S3T July 17 - Defragmenting the enterprise, Why Web3 is better, dealing w skeptics, Skillets, Superworms...

S3T July 17 - Defragmenting the enterprise, Why Web3 is better, dealing w skeptics, Skillets, Superworms...
NotWhatUThink - Digital Mixed Media Ralph Perrine 2022

Change leaders have to be educators, helping others learn about newer better ways to solve problems. Skeptics can be key allies if they also are focused on solving the same problems.

Why is Web3 better than the status quo?

One of the big challenges that change leaders face is explaining to others what you're doing and why. Why you're interested in say, Web3 or - going backwards through time - Deep Learning, Cloud, Mobile, Web 2.0, Java, the Internet, CD-ROM, PCs, etc.

As I look back on my career (which started in summer of 1990!) I remember wave after wave of new things. And those of us exploring these new things were always getting funny looks from everyone else. For a while. Then over time the new strange stuff becomes "this is how everyone does it now."

Watching those adoption cycles over and over thru the years, I finally realized the basic question was always the same: Why is (fill in the blank) better than (what we have now)???

Why do we need web sites when we have Word Perfect?

Why do we need Java when we have C++ ?

Why do we need blockchain when we have databases?

The answer usually was, there's something you're trying to solve and what we have now doesn't solve it very well. You are convinced there has to be a better way.

This post ...

Web3 Use Cases: Today
Jumping Back Into the Web3 Debate

...comes on the heels of this interaction (and this article links to  others)...

The Petty Pleasures of Watching Crypto Profiteers Flounder
Behind all the Web3 bluster is just “hollow abstraction.”

...where a crypto advocates appear to be stumped by a skeptic asking why Web3 is better. On the surface, the conversations appear to be disasters for the advocates. But there's more to this than meets the eye so let's zoom in.

4 Ways to define better

This question gets asked over and over again through the history of innovation. Why are CD-ROMs better than cassette tapes? why are DVDs better than CD-ROMs? Why is Web3 better than Web2? Why is Defi better than Tradfi? etc.

Something can be better for maybe 4 different reasons:

1. Because it works better or solves a problem in a more efficient way.

  • Example: I can use that Bitcoin as collateral for a loan and can complete this process in minutes from my phone (and have done so multiple times over the years). The traditional finance world does not do this. They don't let a digital asset serve as collateral. They can't evaluate collateral (or do much of anything) without requiring me to fill out a lot of forms.

2. Because it creates new incentives and these in turn change behaviors.  

  • Example: Smart contracts enable more efficient creation of agreements and execution of the terms of those agreements vs traditional contracting process where various service industries (legal, contracts, brokers, IT support, etc) are incented to disintermediate and complicate processes in order to extract a larger and larger portions of the value.  

3. Because its built by a different set of players, with fresh ideas and motivations to solve problems the incumbents aren't motivated to solve, and/or  will distribute power or advantages in a different way than they are being shared today.

  • Non-Web3 Example: Napster surfaced a more consumer-focused way to distribute music vs. the industry's default of forcing people to pay $15 for an album with 1 song they liked and 10 they didn't.
  • Web3 Example 2: With crypto I can move money anywhere in the world much faster and cheaper than any traditional finance service allows. Without crypto, the money transfer industry would be more than happy to continue to overcharge and under-deliver.

4. Because its part of a set of building blocks that if implemented together create better value or opportunities.

  • Example: Surround Sound speakers are better than regular speakers, IF Surround Sound recording and production capabilities exist.
  • Example: Oracles are better than file based integrations because they are designed to bridge on chain and offchain systems. They are valuable if blockchains have smart contracts that need reliable information about physical events in order to execute the terms of their contract.

So why is blockchain better?

I think its helpful to start with a general understanding of how blockchain based architecture addresses a key problem facing enterprises today: fragmentation.

Fragmentation is bad because it is expensive and it drives entropy (tendency toward instability), which in turn makes it harder/more expensive to meet the expectations of customers and the competitive market.

Zooming out a bit:

If you think about how you use technology in your business, you'll notice 3 kinds of workloads:

Relationships, Operations, Accountability

Under each of these 3 words reside all the required functions that enterprises have.

Key problem statement: Traditionally we have designed built these 3 kinds of functions in not just separate systems, but separate systems designed and built by separate industry sectors:

  • Relationships: Systems involved in making and recording agreements and contracts - Sales/CRM systems, legal systems, contract systems, etc.
  • Operations: Systems involved in executing transactions that fulfill those agreements and contracts - think of all the back end operations and finance systems that process in accordance with business logic, which must align to the above mentioned agreements, contracts, fee schedules and so forth.
  • Accountability: Systems involved in recording and reporting on these transactions - think accounting and reporting systems, analytics dashboards, audit software etc.

Again, we've been conditioned to expect that these systems will come from multiple vendors and that we'll have to somehow make them all work together.  

To make matters worse, individual companies each have their own collection of these systems and, in order to work together, must somehow get those systems to be able to talk to each other. In other words, for company A to work with company B, both companies must decide which of their systems will be the trusted system of record for their side, then figure out how to reconcile the outputs of that system with the outputs of the system of record for the other company.

This highly fractured (and expensive) approach reflects the gradual evolution of IT systems and vendors as we all learned more and more ways to leverage technology in our businesses. We kept creating new silos without realizing (until more recently) the fragmentation problem we were creating, and its associated entropy (tendency toward instability/unforeseen issues).

