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In this interview, Don Tapscott explains why blockchain will transform finance.

  • By Staff Writers
  • Published: 4/26/2017

AFP-17-AFP2017-Tapscott-PgHdrDon Tapscott is one of the world’s leading authorities on innovation, media, and the economic and social impact of technology. Tapscott has been writing, lecturing and consulting about the rise of technology and its impact on communications and commerce for more than 30 years. His first book, “Office Automation,” which came out in 1981, was the first to outline the case for the use of multifunction workstations connected to networks. He also argued that computers, which at the time were used purely for data processing, would become communications tools.

Tapscott’s latest book, which came out last year, is “Blockchain Revolution: How the Technology Behind Bitcoin is Changing Money, Business, and the World,” and is co-authored by his son Alex Tapscott. In the book the Tapscotts explain why blockchain technology will fundamentally change what we can achieve online, how we do it, and who can participate. We are looking forward to hearing Don Tapscott speak at full agenda at this year’s event in San Diego, October 15-18, 2017. 

Tapscott recently was a guest on the AFP Conversations podcast. Here is an excerpt of Tapscott’s interview with AFP Conversations host Ira Apfel:

Ira Apfel: What do you see as potential barriers to uptake on blockchain and distributed ledger technology and also, what do you see would be potential pitfalls or challenges for organizations or individuals just getting it in use within the organizations?

Don Tapscott: Well, there are lots of challenges, to be sure. The technology is still quite early stage. It’s not clear which of these emergent blockchains will be the most important, although right now there are two main ones, bitcoin and Ethereum. Ethereum has a whole bunch of extraordinary capabilities, as you mentioned, to build smart contracts and to rapidly build applications on that platform. That’s very interesting. Overall the governance, the stewardship of these new ecosystems is quite immature, so the whole process for creating standards is full of problems.

Alex and I wrote a whole chapter about this in Blockchain Revolution and we analyzed them. We had to put every one of them in a box. Box number one was reasons why this is a bad idea and we should drop the whole thing. Box number two was what we called implementation challenges. Everything went in box number two.

There are challenges, but it doesn’t mean we shouldn’t go forward. In fact, I would say in answer to your question, that the biggest problem is that companies are moving too slowly because leaders of old paradigms have difficulty embracing the new. We’ve got 40 years of thinking about what is information technology in our companies. It’s hard to break free from that, just like it was 20 plus years ago to think about this thing called the internet.

The same resistance I got back then, people would say, “Come on, it’s slow. It’s dial up. There are no applications,” they were right. When I wrote The Digital Economy, eBay, Amazon didn’t exist. “You can’t search this thing.” They were right about that, too. Google was five years away, but I get all the same kind of stuff today.

Ira Apfel: Corporate treasury and finance executives understand on an intellectual level that blockchain will be transformative long term, but short term they’re having a hard time figuring out how to implement it and take advantage of it in their organization. What would you tell them?

Don Tapscott: That’s why we’ve launched the Blockchain Research Institute. It’s doing 40 projects about blockchain use cases and strategy. We’re looking not just across a number of verticals, financial services, retail, manufacturing, energy, media, telecom, healthcare, retail, government, etc., but we’re also looking orthogonally. What does this mean for the CFO? What does it mean for the corporate treasurer? This work has not been done, really.

Think about triple entry accounting. Double entry accounting was the foundation of the corporation and of capitalism, arguably the biggest business innovation in history. Now, with blockchains, you get a debit and a credit, but a third entry automatically goes into the blockchain. What does that mean?

Let’s say your annual audit, do you really need to have an annual audit now, which is, by the way, just a sample. It’s not even a measure of all transactions, when you can see all transactions real time on the ledger. Those could be aggregated in any kind of way for a third party or an auditor or for you as the CFO. This is staggering, just to think about the implications of that. Fair enough, there are more questions than answers, and that’s why we’ve launched this program.

Ira Apfel: What kind of blockchain projects right now leap out at you as being slightly more advanced, closer to market or actually already being utilized by organizations?

Don Tapscott: They’re everywhere that are happening. They’re not just like the project underway to create a blockchain version of Uber or Airbnb. We actually don’t need these companies, Uber and Airbnb. They could just simply be a distributed application on the blockchain. Those are the big, disruptive projects that are underway. On the other hand, you’ve got the world’s largest corporations now are getting all over this. I don’t know. Pick an industry.

I just came back from Taiwan. Foxconn, I think, is the world’s biggest company in terms of employees. It’s the largest electronics service manufacturer in the world. It has a plant with a million people in Shenzhen province. They are looking at blockchain for the supply chain as is Walmart. Again, these are massive, massive supply chains. Every bank is looking at this and is not just looking at it but developing pilots. We argue that they need to go beyond pilots and start to think overall about strategy. That’s why we’re doing the Blockchain Research Institute programs.

Within government there are great initiatives underway that are actually happening. It’s well known that the government of Estonia has a blockchain based national identity system. Land titles are going on blockchains. Western Union is about to be disrupted by companies like NewCo or Abra that can do remittances peer to peer from your device to your mom’s device in the Philippines at a 1 percent transaction fee rather than 10 percent or 15 percent.

Ira Apfel: You’ll be speaking at AFP 2017 this October in San Diego. What specific message will you be bringing to attendees at the conference?

Don Tapscott: Well, it’s this kind of thing, that don’t think about this as bitcoin. Think about it as the second generation of the internet. There are lots of exciting technologies these days that are part of this so called fourth industrial revolution. The first was steam. We automated shovels. The second was electricity, created the electrical mass production line. The third was the computer with mainframes, minis, PCs and so on, then eventually the web, the mobile web, big data, and the cloud. Now we’re into this fourth thing that has AI, machine learning, the internet of things, robotics, drones, technology in our bodies, and so on.

Blockchain is not yet another technology. Think of it as the underlying transactional and commercial platform for all of that. All of these exciting new technologies will only be part of the economy insofar that they have a new platform. I think the banks will be unrecognizable in a decade and that the ones that will be successful will be the ones that find leadership for change within them.

This is not just about banks. It will affect every aspect of the economy, the deep structure in architecture of the firm, of how we orchestrate capability in society, to innovate, to create goods and services, to create public value, to change government. It’s an opportunity to help solve the problem of legitimacy of our democratic institutions, to change the way central banks run, and overall not just to enable more competitive organizations or better innovation, but also to help solve this prosperity paradox in society, too, where we have wealth creation but declining prosperity.

The finance function, obviously, will be completely transformed by this and that this is one of these times when we all get to be a leader if we want to. Typically, leaders of old paradigms do have difficulty embracing the new and it’s a real challenge for us to become curious and to start to think about how things could be very, very different. The change that is occurring today, I think, is much bigger than the change that was brought about by the original internet.
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