The Pomp Podcast - David Post, Ph.D. Managing Director, IBM Blockchain Accelerator: How to Decentralize a Centralized Network

Episode Date: April 23, 2019

David post is Managing Director at IBM Accelerator. In this conversation, David and Anthony Pompliano discuss transaction volumes, smart cities, and how to decentralize a centralized network. ----- Curious about Cryptocurrency but don’t know where to begin? Storm Play is a free and fun way to start earning in exchange for you time. Simply download, register and discover microtasks that meet your interests and be rewarded with Storm Bolts. These Bolts can then be converted and withdrawn into your favorite cryptocurrency, including Storm Token, Ethereum (ETH) and Bitcoin (BTC.).  Earn cryptocurrency rewards by playing new games and trying out cool products! Download the app to start earning crypto here! https://bit.ly/30pSxh9 (Available for iOS and Android). ----- If you enjoyed this conversation, share it with your colleagues & friends, rate, review, and subscribe. This podcast is presented by BlockWorks Group. For exclusive content and events that provide insights into the crypto and blockchain space, visit them at: https://www.blockworksgroup.io

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. David Post is Managing Director at IBM Blockchain Accelerator. In this conversation, we discussed transaction volumes, smart cities, and how to decentralize a centralized network. I really enjoyed this conversation and found David very engaging and educational. I hope you enjoy this as well. Storm Play is a free and fun way to start earning cryptocurrency in exchange for your time. You can simply go to the App Store, download, register, and then discover micro tasks that meet your interest, and you're rewarded with Storm Bolts. These bolts can then be converted

and withdrawn into your favorite cryptocurrency, including Storm Token, Ethereum, and Bitcoin. Again, you can earn cryptocurrency rewards by simply playing new games and trying out cool new products. Go to the App Store today and download Storm Play. only as an expression of his opinion. This podcast is for informational purposes only. Bang, bang. All right, guys, I'm here with David. We got a lot to go over. And you are the second person from IBM that we've had come in here, which normally would scare people. But you've got a really interesting background. So let's start there and then we'll get into all the crypto stuff. Yeah. So, you know, I know. What did you do? What did you do in your past?

Or what didn't I do? Yeah, I think I've had a non-traditional route to somewhere like IBM. I didn't think I'd be working at IBM, period, much less for eight years. You know, got my PhD in political science, spent time with the World Bank, worked with a lot of hippies, doing stuff around anti-corruption and climate change and post-conflict reconstruction. And when I was doing my PhD, I asked my friends at the World Bank, if they got this opportunity to do strategy consulting at IBM, what should I do? They said, check it out. Come back if you don't like it. And I've been here ever since.

So it's been an interesting ride. And the blockchain space has been super interesting, but we're not there yet. Yeah, absolutely. So one, anti-corruption work at the World Bank. What is that? Yeah, so basically going places, you know, very high on people's to visit lists, Southern Sudan, Burundi, Liberia, Sierra Leone, really working at the community level to figure out how we could put programs in place that would basically deliver results

for people by empowering them. So giving communities control over budgets, having them build small-scale infrastructure projects, develop micro-enterprises, really fascinating work. I had a great time just going and hanging out with people and seeing the world. I mean, people are pretty much the same everywhere you go. That's what I learned. We might be separated by geography. You might have been born in different places. But everyone's pretty much the same wherever you go.

That's one of the lessons I've taken away. Everybody just wants to have fun. Everyone wants to have fun. Everyone wants to provide for their family. I mean, we have all the same common needs. It's Maslow's hierarchy of needs. I mean, Maslow got a big portion of that right. So everyone pretty much wants the same.

Got it. And then when you got to IBM, at some point you were working on the smart cities stuff. Maybe talk a little bit about that. And then I want to – I got a lot of questions. So we're just going to spend a couple minutes on that. No, it's good. Yeah, so basically I was in consulting and they needed someone to write a paper for some senior executives at IBM. I was on the bench and I came in and it turned out that a new general manager for smarter cities came in at the same time.

and I got a three-month dress rehearsal for him. Anyone who's listening, careers are a combination of right time, right place, and having the right skills. So I basically got hired as one of the first people on his management team. And we were kind of the growth business within Smarter Cities. We were kind of the equivalent of a Series A. So the question was, we've got a product. We've got some buzz in the market.

How do we put together a suite of tech products and services offerings that's really going to make a difference in cities? So triple bottom line business. A lot of the same principles I used in public management within the World Bank was applicable to the types of things we were doing within cities because it's all about how you improve core processes in a way that's going to generate economic development, improve operational expenditures, and ultimately create better results. And fascinating opportunity traveling all around the world, meeting with city leaders, pretty inspiring. So let's talk about two different types of cities. Like when you guys go into something like New York City, right, so kind of a major metro, what are the types of things where you can use technology to drive, whether it's change or impact or however you kind of measure that? But like what does that actually mean in execution in a major metro?

