Scott Nelson

On transforming the legal, financial and accounting aspects of supply chains using blockchains.


Jason: I’m speaking to Scott Nelson who is the Co-Founder of Sweetbridge and a global supply chain veteran, who has an incredible plan to, as you just put it, liquefy the global supply chain. Is that about right?

Scott: That’s it!

Jason: Let’s start off by talking about your background and you became involved in this project, how you came to it.

Scott: I’ve been in supply chain or logistics activities for my whole career, along with computer science program development and finance, so it’s kind of a union of those three things that has prepared me for Sweetbridge. Sweetbridge came about as a result of a lot of thinking about how things were being done, and looking at the world over the last 20-some years when I ran another business that I eventually sold, and thinking that it was just crazy how things were actually working. As you got into how supply chains really worked and how global finance actually functions in and around supply chains, you really get into the detail and you go, “It can’t possibly work like this!” particularly if you’re into technology and what technologies can do. So it was the realisation that this is absolutely a crazy way to run the world that led to getting together with a bunch of other people to start Sweetbridge about a year ago.

Jason: Okay. Maybe let’s start out by defining what global supply chains are and how they currently function.

Scott: Most people when they think of supply chains, they think of a ship on the water, containers coming from Asia probably to wherever they live. That is a piece, a small piece of what supply chains are about. The better way to think of supply chains is that it’s Mother Nature or it’s the supply chain for everything that you deal with in your life. It either grew where it is or it was created where it is, or came to you as a result of a supply chain. And supply chains provide $54 trillion of global GDP, so it’s two-thirds of everything that happens on the world financially is a result of a supply chain. These microphones, what we’re wearing, where we’re sitting… These are all products of a supply chain. Supply chains are really about the management of commerce, and they’re about the production, storage and movement of the things that we eat, use, wear, live in in our lives, so that’s what we mean by supply chain.

Then creating liquidity in the supply chain, we actually mean three things by that, and they represent three key phases of our project, one is liquidity of capital. There are trillions of dollars tied up in the supply chain at any given time between the order and somebody actually starting work to build something or create something or provide some service and the delivery and the resulting payment. Then you have lots of things tied up in the manufacturing processes: the factories, the warehousing, storage locations and the transportation equipment, all of this has got trillions and trillions of dollars tied up in it. We want to provide liquidity out of that.

The second thing we want to do is we want to liquefy the assets so that they can be shared. Over the last 50 years – according to the Federal Reserve of the United States, which publishes a study on this every couple of years – the asset utilisation in the supply chains of the world have been falling: 50 years ago it was 90%+, now it’s down under 75% and it’s continuing to fall. This is a tremendous amount of underutilised capacity, that if utilised better would result in every product we use costing less, that would be significant. $54 trillion, let’s say you can make a 10% improvement in that… That’s five trillion dollars! [laughs] You’re talking about a 3% change in global GDP, so that’s a very significant thing.

And then all supply chains have become overly complicated as the world has diversified and as options have exploded, and as technology has increased, the pace and scale of change has increased. This means that every single supply chain on Earth is always under-optimised, because the things that it could be doing differently are always changing, the conditions are always changing. You might have optimised it at one point, but a month later it’s suboptimal, a year later it’s really suboptimal, and the more dynamic your business, the more change there is in the environment that you’re in, the more that’s true, and people just literally cannot afford anymore all the change management and the cost of the talent and the expertise, because it’s changing so fast, and even the skills you need are changing all the time, so you can’t afford to keep this on staff. You can try to outsource this to specialised entities, but they all have their own particular mission that is driven by what they want to accomplish, and isn’t really tied to what is that you want to accomplish.

By taking the knowledge, wisdom and expertise of people that are in the supply chains of the world and allowing them to tune the supply chains of the world on their own, and as a result of actual measurable improvements occurring be rewarded for that, we can create liquid talent in the supply chain, where the talent actually flows to where the greatest opportunity is. So wherever there’s a supply chain that could be optimised more, the talent actually to do that just flows through it, because using a blockchain we can now track the difference between the financial results that were happening before and the financial results happening later because we have a public ledger, and that public ledger is auditable and trustable, so you can actually now compensate people, not by time but by the results they can produce. This reduces risk for the company who is getting the improvement and increases the financial results for the expert who provides the expertise.

