Ep. 64 The Convergence Ecosystem insights by Outlier Ventures
The. Hello. Hello. Hello. Hello, welcome to intra blocks. Your dedicated podcast blockchain and smart contracts. I'm will lead all scuff your host for this week's podcast Willoughby discussing the convergence eco-system was insights by outlier ventures. I'm very pleased to have Jamie Burke, founder and CEO of large ventures Jamie. Thank you for joining us today. Could you please give our listeners a quick introduction on yourself and not lie ventures? Schule so ally inches is just under five years old. We were Europe's first blockchain, venture platform, and I'll maybe explain a little bit about I mean by venture platform. Prior to outline I was an angel investor and prior to that had worked within digital innovation and change management. Typically with. Lodge complex institutions. Trying to help them to adapt to new emerging technologies. And so when I kind of came across bitcoin, and then Moberly blockchain soul, the opportunity that presented and the potential is a new paradigm has founded ally. Vengeance. Thanks for that, Amy, so as it has caused me here in blogs, could you please explain to our listeners. What is blockchain and how does it work? So obviously blockchain means lots of different things to different people. So fa me it's a catch your word, which broadly represents distributed, ledger, technology. So obviously a blockchain is a very specific form of distribution. Logitech -nology. And docks. Interesting. But I'm more interested in broader application of distributed ledger, technology in all of its different configurations. So I would kinda also back with what I think, distributed ledger, technology is rather than the blockchain so for me awfully have the legend component, which is about ownership and the transference of ownership in a noticeable way. But one where that state or view on the economy effectively? Amicably is governed by the network rather than central party. But broadly, I break blockchain into three innovations. So one is the ledger itself. The second is the idea of digital scarcity the idea that you can have something that is both digital and scarce, which is a huge innovation and was the kind of light bulb moment for me in that, you know, before that point, if you think about. All of the value that the digital environment had kind of eroded web. I it was digitally. It could be copied in time, so everything from Ajay pack movie. A sound file whatever it may be. So digital innovation, the Shad ledger. An cool the idea of small contract. So the idea that you can have you can program rules into the ledger that can carry out, currently anyway, rudimentary if this than that. But increasingly if we look at the, the world is today, most ledges are pretty dumb, and most small contracts needed contracts. No smart. But increasingly the idea is that these ledges themselves can become intelligence. They can learn they can optimize and. An equally you can have increased levels of intelligence at smart contract last both at the ledger and the small controller. And so that's why we've done innovations investments and things like fact which speaks to both of those things. Great. Thank you, nine in conferences. We all referred that we idea. Amazon simple looking websites books moment woman, but it will evolve into a marketplace. And I was in lesser than so long, so Hal level. What is the convergence eco-system? So I lose track of time, I think probably three and a half years ago or something like that. We'd spoken by that point about one thousand five hundred blockchain startups all around the world. As you can imagine most of them will never see the light of day, or they did wouldn't survive beyond the line kind of not present fell rate is inheriting any startup. But as we were speaking to all these different projects at that stage, this was both before, and then kind of just after theory him. We, we started to look at all of the cases that were very excited conceptually about what was possible at the application layer. With the innovations that blockchain enabled butts. Realistically, the infrastructure just wasn't that, you know, we knew because not only have we always invested in space, but kind of employees to my co-founder was a CTO. The first thing we did was get a small team to ply learnings actually playing with technologies that we're investing it. And so we've, we, we were always very aware of its limitations, because we break it and sometimes you'd be the first person to break it in that way. So we saw this flurry of people wanting to pitch a blockchain starter that was going to build something on top of their bitcoin. Very quickly, realized most of those use cases, either just impossible now or maybe weren't even that relevant ever. But the thing that became very interesting to was the idea that DLT shouldn't be looked at on his own an increasingly we started to see the old started that was looking at applying. Blockchain technologies, our DOT two problems or problems, primarily predicated around later. And that's kind of when we had the light bulb moment where we said we. If we can focus the protocol lab than the most interesting way to look at this is seeing in the context of other technologies. And in particular DLT's ability to help Seoul, for many of the challenges that I t has especially industrialized eighty or the economy, and that's what we then call convergence because we realize not only did it sold for IOT problems or problems, but actually all of these things