Well, if you think about a city, if you think about New York City, it's a city from an operational perspective. It's a city in name only. What really is New York City? It's the departments that deliver services for cities, for citizens. So you have the water department, you have the education department. So within each of these verticals, there are ways that you can apply technology to improve their core functions. So if you think about water management, New York City is probably pretty good, but a lot of cities, much of the water leaks out the pipes before it reaches the end users. The traditional way to maintain those pipes is to send a crew on a predetermined maintenance schedule, basically to check if everything's okay.

With technology, you actually don't need to do that. You put some sensors on the pipes, and the pipes will tell you when they're broken. So it's just a way of being able to use technology to act more proactively. If you've been listening to what's going on in the city council, people are thinking about congestion pricing. IBM pioneered some of that technology both in London and in Stockholm. And it's really decreased the amount of wear and tear on the roads, which obviously is good for the capital budget. All right. So let's talk about this because in New York City, for those that don't know, they've now implemented a tax. I think it's like a fee.

Proposed. Well, there's the one on taxis, Ubers, Lyfts, like ride sharing that I think is like $250 or $270. 75, uh, just for getting in the car. Right. And that's supposed to go to, um, go towards the improvement of infrastructure. So that's just kind of a flat fee per ride. Uh, I think people were, Hey, now I get in the taxi and it's immediately $5, right. It's a little bit different than when it was two 50. Um, but now the new one that is proposed, I think you're talking about is essentially there will be higher rates or taxes, uh, for certain parts of the city that are most congested. Correct. And I'm guessing you've got the experience here.

They're trying to use economic incentives to divert traffic from the most heavily congested areas. Is that correct? That's correct. And it's been very successful in cities like London and Stockholm and Singapore. They want to effectively provide you with an incentive to ride public transportation. Don't take your car into the busiest area of the city. The revenue that's generated, my understanding, I'm not an expert on this, but it'll go to the MTA. And so there's a benefit to the transit authority from this specific proposal. And there's also a benefit because if there's less cars and there's less wear and tear on the infrastructure, which means you have to spend less money repairing the infrastructure.

Absolutely. So that's the main idea. And so in that, like, talk about the technology that gets used and kind of the data. I'm assuming there's tons of data around just like, what are the most heavily congested areas of the city, right? So like that, and some of that's anecdotal, like you and I probably could say in Manhattan, here's the places that suck to drive a car, right? But how do you use the technology and the data to come up with, here is what that solution looks like, and if it's implemented, it will be impactful? I think there's two things you're trying to optimize if you're talking about what's

the transportation sector. So, if you're talking about congestion pricing, you're using, you know, license plate recognition, you have to have a billing system. That's the way you track who's coming in and how much they should be charged. And you charge based upon how many cars are in there already. So, you have to have a sense of what the current situation is. That's how you set the pricing. For optimizing traffic within a city, you can do things like interconnect this traffic light so they'll respond based upon the traffic patterns as opposed to a predetermined schedule. Once again, you're optimizing based upon data. So, there's a variety of levers that you can pull if you want to improve the core functionality of a system within a city.

Now, there's also ways that you can benefit from improvements or synergistic improvements between systems. So, something like transportation data and economic development data. You might use transportation-related data to inform how you want, you know, what's going on at various businesses, for example. So, there's a way of triaging these data. You start by implementing something that improves an individual system. Then you try to combine one or more systems. Then you try to combine one, two, three, four, five systems. And, you know, it's still a journey. Things in the public sector obviously tend to take a longer period of time. I think we did really good work. That work continues, though. And I think that what you see in New York City,

most recently with the proposal for congestion pricing, is very much about that's what Smarter Yeah. And I guess like forget the underlying technology, whether it's blockchain, not blockchain, whatever, but just like from a user experienced way, the idea that, hey, there are probably going to be autonomous cars in the future. Right. I think that's pretty inevitable at this point. But also those cars may be able to communicate, pay, do certain things that we don't think as cars doing today. We kind of have dumb cars today and we'll really have smart cars. But to me, it feels like it's not just, oh, I drive over something and I pay the toll and the car somehow transacts with that sensor in the road. And now we don't have to have people sitting out in basically a phone booth collecting tolls at the toll booth. But actually, it can communicate all sorts of data that the city then can use to better understand the wear and tear on the streets, safety, policing. Right. Exactly. All this kind of stuff. And it just feels like theoretically we all see this.