Jason: So this would be a service that companies would plug into essentially.

Scott: Yes, and that would use people all over the world to basically help them improve the efficiency of their supply chains.

Jason: That’s incredible. Blockchain is what makes that possible?

Scott: You can do a lot of this without blockchain, but you have a problem, and that is that in order to make all this stuff work, you have to connect a legal thing happening, like the transfer of goods or services or something, so some kind of contract with the value of that, and some kind of computerised record that synchronises it. In the past, you had to have three separate systems, three separate processes for doing each, and then you had to try to make sure that they stayed synchronised, and they were always getting out of sync. This is why we have audits of the financial statements, not just because there are people that lie or cheat, but because people make mistakes, they do. [laughs]

What the blockchain does is it makes sure that the legal record, the financial exchange of value and the state transition that model what’s happening in the real world all occur or don’t occur at the same time. This means that you don’t need audits to check to see if that has happened, you don’t need outside regulatory bodies coming in and enforcing regulation to make sure it happens; you can enforce it with code. It means that the difference between the bank account and the accounting of the transaction can’t be out of sync so to speak, because they all happen together or they don’t happen at all. People haven’t really grasped how fundamental that is, because so much of the institutions that we have in society, the things that we just take for granted having to exist, everything from certain kinds of laws to banking structures to the way we enforce things – think about how we get people to act properly, how we check things – all of these things have been changed with the blockchain, and we haven’t yet recognised the implications of that. We will, but it is early days.

Jason: Right, and this is certainly the most ambitious plan ever to use the blockchain. Can you maybe paint a picture of what the world would look like with this system implemented?

Scott: Well, let’s look at each stage, because this is three stages and it’s going to take years to get there. The first stage is liquidity. Let’s make it personal for people: imagine if as you were working through your day, at the end of the day you actually received the money for that day, you didn’t wait for your pay cheque.

Jason: As somebody who has worked as a freelancer quite a bit, that sounds pretty good! [laughter]

Scott: This is an effect that we’re talking about with businesses. As they build the product, start to fulfil the order, ship the order, whatever, they are getting money. The difference is you might have a pay cheque that you’re waiting several weeks, or maybe as a freelancer it’s a couple of months, but the average person probably waits maybe a couple of weeks, maybe at most they get paid once a month. In a business, in the supply chains, from the time a company ships something until the time they get paid on average is 52 days, and if you include the time for the order it would be another 37 days on top of that. So from the time that somebody gets an order and starts doing work, buying raw material, creating stuff, doing stuff to fulfil the order, then shipping the order and getting the money back is like 90 days.

With Sweetbridge, that happens now immediately. This means that everybody in that supply chain has money coming to them faster and at a lower cost than they do today. What the effects are is if you’re a large corporation, it might make a change of 2-3% on the bottom line of your company, plus create potentially billion dollars in more free cash. If you’re a small company in some third world country, it could allow you to actually expand your workforce, invest in better technology and do other things… Because you can’t even access capital today, you can’t get a bank loan, you can’t get a loan.

And the crazy thing about the system that we can build on the blockchain, and this is just a freaky, freaky thing, and it’s using a kind of economics that people just don’t recognise is how the world really works, but with the blockchain, we can actually take assets in the real world, lock them up in the blockchain, and you can borrow from your own asset yourself, without another counterparty. This means you don’t need to pass a credit check… Well, it’s a credit check with you, right? “Am I good for it? Of course I am!” [laughter] You don’t have to have a credit rating, you don’t have to have a credit report, you don’t have to have anything else; you can take literally an app on a cell phone that you can put your assets into, and this is taking a lot of real-world legal tech to make this work, but within minutes you can just basically say, “Well, I need to borrow some money today so let me do it,” and if you want to pay it back tomorrow, you can. The other crazy thing is because you can borrow the money from somebody without another counterparty, you don’t have to charge interest to rent the money.

