Innovation Footprints

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Distributed Ledger Technologies

Can Collaboration and Community Serve as Catalysts For Innovation in Supply Chain?

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Note: A version of this article was first published on July 31, 2019 at Port Technology.

The innovations required to reinvent global supply chains will not happen without collaboration. This article describes our experience facilitating such collaborations, starting in late 2017.

In late 2016 and early 2017, I spent a lot of time studying trucking and shipping, with a view to understanding the industry dynamics at play, and to see what opportunities might exist for software startups. What I learned about the trucking industry piqued my interest in logistics overall, and ultimately led me to a decision to focus on early stage technology investing in supply chain by building REFASHIOND Ventures to invest in early stage technology startups reinventing supply chains.

Through that work it became painfully clear to me that there is a need for closer collaboration between software startups and established, mature companies. 

This article will explain why there’s a need for such collaboration. I will also discuss the approach our community, The Worldwide Supply Chain Federation, has taken to enable such collaboration. Although it is still early, we will end with a discussion of some early indicators of the results we might expect in general.

Note on prior and recent work: Disruption, supply chain management, supply chain finance, and supply chain logistics are topics I have been studying for some time – from the perspective of an early stage venture capitalist specializing in supply chain; Notes on Strategy; Where Does Disruption Come From? (2015), Industry Study: Freight Trucking (#Startups) (2016), Updates – Industry Study: Freight Trucking (#Startups) (2016), Industry Study: Ocean Freight Shipping (#Startups) (2017), Updates – Industry Study: Ocean Freight Shipping (#Startups) (2017), Where Will Technological Disruption in The Fashion Supply Chain Come From? (2018), Is disruption finally underway in the freight brokerage industry? (2019), and Why digital freight brokers might fail to disrupt the freight brokerage industry (2019).

Identifying The Chasm

A consequence that arose from my decision to publish my articles on trucking and shipping is that it prompted several executives at established companies to reach out to me to talk about my findings. The same happened with startup founders – though, they mostly wanted to meet an early-stage venture capitalist who cared about supply chain logistics.

Those conversations made it painfully clear that: On the one hand, executives at established companies know the business problems in supply chain operations for which they desperately need new innovations. However, they typically do not have sufficient time to meet their daily responsibilities at work and scour the globe seeking out such new innovations. Moreover, their companies might not be plugged into the right communities to find such innovations through tradition RFP processes. Moreover, such executives also tend not to have a very good sense of how much certain emerging technologies have matured, and if such technologies might be applicable to the problems they need to solve. I call such executives BUYERS: these are people and organizations who want to buy new technology innovations for supply chain operations. This is particularly true in a nascent area like cryptocurrencies and blockchain.

On the other hand, founders of software startups that are creating new innovations for supply chain tend to understand the technology well, but they lack a deep and nuanced understanding of the business problems that potential customers face. They lack a sufficiently mature understanding of the value proposition they must offer to the BUYERS if they are to win market adoption. I call such startup founders BUILDERS: these are people and organizations who are building new technological innovations for supply chain operations.

For this conversation to make sense, it is critical that we share a common understanding of what I mean by supply chain. 

The definition I have adopted is from the 4th edition of Martin Christopher’s Logistics & Supply Chain Management: Creating Value-Adding Networks. A supply chain is: “A network of connected and interdependent organisations mutually and cooperatively working together to control, manage and improve the flow of materials and information from suppliers to end users.”

Crossing The Chasm

In order to bridge this chasm between BUYERS & BUILDERSTM, Lisa Morales-Hellebo and I founded The New York Supply Chain Meetup in August 2017. We started with a very simple premise: Once a month, for about 9 out of the 12 months each year, we would bring these two groups of people together to:

  • Network, 
  • Talk to one another about the problems they were trying to solve and the products that they were building, and
  • Participate in curated programming that is based on relevant and topical themes related to supply chain. 

Each event would last about 3 hours. The format of a meetup appealed to us because it is inherently grass-roots driven, and emerges spontaneously based on a shared enthusiasm among a group of like-minded people for a particular topic. 

We ultimately settled on a mission for The New York Supply Chain Meetup: To nurture and grow the world’s foremost open, global, multidisciplinary community of people devoted to building the supply chain networks of the future – starting in NYC.

Even before we held our launch event on November 16, 2017 people in other parts of the United States, and in other countries asked us if we would be live-streaming the event. We took this as a promising sign. As we approach 24 months since we initially started working on this, our tentative first efforts have grown into an initiative to build The Worldwide Supply Chain Federation; A collaborative, and mutually supportive coalition of grassroots communities focused on technology and innovation in the global supply chain industry. The New York Supply Chain Meetup is its founding chapter. 

The initiative is entirely grass-roots driven. Our community includes:

  • Startups,
  • Mature Companies – across all industries,
  • Academics from research institutions,
  • Early-stage technology venture capitalists, and other late-stage investors, and
  • Journalists, regulators, professional services providers, and any other groups of people with interests and skills relevant to innovation in supply chain.

We have 1900+ members in The New York Supply Chain Meetup – the founding chapter, 2700+ members around the world, an active chapter in Charleston, South Carolina, and chapters in the process of being formed in several other cities around the world. 

The Worldwide Supply Chain Federation held its inaugural global summit, #SCIT2019, on June 19 and June 20 in NYC. 

  • We had 1000 people sign up for the event before we closed registration. 
  • During the event we had about 400 people attend on each day of the summit. Attendees came from 15 countries. 
  • We had 31 speakers: With 11 startup showcases, and a presentation by the Singapore Economic Development Board on June 20. Video of the event is available on our YouTube channel. 

Also:

In An Age of Platform Competition, Open Collaboration, Open Communities, and Open Ecosystems Matter A Lot

Why are companies like Amazon, Apple, AirBnB, Microsoft, Alibaba, Google, JD.com, Uber and others, posing a threat to companies in traditional industries? Why are startups that many people have never heard of beginning to attack and threaten companies in mature, established industries that one may have considered immune from such threats as recently as even just half a decade ago?