But how close are we from a technological standpoint? Like, is it something where it's more pipe dream than reality today? But over time, the technology is going to improve and we'll eventually get there. Or are we actually pretty close to some of this stuff? I think that we tend to have we tend to be impatient and we tend to really care about the here and now. So I think that if you look at how development occurs and I think that technologically enabled urban development as one particular type of urban development. I think you're going to see it in stages. You're going to see it sequentially. So, specific technologies will take shorter versus longer. So, some of the core functionality or infrastructure you need for autonomous vehicles

could do the types of things you're talking about, could tell us about wear and tear on the roads and things of that nature. It's a necessary but not sufficient condition to get to autonomous vehicles. So, I think that as in other areas of technological progression, you'll see stepping stones, and that will lead to a subsequent innovation. And that's how I things will continue to pursue absolutely and so uh after smart cities you went and joined the blockchain team or how did you get from smart cities to blockchain or were you just one day you woke up and you're like i think it's going to change the world i'm all in so uh basically i was uh i was uh in uh running a sales for a portion of our public sector business so government health

care is an area that i've worked in for for a long time and um i was uh on my computer getting increasingly panicked that i hadn't invested in cryptocurrency earlier and um as i saw that the boom happening. I began learning more and more about it. When a job came available in the blockchain group, I thought to myself, wow, I've already studied this a lot. I'm ready for it. I jumped at the opportunity to join the blockchain group. It's within large companies. Smarter Cities was an internal startup. Lots of fun. You get some of the benefits of being in a more nimble, smaller organization, but you also have the access to all of the good stuff that a big organization brings you in terms of access to clients and

platform for action so i felt very much the same going into the blockchain unit i said wow this is a cool place to be um and you know lots of potential to innovate and lots of ambiguity which is what i really like yeah absolutely and so give me like an overview of what ibm is doing in blockchain because my understanding is you actually have a couple of different teams working on different aspects some internal some external exactly so there's there's three ways you can have a business in the enterprise blockchain world you can sell technology you can sell services or you can build networks so we have a team that's very focused on uh you know ibm blockchain platform which is based upon hyperledger so you can access that in a multi-cloud

format so if you're on aws you can access it or if you're on our cloud you can access it we have a very active services organization we've done over 500 blockchain services engagements so that's working with big companies on various blockchain use cases or business models and then Then we have blockchain networks. So IBM owns three blockchain networks. There's the Food Trust with Walmart and Dannon and Unilever. And that's about the traceability of food from farm to store. And then there's TradeLens, which is with Maersk.

That has to do with the provenance of shipping containers. So how do you move shipping containers more easily in a more digitized fashion throughout the global shipping supply chain? And then we have WorldWire. Shout out to Jesse Lund, who I know has been on this podcast as well. and that's about international currency transfers. So those are the networks that IBM owns. I'm managing director of our Accelerator, which is basically a program where we work with startups and primarily small and medium-sized companies.

When I say small and medium-sized, that could be $100 million in revenue, $300 million in revenue. And we work with them to build out new blockchain network concepts. So myself and my team, we manage basically like venture investors would, a portfolio of different networks where IBM has some type of an upside position. And we partner very closely with the management teams of those networks to both design blockchain business models based upon our successes and what we've learned throughout those 500 engagements, and also use IBM's client relationships to take new networks to scale. Got it. And as you're doing this, one of the things that you've said that I think is really

fascinating is that there's a lot of folks in crypto specifically that are building decentralized applications, and they're really focused on the technology, right? And I've talked at Nauseam at this point about, like, it doesn't matter how good your technology is, if people don't use it, doesn't count. That's right. That's right. Like the usage is more important than what the technology actually is. But you've got this interesting theory around like the aggregation of transactions or volume, maybe explain a little bit more about, you know, what this theory is, and kind of how it actually works in practice. Yeah, so basically, there's no shortage of blockchain ideas or crypto ideas out there, but there's a real shortage of ideas that have gotten

widespread adoption. As you were talking, it made me think, if you look at why the internet has been effective, it's because it's been the layer upon which people are transacting in a variety of different ways, from sharing funny photos to buying diapers. So when you think about any platform type of business, the lifeblood of any platform business is transaction volume. And I think what I've noticed, especially in the public, unpermissioned space, is that there's a lot of protocols that are built out there, but I don't really see any reason why you want to aggregate transaction volume on one platform versus the other. So I think that's going to be when I when I think about public unpermissioned networks, it's about transaction volume. If I

think about private permission networks, it's about transaction volume. So the T-shirt that I wear around is got transaction volume, question mark, because that is what really matters here. If you don't have transaction volume, you don't have a business. If you do have transaction volume, You do have something people want to use, and it's a very good market indication that you're on to something. And it's really another way to say this, I guess, is just like you have product market fit to some degree. The product has found a subset of users that want to use it, and it solves their need. Correct, yeah. I would say that.

Let me talk about the private permission space because that's what I spend most of my time when I'm chasing my three-year-old around brainstorming on. And basically, if you think about it, in the enterprise space, there's a big bias towards revenue bubbles. So, when we're looking at what type of business should we build from an enterprise SaaS perspective, you're doing a traditional market analysis. That's how it's been done. Blockchain networks are a different flavor of business. They are enterprise SaaS enabled, but they're fundamentally two-sided marketplaces or maybe multi-sided marketplaces. So, the way that we think about it is not what revenue bubble you can basically go after first. It's where do pockets of transaction volume exist that you could aggregate around a business network concept.