Jason: What happens if you’re not able to pay yourself back?

Scott: Well, just like what happens today: if you borrow money on your flat or your car or something that you have and you don’t pay it back, somebody comes and repossesses it. That doesn’t change, so you don’t get a free ride, it has to get sold to basically repay the debt, that doesn’t really change. But the difference is that we could actually design systems now where you don’t actually have to pay interest. So it’s not only that you can get money now quicker in the supply chain, or you can get your pay cheque paid to you literally every day through this same kind of mechanism, you now don’t actually have to pay interest for having done that. I used to have employees that worked for me in the Philippines, and I hated these companies which were these payday loan companies, they would just charge…

Jason: Yes, very predatory.

Scott: Oh, incredible! They have a family member who is sick and the doctors won’t treat them unless they get the medicine or whatever, and so they go to the payday loan folks and they get this absolutely usurious loan, which is basically an advance of pay period’s pay, and then they take a 2-3% discount on the pay. Which sounds like it’s a great deal, but this happens 50-some times a year, and so that 2% it’s like 100% over the course… They take the whole pay cheque over the course of the year to get back – it’s just absolutely destructive! Well, this kind of stuff can be wiped out, these are the kinds of things that can change. And these are fundamental things that change people’s lives in places that could have really profound impact. We are actually, with a straight face, saying that we can have a profound impact just through liquidity in the actual GDP of the world in a measurable way, and as a result of the blockchain, not because of anything we’ve created but it’s just one of the implications of the blockchain.

Jason: The thing that’s really mind-blowing about thinking about that also is when you’re saying two, three or even 10%, that obviously it’s not just that, it’s the compounding effects of that over time, which is hard to think about. In full, that’s a tremendous amount of efficiency added to the system.

Scott: That’s right. If you take a look at the capital, then using the assets better, if that was a 10% improvement… Working capital frees up turns in economies, that’s one of the two ways you really grow an economy, is either injecting efficiencies or creating more turns in the economy. If I don’t have to wait as long before I can spend the money, to hire more people or buy more products or invest in something new, maybe make another sale or whatever it is… If I have more turns in the year of the same pound, if I give you a pound and you give it to somebody else, that’s maybe one pound that I’m passing, but every time it passes to somebody, that’s another pound that’s moving in the economy. If that happens five or six times a year right now, and as a result of higher liquidity it happens one more time, you are talking about an increase in the whole economy of the world that’s like 10%. Liquidity is really a big deal, it’s a really a big deal! [laughs]

Jason: When you put it like that, yeah. [laughter] Wow, I’m taking all that in. Essentially, what you’re talking about is optimising the world economy.

Scott: Yes.

Jason: No small task. What are the big challenges, or are there challenges to achieving that goal going forward?

Scott: There are many, and it’s not about us, we’re a non-profit open source project, and in order to make this work, we need hundreds of other projects that are going to work together on this in an alliance. We have an alliance where we’re trying to bring together all of the projects that are on the blockchain working related to supply chain commerce, and getting all of us to work together so that we can share data, even if we’re using different blockchains, and we don’t go back in time to places where we couldn’t share data… The fact that data is public in the blockchain or on a private chain, it’s not easy to share if it’s not in a semantically consistent data structure.

If you take providence for example, there are dozens of projects out there working on the providence problem, which is how do I know that this microphone came from who said it came from? Maybe that’s not that important to me on a microphone, but if I’m buying a Gucci bag, I might care that it’s really a legitimate Gucci bag, if I’m buying it on eBay or something. Or how do I know that the food I’m getting is actually organic? How do I know that the medicine I have isn’t counterfeit medicine that was produced by somebody that’s going to kill me? That’s what providence is. There are dozens of people working on providence in the supply chain using the blockchain, because the blockchain helps solve this problem, working in different spaces, but none of these have a common data structure. We’re trying to get everyone in our alliance to adopt common data structures, so that people who need to work with that data, like folks that are building order to payment systems or other things that need to be able to read that data, can actually do that. Then we’re trying to create the operating system in effect for the supply chain, where a customer, like a big corporation or a small shop or an app developer, doesn’t need to know which project this is from or what blockchain it’s on; they can work through one interface that we provide and work with all these. So we need a lot of people to make this happen, that’s one of the big obstacles.

