentally important new technology funded at the level you need to get it funded to make it work. Did anybody in this room ever actually take a Concorde? There might be a couple here that were old enough to do it. Concorde was three and a half hours to Boston — you land before you left. We don’t have Concorde anymore, because it is economically inefficient, and because we couldn’t organise the capital to fund the next generation of Concordes or the runways and everything else that they would have needed to make that work. If we had equity crowdfunding, I bet that we would still have Concorde, because I think that you could have gone to the global public and said, “For God’s sake, it’s a rocket plane! Just give us money!” and I think they would have done it. It’s really hard to convince a bunch of bean counters that it’s really important that humanity has a rocket plane, but there’s a wilful enthusiasm in the love of technology that I think corresponds very closely to what humans actually needed to build in order to survive. I think we are emotionally programmed to love a particular kind of gadgetry that has fundamental utility. Think of the amazing love that small children have for animals, pocket knives and fire — that’s an evolved instinct. [36:00]

I think that our overenthusiasm for new technology is actually an evolutionary instinct on the same fundamental level as hunger or sex or the desire not to be wet and cold, and I think that we’ve created a situation where ordinary individuals have no way of expressing this kind of techno-lust, other than buying things that other people have made. They can’t get heavily involved with the process of changing the world into a place with flying cars and jetpacks, because we don’t actually provide a social machinery by which an enormous number of people can actively create that future, and this is largely bureaucratic, regulatory and transaction cost bound. The people want flying cars and they’re willing to pay for them; the problem is that flying car dude has to go and find a bunch of investors that are willing to put in £2.5 million for the next round. What he really needs is the 85,000 people that think flying cars are cool and are willing to take £100 punt on it to get behind them.

Once you begin to think of all of the places where we need really, really bonkers technology built to solve real human problems but we can’t successfully allocate capital to open up that territory, the problem is that the people that are holding on to large sums of capital are innately conservative. What we need is recreational, hobby investment in new technology on an enormously wide scale to bust open a whole bunch of these fundamental technological blocks, to deliver us this flying car utopia that we all feel entitled to, and — you know what I’m going to say — blockchains are the key. I can’t see any way of doing this that isn’t blockchains from one end to the other.

Indeed, Ethereum the platform comes from exactly this kind of wildly-exuberant crowdfunding exercise. 9,000 people got together and said, “We are going to give Vitalik enough money to implement this amazing vision of his, because we believe that he is going to change the world into a better place,” and off they go to the races. They pile in behind that vision, and because we don’t have all of the necessary structures in place for this to be formally an equity crowdfunding enterprise, we wind up putting the money into a non-profit, and it becomes seed money that the non-profit uses to hire a bunch of programmers to write a bunch of open source software. But if we had equity crowdfunding vehicles available, it’s clear we would have used one. Ethereum is absolutely not an equity crowdfund when you get down to the technical detail of how the deal was done, because there’s no legal way for us to have done it that way. [39:00] Instead, we have this charitable foundation model, but the absolutely fundamental situation is we’d love to build equity crowdfunding platforms on top of Ethereum, and the next thing that comes after Ethereum could be legitimately equity crowdfunded. I’m already making my living right now from technological exuberance expressed as lots of small donations to charity. You see what I’m saying? It’s amazing! You could do things that nobody else could possibly do, and real wealth creation results.

If you’re just using Bitcoin as a way of taking a whole bunch of payments business off a bunch of stupid bankers and giving it to a bunch of… actually giving it to nobody because you keep the money, you’re not actually creating new wealth. Making an existing system more efficient reduces the drag and moves money from the pocket of one middleman to no middleman or leaves it in the pockets of the customers, but it does not create new wealth; what creates new wealth is doing deals that could not otherwise be done. If you get a 12- or a 15party deal, it’s impossible to use normal instruments to cut that deal, you come along with some piece of new technology that enables a more complex kind of multiparty cooperation… Boom, you have just achieved wealth creation.