This same fractured approach and the silos it proliferated gives IT service firms perverse incentives to extract more margin in 2 especially lucrative ways:

  1. By charging extra to integrate all these disparate systems, and often inserting themselves as "toll booths" that charge transaction fees.
  2. By leveraging the entropy (tendency toward instability) in highly fragmented enterprises to make a lot of money via "production support" contracts.

These perverse incentives trap business leaders in a vicious cycle:

  • Step 1: Your current systems have gaps and performance failures.
  • Step 2: Vendors happily sell you new "solutions",
  • Step 3: Vendors charge you extra to integrate them with your old systems. This increases entropy, instability and costs.
  • Step 4: Vendors set up production support contracts with you so they can make a continuous profit off of your growing mess.
  • Step 5: You realize this isn't working (and start over at Step 1)

Blockchain based architectures offer purpose-driven companies a chance to break out of this "Shawshank" nightmare.

💡
Blockchain takes the set of functions that business currently delegate to a plethora of costly fragmented systems, and runs them on one network. 

Here's how:

Blockchain based architectures offer us a chance to take the 3 kinds of workloads (relationships, operations, accountability) and reduce them to a single unified architecture, where the agreements, the transactions that execute the agreements, and the records of those transactions are all handled on a single network. And, your business partners can join this network and benefit from the same set of unified capabilities.

  • Relationships: As relationships and agreements are formed, smart contracts are established on the blockchain.
  • Operations: As operational conditions are met, transactions are conducted via the same blockchain and recorded.
  • Accountability: Because all activity is written to the shared ledger of the blockchain, all authorized stakeholders have the visibility they need to fulfill their roles as business owners, partners, customers, auditors, regulators, etc.

Blockchain takes the set of functions that business currently delegate to a plethora of costly fragmented systems and vendors, and collapses them to a thin layer that runs on one network. Collapsing these systems down to a blockchain based architecture removes the need for millions of dollars of annual spend on fragmented systems. Adding partners to the same blockchain network, then reduces the costs even further. In B2B arrangements (and healthcare especially) the processes and platforms of one partner can drive excessive costs for other partners.

This is a fundamental reason why forward thinking companies and startups are pouring so much energy into building out blockchain based business capabilities. Given the advances in blockchain based technology, the average cost of the average enterprise is now artificially high.

Back to the conversation with the skeptics...

Skeptics can play a key role in sharpening and improving new ideas. I highly recommend them!  This is especially true if your skeptic has a shared interest in solving the same problems you are trying to solve. If they don't have a shared interest in solving the problems, then its possible you just have a "crypto hater" - maybe. Good to give people the benefit of the doubt. Share the problem you're hoping to solve, why its important to you, why you suspect this new technology might be able to help, and how you are building & testing in order to find out.  

Related: Decrypt has compiled a handy list of the 9 common things crypto haters like to say, and how to rebut / explain them:

Laminate This: What to Say to Crypto Haters - Decrypt
Another market downturn brings another round of crypto critics crying, “I told you so.” Use this handy one-sheeter to respond to them.

Sensible Ideas

I'm blessed to be in a family with kitchen skills and the good sense to stay ready to celebrate life. So each week I share a few "sensible ideas" for good food and good times!

Skillet Cooking

Iron skillets of a way of weaving themselves into your soul. I have an old iron skill I call "The Legend" (pictured above with veggies, eggs and chorizo).

This old skillet has served family and friends for decades now, on camping trips (Campfire Quesadillas anyone?), Tamale parties, Saturday morning breakfasts, perfect steak sears for Father's Day cookouts and so many more momentous occasions, indoor and out.

You can stare into its depths and sense the history. I suspect a good hound dog (like Roxy here)...

...could run her nose around this skillet once or twice and tell you the high points of the entire Perrine family history :)

Some folks are hesitant to try skillet cooking. They're very easy to maintain and cook with, chemical free and over time take on heirloom status because they last forever. Uno Casa breaks down the advantages of skillets here and I've also included a handy link below on how to care for your skillet.

How To Clean a Cast Iron Skillet
Don’t be scared of cleaning your skillet!

Male Eastern Bluebird perched on a branch.
Photo by Jack Bulmer / Unsplash

Nature Notes

Superworms can take out the trash

Researchers in Australia have found evidence that some worms (larvae of the Darkling Beetle) can digest plastic well enough to help with the trash crisis! As noted in their paper, the researchers found that 66% of the larvae were able to exist on a diet of styrofoam only and still turn into healthy beetles! They are studying the enzymes in the digestive tracts of these worms to understand how this capability could be harnessed to reduce the large amounts of discarded plastic that impacts our ocean and land environments.  

If you have a birdhouse or feeder for bluebirds (like the one pictured above), you might recognize the "superworms" in the article and its photos as the "Mealworms" that bluebirds love. You're right, they're related:  

  • The Mealworms you can buy in your neighborhood bird store (I like WBU) are the larvae form of a species of Darkling Beetles (Tenebrio molitor).
  • The Superworms in the above article are also a species of Darkling Beetle (zophobas morio).

They are from two branches under the Tribe Tenebrioninae.  You can see a nice depiction of the Classification tree at BugGuide.net.  

Final Note

If you haven't already, take a moment to subscribe and get S3T delivered free to your inbox each Sunday morning. For me Sunday mornings are a time for reading and reflection, preferably with coffee and a chocolate croissant.  

Thanks again for reading and sharing. Hope you are all S3T for success this week! Feel free to forward this to a friend and continue the conversation on the S3T Discord, Twitter or LinkedIn.

Ralph

Opinions mine. Not financial advice. I may hold assets discussed.