Blockchain as a disruption | Jeremy Kirshbaum

Most corporations, or people actually, focus on trends, patterns of change which you can extrapolate with from confidence. So this is things like demography or weather, you know, things where you have a lot of data and you make a model and then you extrapolate from that. Very useful, probably what you should spend most of your time on. And what we focus on is disruptions or breaks in that pattern, either cases where you have a lot of data and looking at places or situations in which that model might no longer apply, or things for which we don't have very much data because they're very new, and so data-driven trends work is not the most appropriate or effective way to analyze the situation. So the reason why we focus 10 years out comes from, originally from one of our founders, Roy Omara, said, we tend to overestimate the impact of technology in the short term and underestimate it in the long term. Or, as he put it, don't mistake a clear view for a short distance. Just because you can see that something is possible, or that something will be possible, doesn't mean that you've fully described what that impact is on society. And for this reason, we don't really do a lot of pure technology forecasting. We do a little bit of that in our Technology Horizons program, but we're much more interested in what are the social impacts and social behaviors around technology, and how do they impact society at scale? Studying trends leads to incremental innovation, doing faster or better than what you're already doing. Again, no judgment on that. This is probably what you should spend most of your time doing. Studying disruptions can lead to radical innovation, doing something new. So as a startup, this might be where you're focusing more right now as you're developing your idea or trying to create a radical innovation. Although a lot of startups just do the top one very, very well, and that can be very disruptive. But the bottom one is what we focus on. So what's an example of a future disruption, a break in the pattern of change? So one example is blockchain. Have any of you— I'm sure a few of you have heard of blockchain. Who's heard of blockchain?

Okay.

Can anyone here give a, like, 2-minute description of what blockchain is?

I'll try.

All right. Yeah, give us your best shot.

So I'm pretty sure that Bitcoin is a way to pay for things anonymously.

Okay.

Well, at least that's how it was.

Okay.

And that was the drawback against it when, you know, Silk Road went down and other services that use Bitcoin to pay for stuff. The Bitcoin is a snowball. It can be mined, and the first Bitcoin will lead to the last Bitcoin. It's a fixed number. Blockchain came in to alleviate the issue of regulation, whereby if I'm— if I have a Bitcoin and it's mine without my knowledge, or it's taken from me, who do I appeal to? How do I do like a forensic financial backtrack to find out? For example, if we ordinarily pay for things with our credit cards and our cash, we can go to the FDIC. We have regulators, we have instruments in place to kind of do a financial accounting and track it.

Right.

So I think Bitcoin is the The regulator for, I mean, blockchain.

Yeah, yeah, in a way, like, blockchain is the underlying technology that enables Bitcoin, and most of that was very good, thank you. So blockchain, Bitcoin, I started looking at Bitcoin in 2010, I wrote my first paper on Bitcoin in 2011, I didn't buy any Bitcoins, so I get like the future cred, but I didn't get any of the money as the price went up. That's why I'm working in a research organization, not a VC firm, I guess. But as time has gone on, it's become clear that Bitcoin wasn't the real disruption. Blockchain, the technology on which Bitcoin was built, was more disruptive because of what it enabled beyond finance and into the world of society and business models. So thank you for your 2-minute version. This is our best attempt at a 2-minute Description of blockchain.

Do you get it? Yeah.

Here, let me see what's going on. Thank you for your patience. We do a lot of forecasting, and in no forecast we've ever done do we predict that PowerPoint will start to get its shit together in the next 10 years. Media files, not tabs?

Interesting.

Let's try and bring it up in here. I really want to show this to you guys. Sorry. Let's see.

I know it's in here.