It is because the companies I have listed, and others I have not, understand the importance of business models that are built on open ecosystems rather than proprietary and linear value chains owned by a single company. 

Using the internet and other maturing software-enabled technologies as the foundation, these companies are launching demand-side and supply-side attacks on industries that have become accustomed to relatively sanguine competition among well established companies. 

That raises the question: What is an ecosystem? A business ecosystem has three main characteristics;

  • First: It is a network of networks.
  • Second: The focus of the ecosystem orchestrator must be on enabling and facilitating the creation and exchange of value, between all participants of the ecosystem.
  • Third: The creation and exchange of value must occur in a way that increases the aggregate well-being of the entire network over time.

When executed well, platforms and ecosystems give rise to powerful network effects. Network effects matter because, in the most extreme cases they can lead to winner-take-all outcomes. At best, they lead to winner-take-most situations. 

What’s are network effects? 

As I explained in my September 2014 article on the topic Revisiting What I Know About Network Effects & Startups: “A network effect occurs when the value of a good or service increases for both new and existing users as more customers use that good or service. The network effect is a virtuous cycle that allows strong companies to become even stronger. Network effects are also known as direct-benefit effects.”

The Results Are Early, But The Signs Look Promising 

As I have pointed out already, our effort is entirely grass-roots driven. We are yet to attract significant outside support to accelerate our efforts. Nevertheless we are showing promising early results in the 24 months during which we have been working on this. Here are just a few highlights.

  • A startup in our community is working with a very large shipping company that is seeking software technologies that enhance its ability to make decisions under uncertainty. Such software can be applied in various aspects of the shipping company’s global operations. The software could also be introduced to the shipping company’s customers who also need to optimize their own supply chain operations. The shipping company gains new technology, while the startup wins a channel partner to aid its go-to-market efforts.
  • A handful of startups in our community are building software to enable established freight forwarders modernize their business operations without bearing the expense of developing software from scratch. Many such efforts are led by people with significant experience in the freight forwarding business who have teamed up with technologists to build the technology. For such startups, a community like ours provides a great, low-pressure opportunity for them to connect with potential customers as well as potential investors.
  • Another startup in our community is building a derivatives exchange for the freight markets, creating a new suite of tools that shippers and carriers can use to manage risk.
  • One startup in our community is building a communication platform to enable communication around the transactions that take place between shipping companies and beneficial cargo owners, freight forwarders, and other parties involved in the shipping of cargo. Currently that communication happens over email, and relies on manual, paper-based processes. The team already has significant experience building software for the maritime shipping industry. The need for the product it is building is confirmed by the explosive rate of growth in adoption by very large shipping companies around the world. Where our community can help is with advice about the startup’s interactions with potential venture capital investors, and providing opportunities for the startup to tell its story to a wider audience. In one instance, after presenting at one of our events, a real estate broker told the startup’s founder that the same problem exists in the real estate industry. He also met an executive from a large shipping company who offered to introduce him to the shipping company’s corporate venture capital arm.   

Collaboration Is Especially Critical in Blockchain + Supply Chain

Like everyone who is enthusiastic about supply chain and technology, we are exploring how blockchain and other distributed ledger technologies will affect the supply chain. Here are some of the things I have learned;

In relation to blockchain, one of the lessons I learned while studying the shipping industry in early 2017 was this: 

“One product that it appears the industry would gravitate towards is a system of record that connects all participants in the supply chain, from end-to-end. This would be a platform into which various shipping industry data could be input, and other data can be obtained as outputs. Probably most input data would come from other platforms and data repositories, while output data would be fed to different counterparties based on their access rights and information requirements.” 

In that blog post, which I published in June 2017, I went on to say that this product seemed to be one ideally suited to be built on a blockchain. The platform would need to allow several independent parties to collaborate with one another while providing each of them with anonymity for certain aspects of their interactions. 

For example: Customs agencies around the world might demand special access rights to enable them monitor international trade transactions happening under various national regulatory jurisdictions. Such agencies could desire anonymity under certain scenarios.

About a week after I published the blog, I discovered that IBM and Maersk were beginning to release more details about their plans for TradeLens to the public.

During our meetup in January 2018, we hosted a discussion featuring speakers from UPS, SAP, Sweetbridge, Blockcience, and MState. The keynote speaker at that event was Dr. Michael Zargham, CEO and Founder of Blockscience, and at the time, also a technical advisor to Sweetbridge. The overarching conclusion I reached by the end of the event was this:

 “Successful implementations of cryptocurrencies and blockchains in supply chain will require more collaboration than the traditional industry is accustomed to.” — Why? The technology combines: digital systems; physical systems; social and political organization; economic structures and incentives; finance; and capital markets. No single organization is expert enough in all those fields to go it alone.

At our meetup in April 2018, we had speakers from: Algorand, Maersk, IBM, TigerTrade, EY, MState, Celsius Networks, and Sweetbridge. Professor Silvio Micali of MIT’s Computer Science and Artificial Intelligence Laboratory was the keynote speaker at that event. He described the key ideas behind Algorand, a blockchain he invented expressly to satisfy the demands of businesses. The other speakers discussed what it would take to bring blockchains out of the lab and into the real world of supply chain. Based on the discussions that day, I reached the conclusion that: 

Blockchain applications for supply chain must be interoperable with other blockchain platforms, and they also must be interoperable with the older technologies that businesses have relied on up till now.

TigerTrade started a conversation with IBM as a result of initial informal interactions at our in April 2018. Ultimately, this led them to partner and collaborate on the creation of TRADEFLO, a blockchain-powered platform for global trade facilitation and financing. Tanjila Islam, CEO and founder of both TigerTrade and TRADEFLO presented TRADEFLO at The Worldwide Supply Chain Federation’s inaugural global summit in New York City on June 20, 2019. Tanjila’s experience building TigerTrade directly informed her understanding of the need for a platform with TRADEFLO’s attributes. 