The notion that we could start creating new wealth by doing impossible deals to fund impossible projects on a huge scale, because lots and lots and lots of nerds are on $100,000/year and could easily burn $5–10k/year on equity crowdfunding stuff, and if you multiply that by 10 million people on tech salaries across the West, you begin to realise that’s a river of money that’s substantially larger than most governments… Whoa, whoa… Right? You begin to think, “What is that? 10 million people… 100 million… a billion… 10 billion… 100 billion.” With relatively conservative assumptions, you could imagine a pipe with a $100 billion a year coming out in equity crowdfunding, and that’s assuming that none of those crowdfunding projects actually make a bunch of money, because if they do, a lot of that money is likely to be reinvested.

What I’m basically suggesting is that there’s a potential for this enormous investment in building the cool future, if we could get equity crowdfunding fully legitimised, and I think it’s going to have to be done on blockchains for technical reasons. If that happens, you could begin to see this rolling reinvestment of a pile of money large enough to actually look at projects like Concorde and say, “Maybe we should redo that with modern technology.” Certainly there’s a whole pile of highly-risky things that it would be fascinating to take a crack at doing. Neal Stephenson talks about this 20-kilometre-high tower, and it’s actually fairly credible that you can use current material science to build a 20-kilometre-high tower, and his approach was basically “Maybe we should just build one and see what people do with it. [42:00] Put an elevator in it. Maybe people will hang glide off it, maybe they will use it for science, maybe they’ll just drop things for fun, don’t really know… Maybe we should just build it and see what people do.” I think that that kind of an approach is impossible to sell to somebody whose job it is to responsible manage a bucket of capital. But, responsibly managing capital is not how human beings made it to the 21st century. We made it by being gonzo, we made it by being crazy! “I’ve got this idea: we’re going to go across the desert, and on the other side I think there are going to be more trees. — You’re mad. — Yeah. What’s your point? — Okay, let’s go!” Of course most of them die in the desert, but the ones that don’t, succeed.

It’s impossible to get people who are charged with not losing the money to take enough risks to get real progress. To get real progress, what you need is this attitude that we’re just going to shovel the money into the furnace to watch it burn, and once in a while we’re going to find an enormous lump of gold in there at the end of the alchemical process. Equity crowdfunding is the way that we could open that river of money up, so that we could take all of this wealth which is being poured into the pockets of the technical elite who are bored with the reality that we have given them, and we could give them the social mechanisms to turn that money into unbelievable technological acceleration, which is more or less the only hope that we actually have of fixing the fundamental problems of the planet that we’re on. Right now we’ve got 10 billion people, about 7 at the moment and headed for 10, we’ve got an incredibly rapidly shrinking natural resource base because of things like spreading forests and global warming, and nobody is really looking at this seriously, because the governments are just too small-minded to really, really face “Oh my God — it’s all broken! What are we going to do?! — I have no idea!” You just can’t talk about that and still get elected.

But, what if you get this kind of equity crowdfunding approach for things like radical environmental action? Not charities, because charities don’t scale, and they do things like take… Was it half a billion dollars for Haiti and then build six houses, this whole recent Red Cross report? Oh my God — what a mess. Put that in a blockchain and then execute everybody that screwed those people. No, we could actually get into this kind of position where most of the world’s high technology development is funded by equity crowdfunding from overpaid nerds who love gadgets, and that demographic has enough money that it can outspend the state and most of the big corporations relatively easily. We could get our flying cars, and I think the only missing component is an effective equity crowdfunding platform. It needs legal and it needs technical and it needs financial and it might be 50 platforms rather than one, but I can’t see any flaw in the basic argument that if you want to blow the doors off innovation at a global level, this is the missing piece. [45:00]

Other things we might get out of this: societies of stakeholders. Bridges, viaducts, wind farms and all the rest of that kind of fundamentally boring but worthy stuff. I think that getting the people to go over a bridge to actually raise the money to build the bridge on the basis that they will be paying their tolls into their own pockets seems like a fairly reasonable approach and I bet there are a lots of places where it would work. You would also get a re-democratisation of the way that we manage critical infrastructure, and I think that that’s an extremely important thing in the long run, because who owns the means of production? As my friend Jay Springett says, “Who owns the means of not dying?.” They’ve got a political analysis toolkit called #stacktivism, which is all about analysing ownership of critical infrastructure as a way of understanding the shape of societies. All of that stuff is fundamentally fungible, transformable using equity crowdfunding models, if you could figure out how to let people buy shares in a bridge that they’re then going to pay tolls to cross. It’s the same kind of unification of users and owners that you see when we were talking about the example of what would happen if we’d equity crowdfunded Facebook. There’s no reason we couldn’t do it, and it’s a way of doing democratic ownership that doesn’t involve going through the mechanisms of a nation state. ~Stakeholder society: Mrs Thatcher would almost certainly approve, but that doesn’t mean it’s a bad idea.~