And the areas that we've decided to start with, the networks that we're incubating, for us, are areas where IBM has transaction volume. So, every big company has suppliers that they manage. They issue financial instruments like debt. They spend money on digital advertising. They manage IT assets. They issue patents. These are all areas where IBM has a tremendous amount of transaction volume, and so do a lot of our peer companies. So if you're thinking about trying to build a blockchain network, you want to think about how you're going to aggregate that volume.

Because if you aggregate that volume around one use case and you have entities transacting, you can then find a lot of other cool stuff to also allow them to do. So the first order of business in this early stage of the market has to be on aggregating transaction volume. And whether you have a blockchain application that you've built or whether you have a network that you're working on, when we're assessing what partners we want to work with, it's really with transaction volume in mind. That is the first order of business is to get entities transacting with one another. Got it. And out of this, how much of the focus is let's find areas where there's transaction volume and we're going to then start to use the technology to create more efficiency, lower costs, you know, just improve what's already happening versus are you looking at areas and you're saying whether IBM's got a business there or not, we know there's a lot of transactions in this market. And so let's build a new product from scratch and then try to attract those users over. Are you trying to ride the coattails of the trend or are you trying to actually get people to switch and kind of redirect their energy, their transactions, etc.?

Yeah, so if you look at what blockchain does, there's a very interesting analogy which I took from somebody else. It's not mine uniquely, but if you look at what ERP did for the enterprises, it basically did business process standardization within a company. And that created a lot of synergies, a lot of potential benefits that people recognize, especially from an OPEX savings standpoint. If you look at what blockchain networks are very good at, I think what hasn't happened is there hasn't been business process standardization between companies. So when you're looking for a blockchain network, what you really want to look for is an application that you can build that's an extension to an existing system. So we're engaged in one around supplier management. SAP Ariba and Coupa are the biggest e-procurement tools out there. We built an application around basically supplier identity.

So it basically helps you with onboarding and validation. Right now, you have to prove yourself if you're a supplier to eight different companies using 80% of the same data. Much easier to have an immutable digital identity on the blockchain, digital passport for suppliers. You can use it to transact with any buyer on the network. In this particular case, we built something that is interoperable with existing systems. It's just an extension. It's an additional module. And we built it on the basis of the fact that chief procurement officers, ours first and foremost, said this is a big problem for us.

an issue. Existing systems don't really solve it as effectively as it would if it was in a network context. So let's find a solution where there's benefits on both sides of the fence and there are clear benefits to buyers and suppliers in this instance. So in this case, we said, is it a good blockchain use case? Yes, it is, because we need to have the ability to permission identity. It's going to provide business benefits on both sides of the fence. Do we have internal transaction volume? Yes. IBM has tens of thousands of suppliers. Number three, is there a partner that we can find to work with. So you asked how we pick technologically where we go. We look for partners with mature blockchain applications that are enterprise ready, that can be taken to market

within a year. And we pair that with the expertise we have in terms of designing blockchain business models, and also aggregating transaction volumes from our client base. And then we partner together to build out a network. So the accelerator that we run is one feed into our partnership pipeline. accelerator has two meanings it's the it's a program but it's also kind of what we do we incubate new ventures and um we you know it's not theoretical for us uh we have a very clear perspective on how you build out blockchain networks and we're currently working with partners to build those out would it be fair to say that a lot of the blockchain work that you're doing when you go into a vertical uh where there's already transaction volume there's already

people using, um, other types of technology to, to conduct their business. And you introduce this new kind of, I think of it as triple entry accounting, smart accounting type stuff, right? Um, it feels like there's just elements of automation and you're really trying to let the machines and the algorithms get better. Right. And so it's less to me about like, Oh, is it the decentralized versus the centralized versus, you know, some other former fashion however people are cutting it and debating it today and it's much more let me take this piece of technology and implement it into a marketplace that we already know people want to use these transactions and then all we're really going to do is we're going to chip away at the

inefficiencies we're going to chip away at costs and ultimately if we are successful we should reach near full automation because the technology is just able to do it without us humans fucking it up yeah i think that more or less i'd agree with you i think that what you want to do in these types of situations you want to build something where there's a where there's a clear need. And as you said, you want to improve the efficiencies of processes. If you can standardize processes, whether that's buying a digital ad that you know will not be fraudulent, or it's tracking an IT, a computer, an IT asset from the time it's issued to an employee to the time where it's turned back in, there's just no process standardization. And if you can bring

together an ecosystem of participants around a process and allow them to transact based upon the common data and to do so using smart contracts, perhaps in a more automated fashion, And that makes life easier for basically everybody. What I think blockchain is very good at and why I think it's going to be – it already is a huge catalyst for putting these massive B2B networks in place, which don't really exist at a meaningful scale. If you look at C2B2C marketplaces like Lyft or Airbnb or Uber or eBay, those are the marketplaces that have huge valuations, the C2B2C ones. There's not really B2B marketplaces out there at any huge level of scale. So I think that's what blockchain enables. It enables these ecosystems to come together because there's finally a method of transacting in a much more efficient way and a much more automated way.