Conclusion

Platforms and ecosystems work well because they allow each participant of the platform to play to its unique strengths, while relying on its ecosystem partners for capabilities that it does not have in-house. This is not an issue that has mattered for shipping companies in the past. But, it is becoming more of an issue now, and it will continue to become a more acute problem in the future as beneficial cargo owners demand more sophisticated services from their supply chain partners. 

Collaboration is difficult because it requires a change in culture. It requires an openness that is not customary in many organizations. Collaboration for the purpose of discovering and nurturing innovative new ideas, products, services, and business models is even more difficult because it requires a commitment from senior leadership. Given how often individuals are shuffled around in organizations, it can be difficult to get anyone to focus appropriately on the long and difficult work that is required to build collaborative partnerships.

However, those companies that do not partner with others to meet their customers’ demands stand the risk of losing those customers to companies that come to grips with platform-and-ecosystem-driven competition more quickly. 

#CountDown: 9 Days To #TNYSCM05 – Bringing The Blockchain From The Lab And Into The Real World

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A cross-section of the audience at #TNYSCM02, January 2018.

We’re now just a little over a week away from The New York Supply Chain Meetup’s fifth gathering. The purpose of this post is to outline our plans for that event, and preview what we expect to do in May and June 2018 . . . We’re still in the early days of building this community, so much of this is subject to change, especially as we go through the process of recruiting sponsors.

Our Mission

To nurture and grow the world’s foremost open, global, multidisciplinary community of people devoted to building the supply chain networks of the future – starting in NYC.

The New York Supply Chain Meetup is powered by Particle Ventures, a seed-stage fund in New York City that invests in Supply Chain & Industrial Intelligence. Particle is built by the same team that launched KEC Ventures.

#TNYSCM05 is sponsored by Work-Bench, an enterprise technology focused venture capital fund in New York City. Work-Bench supports early go-to-market enterprise startups and helps scale customer acquisition with community, workspace, and corporate engagement.

 

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Logistical Details: #TNYSCM05

  • Date: Thursday, April 26, 2018
  • Time: 17:30 – 20:30
  • Location: Work-Bench, 110 5th Avenue – 5th Floor, New York, NY 10011. Please register by following the link above.

#TNYSCM will feature two panel discussions and a keynote presentation. The keynote presentation happens between the panel discussions.

Agenda

5:30 PM – 5:55 PM: Pre-event Networking
5:55 PM – 6:00 PM: Welcome Remarks (#TNYSCM, Work-Bench)
6:00 PM – 6:50 PM: Panel Discussion I (40 minutes), Q&A (10 minutes)
6:50 PM – 7:30 PM: Keynote Presentation (30 Minutes), Q&A (10 Minutes) 7:30 PM – 7:35 PM: Break
7:35 PM – 8:25 PM: Panel Discussion II (40 minutes), Q&A (10 minutes) 8:25 PM – 8:30 PM: Closing Remarks

MC: Daniel James (@daniel_r_james)

The panel discussions will be moderated by Rob Bailey (@RMB). Rob is CEO & Co-founder of MState (@mstatelabs), a growth lab for enterprise blockchain startups. Rob’s experience is in scaling enterprise startups – Kustomer, DataSift, SimpleGeo, and eScene, which he scaled from pre-launch to fast-growing revenue between $1M and $25M. In addition he has raised, or helped raise, $200M in venture capital. My friends Ed Sim and Eliot Durbin of BOLDstart ventures are each a co-founder and advisor respectively of MState.

The important and difficult job is never to find the right answer; it is to find the right question.
– Peter Drucker

Panel Discussion I

Tanjila Islam is the CEO and Founder of TigerTrade, an international B2B marketplace and supply chain solution for companies buying and selling excess inventory worldwide. TigerTrade’s customers include the largest off-price chains and brand outlets in the US, Latin America, the Middle East, Europe, Asia, and Australia. As an end-to-end solution for the global trade of excess inventory, TigerTrade manages the entire supply chain, from vendor verification merchandise authentication to payments and shipping. Prior to founding TigerTrade, Tanjila was an international trade and economic development expert, designing and managing large-scale economic growth and trade promotion programs in developing countries, including Indonesia, Afghanistan, and Bangladesh for organizations such as the U.S. Agency for International Development and the World Bank. She is also an Adjunct Professor at the Fashion Institute of Technology, where she teaches courses on International Trade, International Business Transactions, and Global Sourcing. Tanjila is an avid traveler and adventurer and speaks Arabic, Bengali, English, and Spanish. She holds a B.A. from Columbia College, and M.A. in Near Eastern Studies from NYU, and an M.I.A. in International Economic Policy from the Columbia School of International and Public Affairs.

Todd Scott is VP Blockchain Global Trade at IBM. In this capacity Todd has the responsibility for the Go To Market strategy and execution for the JV between IBM and Maesrk. He also owns building the new sales, enablement and operations capability for IBM as the main reseller channel for the JV. Prior to his current role Todd was the IBM VP and Managing Director for PepsiCo, and Southwest Airlines. Todd’s present role caps a 30-year IBM career that began as a client executive in Greenville, South Carolina. He then moved to the Mid-Atlantic area where he managed a team of sales and technical staff who provided integrated solutions for mid-market customers in Virginia, Maryland, and Washington, D.C. In addition, during his tenure at IBM, Todd has managed regional sales teams covering various components of IBM’s business including Systems Technology Group, Channels Group, Media and Entertainment, Retail and Consumer Products. One thing he accomplishes in each of his roles is a clear understanding of the customer’s business. This enables him and his team to make credible and highly valued recommendations. Those recommendations included global SAP implementations to the design of new business operating models to implementing IT data center and business process outsourcing initiatives. Todd attended Davidson College and graduated in 1987 with a B.A. in Political Science.  At Davidson, Todd lettered every year as a basketball player and was a member of the 1986 team that participated in the Men’s Division One NCAA tournament. He lives in North Texas with his wife Norma. They have four children.