It gets you most of the same benefits as you would get from nationalising an industry without having to nationalise an industry. Decentralised, democratic ownership of assets, without having to put the entire thing under the military authority of a nation state in order to have it collectivised. Small-scale, petty, bourgeoisie collectivisation. You could think of these things as being cooperatives, but however you want to think of them, fundamentally there’s this potential for hugely spreading the ownership out among the people that are using the assets, because they will be the ones that are most likely to buy in when the thing is floated.

The left believes that the people who work in a factory should own the profit that comes out of the factory, the right believes that the people who finance the factory should own the profits that come from the factory, and that’s more or less the entire left-right political debate in a nutshell. Marxism was an industrial age ideology and it couldn’t have been anything else; Maoism is another story. [48:00]

Right now, when you take away the idea that the wealth is created by industrial production, the left and the right completely disintegrate into a little cloud of purple sparks, they vanish. As soon as you’re no longer talking about an industrial generation of wealth, left and right become meaningless. People often ask me am I left or right, and it’s just like: look, I’m post-industrial, and I cannot find any meaningful redefinition of left and right for a post-industrial society. Left and right are industrial age concepts.

What I’m basically going to suggest is this: if you’re talking about very, very broad-based democratic ownership of assets on the basis that anybody that had a little wealth could buy in, you are still talking about a bourgeoisie democracy. The genuinely poor people cannot participate in a crowdfunded system, because they don’t have any equity to put in in the first place. Right now, the only people that get access to equity as a vehicle are the very rich. If the minimum slab to get involved in the game is five million dollars, only the very rich are in there, and the vast majority of the returns in our society go in games which are $5 million as your basic slab. Once you begin to spread that and you get down to say $100 as your basic slab, you get a much, much more democratic engagement in the creation of your infrastructure. Many, many more people have an opinion ~in/on/and~ accounts, because anybody could get involved in those kind of issues. But it’s very important to not analyse this stuff inside of a left-right framework, because if you try and sell this idea of micro capitalist investment in local utilities as being an idea of the left, it sounds like you’re democratising things, you’re bringing back local ownership and it’s the cooperative movement all over again. On the other hand, if you talk about it from the right, it sounds like what you’re talking about is bringing real financial instruments into the reach of far more people than have them already.

It makes sense both from a left perspective and from a right perspective; what it doesn’t make sense from is an authoritarian perspective. There’s lots of authoritarians on the left and the right that are profoundly against notions of equity crowdfunding, because “For God’s sake, you wouldn’t want people just run around and band together to go and buy things into existence that they think should be there! That should be our job. We’re here to allocate society’s capital, not you.” Right? Building mechanisms to let the people own society’s capital allocate society’s capital by cutting the transaction costs and cutting the red tape is not a strategy that makes sense in either left or right terms. It’s a strategy that makes sense along a political axis which has not yet been defined, because we have not yet seen the Hayek or the Marx for the post-industrial age. [51:00] Right now post-industrial politics is a wasteland. Nobody even remotely begins to understand the political economy and the economic geography which are the fundamental generators of wealth in the societies that we’re in. Nobody has got the political economy or the economic geography; as a result, all of the politics are just floating in space, because you can’t find an accurate map and you can’t figure out where the money and the power are.

Part of the reason that this whole equity crowdfunding thing has such a hard time gaining political support is because it’s so difficult to explain to people why it is in their political interests that equity crowdfunding is the standard way of funding society. I don’t even think the libertarians really understand this. It’s obviously a great idea for libertarians, but there is no political ideology that says decentralisation of ownership by owning up micro equity is a critical part of democratisation of the functions of the state, and that’s the thesis.