combined, etc. One another minute you sold for one problem, such as securing an IT supply chain of devices. So you can have providence of devices and data all the way up to incentivizing the ability to unlock data. Marketplace's train algorithms you go. Well, okay, this is actually a stack of protocols. And if you're going to be investing innovating in any of them, you need to think of them in combination, which was a wonderful light bulb moment. But then also incredibly daunting said, okay. Well, we can't just be expert and DOT. We need to be experts in IOT. And I, of course, each of them has. Their own levels of complexity. So, you know, that's why we are now thirty plus members of staff full-time, because we need to track something like convergence is just so complex comple- agree. I mean it's fascinating to hear you say because we went through a similar journey when we launch cer- blogs, it was solely as a podcast on blockchain for the insurance industry. And by the end of last year, we quickly realized that, that same point blockchain, sits within a whole new stack of new technologies which has AIT, and so on. But also at an industry level, you know, we, we believe that there is this council echoes of eco-systems where a three I insurance industry can connect to a trailer and supply chain logistics, in the automobile or EMMY in the pharmaceuticals, and that, that brings challenges in terms of data standards in terms of cross blockchain interoperability, and governance structures needs to be addressed. So what, what are you view? You know, in terms of, you know, we discussed very briefly conversion system insurance technology, but holidays, that's going to affect the industries were looking at it. Because if you look at insurance, finds a lot of them are looking at just a in isolation. Yes. Or blockchain in isolation. They're not taking this more holistic view for me new stack perspective. And from an acquisition perspective. Yeah. So metal level. The best way to think about convergence conversions. Thesis is a new data Konami because data is the commodity, whether it's, you know, the collection curation of it, the transportation of it, the conversion of it into a digital set that can be traded and measured quantified or how it's then fed into small contracts, all machine learning to enable autonomous systems at the end of the day data's at the central of all of that. And so, so that's kind of the heart of it. But then if we think about what that's going to enable in a web, that is more, increasingly more decentralized, moral to mated. So the way that we look at it is the, the convergence of these technologies in par-, powered by the innovation of Ditchling sets, digital assets, not just as a representation of value, but because these assets digital program -able, which means that they can be incentives and disincentives. So they can be coordination mechanisms in districted systems so they can be both an asset traded. But also the DNA will the rules of the game, the rules of the road to make sure that these systems can be orderly. So not catch really interesting in that the potential of the promise of that is it can allow us to unbundle the current where paradigm or actually, the paradigm and internet, which is predicated around the combination of two patients, the platform model and the cloud cloud the platform being mediated marketplaces, so mediated peer to peer not truly pit to pit. Then the cloudy IT infrastructure that allows that to reach planetary scale. And of course that's delivered huge convenience but it's led to huge concentration of wealth in handful of platfo monopolies knows monopolies are now threat to everybody, so you could speed to almost any industry and Google Facebook or I'm all that new competitor. The one that most worried about whether it's. 'cause all shipping logistics transportation, so so the promised to be able to unbundle these, these platforms, and a banking really good example. You look at what Facebook doing now effectively the idea. I mean, it's interesting that they still speak to the banked think the reality is, the banked probably will never have a Bank note that I want to Bank. They want a bundle of services that might end up representing looking like something, you might call a Bank, but will be delivered almost entirely digitally. And so there are already a lot of these platforms. They're trying to unbundle the Bank, but still keep it in a new concentrated model. The interesting thing with this new emergent bottom up. Paradigm is that it will it will kind of break up these platforms, and please. And of course, that's what a lot of regulators wanted to do from top down perspective. So this kind of a moment now where we have a top down knowledge, -ment by all the governments that it doesn't directly benefit. These things need to be unbundled. And we have this emergent technology stack that just naturally does that. The final piece to that is the idea currently people still perceive, the internet. And then as a consequence things like crypto. As something that a space where people transaction engage with people. And actually, if you think about the internet is already there are more devices connected the incident people. Half of a web, traffic is from bolts off of that is militias activity, so already. Either people on the participants or their devolve. Ing work to digital agents machines. The differences is that in the current paradigm. Those ditch representatives serve the platform over the person. So they might