Here we go. Send me that video. All right. Well, I'll send you that video later. But luckily, I have a non-video-related slide for us to use. So what blockchain does is create a distributed ledger, basically, a list that everyone has. It's like a Google Doc where nothing can be erased. So I can do a lot of things with that Google Doc, and it's protected by a very powerful form of cryptography. So it's essentially impossible to hack. You could— you always have to think about hacking in terms of how much money it would cost, because nothing's truly unhackable. But to hack a blockchain would take billions and billions of dollars. There's no blockchain system on Earth that's worth hacking for that amount of money currently. But what that Google Doc allows us to do is create systems of contracts. With no central arbiter. So for instance, if I want to send you money right now, let's start with the Bitcoin example, 'cause we're all familiar with that. If I wanna send you money right now, I would use PayPal, right? So let's say you're PayPal, and I wanna send you money. So right now, if I wanna send you money, I don't hand it to you directly, if we're going over the internet, I hand it to PayPal, and then PayPal hands it to you, and he takes 10% for for the privilege of handling it. And of course he does a lot of very important things. With Bitcoin, we all just have a ledger of who has how much money. So I hand you the money, and everyone checks on the Google Doc, and so I write on mine, you know, minus 1 Bitcoin, you write plus 1 Bitcoin, and then everyone writes that down. And so if I hand it to you, then everyone checks, oop, does that match my Google Doc? Does Jeremy actually have that coin, and is he actually giving it to that? And when everyone puts their eyes on it and sees, oh, OK, yeah, that's true, that's not a double count, then it goes through. So it enables this direct peer-to-peer transaction. You can do that with all kinds of things. You can do that with contracts. You can do that with anything that is a set of rules. So you can build a whole company out of this without any central entity in the middle. It automates from the center. Let me go on a little bit more, and maybe it will start making more sense. So this is from 1964, I think. A person named Paul Baran, who invented something called packet switching, which is one of the foundational technologies of the internet, was trying to design a system that had no center and no edges. And so the idea at the time was to create something that would be very resilient to a nuclear attack. This is a centralized system. This is the original kind of centralized computing. And then this is a decentralized system where you have many different kind of like centralized nodes. And then this is a distributed system. So originally the ARPANET, the original days of the internet, it looked like this. It was scientists communicating directly one-on-one with each other. And then over time it's kind of shifted backwards and there's these little tiny fiefdoms that have developed, fiefdoms of data and money and— and centralized control in cloud networks. So here's Facebook, and here's Twitter, and here's Google, and here's Palantir, or whatever. And so what we're seeing now with blockchain and other distributed computing technologies is that we're moving more towards here, a direct peer-to-peer connection in Internet of Things, in business models, and in computing. So here's another picture that I like. Closed network, cloud network. And of course, a cloud is really in the basement. It's just a giant server. And then here's open access IoT. This is what we're going to see in the next 10 years developing. These are just some pictures of what the cloud really looks like. It's a big body of servers. It's really hot. Here's some other things about blockchain. A way to provide high trust interaction in low trust environments, a new trust protocol, A new kind of coordination technology being built on top of the internet, a distributed ledger or log, a currency or record without a central bank or government, a way of documenting integrity, a new infrastructure for organizing ourselves in a global society, or a way of creating distributed anything. So I'm gonna pause there and kind of take a step back. So why am I talking to you about blockchain right now? Blockchain is an example of what we would call a disruption as opposed to a trend. Blockchain may be all kinds of things. It may end up being nothing. It may end up being the way that we organize future governments, but what it is is disruptive in that there's not a lot of data on blockchain. You can't take 20 years of data on how blockchain currencies function and then create an extrapolation out of that. You need a different kind of methodology, and that's where something like future forecasting comes in. So here's a signal from the disruption of blockchain. Arcade City is a blockchain-based Uber. So it's Uber without Uber. There's no server on which Arcade City is based, it's just a series of clients. And it connects passengers directly to drivers. They can pay in Bitcoin, they can pay in cash, they can pay whatever they want. The platform is provided for free, and the company Arcade City tries to make money as a third-party service selling insurance to drivers on the network. So this is Uber without Uber. You don't need a central arbiter in the middle because peer-to-peer payments can be made, peer-to-peer contracts can be made. So this is very disruptive towards how we organize businesses, and it's very intimidating if you're a middle manager or an upper-level executive. So we call Arcade City a signal. It's a piece of the undistributed future here in the present that tells an important story. This comes from a quote from William Gibson, an amazing science fiction writer. The future is already here, it's just not evenly distributed. So these are what we look for all day, pieces of the undistributed future that are here in the present. Signals don't always succeed. They often don't because they're ahead of their time. But they often fail in an interesting way that teaches us something. So is Arcade City going to succeed? I kind of hope so, because they're cool people. But I frankly think that they're a little bit ahead of their time in terms of launching a business model that people don't really understand yet. But what does it tell us? It tells us an important story about the business models that are going to start emerging and succeeding in the next decade. This is an example of, I won't show this whole video, but this is a young baby from one of our research affiliates who was the first global citizen who ever had her citizenship recorded on a blockchain. So she became a global citizen by certifying, proving what the date was, who her parents were, and who her grandparents were, and then placing it on a blockchain, which exists in no particular location, on no server and belongs to no one, thus certifying that she existed on Earth at that moment, essentially permanently. So that's an example of how things like identity are also disrupted by blockchain.

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