There are four technologies that are currently going completely nuclear, they’re just melting down reality: blockchains — oh my God, but you all knew that — virtual reality and augmented reality… Has anybody recently strapped a phone to their face? All of this new VR gear: you strap a phone to your face with a couple of little plastic lenses and a cardboard box — Google Cardboard is one such brand, Samsung has a thing called Gear — you look around and you get stereo depth perception of the world, only it’s not the world that you’re looking at, it’s a different world, and it works. The good stuff is really good, the cheap stuff is also really good, and it’s good enough good. Christmas of this year, I believe there are going to be something like six systems like that on the market on sale at Christmas present prices. By the end of this year, a third of the teenagers in America from middle class households will have virtual reality gear; that’s a really substantial change in things.

I had my first virtual reality experience in 1991. It has taken 24 years for that technology to arrive. Once it arrives, once this stuff is actually here, you’re going to see this sudden fracturing, because it’s a technological jump that society as a whole is not ready for, and because society as a whole is not ready for it, it’s going to be demonised in the worst possible way. [54:00] It’s just like all of the cyberpunk literature of the 1970s, 1980s and 1990s, all of that tearing between the regular people and their kids who are gargoyling around and won’t come out of their virtual realities, all of that stuff is just going to go boom. It’s just going to be hilarious and possibly awful, but it’s coming and nothing can stop it and nobody is ready. Technology meltdown, nobody knows what to do — “It is coming — oh my God!” Does this sound exciting? I’m excited. A lot are terrified, but I’ve been waiting for virtual reality my entire adult life and finally it’s here, and it’s cheap, because your kid already has an iPhone, and it’s an iPhone plus a cardboard box! What?! The notion that the phone ate the TV and it ate the phone and it ate the web browser and it ate the camera and it ate the recorder and it ate this Walkman and now it’s going to eat the virtual reality… The phone is rapidly becoming this unique, powerful, magical artefact. So, by the end of this year we’ll be knee deep in virtual reality that works, massive sales campaigns telling people how cool the virtual world is, and people will be piling into that like there’s no tomorrow.

Drones, robots, Internet of Things. Every time I see another drone, like some kid will be rummaging around in their backpack and I would be like, “What’s that orange thing? — 1.5-inch square drone, 10-minute flight time, you control it by balancing it with your phone and it’s got automatic hovering. — Where did you get that? — It was $1.50 from China, I’ve found it in the back of a cereal packet.” The world is rapidly turning into drones and robots that actually work. Nobody has figured out what they’re for yet, but I don’t think it will be that long before Amazon will do drone delivery to your picnic. “Did you run out of cheese?” Beer delivery at festivals, medical uses, flying samples around in hospital — there could be all kinds of uses. But once that process begins, the notion that you actually have to physically carry things from place to place rather than having a drone come and fetch it and carry it for you… “Could you run this key over to Bob, please?” Uber droning keys around a city… Of course that only works because you haven’t modernised your locks yet, but there’s lots of physical movement of stuff that will just evaporate, errand running just goes away. Not quite the same kind of discontinuous boom that we’re going to see with virtual reality this year, but coming along very nicely. 3D printers I would also put in there, but I think that’s still five years out from really making a difference.

Finally, artificial intelligence, not in the sense of artificial people but in terms of problem solving is now a fact. Computers could finally tell the difference between a cat and a dog more effectively than a human being. Travel planning: give me a system that says, “I want to meet these seven people, find me the cheapest and easiest location in Europe for us all to meet,” and it goes all the way through the travel systems, we could do that tomorrow. [57:00] Watson: medical diagnosis and it can answer pop quiz questions. Why we don’t have a clean interface where you could just ask a question of Watson for a fiver and it will come back with an answer I don’t know yet. “Watson, what is the best HD TV? ~Send $5. Cheaper than~ twice the price.”

Comment: SoundHound can answer crazy questions, like what the square kilometre area of China and India and the relative populations and what’s their capital city. What is the population of [~5, 57:30] for Germany? [~2] and it will instantly give you the answer.

So it’s basically useable artificial intelligence on a phone?