And as we go forward into innings two, three, four, and five, I think you're going to see AI, machine learning get layered on top of the underlying blockchain data. And that's going to further improve the process, as will advances in how we design smart contracts, right, as that becomes more mature. So I think that's kind of where we're going. It's a situation where if you're shipping food internationally, you might be able to contract directly with the restaurant as opposed to having to go through three or four different intermediaries because you have an identity that's on the blockchain as a buyer and a supplier of that particular food. So, I think we're just kind of at the beginning. And as in any situation, as I said before, with the platform business, I mean, the only metric that matters at this juncture is transaction volume. That's it. Yeah. See, it's so funny because I explained to somebody the other day that in many transactions, there's actually not one middleman, right?

There's multiple middle kind of intermediaries, if you will. And those intermediaries usually get layered in at different times. These different technologies, they don't talk to each other very well, right? There's all kinds of inefficiencies and stuff in there. And so if you're able to look at that transaction, you say, you know, person A is transacting with person B. and we are going to design all of the technology to consummate this transaction from scratch in a holistic way you're actually going to build it very differently than when it looks like when it's kind of cobbled together over time right and so it's it's this ability to almost like upgrade

the transaction infrastructure to some degree um and it does feel like starting at the places where people are already transacting is much smarter than saying hey now am i going to build new infrastructure and with new technology i'm also going to then try to convince you guys all to do some kind of transaction you haven't done before. Yeah, exactly. I think you're exactly right. And I think that what you're getting at is what we talked about before.

It's business process standardization. So let's do it in the same way. Let's do it in a better way that connects folks in the value chain more clearly. For those in the ecosystem who are providing value along the way, let's incorporate them. So in the supplier management example,

which is called Trust Your Supplier that I mentioned, we're inviting third-party validators to basically provide the same information that they do already, but just provide it in the context of the network as opposed to point to point. So if you can standardize business processes, it becomes really a way of bringing together the ecosystem. And I think that's what blockchain is really good at.

And then we can talk later about how things begin to decentralize. But I think if you think about decentralization and centralization on a continuum, zero is maybe Ethereum and 10 is the U.S. Army. You probably have to start these types of networks at a 7 or an 8 in terms of being centralized. And over time, hopefully get to a 5. But if you can do that, I think you'll be in a really good place. Yeah, because your thought here is basically if you can aggregate transaction volume for whatever it is, then what you do over time, whether that's semi-centralized or fully centralized, however you have to do it, the transaction volume is the most important thing. It's the most defendable thing. It is the mode.

And then once you have transaction volume, then you can start to decentralize. And decentralize is a scale, right, in terms of you don't go from fully centralized to fully decentralized overnight. You may actually take a transition there over months or years to do it. But, again, you've got the most important thing. You've got the transaction volume, and then everything else is kind of ripping parts out of the plane as you're flying. 100%. Everything follows the transaction volume. So if I was giving advice to people, let's pick a use case that's going to allow you to aggregate transaction volume and tell the entities you're working with, the folks in the ecosystem, this is the first step.

Because we can't generate additional business benefits unless we already have the ability to transact easily. So use case two, three, four, and five in the networks we're working on will follow soon thereafter. And we will decentralize some of those decisions to folks who bring the initial volume to the network. So the initial volume on a network is the most important volume by far. And the commitment we make in some of these networks that are run by partners is that the governance board will make decisions on the product roadmap. So it's also interesting philosophically. It's a new type of business because you want these to be informed by your users. And you might make decisions that are not the traditional revenue optimization decisions.

You may make the decision to build out a product roadmap in a way that's not most lucrative, but it best satisfies your members' needs. So, I think it kind of – maybe this is another way of saying is you can kind of adhere to some of the ethos of decentralization, even if some things are centralized. It's a matter of what decision rights are kept in-house and which are decentralized. And there might be a hybrid approach here. Got it. And I guess, how does Bitcoin fit into all of this, right? When you think about something that got started in a highly decentralized kind of digital currency, so the transactions are there, decentralization was at the core from the beginning. It has a lot of the elements that you're talking about.

Maybe just sequentially it did it differently. How do you think about that in comparison to what we've been talking about? Yeah, I think it's really interesting. Obviously, the movement of financial value is one use case on top of blockchain of many. But I think that if I was to give you a five-year view or maybe even a 10-year view, I think that you might get to decentralization and massive aggregation of transaction volume around other types of use cases beyond the exchange of financial value in a slightly different type of way. So you could imagine that private permission networks would start out and they might be interoperating with the public blockchain. So there might be a hybrid approach here. And they begin to aggregate transaction volumes in the kind of way I've been describing them.

