Don Tapscott, CEO of The Tapscott Group, is considered a leading authority on the impact of technology on business and society. He has published 16 books, including Blockchain Revolution: How the Technology Underlying Bitcoin is Changing Business, Money and the World, which he co-authored with his son, startup CEO Alex Tapscott. Tapscott’s Ted Talk on how the blockchain is changing money and business has been viewed over 3 million times. (https://www.ted.com/talks/don_tapscott_how_the_blockchain_is_changing_money_and_business)
In 2017, Tapscott and his son co-founded the Blockchain Research Institute in Toronto, with the financial backing of 40 large companies, including Pepsico, FedEx and Thomson Reuters. The Institute is running some 75 projects on blockchain strategy, use-cases, implementation challenges and organizational transformations. Tapscott recently agreed to an interview with The Innovator’s Editor-in-Chief about how blockchain will tranform business.
Q: Nouriel Roubini, the noted economist, just wrote a column in which he said that blockchain is “one of the most overhyped technologies ever”. He went on to say that it does not make sense to use blockchain for financial transactions or supply chain monitoring and that “ultimately, blockchain’s uses will be limited to specific, well-defined, and complex applications that require transparency and tamper-resistance more than they require speed — for example, communication with self-driving cars or drones.” Do you agree?
DT: Obviously he is wrong and ironically speed will be one of the main reasons to adopt this technology. It reminds me of 1995 when people said the Internet does not have the speed for high volume activity. The march of technology solves these problems. Blockchain is a very important development and it would be a big mistake to dismiss it.
All supply chains will move to blockchain not just for transparency and providence but for speed. Supply chains today are archaic. They are full of paper faxes and bills of lading stuck in little envelopes on railroad cars and the metabolism is glacial. With blockchain you can have a real-time shared network and everyone can see exactly what is happening and where things are. It will solve supply chain issues dramatically and solve a bunch of other problems for other sectors, including financial services.
Financial services are based on a kind of Rube Goldberg ridiculously complicated system in which a bunch of messages are passed to half a dozen counter-parties, each with their own ancient technologies, their own risks and their own delays and then, a few days later, there is a settlement. In the blockchain payment and settlement are one in the same. Speed is one of the most powerful advantages, not the main one, but a significant one. Don’t be confused by today’s speeds. It would be like saying artificial intelligence is not important because it not very smart right now. Of course it is going to be. Similarly blockchain is going to get faster and be much better than traditional ways of doing things.
Q: So what do you see as the biggest use cases for the technology?
DT: When you add up financial services and supply chains it comprises the majority of the global economy. Supply chain is a $54 trillion industry. Financial services is the biggest industry in the world.
Q: What are some of the other use cases?
DT: The technology will change every industry.
Today, there is an opportunity to put land titles on the blockchain. Seventy percent of land titles in developing world are not enforceable. There are big implementation challenges because you need to have a good human regime before you can put land registry on the blockchain. There needs to be a rule of law, an agreement between buyer and a seller, which constitutes a legal contract within the society it operates. It can work well in more developed places like Georgia, where there is some interesting activity.
We are looking at big potential disruptions in ten industries at the Institute. Retail is a big one largely because of the supply chain angle on that. Fedex is innovating in their industry. That company has always exploited new technologies effectively so predictably it is one of the most interesting. Manufacturers like Moog are using blockchain. Walmart and others are using blockchain around food safety or anything where providence is very important. Education and healthcare are two industries that are ripe for disruption. The idea of student identity or a patient’s identity is quite central. Right now we as citizens generate data which is captured by powerful companies but the world is moving towards citizen-owned identity.
Q: Canada’s largest banks, telcos and the government are experimenting with using blockchain for digital ID. Do you see this as a big area of opportunity?
DT: There is great work going on in Canada on identification and authentication — proving you are who say you are and that is great because its enables ID and privacy. It means you are not giving up your entire identity when you open a bank account or go into a bar. But identification is just the tip of the identity iceberg.
Last week we organized an identity workshop in Toronto — where all the key players were in the room — and we explored the next steps, creating a rich identity on the blockchain that is full of data is owned by citizens. We are currently in a state of what I call digital feudalism. Data is a new asset class and we all create lots of data but it is not owned by individuals. It is owned by a combination of big social media, big banks , governments and other intermediaries which means you can’t monetize it, others are monetizing it to create the most valuable companies ever built. You also can’t use this data to plan your life and privacy is being undermined. Many people say to me ‘privacy is dead get over it ‘ but I believe that is an ignorant position. Privacy is important. It is the foundation of freedom and retrieving our identities and managing them responsibility is one of the biggest promises of blockchain.