Comment: Yeah. The demo came out last week.

SoundHound — fantastic.

Comment: The SoundCloud people have been working on SoundHound, and it’s crazy good.

So, blockchains are going nuclear, VR and AR are going nuclear, drones, robots and Internet of Things are going nuclear, and artificial intelligence is going nuclear — boom. Who is going to fund the areas where these things intersect with each other, given that individually each one of these things is right at the limit of our current bureaucratic appetite for risk? If each one of these things is already at the limit of VC appetite for risk, the intersections between these things will definitionally be too risky for VCs to go into.

My suggestion is that we take this kind of ultra-technology apocalypse thing which is currently happening this year, next year and for the next five years, and we figure out how to build equity crowdfunding vehicles so that we could take the excess cash of 10 million nerds and use it as $10 billion/year funnel to get our bloody flying cars funded. Because we’ve got the possibility of unbelievable technological acceleration in the intersection between these technologies, but it’s going to involve enormous amounts of really expensive technical labour doing more or less trial and error. My suggestion is that we basically close the loop on the dotcom ecosystem, and have the nerds fund their friends, the other nerds, to do this stuff in micro capital enterprises, as a way of rapidly pulling these technologies into existence in domains where venture capital is simply too risk averse, because they don’t understand that it is their job to burn money in a furnace to make alchemical gold. [01:00:00]

I’ve basically run out of brain for this, but I’ll very briefly go through the remaining two slides. Whether multitudes or elites own the future comes down to whether you get equity crowdfunding that works, therefore it’s critical we get equity crowdfunding that works. That’s the political case; I’m not going to explore the ramifications, because I’ve just run out of volts.

Funding as free speech. If funding is performable with a speech act, I’d say give Bob £5; and it does, it gave Bitcoin. There is absolutely no way that you could prevent people equity crowdfunding things into existence as an exercise of their democratic right to free speech. Free speech arguments behind funding on blockchains are the critical way of deregulating the damn things, because you’re either going to regulate my speech and tell me that I’m not allowed to say this, or you’re going to basically tell me that I am free to speak because in this environment speech acts are performative, and there’s no way to get away from deregulating these systems — worth thinking about.

Finally, institutions. The current institutions are completely unable to actually get their head around reality, because the institution of the institution is centuries or millennia old, depending on how you count. Reality has speeded up by a factor of maybe a 1,000 since we decided that we’re going to have MPs sit for four years at Westminster and we were going to elect them by boroughs of 20,000 people voting. The acceleration in every other part of reality has gone completely out of control, but we still govern at the same speed that we did 200 years ago. Four-year electoral democracy is an idea which is 200 years old. If you told Thomas Jefferson that 200 years in the future when we had airplanes we would still be using representative democracy, he’d slap you. If the American Founding Fathers were redesigning American democracy today to represent the will of the people, is there any possibility that they would come up with the system that we currently use? No, clearly no. There’s no way that they could possibly justify it as an efficient use of resources.

Once we understand that the purpose of the government is to perform capital allocation on behalf of the people, we could use equity crowdfunding approaches to allow the people to do their own capital allocation. If you could fund your roads and your bridges and your spaceships, and you could fund all the goofy stuff like “I want an artificially-intelligent Snoopy that I can see through the eyes of using VR,” if we’d get all of those things simultaneously running on these kind of equity crowdfunding platforms, the possibility is that we could start to dismantle the need for the nation state far in advance of its collapse. [03:00]

For example, I think that if you had efficient equity crowdfunding solutions in Greece right now, an awful lot of people would be using them as ways of maintaining the kind of critical stuff that they’re doing right now. When we get right down to it, I think we could put all of these systems together into a single proposal, which is democratisation of society and massive acceleration of technological change as a single package. Could anybody really say no to that? Massive acceleration of technological change and democratisation of society, all of that is encompassed inside of equity crowdfunding. The technological change is what you get when you equity crowdfund gadgets, and the democratisation of society is what you get when you crowdfund critical infrastructure like bridges and roads. We could do both of these things simultaneously on the same legal framework or on the same technical framework, and if we get that right, I think we’d get the open future that everybody has fundamentally wanted. Thank you. [applause]