Nolan Bauerle is Director of Research at CoinDesk. Before joining Coindesk in early 2016 he conducted research for the Senate Banking Committee in Canada. He is a serial entrepreneur, a techno-optimist, and also writes science fiction. He holds an LLB from Université Laval.

Scott Carlson (@Scottophile) is Chief Information Security Officer at Sweetbridge. He is using his 20 years of experience gained from position at Cargill, Schwab, PayPal, and elsewhere to guide security policy as Sweetbridge transforms how the world thinks about asset backed loans, supply chain finance, and wealth building. Scott’s focus in the past has included Information Security, Data Centers, Cloud Virtualization, and Systems Architecture. He is a top-rated speaker and contributor to RSA, Gartner, Kuppinger Cole, OpenStack, and VMworld. He holds a B.S. in Computer Science from Moorhead State College.

 

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Keynote Presentation

Some researchers argue that building on existing blockchain and DLT frameworks is a mistake, because they are fundamentally unsuited for large-scale, real world applications. They argue that new DLT frameworks must be built to meet real-world demands. Our keynote speaker will offer one perspective on that topic.

Silvio Micali (@silviomicali) is the Ford Professor of Engineering at MIT’s Computer Science and Artificial Intelligence Laboratory. He has been a member of faculty of the Electrical Engineering and Computer Science Department at MIT since 1983. His research interests are cryptography, zero knowledge, pseudo-random generation, secure protocols, mechanism design, and distributed ledgers. Silvio is the recipient of the Turing Award in Computer Science, the Gödel Prize in Theoretical Computer Science, and the RSA prize in Cryptography. He is a member of the National Academy of Sciences, the National Academy of Engineering, the American Academy of Arts and Sciences, and the Academia dei Lincei. His presentation will focus on Algorand (@Algorand) a scalable, secure, and decentralized digital currency and transactions platform. Algorand recently announced that it has raised $4 Million in a seed round of venture capital funding.

 

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Panel Discussion II

Samantha Radocchia (@SamRadocchia) currently serves as Co-Founder and Chief Marketing Officer at Chronicled (@ChronicledInc) which leverages blockchain and IoT technologies to deliver smart supply chain solutions. Prior to serving as CMO, she led product development and architecture as Chief Product Officer for 3 years. She is also a Co-Founder at Better Kinds, which fosters everyday practices of conscious consumption and responsible production by empowering people to make better micro decisions that lead to better macro results. Recently named to the Forbes 30 Under 30 List, Sam is a thought leader in the blockchain sector and the founder of Machine Elf Consulting, an emerging technology and product development consulting firm based in Brooklyn, NY. Founded in 2012, the firm focuses on blockchain, IoT, and additive manufacturing advisement to enterprises and individuals. Sam has an entrepreneurial background that spans several technology companies. She became interested in blockchain as a mechanism to facilitate trusted interoperability, a challenge she sought to overcome leading her first two companies. Before joining Chronicled and Better Kinds, she previously served as the CTO of Huckabuy, a consumer product metadata aggregator and standards company and Founder and CEO of Stunable, a provider of inventory management and marketing software utilized by consumer products brands to integrate e-commerce sales with cross-channel interactions. Sam attended Colgate University, earning a BA in English and Anthropology – specializing in Critical Theory, Linguistics, and Symbolic Systems. She continued her academic pursuits at King’s College in London where she studied Management & Entrepreneurship and at the London School of Economics where she studied organizational culture. Samantha graduated from NYU Summa Cum Laude in the spring of 2013 with a MA in Media, Culture, and Communications, focusing on the socio-political analysis of emerging technologies. On the personal side, Samantha is an avid risk-taker and daredevil, attaining her pilot’s license at the age of 17 and accumulating over 700 jumps as a competitive skydiver.

Alex Mashinsky (@Mashinsky) is CEO and Founder of the Celsius Network. He is also one of the inventors of VOIP (Voice Over Internet Protocol) with a foundational patent dating back to 1994 and is now working on MOIP (Money Over Internet Protocol) technology. Over 35 patents have been issued to Alex, relating to exchanges, VOIP protocols, messaging and communication. Alex is a serial entrepreneur and founder of seven New York City-based startups, raising more than $1 billion and exiting over $3 billion. Alex founded two of New York City’s top 10 venture-backed exits since 2000: Arbinet, with a 2004 IPO that had a market capitalization of over $750 million; and Transit Wireless, valued at $1.2 billion. Alex has received numerous awards for innovation, including being nominated twice by E&Y as ‘Entrepreneur of the Year’, in 2002 & 2011; Crain’s 2010 Top Entrepreneur; the prestigious 2000 Albert Einstein Technology medal; and the Technology Foresight Award for Innovation (presented in Geneva at Telecom 99). As one of the pioneers of web-based exchanges, Alex authored patents that cover aspects of the Smart Grid, ad exchanges, Twitter, Skype, App Store, Net ix streaming concept and many other popular web companies. Additionally, Arbinet’s fundraising story was featured as a case study in 2001 by Harvard Business School. Alex holds a Bachelor of Engineering in Electrical Engineering from The Open University of Israel, and a Bachelor of Science in Economics from Tel Aviv University.

Juan-Jose Ruiz is a global Strategy and Business Development executive with experience in technology, financial services, and media/information industries. He is currently leading IBM’s Blockchain business development efforts across several verticals with particular focus on Global Commerce. Prior to IBM he filled a number of strategic and operational roles at Thomson Reuters based in Europe, Asia, and the Americas including leading Strategic Alliances efforts for the Scientific division worldwide. Juanjo started his professional career as a software engineer in Spain developing some of the early web-based vertical b2b marketplaces. He holds a Computer Science and Engineering degree from the Universidad Autonoma de Barcelona, an MBA from Mannheim Business School, and got his Chartered Financial Analyst accreditation from the CFA Institute. In his free time, Juanjo is an active start-up mentor in the NYC area and volunteers in local youth sport organizations.