In this new world we are going to own our own data and we may sell it. If, for example, you go to a big hospital in Toronto to be tested and get a radiology report, you will own it. You can anatomize it and sell it, you can port it to another institution to get a second opinion or just keep it to better plan your health. The point is you own the data. It will enable us to have bigger, better, richer data. Companies like Facebook that initially felt threatened need to wake up and realize that this is a huge opportunity.
Q: What role is your Blockchain Research Institute hope to play in moving adoption of blockchain forward?
DT: We are exploriing the strategic issues of this technology across 10 industries. We’re also looking at how blockchain will impact the C suite: CEOS, what triple entry accounting means for the CFO, how it might change the role of the CIO and enterprise architecture, the role of smart contracts and the tokenization of your supply chain. We are also looking at how blockchain will transform different aspects of government, including central banks., because fiat currency will move onto the blockchain.. We are also looking at regulation because governments can really mess that up.
Q: What should every business executive be doing to prepare?
DT: Personal use. It is a precondition for comprehension. Get a digital wallet, it will take you two minutes and go buy $10 worth of bitcoin. You will learn more about public key cryptography in a few minutes than reading a whole book about it. Read a book, our book, Blockchain Revolution: How the Technology Underlying Bitcoin is Changing Business, Money and the World. Start to figure out who in the company is interested in this — there is bound to be talent there somewhere — and empower them, give them a license to self organize to start to explore and do things. Start some pilots. I just spoke at a meeting of 130 CEOs of the biggest companies in the U.S. and conducted a survey. Almost half of the CEOS were not aware of blockchain pilots in their companies. I found this to be a staggering piece of data. Twenty percent said they had more than five projects so there is a real bifurcation.
Q: How much time does the C-Suite have to adjust?
DT: It depends on the industry but complacency is a bad strategy.There is a saying: ‘we tend to overestimate the impact of technology in the short term and underestimate in the long term.’ That is not true anymore. It took a long time for the Internet to really kick in because most people did not use computers, there were no wireless telephones and no broadband. Today there are six billion people with supercomputers in their pocket and WiFi all over the place. We have a new generation of digital mavens who consider this to be like the air. Many are also becoming crypto mavens. There were parents who told me that their 12-year-old bought bitcoin three years ago and they have now used that to pay off their mortgage. That is a real story. So the preconditions for rampant change are there.
Alex and I wrote in our book that venture capital will be unrecognizable in five to ten years. Instead it became unrecognizable in 18 months. ICOs raised $3 billion last year — and recently there was one for $800 million. This is real money. Now we are not talking about VC but investment banking. There was no need for a stock market, no shares issued in the traditional sense. Collaborative lending is taking off and it is happening way faster in some areas then people thought it would.
Q: There are a lot of headlines regarding fraudulent crypto-currency exchanges and ICOs leading the heads of major bank and some CEOs to dismiss blockchain. Is that a mistake?
DP: A lot of CEOs are confused by this shiny or not so shiny crypto asset thing but the real pony is the underlying tech, blockchain. We are backsliding because of the explosive growth of crypto assets and lots of people are making money. Right now many CEOs are writing this off. All of these false opinions are dangerous. Some say it is all about criminals.. Criminals have always been the first to adopt any new exciting new technology. And yes many of the ICOs are garbage but many dotcoms failed, most businesses fail.
Governments and regulators are trying to sort their way through this, and to be sure they have a tough job getting the balance right between defending the public interest on the one hand and ensuring helpful innovation in the economy on the other.
Having said that, CEOs focus on the crypto side of this at their peril. This is not about buying and selling and making money and losing money on crypto transactions. This is about a march to a whole new infrastructure for our economy. It is about rapidly dropping transaction costs. Companies are going to become more like networks and may become bigger. Transactions costs will drop as firms become vertically integrated. The cost of contracts and the cost of establishing trust will dramatically decrease because a trust protocol is native to the medium and contracts will police themselves. CEOs need to recognize that we are in the early days of what will be a deep change.