For as long as there have been great decentralized movements, there have been powerful institutions and governments that have attempted to co-opt and control them. Will Bitcoin's story be different?
The early internet was chaotic, and most mainstream computer users didn't bother accessing it. Eventually, walled gardens like AOL, CompuServe, and Prodigy went up, attempting to tame it into a proprietary existence. One by one, they all went extinct. The internet—with no CEO, no revenue model, no subscriber base, and no plan—survives with Creative Commons, democratic exchange of information, and no one company in control of domain registration or technology protocols.
Today, social networks like Facebook challenge that neutrality by controlling the algorithms that make information popular, and the impact of monolithic giants in industries like eCommerce remains to be seen.
For as long as there have been great decentralized movements, there have been powerful institutions and governments that have attempted to co-opt and control them. Despite the best intentions of idealists, these movements usually only succeed in establishing a new power structure. Will Bitcoin’s story be any different? If history is any indicator, its growth will depend on surviving similar threats of consolidation. As a currency built on ideals of distributed authority, will anyone succeed at controlling Bitcoin?
Bitcoin has one historically unprecedented advantage: its ideals are an immutable part of its codebase. Decentralization has been chiseled into its codebase. It is structurally impossible for a central authority to assume control of Bitcoin. A fascinating twist to an otherwise predictable plot.
Still, for Bitcoin’s ideals to succeed in disrupting anything, the currency will have to achieve mainstream adoption. If the technology fails to achieve critical mass, its decentralized codebase will remain in the realm of nerds and marginalized revolutionaries. Today, Bitcoin remains chaotic, and most people don’t even know where to begin owning any, let alone using it. The majority of Americans are pretty slow to adopt new financial products, especially since there aren’t a lot of first-mover benefits to embracing an idealistic technology with limited utility.
Yet, somehow, my grandfather never owned a credit card and I can’t buy a coffee at my local shop without one. Will my grandkids be saying the same thing about Bitcoin? The more I dig, the more I uncover hints at Bitcoin’s future buried in the history of the credit card.
In 1958, a small bank based in San Francisco made a bold move. Without any sort of credit check, it handed out 60,000 credit cards to residents of Fresno, California. Despite widespread fraud and charge-offs, the experiment was a success, and the credit card industry was born. [read-more]
Rapidly expanding and without a national credit card network, the system was disorganized and fraud was rampant. Competition between companies became so wild that children and pets were being issued credit cards.
In 1968, Bank of America called a meeting of all its licensees in Columbus, Ohio. After the meeting descended into chaos, a 38-year old executive from a licensee bank in Seattle recommended a more systematic exploration of the issues facing the industry. The group voted to make the Seattle executive, Dee Hock, head of the exploration committee.
Hock would make a revolutionary recommendation: Bank of America should spin out its credit card division and turn it into a non-profit.
Appointed CEO of this division, Hock understood that the only way banks would join his network is if Visa was a neutral player. Though he couldn’t encode decentralization like Bitcoin, he attempted to embed its spirit in his organizational structure. Visa was formed as a jointly-owned organization (no stocks, no dividends) and all accumulated net revenue was used to finance the ongoing work of the operation.
In 25 years, Hock grew Visa faster than any financial institution in history, to a thousand times its size. Today, Visa connects 1 billion people via a payment network and has an annual sales volume of $1.8 trillion. The story of Visa is not that of a powerful entity consolidating control and becoming more and more powerful. Rather, it's one of the most compelling case studies of successful decentralization in corporate history.
Visa was most notable for the things that it didn’t do. It didn’t make the plastic credit cards people use, it didn’t provide credit, it didn’t set credit card interest rates, nor did it do most of the other things people associate with credit cards. Those functions are provided by Visa’s member banks.
In Visa, Hock envisioned an entirely new type of organization, one based on biological concepts so it could reach beyond the imagination, “perceive all the conditions it would encounter,” and “evolve to organize itself.”
Even after years of improvements, the experience of buying something with Bitcoin is still very clunky. Yet the early Visa interface was far clunkier. Merchants would make a physical phone call to the acquiring bank before each transaction to ensure the card wasn't on a blacklist and that the buyer's account and purchasing history were in good standing. It would take an average of fifteen minutes on hold before the merchant was issued an authorization code. With the buyer on their way home with their new dishwasher, the merchant would then send the sales draft to the acquiring bank who would proceed with the arduous and error-prone exchange with the issuing bank to reconcile the transaction.
Like Bitcoin, people were certainly not using early credit cards for the sake of convenience.
In 1974, Hock computerized the credit card transaction by implementing the Base I and then Base II systems. Almost two decades after the first credit cards were issued, these systems revolutionized the transaction process and finally made credit card shopping as easy as cash. The innovation also helped Dee Hock understand, in an almost prophetic sense, what digitization would mean for the future of money.
"If electronic technology continued to advance... two-hundred year old banking oligopolies controlling the custody, loan, and exchange of money would be irrecoverably shattered."
Like Bitcoin, the goal of Visa was to create a “trustless” environment. Banks didn't have to worry about who the acquiring or issuing bank was in any transaction. They knew that Visa would enforce consistent rules and would guarantee that funds were transferred in the case of a default. This enabled the system to grow exponentially, to the point today, where trillions of dollars are spent over the Visa network every year.
Hock also emphasized his desire to maintain Visa as "an invisible organization" with just enough structure to create and enforce a set of rules—and then get the hell out of the way.
