HOW This ability to catalog and retrieve transaction data more effciently, to BLOCKCHAIN ensure transparency and accountability, led Sumer to leap ahead of other societies, becoming the dominant May Transform power in the known world.

Similarly, what later set apart ancient Your Organization Egypt, China, and the Incan Empire was that these cultures developed techniques for archiving, cataloging, and retrieving information.

Around 3,000 B.C. Today, we are about to experience what something strange could be a similar evolutionary leap. Will your organization be the next Sumer? Or started happening. will you let others overtake you? Merchants in Sumer started writing. They pressed shapes The Blockchain Revolution When we hear the word blockchain, our into clay tablets. Some shapes thoughts turn quickly to cryptocurrencies symbolized numbers (1, 10, like Bitcoin or Ethereum. But the implications of blockchain are far 60, 600…) and others objects broader and have the potential to (people, animals, locations). radically restructure how organizations operate. The frst human written script was born. In simple terms, a blockchain is a record of information that is stored in multiple places. Each time a record is altered, an entirely new database is created (a Until that point in human history, block) and linked to older databases information had to be stored (in a chain). This approach to storing in our memories, passed along and retrieving data offers two unique by spoken word, sometimes in aspects that have, until today, been stories. The Sumerians didn’t unavailable: write poetry. Their language was used for a specifc purpose: to 1. No central authority: When a record and enable the recall of change is made, multiple “nodes” information. If two Sumerians confrm the change is legitimate. If had a dispute, say, of how much consensus is established, then the barley was to be shipped and how change is deemed legitimate. The much was received, rather than new database is stored in multiple engage in a long, heated debate, locations. This makes it nearly they could fnd the clay tablet impossible to hack because doing in which they had pressed their so would require hacking many agreement and compare it to the “nodes” at the same time. It also clay tablet logging the incoming means no central authority can shipment at port. claim the power that comes from controlling information. 2. Permanent record: Since not just one instance of the database is shared, but every past instance By Kaihan Krippendorf of the database, there is a permanent trail and history. Continued on page 14

Fall 2018, Issue 4 www.mycalibr.com THE GENERATOR 13 Continued from page 13

The end result of this approach is what you might call the “triple T”: trust, transparency, and transactions 1 3 RECRUITMENT INVESTOR RELATIONS at a far lower cost. To understand why this matters, we need to understand With blockchain, job candidates The quarterly ritual of compiling and why corporations and, indeed, any would not be able to lie about their releasing earnings reports could go hierarchical organization exists. work history or degrees received. away once companies adopt blockchain These experiences could all be held -enabled accounting methods. Investors Trust, Transparency, and and validated in a blockchain. No could get insight into your fnancial more need for background checks or performance in nearly real time. Did Transaction Costs resumes. Candidates would be able to you win the big contract? As soon as it’s In 1937, the economist Ronald Coase choose which companies can access logged, investors and regulators would wrote a highly infuential paper titled their information. Some might let all know, eliminating the need for arduous “The Nature of the Firm”. He argued companies from a certain industry regulatory flings. that businesses can only operate when access their records when they are their internal costs of transacting were looking for a job. Employers could query Whether this speed of transparency is lower than the costs of performing the the blockchain to fnd candidates that a good or bad development is unclear. transaction using the open market. meet their needs. The short-term-ism that plagues Corporations have employees, for public companies, whose investors example, because it costs less to enter Companies like Restless Bandit are drive management to maximize into one employment agreement with a already bringing machine learning into quarterly performance, could become worker than to sign a new employment the mix, helping companies fnd just “micro-term-ism” if investors are now agreement each morning when the the right candidate without a recruiter. concentrating on increments of minutes. factory foor opens. By searching data on a blockchain, they can identify ideal candidates with Whenever the transaction costs greater precision and speed. come down in the open market, the corporation’s advantage erodes. And 4 those transactions will eventually be CAPITAL RAISING conducted outside of the frm. Ten years The use of blockchain currency to ago, for example, owning a taxicab and 2 raise capital has already become hiring a driver was the most effcient ACCOUNTING AND BOOKKEEPING commonplace. By assigning a certain means for staffng a feet of cars. But One of the primary purposes of number of shares to each coin and then ridesharing businesses like Uber accounting and bookkeeping is to then selling them through any of over and Lyft essentially delivered superior create trust and transparency. Today, 100 blockchain-based coin exchanges trust, transparency, and transaction companies signifcantly invest in as part of ICO (Initial Coin Offering), costs through a platform to connect collecting, cleaning, checking, and companies can raise money while riders and drivers. We have seen what logging internal transaction data. A giving investors a market on which to the implications have been for taxicab blockchain solution could enable such trade their coins, at a fraction of the companies. activity to be done in a decentralized cost of an IPO (Initial Public Offering). and fairly automated way, without an It’s estimated $7 billion was raised Wherever trust, transparency, and army of accountants. Books which today through ICOs between January and transaction costs are critical in your are updated and released once per June of 2018. organization, a blockchain solution month or per quarter, could be updated may prove superior to your hierarchical every ten minutes. Which has important Even traditional stocks are likely to be approach and that activity is ripe for implications for investor relations. impacted by blockchain technology. disruption. Private companies endure considerable back-offce paperwork to update So what areas of your corporation are ownership tables. Blockchain could at risk? allow them to track changes in ownership instantly at a far lower cost Our interviews with experts and survey or effort. of emerging blockchain activities point to several compelling possibilities. This ability to coordinate investors quickly should not be underestimated. In the 17th century, the Netherlands came to dominate trade with Asia, making the