The other obstacles are educating governments and folks about what we’re doing, in ways that… We are desperately trying to be responsible and be transparent and be restrained, to protect people and not break things that we shouldn’t break. And really, unlike a lot of blockchain projects, we see governments as key players, as participants in this process. We are trying to talk to as many governments as will talk to us about things, to get their advice, get their feedback about what we’re doing, trying to make sure we’re not doing something that would in some way cause them difficulty. We’re also having to go through and get, because of what we’re doing, an awful lot of different kinds of regulatory, compliance, licensing and other kinds of things that really shouldn’t be necessary and it’s going to be a tax on everything, but we’re doing it in order to be good citizens. Does that make sense?

Jason: Yes. What type of feedback have you been getting from governments so far?

Scott: You know, we were so surprised: we’ve not had a bad conversation with any government, and that actually surprised me.

Jason: Were you expecting it to be different?

Scott: I expected fear and ignorance, because you find that in the… There is ignorance, there’s a lot of that, and there’s a lot of misconception because of the bad things that people have associated Bitcoin with and that kind of stuff, so there’s an education issue that needs to occur. But I have, by and large, found curiosity, an openness to being taught something different, so it’s not like they’re closed-minded. They might have the wrong ideas, they might have misconceptions, but they’re open to “Well, help me understand it differently,” and I didn’t expect that, I didn’t expect that to be as true as it has been. And then in several cases – the Dutch government for example, the British government for example – very enthusiastic conversations.

Jason: Well, I’m sure if you go in with the sales pitch being a 10% improvement in market efficiency and GDP, that’s probably going to get receptive ears.

Scott: Well, it’s hard to vote against it. [laughs] The bigger problem is believing it, the bigger problem is how does that actually work. Some of the fears were like central banks or the banking structure… We’ve actually had some pretty decent conversations with banks.

Jason: What has their reaction been like?

Scott: They’re the most… And I don’t want to categorize it as banks. There are employees of banks who are at times very threatened by some of the things that we’re doing and they come across extremely sceptical initially, but as we talked to them and actually tried to explain what we’re trying to do and how it works and how we don’t believe banks go away… Banks need to change, but banking services don’t stop, and there’s a lot of things that banks do that… They’re much maligned, and rightfully so in some cases, and even they’ll admit that, or at least the employees that work for them will, but they are searching for what they can be relevant and good at doing, and they do a couple of things pretty well.

Banks are pretty good at keeping secrets, and we need people that can keep secrets. Banks are pretty good at doing custodial duties, so being responsible for a trust or being responsible for a piece of property or a title on something on behalf of somebody else, they’re pretty good at that in most parts of the world, and they are absolutely fabulous at relationship management. If you’re good at relationship management, probably the best and highest used place where you can work in society is a bank in terms of who will compensate you most for that skill, and we desperately need people that are good at relationship management and helping people understand complex things simply, and banks are pretty good at that. My mom doesn’t understand anything about finance, and she has a gal that’s at the local bank that she just loves to go and have coffee with, and that’s valuable. Maybe I don’t want to do that, but if I need to deal with something that’s complicated in the financial space that I don’t understand, it’s not a bad thing to have somebody I can talk to who, by and large, will try to give me pretty reasonable advice. There’s not a lot of places that I can go and do that. I can’t talk to my stockbroker to get that. [laughs]

Jason: Do you want to maybe talk about the Internet of Agreements and how that plays in?

Scott: Sure. This is a very significant thing: the real world is much bigger than the existing digital blockchain. The currencies and things that exist in the blockchain right now, Bitcoin and whatnot, Ether, all coins… This is tiny in comparison to the real world, terribly small.

Jason: Yes. I think Vinay mentioned to me that the entire market cap of all crypto is smaller than Netflix at this point.

