Scott & Don: [Weather talk.]

Scott: So let’s talk a little bit about supply chain. What are your thoughts about how Blockchain is going to affect supply chains?

Don: At the Blockchain Research Institute we’ve been exploring this quite a bit. We’ve been coming at it from different angles. One of the early apps was Trade Finance, and that is sort of the tip of the iceberg that brings you into this topic, because you have a buyer and you have a seller, and then there all these people in the middle. They are shipping companies, and airplanes, and there are escrow agents …

Scott: Warehouses. Yeah.

Don: … and warehouses, and governments, authorities. And right now it’s a very serial kind of thing, the way that stuff moves around. So, if you can move all that onto a distributed ledger, you have a real time view as to what’s happening.

Then you consider something like logistics, going through this, FedEx is one of our clients, and they’re a real innovator on this. At Consensus, the opening session, I’m going to interview Fred Smith, the CEO of FedEx.

Scott: Are you really?

Don: And the legendary CIO, Rob Carter.

Scott: Yeah.

Don: He’s been there for 18 years. They’re really very interested in the whole issue of Blockchain.

Scott: They’re a really scrappy business too.

Don: Yeah, they are.

Scott: They know how to get in and make things change.

Don: And, well, with a leader like Fred, it’s unbelievable. He’s one of the greatest business leaders ever. But they describe certain things that happen. Like in a railway car you’ll have a little box up in the top where a piece of paper goes, the most archaic and bizarre things that still happen in the digital age. And then you think about supply chains per se. When you move that onto Blockchain, that’s starting to happen with some really serious stuff. Walmart, food safety.

Scott: Yeah.

Don: Foxconn is one of the biggest supply chains in the world. They make your iPhone and just about everything else. One Belt One Road became linking Hong Kong and Rotterdam that started with the trade finance. That’s based on Blockchain. It’s like a trillion-dollar project involving dozens of countries, hundreds of companies, and so on.

Scott: Most people have no idea how much stuff moves in commerce and trade.

Don: And the way it moves is, it’s hand-offs, it’s very paper intensive, it’s prone to errors. You’ve got too many lawyers. You got all kinds of problems. Imagine all of that on a distributed ledger. And what happens, we’ve got these people Bettina Warburg and Tom Serres that are leading this work for us, and they talk about creating a shared network state. And I sort of, because I’m good at neologisms, came up with this term asset chains, that you start to think about these networks that are moving assets around. And when you have a shared network state, everybody can see what’s happening. It’s real time. You know what’s truthful and what’s accurate.

Scott: Or at least you know if two parties have a different view.

Don: Well, yeah.

Scott: Yeah, so it’s like a man with two watches. He always knows when to actually check, because if they agree, then it’s all good. If they don’t agree, well, then they gotta go-

Don: Well, and the goal of course is to get to a single version of the truth.

Scott: It is. But you’ve always got to sync with reality.

Don: Yeah. Yeah. You want the truth. You want the single version of the truth to be truthful.

Scott: Yes. Exactly.

Don: But then also, so you think about that. It sort of becomes a machine, then you start to build in autonomous agents and machine learning, and you have what they call a cognitive machine. And that’s a mind-boggling kind of idea, that-

Scott: Because it would actually be on the scale of economies.

Don: Yeah. But what would that do to the architecture of a corporation, when you have corporations playing in this broader machine?

Scott: So why would you even need a corporation to coordinate that?

Don: Well, ultimately the deep structure of the firm and how we orchestrate capability in society to innovate, to create goods and services, to move things around, to engage with customers. All of that starts to change. So I think that Sweetbridge is absolutely right sort of tackling this one, because it’s the juiciest of them all.

Scott: Well, and they could make massive change to global GDP. You’re talking about actually affecting the size and growth rate of economies by doing this. You take that much friction out of that process, you increase returns …

Don: Yeah. Speed up the metabolism.

Scott: Absolutely, which basically super-heats the economies and creates a more level playing field. What we’re doing in that space to start with is to create infinite liquidity, because in that supply chain, the fact that one party owes another party, who owes another party, who owes another party, and they’re all waiting for money, and they’re constrained in their business because they don’t have it, it’s entirely artificial.