deliver value to the person, but they serve the platforms interest, firsts whilst in this instance, if we have a web, that is decentralized deaf centered around the user, and their sovereignty sovereignty data. Than we can trust. We can devolve increasing amounts of economic work to digital representatives to serve as individuals or collectives rather than the platform. So the, the real promise for me of web three is that we can actually enable a web, where we ask people have to do very little. We can devolve economic work an agency to digital agents that can. Carry out work on behalf for marketplace's optimize world around us. And we will increasingly engage last with technology normal. Is a huge amount. He just shared dance winning trying on bundling on one piece at a time because if we go back to the data as the oil, because what is interesting as Tim burners Lee for the web was kind of decentralized, web Commons amongst other ultra stickers perations, but unfortunately, what we've seen is that we as consumers have become the product, which is controlled, those pather monopolies vendors Facebook Google onto name a few. And if these platform monopolies create an absorb a lot of data on our behalf, I'd say, over more, like you'd say their plot for their platform purposes, then you have those you mentioning in some of your documents before that those Pathum monopolies create those determine pleased. Yes. And whether they I need needs a ton of data so you could move to this system of AM and all, please. And that again, is, is also interesting because it's a couple ways you could look at it one is that if these forms are the monopolies. And the incumbents, whether it's an insurance company, or a Bank, they don't fundamentally produce a huge amount of data, they have some, but it's very digital and it's not into with other path from that not going to be producing very ASA fisted AI systems. And then, of course, there is this whole point which him a friend of ours called mind montesano. So we've had on our podcast before she bring this point in conference. We were at a couple of days ago that you have potential AM please coming out at state level. For example, China. Yes. Which has a very centralized system was we in the west through GDP, or the, from the regulation, we prefer decentralized, conver- pro-choice. But in this scenario where AI could potentially be weaponized essentially system has has has an advantage. Or do you believe that we can have a system for protecting your ideas that still Bill sophisticated? A is decentralized. Later. So I know I'm asking you all lot, but, but also I do still want to come back to the note about how corporations who do not have a digital mindset who used his role as division, but is in a mindset will be able to operate in such a world. Yes. So. If we can I speak to how we've ended at where we all know. Timber Nestle and the people prior to him that pirated insent, more generally. They made some design choices and they were not accidental. They were deliberate design choices, and they were they were motivated by certain political philosophical beliefs about world, which of course, now at hindsight is easy to look back and say, well, it's naive. But, you know, there was the declaration of independence of cyberspace, and in that it very clearly articulated that. The innovators of internet at that time, which you gotta remember were very small group of scientists researchers from few academic institution. So they would they were peers they genuine generally thought the same. About world. They had to say you topic aspirations. And they said they wanted to do away with many of the instruments of the state, so they, they kinda saw this as the last frontier, which was very kind of west American concepts of the pine is going out going out to the west, and they saw this is the last the final frontier to borrow from. The SCI fi inspired them. And so they wanted to do way with identity explicitly, they wanted to do away with property, so concepts that society was based upon that much of rule of law was oriented around, and they wanted to create an environment. They felt where that wasn't required. And of course, that was true when they'll knew one another nickel trust. One another because they were peers. But it didn't scale to a planetary level where the massive IRS pilot to this place without the connection social bond with one another, and you get more animalistic behavior. And so, you know this created an environment without identity. And if you think about a lot of the platform monopolies that oriented around being trust broker because people called trust one another on the internet. So they broke a trust, and in return day rent Zeke. And timbers -ly kinda continued Thole because he's a free market fundamentalist. He believed that the way think about the web was a market and therefore markets optimize themselves. And so there shouldn't be anybody in the middle of that trying to. Police it. And so the reality is, we created an volition Lucien Renisha for the platform, and -opoly to take hold. And a lot of them did and still do try to speak to those same manifestos about freedom and liberty and the market forces that can shape into that. But the reality is, is we know they've become non-state state actors. So Facebook is one of the biggest countries on the planet, yet, they don't have any of the degree of accountability that any politician. Government would have. And so if you think about what they do with data centers, and of