Scott: Yes, yeah. [laughs] Well, it’s terribly small. There’s $700 trillion valued assets in the world, and there’s $1.6 quadrillion in financial instruments as a result of derivatives and other things, so $200 billion is nothing, it’s a rounding error. [laughs] So if we’re going to work in the real world, we have to take real-world things – homes, cars, receivables, equipment and other real-world things – and we need to be able to manipulate them on blockchains. If we’re going to do that, we have to have legal technology that allows a real-world, in legal jurisdiction contract to delegate control of an asset to the blockchain, and to allow the blockchain to make state transitions – sell it, transfer it, rent it, whatever – and be the authoritative source of the state. This requires agreements, and people have not thought this through deeply at all in this space, because it doesn’t require just agreements but you also have to have dispute management. I mean, you’re not going to, at least in the next five years, go to most courts and say, “Well, I sold my house on the blockchain,” and they’re going to go, “The the block-what?!” It’s not going to work, okay? [laughs] You’re going to have to have alternative dispute resolution processes, just like you have in a lot of business stuffy, where people use some kind of dispute resolution process as an alternative to the court, whether it would be the maritime court or something else, arbitration or whatever.

You also have to have an alternative enforcement mechanism, and the Internet of Agreements is all about pulling together the thought leadership and the people and whatnot that are working on this holistic problem, how do we solve this problem. Just like Sweetbridge needs a lot of people to help with bringing in their projects from the supply chain – governments and others, education institutions – the legal world, in order to really make the blockchain work, is going to have to participate in defining how do we bind real-world things to a blockchain, and then how do we defend those and how do we basically address bad actors when people do bad things or refuse to accept that they actually did sell the house, things like that. There are a lot of really important issues that are being addressed around this Internet of Agreements.

Jason: How close are we to essentially merging those two worlds of smart contracts and real-world law?

Scott: Well, the very early things are happening as we speak. The first home, I saw in the news this morning, that was ever sold on the blockchain was sold yesterday, so we have all these kind of firsts. There will be a big amount of time, and there’s a ton of work to go from these isolated cases where these things have happened and until it’s ubiquitous, that’s going to take a lot of time, but the speed and pace at which this is happening is way faster than what happened in the Internet. I was around in the early years of the Internet, and I actually predicted that it was going to happen faster than it did, I was early and I paid the scars on my back for being early. This time I was very concerned about being early, and I almost feel like I got in too late. I was sitting on the sidelines, looking at blockchain for a while a couple of years, and thought, “This technology has got years to go before it’s going to be mainstream,” and I am stunned by fast things are happening.

Jason: Yeah, it really seemed to exponentially take off just in the last couple of years.

Scott: I think people will point back to 2017 as the year it became real. This is the year it happened.

Jason: Yes, absolutely. Where are we on the adoption curve? It seems clear to me that it seems like 2017 really is the transition year of something that’s way out on the fringe to something that’s starting to come into the mainstream, but we’re still ways away maybe from mainstream adoption. Can you maybe give me a timeline of where you see maybe the waves of adoption with blockchain, or where things are going to go in the next 5-10 years?

Scott: I think it’s going to happen quicker than 10, I think it will be ubiquitous in less than 10 years. I’m probably unusual in my thoughts about that, but it comes from having spent quite a bit of my time this year travelling around the world and meeting with the people that are doing stuff on the blockchain – talking to governments, talking to corporations – and every single group that I’ve met with, even if they don’t really know about the blockchain, has something going on related to studying it, a POC that’s happening about it, a group task to do something about it. But I think we’re going to see breakaway projects occur this next year, we’re going to see things like what we’re doing actually released into the world and actually starting to work, there will be other projects like that that will actually start to actually function in the real world. I think as a year or two of that happens, you’re going to see the early adopter phase happen I think in the next three years, largely, and then the question is what’s going to be the thing that carries us over the chasm, moving from early adopters to the beginning of the mainstream adoption, and I would think that will start in the next 3-5 years.