And over time, the way they decentralize is actually by incorporating crypto economic principles into how the network is governed and how it's run. So this is kind of something that came out of our accelerator program as we were talking ideas back and forth. I used to think, I think I thought last year that tokenization and crypto economics would be in the enterprise space in the next couple of years. I think it's further down the road, but I think that once you begin to introduce those dynamics, after you have that transaction volume already in place, it then provides the impetus for truly decentralized networks where you can't begin to build dApps where you have users in place and the ecosystem will already be there. So I think that maybe Bitcoin might have started us on the road on one particular use case, but the way that we get to scale might be going about aggregating transaction volume a little bit differently to start, but incorporating some of the same common principles over time. Got it. And what are the areas that you think – if you were an entrepreneur today and you wanted to start a blockchain-based business, which is a little bit of an oxymoron because I think that you should start a business and then you should just use blockchain if it helps. That's right.

But if you were to do that, what are areas maybe that you think are interesting that IBM wouldn't go to? Are there certain things that you guys have identified, hey, this probably does work, it's just not ideal for us? I wouldn't say we've looked and had an analysis like that. I think that basically, if I was to give advice, it would be that you've got to remember that if you believe what the analysts say and what our internal market development people have assessed, is that 90% of the profit pools in blockchain over the next 12 years are going to flow to network owners. So, it's a trillion-dollar opportunity at network level, which we consider to be an app store, and it's a $100 billion opportunity in the technology and in the services. And I'm not that good of a mathematician, but a trillion is a lot bigger than $100 billion. So I would think about, I wouldn't get into the kind of enterprise SaaS bias where we need to build a blockchain-based application to solve a particular problem.

I'd be saying to myself, what type of blockchain-based application can I build that will be strong enough, compelling enough to get entities transacting around it in the context of a business network? And then what type of friends would I need to help me pull this network together? Blockchain is really a team sport. I mean, it's fundamentally different. And I think if you look at AI, that's a technology that's relatively immature with some pretty well-defined applications and business models. Blockchain, I think, is a relatively mature technology.

And what's immature is the business model because it's a new way of working if you're trying to convene an ecosystem. That is a fundamentally different activity than if you're building a centralized business where it's just dependent on how effectively you can work. So I think it's more about understanding what a good blockchain business is and what a good blockchain business isn't. Not to say you can't make money if you just build a blockchain application. You probably can. And there's going to be some that are going to do really well. But I think the prize and the kind of the companies that are going to define industries and define segments, those are necessarily going to be network-based companies. Got it.

And let's go to what somebody has built one of these, whether it's centralized or decentralized. Or I'm sorry, if it's centralized and they've got a ton of transactions and they've really kind of found that niche that people want to use it for. how do you go from centralized down that spectrum to decentralized? Like what does that process look like? And is it something that is you kind of go piece by piece or do you think it's more I can rip out the whole thing and replace it once I've got the transaction volume? Yeah, I think I can postulate and speculate here. I think it's got to be iterative. I think we don't really know how these businesses are going to look at. I mean, it's pretty weird if you think about it, if you're building a P&L. And this is what I talk about with our partners who we're

incubating concepts with, you're going to give decision-making authority to somebody else who's not part of your business. I mean, that's pretty weird, right? That's not a traditional way that businesses are built and run. Of course, we're going to respond to our customers, but our customers aren't going to be the ones telling us what to do. So, I think that there has to be some level of product maturity. You have to have some level of functionality, which then unlocks opportunities for entities within the ecosystem broadly defined to kind of build their own stuff on top of a data layer that you have effectively established. And there's kind of data-driven businesses out there,

like we were talking about earlier, that have moats based upon what they've collected. I think what's interesting here is, can you find a way of having a viable business and will you be okay with it if you're providing that underlying data model and data infrastructure and somebody else can go build on top of it

and capture 80% of the value? Now, for me, that's okay, but it's just a different way of running a business. There aren't businesses that are necessarily run like this than I can think of. And I think that's what is super exciting about this space, because there are a lot of exciting question marks and a lot of exciting opportunities to do innovative things, because I think we're we are treading new territory here. For sure. What's the ideal business for you guys to work with? Right. So transaction volume. You got it right. But what do those look like? Are those big? Are they small? Does it not matter?

I don't know if you can even give an example of something that you guys are working with, but I think there's a lot of people out there who, whether they're right or wrong, think they have a lot of transaction volume. But I'm assuming that's not the only criteria. So what are those other pieces of criteria for what you're looking for? So we can actually help find the transaction volume. That's what I have a team of people who work on is partnering with management teams to identify transaction volume and help aggregate it. So what we're looking for is partners with mature technology products, number one. So, it takes a long time, much longer for IBM to build a technology product than it does for a startup. So, if we want to get a network within one year, which is our typical incubation schedule, a network in production, we've got to find partners with mature technological assets that we can use.

The second, I think, part B is if you have a built-in ecosystem or you have built-in transaction volumes or customer relationships, that also makes the ability to convene a network much easier. So, we have a partnership with MediaOcean, which is a big company in the ad tech space. It's about payment reconciliation and advertising in the digital advertising value chain, which is very complex, a lot of inefficiencies. So that's a company that's very well established. They've got a high valuation already, and they have a built-in network of potential members of the ecosystem that we will complement and will jointly work together to build out and scale this network around payment reconciliation in the ad tech space. So we've worked with them. We've worked with Series A, Series B type startups. We're very comfortable with that as well.