Don: Right.

Scott: And there’s so much money made in that process in profit.

Don: Right.

Scott: And it’s $54 trillion of global GDP that you can deal with all the counterparty risks just for the profit that’s made. And this means you can get liquidity. Then if you look at shared assets, assets that can actually own themselves with a common accounting, so you’re not just sharing. Imagine an accounting system where the assets and the liabilities are actually on the books.

Don: Yeah.

Scott: They can’t ever get out of sync, because the asset’s actually on the books. The legal title is on the books, and the loan, the agreement on the loans, are on the books.

Don: Yeah, yeah. So you can borrow from yourself.

Scott: You can borrow from yourself.

Don: Right.

Scott: Which is the thing that … you don’t need banks anymore. You don’t need anything. And everybody can trust you, because you can’t cheat. You can’t lie, and you can’t make it up. And that then leads to an environment we have all this information. You inject the AIs and people, because I think people can add things that AIs don’t. And we can build economy-scale enterprises that are the size of the medium-size nations that are entirely not controlled by any single party.

Don: Well, and real value comes to the fore in that environment too, because you have the tonic of the market, kind of gets brought to bear on all these different elements, as opposed to being shielded within the boundaries of the traditional, sort of vertically integrated firm.

Scott: And there’s all these assets that are underutilized in these firms. There’s intellectual property, there’s talent, there’s all these other things that they can now start actually allowing, you were talking about that porous organization in our last conversation. You can start to monetize that in ways that just provide new value and provide access to things that are underutilized. It can be incredibly transformative. It’s an exciting time to be alive.

Don: Well, and it’s a time where there’s going to be a lot of conflict in the sense that this conversation would be like two Martians talking to each other to your typical CEO.

Scott: Yeah.

Don: Or government leader. So it’s going to take a while for that new paradigm to start to take hold. And that’s what we do around here. We’re in the creating and awakening business, and not by evangelizing, but by providing real research and real data that will be helpful.

Scott: It’s kind of like the Renaissance, isn’t it?

Don: I suppose it is.

Scott: You really are kind of leading the Renaissance, because that’s what led the Renaissance. It was this injection of science and discipline, and kind of information sharing, and whatnot that created Florence and-

Don: Yeah. When we were talking about the title for Blockchain Revolution, Renaissance was one of the words that kept coming up over and over again, the Trust Renaissance, because that’s kind of like what it is.

Scott: It is like that, and I think that’s why it may actually be much bigger than the internet was. Because the internet laid a foundation-

Don: Right.

Scott: But now we’re talking about changing societies and the way we make money and stuff at a much more structural level. We put the foundation and build the building on the foundation, the building’s really quite … it becomes the thing. So it’ll be very interesting to see.

Don: Yeah. You can really push that Renaissance analogy, because part of that whole period was a different understanding about religion and God. They had the Protestant Reformation ultimately; that was a little later. But one of the other candidates for the title of the book was the God Protocol, and it comes from an article written by Nick Szabo ages ago, and he had postulated, “What if there was this protocol that was kind of like God, that you could put stuff into it, and God would always do the right thing. And you could trust God explicitly and implicitly to always act in the interest of all of the other players. God would always be truthful. God would be open and transparent.” And this was years before Satoshi and Bitcoin was created. But that was almost the title of the book too, but our publisher says, “You’re gonna spend all your time explaining the weird title of your book.”

Scott: I’m glad you didn’t pick that title.

Don: Blockchain Revolution turned out to be a pretty good one.

Scott: That is a pretty good title. I do think it will be seen maybe in 5, 10 years from now that this was a renaissance, and 2017 was the year that it really kinda became conscious.

Don: Yeah. If feels like that.

Scott: Yeah. I really do think so. Really do. Well, thank you so much for your time.

Don: My pleasure.

Scott: Yeah, it’s been a great pleasure.

Don: Okay.

Scott: Yeah. We’ll do it again.

Don: Yeah, I hope so.