Sharad Malhautra is a Senior Manager at EY Enterprise Blockchain, where he leads digital transformation initiatives for enterprise clients focused on digital and emerging technologies, specifically Blockchain and Distributed Ledger Technologies. He has gained more than 13 years of experience spanning engagements in the United States, Europe, and Asia. Among other accomplishments; He evangelized and led the sales and engagement for the first Blockchain Advisory Project for EY globally, he led a blockchain engagement on price verification and negotiation for a leading CPG company, and led an event-management track-and-trace Blockchain engagement  to enable visibility across the network for a leading logistics company. Over the years he has earned a reputation for; leading complex global business initiatives, being a trusted c-suite advisor on emergent technologies, a willingness to accept a high degree of uncertainty, and successfully scaling businesses. He often speaks at industry events on Enterprise Blockchain. Sharad holds a B.E. in Computer Engineering from the University of Pune, and an MBA from Rice University. Beyond his work at EY, he is a strategic advisor to BillionBricks, a non-profit organization that works with homeless and displaced communities in India and South East Asia.

 

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He who knows all the answers has not been asked all the questions.
– Confucius

Preview — #TNYSCM  in May & June

Here is what our team of organizers is working on, between now and June.

  • May 24: A showcase of startups in Fashion, Apparel, and Retail supply chain. THIS IS GOING TO BE BIG! I am excited about the plans our team is putting together. Don’t wait. You can sign up for #TNYSCM06: Convergence Across the New Fashion & Apparel Supply Chain.
  • June 21: A Sourcing 101 workshop for startups building physical products. More details coming soon. I have been told; “THIS IS GOING TO BE BIGGER!”

Other Upcoming Supply Chain Events

  • Transparency18: This is the flagship event series started by the founders of the Blockchain in Transport Alliance. It follows BiTA’s Spring Symposium, a members only event that occurs on May 21, 2018. I will attend both days of Transparency 18 on May 22 and May 23.

#ChainReaction: Who Will Own The Age of Cryptocurrencies?

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Brian + His Pencils

Notes:

  1. This blog post represents my opinions only.
  2. My first blog post in the #ChainReaction Series is #ChainReaction: Notes on Centralized, Decentralized, and Distributed Systems.

As I read The History of Money, I have started understanding the monetary and currency systems of the past. It is becoming clear to me that we are inevitably going to transition from the current age of paper money and into the age crypocurrencies. It’s just a matter of time. I also think, the move towards a decentralized cryptocurrency regime will give way to a more centralized system because the alternative would lead to socioeconomic chaos and disorder which would be too destabilizing to society. So fiat cryptocurrencies are the future. This still leaves plenty room for privately issued digital tokens that are used to fulfill various other functions in global trade and commerce, just not as a decentralized substitute for what we consider money today. The social engineering behind money is a centralized function. To get to the age of fiat cryptocurrencies we need cryptography that is so easy to use that “even a caveman” could use cryptocurrencies without even having to think about it. So regulations, social psychology, and technology have to move well beyond the current state of the art. I am thinking a lot about this because trade finance is a massive pain-point in global supply chain networks, and distributed ledger technology offers a promising way to attack some of the issues that cause trade finance to be a choke-point for global trade and commerce.

If the history of commercial banking belongs to the Italians and of central banking to the British, that of paper money issued by a government belongs indubitably to the Americans.

– John Kenneth Galbraith, From The History of Money

Who will own the age of cryptocurrencies?

#ChainReaction: Notes on Centralized, Decentralized, and Distributed Systems

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Brian + His Pencils

This blog post is the first in a series of blog posts I will write as part of my effort to take an inventory of what I am learning about supply chains, digital tokens, and distributed ledger technologies.

I expect these blog posts to be frustrating for most people to read because I suspect they will come-across as disorganized, and confused. That is a reflection of the complexity of the topics I am trying to learn.

If you feel I have got something completely wrong, please do not hesitate to let me know. As Marcus Aurelius puts it;

If anyone can refute me—show me I’m making a mistake or looking at things from the wrong perspective—I’ll gladly change. It’s the truth I’m after, and the truth never harmed anyone.

First, some context; I am a seed-stage VC who has been studying supply chain for sometime. I believe that the greatest technological shifts of the next 3 or 4 decades will happen at the intersection of supply chain, industrial processes, data and analytical decision-making. I believe this shift will transform the way global supply chains function in many different industries.

If you follow technology and business news then you know what some of the trends are that will lead to the kind of shifts I believe we are about to witness. They are; increasing efficiencies in industrial automation, exponentially faster, more powerful, and cheaper computing technology, the proliferation of electronic sensors capable of capturing large amounts of data in almost any industrial or non-industrial setting one can imagine, software that is capable of analysing huge troves of data in order to aid people in making decisions about complex processes and systems, and ubiquitous computing. The list goes on. A more recent addition to any list of ground-breaking technological developments is Bitcoin and its related technologies, including the Bitcoin blockchain, as well as other cryptocurrencies and their accompanying blockchains or distributed ledger technologies.