So what we have, which takes a long time to build and is very expensive, is a distribution channel. So we have client relationships, number one. And number two, as I said, to the extent that IBM can bring its own transaction volume to the network, it makes other large companies especially much more comfortable bringing their own transaction volume to the party. So we approach things like venture capitalists. We've got to work with good companies. They've got to be strong founders, good technology products. Got to be cool people also if you like to have a lot of fun. And then, you know, we have our methodology for getting this from, you know, product to network within a year.

And outside of the blockchain team at IBM, what's the general sentiment? Do you think that there's, you know, in my experience, there's some people who love it. There's some people who hate it. There's some people who are kind of neutral. Do you feel like maybe there's a skew to either side of that? What's the general sentiment inside of a large corporation like that? I think large corporations are highly diverse, and a lot of it depends on the people you work with and the team you work with. If we use the New York City example saying it's really the agencies that make up the service delivery capabilities, that's what New York City really is.

I mean, it's the same with IBM. It's a company made up of people doing different types of things, and I think if you are willing to take advantage of opportunities that are presented with you and create things, it's a very interesting place to work. Other people might have a different opinion. But, you know, fundamentally, I think, and this goes back to something that I wish I would have brought up in the cities thing, gets back to our philosophical questions about people. But, you know, as I was in the cities business, what was so interesting for me, it was really a really simple lesson, but really profound, is that to make a big difference in the world, whether it's in technology or in politics or whatever, it's just a bunch of people sitting down and saying we want to do something a better type of way. So, fundamentally, it comes down to people, wherever you are. And I feel like if you're working with good people, you're probably pretty happy because you're probably doing some cool stuff. You got a shot, for sure.

Before we wrap up, rapid fire set of questions. Yep. What is your most controversial thought in Bitcoin, blockchain, or crypto? The thing that you believe that everyone else will disagree with you on. That's a good question. I only ask good questions. Come on. That's a very good question.

Okay. It's probably this. It's probably a new idea. So it's probably that crypto economics are going to come in and allow private permission networks to decentralize. I think that's probably one that most people. So the idea that the private permission blockchains as they stand today are unlikely to be the final state of them. And there's actually this evolution to a decentralized permission or a decentralized blockchain in the future. Yeah, I think so.

And then the other one might be that I don't think, you know, there's lots of public protocols out there. I think that there's going to be very few that survive because most of them are not going to be able to get that transaction volume. I think there's like, let's call it 3,000. I may be wrong on that. How many do you think is, are we talking like two? Are we talking 20? Probably. 200?

Under 10. Under 10. Okay. All right. I don't actually think that's that crazy, right? There was like 80 to 90, I think, internet-related protocols, and we ended up with basically five that matter to the most part, right? So that makes sense. Okay.

What is the one regulation that you would change or improve if you could? Well, I think clarity from the SEC on what constitutes a security is something that everybody's eagerly awaiting. Yeah, I think that's fair. Okay. What do you think the most important company in crypto is other than IBM? Most important? Yeah, really good. These rapid fire questions are good. I've done this a couple of times. Yeah, you have done this a couple of times. That's a good question. I really don't think I have a perspective on that. I think that, for me, if I look at the crypto space especially, there's not that much differentiation that I can

see. Of course, there are protocols, the early leaders right now that have got adoption. But in the crypto space specifically, I'm still waiting to see how a protocol will aggregate that transaction volume. Because whichever one does, that's where the value of the cryptocurrency is going to go up. Do you think it's possible, so let's dive into this a little bit uh bitcoin for example um there's a whole bunch of people i think that believe ethereum has certain functionality that makes it best suited for all the smart contracts and certain types of transactions there's another group of people that believe well all that can just be built on top of bitcoin kind of layer one layer two type

um you know uh different scalability solutions etc do they coexist do you think it's actually like, hey, the transaction volume is going to go to flow to one chain and it may be on different layers of that chain, but really there's like one big winner and there's maybe four or five other smaller ones? Or do you think it actually is those four or five winners are kind of more coexisting together in success? I think that I would like to see protocols get more specialized. And what I mean by that is I'd like to see, I have to thank Adam Mastrelli who's on my team for opening my eyes to this. I went to Multicoin last year in October. I was thinking to myself, So why, as an enterprise person, of course, I mean, IBM's working with Stellar, we're working with Stavern, so we have some interactions with public chains.