Jason: Can you shed any light on what you think that will be? What’s that going to look like? What’s going to carry us over that?

Scott: Well, I’m hoping Sweetbridge will help make that happen. But regardless, what it will be is we have to stop talking about the blockchain and we have to start talking about what you can do. The Internet didn’t become ubiquitous by talking about TCP/IP [laughs]; it become ubiquitous become, “Look, I can do this! Look, you can do that!” People say, “We’re in the bubble of the Internet Age and whatnot,” and I go, “What are you talking about?” Has anybody actually looked at a comparison? If you’d grossed up the values of the Internet bubble to comparison of today, there’s something like $3-4 trillion worth of value that was out there in Internet stocks before the bubble… We’re at like $200 billion! This isn’t the bubble yet! The taxi drivers and people’s grandparents and whatnot, they’re not yet into this thing. So this isn’t the bubble yet, this isn’t the “dumb money in” yet.

Jason: Yeah, I don’t think those people are even aware that this exists.

Scott: Exactly, that’s my point, and that’s because we’re still talking about it as if… We’re talking about it at this technical layer and we’re talking about what technically it enables you to do, and people don’t care! They don’t know, they don’t care, that isn’t important to them… They have their lives. What they will care about is “Hey, your mortgage is £1,500. How would you like that to be £1,000? – Oh, I’d like some of that! – Okay!” and then what they’ll do is they’ll say, “Hey, guess what? I just cut my mortgage by £500!” and they’ll tell somebody else… That’s when adoption starts happening, it’s that kind of viral effect. That’s when things really start changing, is when people can talk about something really simple, that’s a basic need that they have or their company has, and they can talk about how they won. Because what makes early adopters is the early risk-takers who like to be the first. They like to be known as “I owned the gadget first, I became the expert first, I got the first one,” because they want bragging rights! When we give people bragging rights, like “Look at what I could do!” and that’s started to happen with trading and people investing in Bitcoin and things like that, that has started to produce some bragging rights, but it’s still do darn hard for people to do it.

Jason: Yes. I mean, certainly the killer app for Web 1.0 was that you could get free shipping with Amazon, first with books and then with practically anything, which seems to be a very parallel case to what you’re talking about.

Scott: Right. So with us, if you have a our membership token, which is Sweetcoin, if you get enough of it for the amount of loan you want, you’ll be able to get interest-free loans and also all sorts of other interest-free services. That is equivalent to Amazon Prime, where you bought in initially and then you got free shipping – it’s the same kind of thing, it’s like a membership fee. Or the membership fees of some retail warehouse like a Costco or something, where you join the membership and then you get to go spend $100 every time you go to the store… [laughs] Which is my joke, because it’s $100… I paid this huge membership fee just to spend a whole bunch of money. [laughter] But the prices are really good.

Jason: Interesting. We were talking just a little bit before we started rolling, where you said that you had spent a year working on the white paper for this, and that you had spent a decade doing the early thinking for this. That suggests to me that you came at this with a vision for the world that’s not tied specifically just to blockchain.

Scott: Yes.

Jason: I’m curious, what is that long-term vision? What change are you hoping to see in the world?

Scott: Well, I’d like to leave the world a little better off than when I came in, and the change, fundamentally, is I don’t think that supply chain, trade finance and the way people operate their supply chains is fair, fundamentally it’s not fair. We have created an environment where we have created hypercompetition, where we’ve turned to dollars as the only mechanism of measure around things which that’s not actually the only mechanism by which you actually need to measure them, and we’ve commoditised things that aren’t commodities. A truck for example is not a commodity, unless it’s empty or full; if it’s partly full, adding additional stuff to the truck is almost nothing. Throw another box on a truck or in an airplane that’s already flying, you couldn’t measure the expense, it would be unmeasurable.