There is currently a lot of ongoing enthusiasm, and perhaps, even hype, about Bitcoin, the Bitcoin blockchain, other cryptocurrencies or digital tokens, and their accompanying blockchains or distributed ledger technologies. Mainly, the excitement is around the belief that this group of technologies has the potential to “disrupt” any number of existing business or social structures. Personally, I agree with the following statement by Marco Iansiti and Karim R. Lakhani;

True blockchain-led transformation of business and government, we believe, is still many years away. That’s because blockchain is not a “disruptive” technology, which can attack a traditional business model with a lower-cost solution and overtake incumbent firms quickly. Blockchain is a foundational technology: It has the potential to create new foundations for our economic and social systems. But while the impact will be enormous, it will take decades for blockchain to seep into our economic and social infrastructure. The process of adoption will be gradual and steady, not sudden, as waves of technological and institutional change gain momentum. ((Iansiti, Marco, and Karim R. Lakhani. “The Truth About Blockchain.” Harvard Business Review. February 17, 2017. Accessed February 04, 2018. https://hbr.org/2017/01/the-truth-about-blockchain.))

If you agree with the preceding statement, then you should also agree that, perhaps, before one dives into the intricacies of digital tokens and distributed ledger technologies it is useful to study centralized and decentralized systems in a broad, general sense. Therefore, though I will ultimately migrate to discussing centralized systems, decentralized systems, and distributed systems in relation to information technology systems, at the outset I am thinking more broadly in terms of social structures that exist in economic, political, and cultural organizations.

At the end of this process, I hope to have developed a good frame of reference for understanding why and how digital tokens and distributed ledger technologies will combine with other prevailing advancements in technology to cause the transformation in global supply chains that I believe is upon us. I hope this helps me see what is coming next – in a manner of speaking, and that the knowledge I will develop in the process helps me make better investment decisions.

If you have read any articles that discuss Bitcoin and its accompanying technologies, then you will recognize the recurring themes of centralization versus decentralization. So perhaps the place to start is in understanding when centralized structures should be desired and maintained versus when decentralized structures should be desired and maintained.

The following discussion is motivated by, and borrows heavily from, “Centralization and Decentralization: The Compunications Connection” by Stephen H. Lawrence. ((Lawrence, Stephen H. “Centralization and Decentralization: The Compunications Connection.” Accessed February 4, 2018. http://www.pirp.harvard.edu/pubs_pdf/lawrenc/lawrenc-i83-2.pdf. I am basically paraphrasing pages 6 – 26.)) In that paper there’s a quote from “The Computerization of Society”, a report prepared for the French Government by Simon Nora and Alain Minc;

It allows the decentralization or even the autonomy of basic units. Better still, it facilitates this decentralization by providing peripheral or isolated units with data from which heretofore only huge, centralized entities could benefit. Its task is to simplify administrative structures by increasing their effectiveness and improving their relations with those under their jurisdiction. It also allows the local municipalities more freedom. It reinforces the competitiveness of the small and mid- size business vis-a-vis the large enterprises.

Centralized Systems

A centralized system is a system in which a master-node makes decisions or performs systemwide functions on behalf of all the other nodes within the system – subordinate-nodes. Subordinate-nodes only follow instructions issued by the master-node. It should be obvious that centralized systems depend on a reciprocal relationship of trust between the master-node and every subordinate-node. Centralized systems are also described as command-and-control systems.

Advantages of Centralized Systems

  1. Returns to Scale: Centralized systems generally benefit from increasing returns to scale, meaning that the system generates outputs at a rate that is proportionately greater than the rate at which it consumes inputs. More specifically, the value of a centralized system’s outputs should be proportionately more than the value of the inputs consumed by the system. This happens because resource-intensive decisions and functions can be performed by the master-node only, without burdening the entire system with performing those same functions. As a result, as the system grows, the per-capita system costs can decrease substantially. Increasing returns to scale are generally closely associated with increasing efficiency.
  2. Optimization: It is easier to optimize the outputs of a centralized system given a set of inputs because the effort that goes into optimizing the system’s output need only be expended by the master-node and not by every node within the system. As a result, in a centralized system optimization contributes to the system’s overall efficiency.
  3. Standardization or Uniformity: The hierarchical structure of centralized systems makes it easier to maintain standardization or uniformity within the system. Such standards are determined at the level of the master-node, and then they are implemented and enforced at each subordinate node according to rules established and maintained by the master-node. Standardization and uniformity ensures that the entire system operates as one unit, rather than as a collection of disparate, non-uniform, non-standardized entities. In certain instances, standardization and uniformity may be especially useful qualities if the system is to serve its intended purpose.
  4. Criticality or Importance: A centralized system is preferred when there is a disproportionately high cost associated with the commission of errors or mistakes at the level of a subordinate node. In other words, centralized systems are prefered when the weight of responsibility for avoiding mistakes is high, and the costs of this responsibility are borne by the master-node.
  5. Coordination & Interdependence: Centralized systems perform better when one must account for economic externalities. An economic externality is a positive or negative consequence that is borne by an entity which did not participate in taking the actions that led to that outcome. In other words, it is easier for the master-node in a centralized system to also account for systemwide externalities before choosing an action that is implemented by all the subordinate-nodes in the system.

Disadvantages of Centralized Systems

  1. Information Overload: Centralized systems can experience breakdowns in systemwide performance if the master-node experiences an information overload.
  2. Compulsion: Centralized systems are associated with bureaucracy and lack of freedom – from the perspective of subordinate-nodes. For example, centralized systems do not freely admit new nodes to the system unless such nodes are first approved by the master-node.
  3. Lack of Flexibility: Centralized systems are characterized by an inability to respond with agility and flexibility in the face of changing conditions. This can make centralized systems more fragile in the face of threats to the entire system.

Decentralized Systems

By contrast, a decentralized system is one in which there is no single master-node issuing systemwide instructions that subordinate-nodes must follow. Rather, in a decentralized system every node is responsible for its own decision-making and, is capable of taking whatever actions its independent decisions require it to take relative to agreed systemwide goals. It should be obvious that the trust-relationship in a decentralized system differs from that in a centralized system in an important way.

A decentralized system is one which requires multiple parties to make their own independent decisions.