I mean, why is this important for me if I'm building private permission networks? And after talking to some people there, I came to the conclusion it's important because to the extent that Layer 2 functionality can be integrated into Layer 1, public protocols can provide tooling that's really helpful for me if I have a private permission network. So I think that if protocols begin to act less like infrastructure as a service and more like platform as a service, I think that those have a better chance of being successful. I think also that, and maybe this is my enterprise bias, but protocols that can get a high level of comfort by big enterprises that have a lot of transaction volume have the opportunity to become the overall winners because volume is still concentrated, especially in some of the use case areas we're talking about amongst entities that create a lot of that volume. So I think it's going to be – I'm not sure who the winner will be, but I think there has to be some more differentiation at layer one in order to really separate what's going to be the standard from not. I think that there may be a bias right now in the crypto space towards kind of what's existed, which is normal because we all have a status quo bias. We're humans. But it'd be interesting to me is, you know, how what would a, you know, a Bitcoin derivation would be that would have that layer two functionality?

And could you use Bitcoin as the modicum of exchange within the context of that network? So I think that there are definitely things that us in the enterprise space can learn from the crypto world. I just my impression is, is that there's not that I think that people are slowly I think it's kind of happening this year in the crypto space saying, OK, there's some lessons we can take from enterprise. So I think it's necessarily going to be the cross-pollination – it's not a word. It is now. Let's put that in the dictionary. Perfect. That will lead to this kind of innovation.

And I think it's going to be something like what happened with cloud. There's public cloud. There's private cloud. There's hybrid cloud. So it's going to be what is that hybrid? What does that Frankenstein look like? Yeah. That's what probably will turn out to be the early leader.

Got it. Makes sense. What is the most important book you've ever read? uh you can negotiate anything by herb cohen who who postulates that because all rules are the product of negotiation all rules are negotiable ah i like that not bad right it's an oldie but goodie yeah well there's probably some people who disagree with that probably the people who made the rules but yeah for the most part um all right i usually end up and let you ask me one question but first uh we talk about aliens all right like it real or not do you believe

Oh, there has to be other life forms out there. I mean, just based upon the odds. I mean, we have a human-centric bias. I mean, there is, in my estimation, if there are billions of planets out there, there have to be aliens. And the only question is when they're going to find us and whether they're nice aliens or not nice aliens. I've talked about it before, but there was nine planets when I was in school. There's over a thousand now, and they've got all kinds of weird names. And I just read more on there are two galaxies right now that are colliding with each other.

And then we are going to collide with that new galaxy in four billion years. And so the idea that like galaxy, not planets, galaxies are colliding. What the hell does that mean? Well, how small do you feel when you think about that? I know. So we don't, you know, we know some things about planet Earth. But what do we know about anything else that's out there? I mean, my biggest issue is now we're getting really philosophical.

What was before the Big Bang? I mean, there must be something we're missing in terms of how we interpret time. And if we can't interpret time well, I mean, maybe this is a SimCity game or something like that. I don't know. There's some people who believe that. It's possible. I don't know. Take the red pill or the blue pill.

So I think space people have thought more about it. Just human nature, kind of, hey, I could see the space. I think about space, right? We've got things like SpaceX. It's just in conversation a lot more than the ocean. And so I've talked to a couple of people about – like we probably – I think it's actually – like scientifically people make the claim that we know more about, let's say, Mars or the moon than we do of our own ocean. Would you rather go to space or would you rather go to the depths of the ocean? Probably space because the depths of the ocean, the lighting would be so low.

You probably couldn't see anything. I've had a flashlight or something, but most of the cool, like friendly looking Nemo fish are closer to the surface. So it'd be kind of cool just to, you know, float around, do some somersaults, you know, point, you know, look at, see if I can use my telescope to look at my house down in Brooklyn. I don't know. That'd be probably pretty fun. I got it. All right. What one question you have for me?

What's the meaning of life? The meaning of life. It's easy. Just have fun. I like it, man. That's good. Just have fun and be happy. Too many people are I think too many people are caught up in everything else. Right. And I recently was talking with one of my best friends and his greatest issue is he's ambitious. Right. And I said to him, I said, hey, man, you got a lot. Right. 10 years ago when we were kids you probably would have been really happy with this right and I said

I'm not telling you to stop but I'm telling you just to realize you come a long way and I think that you know it's funny for me to give that advice to somebody because I think it you know every single one of us are ambitious in our own ways and so we get caught up in this idea of like no matter how much you have you want more and it's not necessarily just material things it's more achievement, more knowledge, more whatever. And I think that the people who are maybe the most free are the people who aren't stuck trying to get more. And that can mean different things for different people.

But I think that is, you know, when you kind of think really in a weird way, like that is what life's about. Yeah, I think you're right. It's about gratitude. Yeah. And it's about, you know, finding a way to feel good. Absolutely.

Well, listen, I appreciate you doing this. um i think that uh you've got very unique views on the world uh many of which i agree with um and we will have to do this again after you guys make some more progress thanks a lot for having me it's fun for those of you that are curious about cryptocurrency but you don't know where to begin storm play is a free and fun way to start earning in exchange for your time you can simply download register and discover micro tasks that meet your interest and you're rewarded with storm bolts these bolts can then be converted and withdrawn into your favorite cryptocurrency including storm token ethereum or bitcoin you can earn cryptocurrency rewards by

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