course, surveillance, capitalism book count at the moment, speaks to a lot of this model. Good, Amish model behind it. Data centers, the equivalent of an offshore Bank account. Right. Allows us to do things that they couldn't do. On shore. And so this is whole offshore model is kind of new. This new kind of an environment where comic activities conducted an interesting, if you see. Again, referencing fence capitalism. They talk about the first Sino Google. So the idea that states are having cyber walls with entirely digital states, and that playing out and fighting for sovereignty and all control of data. And so actually, there are I believe, three alternatives to the vision of the internet, one is surveillance, capitalism, which is predicated on largely US corporations which. To degree become extensions of the states and after September eleventh, we saw this marriage of data collection will okay, you can kind of do all that stuff as long as you feed it into into the mothership, then you have in China, digital statism where you have equivalent corporations, but they serve a single state. And so I think in Europe we're in a unique position. Why? The EU commission. And by the way, this is one of the main reasons among many, but the primary will more. I think Brexit stupid idea because the challenges that we face beyond global warming. All that stuff. How do we take on Google? How do we take on Facebook? The UK mission struggles to do it. Let alone the UK on its own. So in, in the European Commission, we PR we've got this kind of trying to constrain all restrict or break up these platforms. Leading the charge more than anywhere else in world because it doesn't benefit in the way that China rule, the US government does from those monopolies, an equally that's married by an increasing warming an embrace of these emerging technologies. And this is kind of what I referenced earlier. So, I think in Europe, we have a third way, which is to create the decentralized, web, I think is more likely to take root in Europe, both in terms of the bottom bottom up innovation, the innovation of crypto assets. As much as from a top down perspective and equally. If you think about the kind of stakeholders the web two paradigms served, Silicon Valley and Wall Street will guess what we don't benefit from that either. So there's a lot of reasons and incentives. Why Europe might champion this third way? Now to your point about the benefits of digital status for China is platform anomaly data monopoly, monopoly. It could be that whilst year. And I might find what happens in China distasteful. Not necessarily something we, we would want to live in, maybe that's just our biases. But it might just give it the most powerful our which can allow it to optimize it citizens, life infinitely better than the market camp. And there is this idea of this book coming, imminently called luxury communism. The idea that holy grail for communism was that you would have all knowing computer that could coordinate the economy, maybe China can achieve so is really interesting time. And obviously, my bias is towards this decentralized, web, that is that is based upon the market. But the puts the user not the shareholder at the center of the center of it. So that was specific to the web on. I forgot you the questions to kinda fascinating Ankara sations. And my question is, as we're increasingly moving into digital space, and we had to digital monopolies in the form of the Facebooks Google's. Corporations incumbents, yet in insurance in the financial industry and others. They have attentive of having an optic, digital distribution his digital as a miser within their DNA and because of that they're not necessarily capturing the right data. I mean, for example, next, we're going to have twenty twenty five billion devices and partly, thanks for five G that's going to be potentially maximized and the way all this data where it's being stored at the moment is in silo database. Yes. And if that was goal with filthy, rich, but data is more like a fresh strawberry. If you don't take a bite into it. It will rot and these organizations are not having that kind of mindset. And why what does this say for their future survival in a way if some leaders platforms are maximizing digital through through capturing the data through processing it or consuming, as you would say was the is what are they do? Yeah. So. The answer to ice. So one is slightly more intellectual and one is a bit more practical. So the intellectual one is again in reference another book. Called the stack is nothing to do with our stack. We'll have outlined vision of convergence into something we call the stack book called the stack and it talks about the. The cost of processing, and storing this, amounted data, which is largely redundant. If you think about the energy waste the energy consumption, the massive stuff that we have to minerals we have to drag out the earth to store load of data is largely being unused and very quickly kind of has its half life. It just goes. Out of out of. Dated loses any inherent value very quickly. And yet, we still store it. He's still secured somewhere great cost to the planet. So I do think coming up with a new model about how we use data in a way, that means we're not burdened with data silos of rotting data effectively. Is going to be a significant question. And if you think about. The, the energy footprint of the cloud computing infrastructure. I think it's already bigger than the industry and several others. So it's not an insignificant