14 THE GENERATOR www.mycalibr.com Fall 2018, Issue 4 small country one of the wealthiest and Bringing it Together most powerful in the world. They did so These are just a few of the most obvious by creating the world’s frst corporation, 6 DECISION-MAKING applications of blockchain technology The Dutch East India Company. Before within a corporation. Put them together then, trading expeditions were primarily Netfix has for years adopted a radical and we start seeing the emergence of a funded by a monarchy. approach to engaging its board new form of organization. If corporations members. Instead of flling quarterly are systems to coordinate capital By enabling a broader base of investors board meetings with long presentations, and effort behind a common goal, to share in the investment and return their board members have constant blockchain could offer a more effcient of such expeditions, the Netherlands access to living documents in which alternative. was able to beat out wealthier nations, management provides updates. Board like Spain. A similar dynamic could members ask questions which are Consider the concept of the play out here. Could companies that then answered in near real time. This decentralized autonomous organization embrace blockchain-enabled capital unprecedented level of transparency (the “DOA”) in which decision-making is raising leapfrog those that cling to between management and board is a not overseen by a board or leadership traditional, more expensive and complex central key to Netfix’s agility. body but is automated into the system. fundraising norms? Instead of being run by people following Companies like Boardroom are rules, the rules are programmed into taking this approach to the next level, the system. applying blockchain technology to 5 systematize governance, eliminating In such a system, groups of people LEGAL the clumsy process of mailing out self-organize to create value following ballots to shareholders and collecting transparent rules. These rules are A contract is essentially an algorithm votes. Unanimous AI is applying a written into software and incentivized that takes inputs (you deliver on time) similar philosophy to amplify human through digital coins. No employment to outputs (you receive your payment). intelligence. Participants “swarm” contracts or centralized legal entity The use of “smart contracts” – around problems to generate options would be needed. algorithms that take inputs directly from and collectively make choices. a blockchain, perform calculations, then Such predictions may seem far-fetched execute resulting transactions – are and their details are surely not accurate. starting to replace legal contracts. When air fight frst started becoming a possibility, people envisioned airplanes Whereas today the inputs need to be in every family’s garage. The prediction validated by each party, in a blockchain proved inaccurate – few of us fy a environment, whether you delivered on plane to work – but fight has certainly time would be validated by consensus. transformed society. Blockchain’s future If enough “nodes” register that you is similarly unpredictable, but its impact delivered on time, then the smart will nevertheless by transformative. contract, trusting the consensus, would automatically trigger your payment. In Kaihan Krippendorff is a former such systems, we have no need for third consultant with McKinsey & Company parties to validate a transaction like and the author of Outthink the notaries, nor middlemen like brokers. Competition and The Art of the Since smart contracts use software Advantage: 36 Strategies to Seize the to automate transactions, the manual Competitive Edge. He is President of processing of documents becomes Outthinker Growth Consultants. unnecessary.

What will your legal department look like when smart contracts make the work it performs unnecessary? Will lawyers become coders?

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