– Rohit Khare

Advantages of Decentralized Systems

  1. Impartial Standards: Decentralized systems are better suited when the emphasis is on effectiveness rather than efficiency. As a result decentralized systems tend to exhibit standards that stress the results that each node in the system produces and how those results contribute to overall system wide goals rather than how each node accomplishes the desired results.
  2. Initiative/Innovation: Since each node in a decentralized system is free to independently experiment with an eye towards maximizing system wide outputs, there tends to be a higher degree of innovation within decentralized systems. Once a superior method of accomplishing systemwide goals has been identified by one node within the system, other nodes will quickly copy that method if it increases their wellbeing. All else equal, this will lead to a higher level of system wide output.
  3. Responsiveness: In decentralized systems, individual nodes are more responsive to local conditions. This is because each node in the system is free to determine local priorities on an ad-hoc basis given information available to that node even if this information is not available to other nodes within the system. It is not difficult to see how this quality of decentralized systems contrasts with the standardization/uniformity quality that is present within centralized systems.
  4. Simplified Decision-making: Decentralized systems exhibit a simplified decision-making relative to centralized systems. This is because for a given situation, decisions can be made by only the relevant subset of nodes within the system while  non-relevant nodes conserve system resources. In such a situation, simplified and localized decision-making is an advantage of non-relevant nodes are not adversely affected by the decisions that have been made, and the resulting actions that have been taken, by relevant nodes.
  5. Minimize Information Resource Requirements: A decentralized system could be designed such that each node only processes information relevant for its role within the system. This way, systemwide resource requirements can be minimized since each node conserves resources by focusing only on information and activities relevant to its specific functions and does not concern itself with matters outside that sphere of relevance.

Disadvantages of Decentralized Systems

  1. Duplication of Effort: Decentralized systems can be designed such that each node within the system attempts to solve similar problems as other nodes in the same system – leading to duplicated effort. It is easy to see how this can lead to more waste than one would observe in a similar, but centralized system.
  2. Suboptimization: In decentralized systems, a single node or a subgroup of nodes, might decide to pursue activities that increase their own well being at the expense of the well being of the entire system. Trade-offs have to be made within a decentralised system to ensure that suboptimization is minimized by keeping incentives between all the nodes within the system aligned with one other, and with the entire system as a whole.
  3. Less Amenable to Standardized Change: Since each node is responsible for making its own decisions and taking actions independent of a master node, standardization takes a much longer time to diffuse through, and become adopted by the nodes within a decentralized system. As a result decentralized systems characterised by a lack of uniformity, whereas centralized systems are characterized by systemwide uniformity.

In a quest to find examples of decentralization in action within organizations that I am somewhat familiar with, I went looking for a book that discusses the topic. I found that in The Starfish And The Spider: The Unstoppable Power of Leaderless Organizations, a book by Ori Brafman and Rod A. Beckstrom, where they  introduce us to the major principles of decentralization; ((Brafman, Ori, and Rod A. Beckstrom. The starfish and the spider: the unstoppable power of leaderless organizations. Portfolio, 2006.))

  • When attacked, a decentralized organization tends to become even more open and decentralized.
  • It is easy to mistake a decentralized organization for a centralized organization because we are far more accustomed to centralized organizations. It is also easy to vastly underestimate the power of decentralized organizations.
  • A decentralized system does not have central intelligence; the intelligence is spread throughout the system. As a result the best information and knowledge is located at the edges of the organization, close to where things are actually happening.
  • Decentralized, open systems can easily mutate.
  • Decentralized organizations can seemingly appear out of nowhere because they can mutate so quickly, and because they are easily overlooked at the outset.
  • As decentralization takes hold within an industry, overall profits decrease.
  • The power of decentralization comes from the phenomenon that when people are put into a decentralized system they automatically want to contribute, and their contributions are usually remarkably of a high quality relative to what one might find in a centralized system.

So far I have not said much about distributed systems. Think of a distributed system as a hybrid between a fully centralized system and a fully decentralized system. Businesses that blend the best of both types of organizational architecture in their business model are not that uncommon, and when they do so successfully the results can be overwhelmingly successful . . . But, we can discuss that another time.

In my next post, I will more directly delve into cryptocurrencies and distributed ledger technologies. Till then, you may delve further into this topic by reading Chris Dixon’s “Why Decentralization Matters“.

#CountDown: 11 Days to The New York Supply Chain Meetup #02

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The New York #SupplyChain Meetup #01 – The Minimum Viable Launch
Photo Credit: Andrew Williams (@aswilliams73)

We’re now about two weeks from The New York Supply Chain Meetup’s second event. The purpose of this post is to outline our plans for that event, and preview what we expect to do over the course of the first six months of 2018 . . . We’re still in the early days of building this community, so much of this is subject to change,especially as we go through the process of recruiting sponsors.

Our Mission

To nurture and grow the world’s foremost multidisciplinary community of people devoted to building the supply chain networks of the future — starting in NYC.

Become a sponsor. Email me at: brian@tnyscm.com for more details about our vision, and the team that’s working behind the scenes to build this community.

Logistical Details: #TNYSCM #02

  • Date: Thursday, January 25, 2018.
  • Time: 17:30 – 20:30
  • Location: SAP America, 10 Hudson Yards, New York, NY.

This event will combine a Keynote Presentation, a Panel Discussion, and a Mini-Showcase. Our MC for this event is Lisa Morales-Hellebo (@lisahellebo), a member of our team of organizers.

Agenda

  • 17:30 – 17:55: Pre-event Networking
  • 17:55 – 18:00 Welcome Remarks
  • 18:00 – 18:40: Keynote Presentation, Q&A
  • 18:45 – 19:40: Panel Discussion, Q&A
  • 19:45 – 20:00: Mini-Showcase
  • 20:00 – 20:30: Post-event Community Announcements and Networking

Preview – Keynote: A Friendly Introduction to Decentralized Economic Systems, Blockchain and Other Distributed Ledgers, Cryptocurrencies, Networked Communities, and Supply Chains.