problem that we need to think through now more of a practical onto. So as you would imagine, because the nature Konami is central to our thesis conversions thesis. We are vesting in protocols, and markets marketplaces that soulful this problem. So one example is ocean protocol protocol answer. Berlin Open source protocol nonprofit foundation. That has designed token economy which enables a data marketplace. And this is kind of the missing component. So at the moment, people say, data's in the oil, they refer to as a commodity, yet, it can't be traded, like commodity and very difficult to quantify the value of data generally and specific to a certain context because market forces just onto ply. There's no incentive. So you look at the open data initiative by governments, you know that there's an obligation to create a data feed or an API, but it should roll data is almost unusable comes in lots of different formats. So it's almost not worth doing and yet, there is your chieftaincy to connect will this data. So what they've done is designed for. Marketplace, which looks to incentivize all the key, participants in data economy that can enable for looking at data providence date, securitisation, Deidra, viability, and that allows for participants in that ecosystem to stake money on the value of data. So you benefit from these kind of prediction markets, in a way where people stake, capital and reputation on. Yes. This is this dangerous from where we think it's from the IT device. The providence data I think that this data is relevant for this problem this algorithm. And then, of course, you need to bring in all the data scientists, and of finally connect up. The machine any experts to train out because ultimately data is pretty useless. Unless it's being fed into an acronym, you think about it, right? People don't want data. They won't actionable outcome. And if a person's got to be the actionable outcome that don't even more inefficient. Right. So really what you want machines to be able to act upon them insights quickly as possible from his fresh day to satisfy possible, and then potentially find correlations between data sets just all possible. Top top down. So solution is looking at kind of creating the, the marketplace in incentives for this economy to form around Eiter in a way that businesses can make it usable. And in a way that this kind of long tail of companies. And so if you think in Germany, you have the middle stand, which is a significant part of its economy, which is a fact of -ly the lot, that, large SME's they can be two billion dollar companies still family run. But these guys can't food to hire data. Scientists sitting not the best ones, they can't afford to hire the best machine learning people. They go to Google Amazon. Currently, the one of the really exciting innovations about the decentralized web is if you speak to the most bright up and coming people in machine learning from impure college UCLA, or am I t- or wherever it is, then I'll thinking about going to work for Google anymore. Right. Thinking about how can I either design for or participate in decentralized economy where I'm my own man? Right. All my own woman. And I can derive all the value from economic work participation. And so if you think about that, and that means we can aggregate along tale of data and things we can aggregate along tale of data scientists machine. Learn people that can very quickly out scale, even Google Facebook grammas. And, and I think that's what's most important and exciting to most enterprise. Because if you speak to any enterprise in an industry, they don't have a blockchain problem. I don't have a decentralization problem. They almost definitely have data problem in data problem is they don't know what to do with that data. They know it has some value to somebody, but I've no idea how to extract it for their own purposes. All the purposes of others. And so saying, all of a sudden, there is infrastructure. There's calling me a participants that can do that work for you where you can set the terms of, how that could be commercially exploited. Is when we speech renter prizes. She usually exciting and then once you start unlock data flow, you can then start to say when okay, it could be interesting that we form some kind of consortia around particular Saturday, ter-, or particular automation, where we can all tomato away. Trust barriers of trust of friction points between supply chains. Yeah. I mean again a huge amount bundle in there. It's interesting because listening to you. It's the web or Email where the killer apps for the internet in begs to wonder if relation is the killer app, you know of this DOT kind of kind of world. And obviously as we grow this digital space where it creating effectively digital twins of ourselves as individuals. But also of assets of a car of building a ship and was that notion? There is the element of cell sovereing ID's, which will make decisions in effect programmable decisions on behalf of that asset of that individual one also very interesting coming back to our original conversation about the street forms surveillance, capitalism, gills, and Jills state has more. The even decentralized part is the has actually looking at potentially getting legal rights to a is. I know it's still in the early stages. How, how do you see those developments facilitating the grocery conversions system? Yeah. I mean so it's exhilarating exciting terrifying. Same because nobody has the answers. The older of magnitude of complexity