That’s not truly the same thing as another bushel of rice or another barrel of oil, it’s not the same. That’s one of the reasons you’re seeing the asset utilisations fall, is this hyper focus on price, instead of on asset utilisation. And we’re in a world where the pace of change and the size of change… I think most people are not prepared for what’s going to happen in the next five years, and I would like to think that we can create an environment where some of those changes that are going to be quite stressful on our societies could be done more transformatively instead of disruptively. In Silicon Valley and other places, we’ve almost made a god out of being able to be disruptive. “I’ve got a disruptive technology!” they have disruption tech days, they have disruptive hackathons… [laughs]

Jason: Yes, until there’s nothing left.

Scott: When did breaking stuff become a great idea? [laughs] Now, replacing things with better things, that’s fine. But it’s not just good enough anymore to replace things with better things; we’ve also got to think about when we’re dealing with massive stuff now. With the blockchain, it’s not like, “I’m going to give you some information, and, oh geez, your kid might use it to get pornography.” We’re talking about “I’m going to actually enable you to basically start transmitting value.” What about terrorists or whatever using that? There are real, big, huge things we could be doing and not recognise that we are doing it, if we are not careful. When I was sitting on a beach, I actually became scared, because I realised, as I’ve been communicating with people, I’ve met a lot of people that were very well-meaning, nice folks, extremely bright, but amazingly naive.

Jason: In what way, in what sense?

Scott: The way I like to look at this is there are probably 100 people alive right now who are either writing right now or will write in the next five years protocols on blockchains that are going to change the world. Many of them are going to be nice, very well-meaning people, but they will not have done very much thought about the implications of what they do. If we change global values in trillions, and I think the blockchain will issue in businesses that actually run in trillions, because it’s naturally designed to create monopolies on a global scale, and we “won’t care” about them being monopolies if they’re open source and run by foundations, and yet we’ll have trillion dollars of value under the control of a single protocol.

If that protocol has unintended consequences, and they’re all going to have unintended consequences, but if they have really unintended consequences, like really naively unintended consequences, things that could have been thought through, then we could create wars, we could create famine, we could displace millions of jobs by collapsing industries within a year or two, and the reason is money is fungible. Unlike almost anything else, people will switch money fast. If a better financial deal comes out, boom, they go, and that’s because we think of financial deals as being just as good from one thing as another. I don’t really care who has my mortgage, I don’t really care what credit card I have, I don’t really care… Things that have to do with money people change very, very quickly, so you can see massive changes in society in very short periods of time, and that could be amazingly destabilising.

Jason: Wow – that’s completely fascinating. The ethical challenge that you’re highlighting there strikes me as extremely similar to the ethical challenge of artificial intelligence, inasmuch as a very small piece of code, and the assumptions about not just the code but the assumptions about the world that go into that code then gets plugged into this thing, and then it’s more or less irrevocable at that point.

Scott: That’s right, and when you put artificial intelligence and the blockchain together… That gets freaky scary, if you do not actually have some human oversight.

Jason: Because then it’s potentially decentralised and out of control.

Scott: Exactly, and it could make decisions and do things that would be so fast that we wouldn’t recognise how things were changing until it was too late, and then you’d have to undo massive value transfers to restabilise things, and what will happen is people will revolt. If you destabilise a whole bunch of people’s lives really quickly, they’re going to be pissed off, and rightly so.

So what really motivates me to answer the question why did I get into this is I felt like I had enough experience to maybe be 10% more aware of some of the things you shouldn’t do. Because I failed a lot, I made a lot of mistakes, and you learn from those. And I had spent a lot of time thinking about some of these things, and so I felt like maybe this is what my career has been for, is that I’ve been being prepared to basically get to a point where I would have enough understanding that I could try to help minimise the disruptive behaviours that are purely just disruptive, and maybe help maximise a couple of behaviours and changes that would be more transformative. And the difference between transformative versus disruptive is transformation doesn’t tear down or part the thing; it changes it, and banks are a good example. I don’t think banks should be eliminated, but I do believe they need to be transformed, terribly transformed. But if you do it through just killing off all the banks, you’re going to get something far worse than 2008.

Jason: Okay. Scott Nelson, what a privilege and an honour to speak with you. I wish you great luck with your project, a truly world-transformative idea – thank you so much for having this conversation!

Scott: Thank you!