The keynote presentation will be delivered by Dr. Michael Zargham (@mZargham). Michael is the founder of BlockScience, a research consultancy that helps legacy business and industry learn about, understand, and interact with the emerging decentralized economic order. He holds a bachelor’s degree in Engineering Science from Dartmouth College, and a Ph.D in Electrical and Systems Engineering from the University of Pennsylvania. His research interests span decentralized optimization and control, network science, and operations research. BlockScience is an advisor to;

  • Sweetbridge, as it develops blockchain-based economic protocols to transform high-friction global supply chains into more liquid value networks.
  • ODEM.io, a blockchain platform that allows qualified and trusted members of the education industry to create customized curriculum and experiences and offer them directly to the market.
  • Fr8 Network, a set of decentralized applications designed to connect the freight trucking industry’s key stakeholders in order to reduce high costs and increase economic value.

The keynote presentation will last 30 minutes, with 10 minutes of audience Q&A to follow.

Preview – Panel Discussion: What Problems Are Big Companies Trying To Solve With Blockchain and Other Distributed Ledger Technologies?

Building on the keynote presentation, our panelists will explore the problems large supply chain management software vendors and large supply chain logistics providers are trying to solve, with blockchain and other distributed ledger technology, for themselves and for their customers.

Daniel James (@daniel_r_james), a member of The New York Supply Chain Meetup’s team of organizers, will moderate the panel which will last 45 minutes, with 10 minutes for Q&A from the audience.

Our panelists are;

  • Nataliya Stanetsky, manager, IT Application Security, L’Oreal. She is also a co-organizer of Women in Blockchain. Nataliya is passionate about blockchain technologies in various applications including supply chain management, identity management, and financial services. As co-organizer of Women in Blockchain she connects technologists and other professionals to share knowledge and experience about blockchain technology and its applications.
  • Kange Kaneene, director, business development, SAP Ariba, where she focuses on identifying merger and acquisition targets, establishing partnerships, and articulating SAP Ariba’s medium term strategy. During her tenure at SAP she has been in several strategic and operational roles including the office of the President for Global Customer Operations. Prior to SAP Kange was a supply chain consultant at Manhattan Associates. Kange holds a Bachelor of Science in Computer Science from the University of Michigan, and a Masters of Business Administration from New York University Stern School of Business. She loves international travel, cooking, dancing and spending time with friends and family.
  • Mahesh Sahasranaman, principal architect, UPS Supply Chain Solutions.
  • Rob Bailey, CEO & Co-founder, MState – a growth lab for enterprise blockchain companies. MState is backed by IBM, Comcast Ventures and Boldstart Ventures and invests in early stage blockchain companies that sell to the enterprise.
  • David Bergonzo, VP, Corporate Strategy for Blockchain/DLT, SAP.

Preview – Mini-Showcase

To wrap things up, we’ll hear from Ryan Robinson, a recent graduate of MIT who is trying to develop a cheaper, decentralized, cloud computing platform through his startup, Conduit.

The mini-showcase will last 7 – 10 minutes, with 3 – 5 minutes Q&A from the audience.

Testing – Community Announcements

People who attended the launch on November 16, 2017 say they’d like to hear from other people in the audience, so at this event we plan to test a “Community Announcements” segment before we wrap things up. This is an experiment, so . . . . We’ll see how it goes and iterate based on feedback from the audience.

Sponsor

This event is sponsored by SAP.io.

SAP.io helps innovators inside and outside of SAP build products, find customers, and change industries through;

  • The SAP.io Fund, a $35 million early stage fund that invests in startups that can leverage SAP’s data, APIs, and technologies to create value for their customers, and
  • SAP.io Foundries, in Berlin, New York, San Francisco, and Tel Aviv.

Preview – The Next 6 Months

Here is what the team of organizers is working on, between now and June.

  • February: A workshop focused on the tactics that non-sales business-to-business startup founders can use to go from zero to their first million dollars of sales.
  • March: A showcase of startups applying artificial intelligence to supply chain. Co-hosted with NYC Bots and Artificial Intelligence Meetup.
  • April: A panel discussion and showcase, focused on the issues that have kept blockchain and other distributed ledger technologies in the lab and out of the real world.
  • May: A showcase of startups in Fashion, Apparel, and Retail supply chain.
  • June: A Sourcing 101 workshop for startups building physical products.

Other Upcoming Supply Chain Events

  • TPM2018: TPM, part of IHS Markit is the world’s largest container shipping and logistics conference, 18 years old this year having attracted 2,300 in 2017 representing cargo owners, container carriers, forwarders/3PLs, railroads, ports, marine terminals, equipment lessors and various others. It is one of the three main annual regional container logistics organized by JOC including the Container Trade Europe event in Hamburg and TPM Asia in Shenzhen China. The programs are developed with editorial independence by the JOC team of veteran transportation journalists. I’m attending for the first time this year to moderate the Innovation Jam on Tuesday, March 6.
  • Maritime Global Technologies: Reverse Pitch on March 15, 2018 from 09:30 – 12:30. MGTIC is an initiative of SUNY Maritime College to build a global maritime technology innovation hub by bringing together all that the New York City metro-region has to offer entrepreneurs building software for the global shipping and maritime logistics market. I’m a member of the advisory board and have previously blogged about it here and here.
  • Transparency18: This is the flagship event series started by the founders of the Blockchain in Transport Alliance. It follows BiTA’s Spring Symposium, a members only event that occurs on May 21, 2018.

Update #01: January 15, 2018 at 13:21 EST to include Kange Kaneene’s bio, and preview of next 6 months.

Update #02: January 15, 2018 at 16:40 EST to include #TNYSCM Mission, and contact information for potential sponsors.

Update #03: January 18, 2018 at 22:50 EST to include SAP.io sponsorship of this event. Edit agenda to include welcome remarks.

Update #04: January 20, 2018 at 19:10 EST to include new panelists – Rob Bailey and David Bergonzo.