makes it borderline impossible to, to, to say with any degree of certainty that, while this is the right way. And this is definitely the wrong way. So what most excites me about the decentralized web in the context of I and how the value. The value realized by now. I can be owned is the idea of almost a cooperative so Trenton Carnegie version calls it an Commons cooperative because I think the closest business model organizational structure to this decentralize, where paradigm is, is the cooperative, the idea that you have a group of people who have common interests. And that can be multiple overlapping forms of cooperative could be. Because we're, we're all firemen it can be because we all live in the state of annoy can be blah, blah, blah. Where of African descent with Christians, whatever configuration on make these kind of social circles, he social bonds. We can. We can we can contribute value that capital data or participates in securing network. Whatever it may be within that circle of trust. And we can be shoulder, the Vialli that's generated by Cam be owned. It can be older did, and it can be transferred to us in a way that we can trust it can trust the logic code. And so I see world where we can, it's a city level at the town level to any kind of macro view, we can, we can contribute, primarily data value to, and I. We can own the values that I then goes in generates and we can do that community. And I think that's more interesting than in a classic corporate structure where you could say, well, let's create let's give person hood to an hour away that we've given person who to corporation, but the, the driving factor for shareholder value, because all that happens is people off shore is they don't pay any tax on the value. That's accrued and. You know, you kinda see the slow economic collapse in nation states that circumnavigated. So I think it's much more. Interesting to say, well, where are the people, those people are creating lots of data less create structures, whereby they can easily click of a button form cooperative that can own the data? If anybody wants to use that data to train now I has to somehow negotiate with that call. All the cooperative itself is. And I think that's really interest. And so, so I think, you know, again, if you look at the cooperative model lauch pasta, gem banking sector is predicated on the corporate moles again. Corporatism whilst as global phenomena also has strong roots here in Europe originated out to Europe. So I think is a nice bedfellow with, with the decentralized web excellent. I mean there's a lot we love to talk to you about especially around governance models. But I'm afraid we're we're we're running out of time. I just want to ask you one last question, which touched upon his for legacy industry insurance finals a healthcare. How would you advise the incumbents to best prepare themselves for this arrival of this conversion Tanko system because we seen what happens when you sit on, on the side. You know, you've got liberal comes left field, and who knows what's going to come in the next few months. How can these incumbents prepare themselves for this conversion ecosystem? Yeah. I mean, there's not an easy onto to it. I would I would speak to where I see the most opportunity. And again, I see the most opportunity in the machine to machine economy. So he's thinking through in insurance. How do we ensure machines? And so whether that in autonomous systems whether that's within. Doc, factories or supply chains weather on so many people. But there needs to be a flow of data flow of value, and therefore flow of risk management. And, and so thinking through vulgarities smart contracts between machines and. That in the context of insurance, I think could be very powerful. So rather than thinking. Growing retail insurance business now is probably not what you should be focusing, as you say very lightly that's gonna be unbundled by any of the existing large digital incumbents. Just as a consequence of digitization in the realities the insurance industry. Like so many others is still not yet properly digitised still just so much paper involved. So it almost needs to his kind of adapting to that incremental pacer change have something that sits outside of the mothership that allows it to be thinking about the, the growth economies, and the economies are going to be predicated machine to machine economies thinking about insurance in the context of machines. I think going to be really interesting. So, so that would be my advice. I think second to that will be around data flow and so thinking about how they can country beat data's and asset to a wider ecosystem and not do so in a way where they think that it in and of itself has proprietary value. But think about the value unlocks when combined with other data sets and the new business models that could be innovative on top of great. I mean, we're, we're seeing also with the nature tech space, for example, there's next mutual, which is a retrial lies kind of insurance uses the blog change in the first product is about insurance, contracts example, to make sure that the performance they should. So I'm afraid we're out of time Jamie someone on share? I wanna thank you very much for sharing your insights. I'm sure we could spend at least three to five podcast going through all the topics we've just discussed a love to have you back on the show in the near future. And discovery. No more about where this conversion eco-system can go. Thank you very much for your time. Thank you.