Today, Visa is a public corporation with its own agenda, the inevitable result for an institution of its size and revenue. Hock would leave the financial industry disgruntled with his creation. Without code, Hock had no way to guarantee that the organization would remain true to its original ideals.
But in Bitcoin, he's discovered and embraced an ideological evolution to his credit card network. He occupied a seat on Xapo's board and has voiced his hope for Bitcoin to complete Visa's original vision.
“Bitcoin is one of the best examples of how a decentralized, peer-to-peer organization can solve problems that these dated organizations cannot; it presents incredible opportunities for new levels of efficiency and transparency in financial transactions.”
Does Bitcoin's codebase guarantee the technology will remain trustless, invisible, and in the hands of its users? Will the currency be overshadowed by other crypto models that re-route transactions through a centralized government or corporate structure?
Hock, for his part, hasn’t lost his idealism. “We are at that very point in time when a 400-year-old age is dying and another is struggling to be born—a shifting of culture, science, society, and institutions enormously greater than the world has ever experienced. Ahead, the possibility of the regeneration of individuality, liberty, community, and ethics such as the world has never known, and a harmony with nature, with one another, and with the divine intelligence such as the world has never dreamed.
Sandeep: Tell me a bit about the early part of your career.
Tom: I spent a decade helping to build start-ups focused on application and database software. This was where I learned how to sell and do business development. I was fortunate to be part of one company going public and another being sold to IBM.
Sandeep: What is something you learned during this time that helped you with consulting?
Tom: I began to appreciate how different customers achieved varying levels of success with the same foundational technology. This made me understand just how critical getting your team and process right can be.
Sandeep: This is something I only came to appreciate years into consulting, especially after the sale of my first consultancy to Capital One.I saw teams in different parts of the company trying to solve challenges like real-time messaging. Same corporate culture, same technology, same internal support mechanisms. Night and day outcomes.
Tom: We saw a lot of the same thing after selling our practice to EMC (sold to Dell in 2015). This is probably the thing I'm most proud of when it comes to the teams I've helped to build: the ability to perform well in a variety of contexts, sometimes in ways that inspires the client team to up their game as well.
Sandeep: Yes. It's particularly cool to see your team succeed in individual ways after an acquisition...consulting skills definitely translate into the corporate environment.
Tom: Totally. We have people who've stayed on at Dell and risen up the ranks, while others took the opportunity to become successful executives at other Fortune 100 companies....or to start their own agencies and startups.
Sandeep: We've both been around a while. My first consulting project was a Y2K thing for Cisco back in 1998. You've been around a little longer than that :). How do you think consulting has changed most during the past five years?
Tom: I think because there is so much infrastructure available now, consulting has become more delivery and outcome-oriented. A better blend of strategic and tactical. Public Cloud has also enabled velocity to increase at a pace unfathomable 5 years ago.
Sandeep: What has stayed the same?
Tom: It's still mostly about people. People who thrive on change and are focused on their personal and professional development. I love that this has not and will not change...it's what I love about consulting.
Sandeep: I know you're adjusting your work style to COVID. You're still a dude who clearly prefers to drive an hour for a socially-distanced hike or outdoor meeting over Zoom any day of the week :) But personal styles aside, what is specifically compelling about a remote agency during the era of COVID?
Tom: Kunai has been remote for years, which gives them an inherent advantage. There is something about the communication and management styles that just works in a way that other organizations are still figuring out.
Sandeep: Yeah, I think what a lot of people fail to realize is that remote work isn't just office work over Zoom. it's an entirely new paradigm. There needs to be an understanding for asynchronous efficiency...and this just takes time and effort to develop. How do you approach remote work and family? What are you learning about separating work and personal time?
Tom: No matter what the form of interaction, Focus. Be present. Quality over quantity. The best weeks are the weeks where I proactively schedule work and personal time. Neil (Kunai's Head of Delivery) shared a great quote with me "With discipline comes freedom." When I am proactively addressing the majority of my professional and personal commitments, I find I earn a little flexibility. A little freedom.
Sandeep: Tell us about a business hero of yours that I may not have heard of before.
Tom: Paul O'Neill is someone you may not know. His work in both the public and the private sector created a profound impact
Sandeep: We are both over forty years old :). How have you learned how to work smarter during the past decade or so? What do you wish you knew about consulting when you were 25 that you know now?
Tom: Consultants want to make lasting change. Lasting change is often not the act of a single person. Today I work much harder bringing others along on the journey.
Sandeep: Last question. What are you doing here? :) Why join a small consulting company this late in your career when you could have a cushy job somewhere else?
Tom: I love a good challenge personally and professionally. When I turned 40, I decided I would run a 10K every Thanksgiving weekend and try to have my finishing time be less than my age. With the exception of one year where I did not run due to a health issue, I have met the goal. I also recently completed the Leadville 100 Mountain Bike race. So, I guess I'm here because I'm a glutton for punishment :) Jokes aside, our customers have a job to do and I intend to put Kunai in a position to execute flawlessly on their behalf. I love committing jointly to audacious goals for our customers and our business.
Ninety percent of e-grocery customers will continue buying food online even after the pandemic. What does this shift mean for other merchants and their payment networks?
To compete in the digital market, financial apps and websites require secure and seamless onboarding experiences. Tech companies have risen to the challenge.