What's Next In Blockchain

John Fitch from Animal Ventures talks with us about how Blockchain is driving innovation in categories well beyond cryptocurrency.

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John Fitch
Venture Partner | Animal Ventures
Spirit Animal : Arctic Wolf
John is addicted to prototyping and firmly believes in the power of rest. He is Venture Partner at Animal Ventures where he leads all venture developments. AV partners with some the world's most successful companies to understand how their supply chains are evolving and form small startups to build Blockchain, AI, and Industrial IoT prototypes to prepare them for Industrialization 4.0.

In between AV venture projects, you will likely find John resting and reflecting on a mini-sabbatical. His podcast Time Off studies the importance of rest, unplugging, and balance in today's modern world. You can reach out at www.john-fitch.com.
David "Ledge" Ledgerwood
Client Services | Podcast Host
Your host, Ledge, is a many-time founder, with deep experience in growing six-figure startups to 8-figure enterprises. Clients talk to Ledge first when exploring a relationship with Gun.io.

“Love this podcast! Best one out there for high-level industry trends and advice. Recommended!”

Danny Graham, CTO / Architect

Transcript

DAVID LEDGERWOOD: Welcome! We're here today with John Fitch, venture partner from Animal Ventures. John, why don't you give a quick intro of yourself and the company, and then we'll dive into some of the fun stuff.

JOHN FITCH: You’re probably not expecting this but one of my favorite things to ask with anyone we work with ─ and that includes you, guys ─ is “My spirit animal is an arctic wolf. If you were to pick a spirit animal, what would yours be, my friend?”

DAVID: It's tempting to say “tree sloth” but when you try to upgrade a little bit ─ we've been listening to the Harry Potters with the kids. So I'm going to go with the stag patronus.

JOHN: One of the best answers I've ever heard!

DAVID: There you go!

JOHN: In Animal Ventures, I lead up a lot of what I would essentially call “experiments.” We are a prototyping venture firm that's really focused on supply chain automation. We are sort of a skunkworks for a lot of Fortune 100 companies specifically applied to their supply chain and supply-chain thinking.

So the convergence of blockchain or decentralized computing, AI, and industrial IoT or industrial robotics are the three sandboxes we're playing; and I lead up all of our experiments.

We have very small teams that meet with the supply chain leadership of these companies; and through a little kit we've formed of design thinking and prototyping, within 12 weeks, it built a shippable prototype to help solve a business goal today. But it's a domino that future builds can take advantage of and build momentum from.

We're just firm believers that instead of traditional consulting where, usually, you're given a PowerPoint or a keynote of either take Option A, Option B ─ either way, it's your choice ─ we like to really go in there, find a few entrepreneurs inside of that company and kind of spin up a little startup on the side, and within 12 weeks, test and learn.

DAVID: Fantastic! You and I started this conversation off camera about ─ I had noticed and was interested in this idea around ─ obviously, we deal with a lot of technical talent and some of the popular press-types of providers have put out their content pieces saying that the number one, most requested freelance jobs are all in blockchain; and we've certainly seen the demand.

Yet, I have this sense ─ maybe the contrarian sense ─ that the hype cycle around the blockchain largely lived in the cryptocurrency space.

Look! There's a lot of cool stuff going on there, a lot of value. We have some clients in crypto. And yet, there's so much else there. And supply chain automation is sort of one of those things where ─ I don't know if a lot of people sit at home and think that supply chain automation is where it's happening. Yet, we know that there's a tremendous amount of value stored there in blockchain IoT, AI ─

I was curious as for your perspectives on the market for blockchain , just to start, and developers in blockchain. What's your broad thinking on the ecosystem there?

JOHN: It's a great question and I have a lot of thoughts on it. I think if the people listening have ever been in a position of leading product, I hope you would pride yourself on your team’s accuracy whether that's a 12-week build like we go about or if it's a company that's been building a product over the course of two years.

If you're a product manager or a product leader, how much throwaway work are your devs or your designers having?

It it's a high ratio, well, shame on you! You've probably haven't done the best job.

And I would say that the biggest threat to the space is not necessarily “Do you need the talent?” The question is “Do you need blockchain for your problems as a company?”

Depending on your situation, the answer presents itself.

But I am seeing lots of hype. I've written about this extensively because I had to put a filter on my inbox of people wanting me to vet ICOs given the amount of talent I have in the space. And instead of trying to address all those, I just wrote an article on my autoresponder saying, “Here are my thoughts.”

If you are a subscriber to the Gartner Hype Cycle, if you do have your hands dirty in the space, you realize that it is such early days that, right now, the most exciting discussions are the “What's the next library?” or “What's the next tool kit?” to even be able to prototype.

So when I look at a massive amount of ICOs that are promising some massive business value, I chuckle inside because I know that deep down inside, a lot of the piping is not even in place.

Should business people study distributed ledger technology like blockchain?

Yes. This is the emergence of a lot of underlying tech that's exciting, that introduces a new age of computing.

Definitely, learn about it so you know the terminology, so that you can vet whether it applies to your business or not.

If you're a developer, the same applies. You should be experimenting. You should be learning. But the good developers I know don't kid themselves. They realize, “Oh, wow, there's this scalability issue” or “Wow! That's really not that secure” and they get to that level of confidence by tinkering.

I think the one thing to shed a light that's exciting is that blockchain, as a whole, or distributed ledger technology introduces a melding that I don't think has ever existed before.

If you're going to be a head developer and you're thinking about a decentralized app, you actually have to think with three hats on. The first is a developer hat; it's code. Obviously, you need to think about systems thinking and programmatic problem solving.

The second is governance. This technology’s underlying implication is that you are taking power away from centralized authority and sharing it amongst people. That's called governance.

I don't know. You should have a background or, at least, access to information on the history of governance models or current thinking around it because whether it's an open blockchain or a federated blockchain, you're talking about participants who have to find a way to trust each other.

So the second hat is kind of a policy/government hat.

And then, the third is economic because whether you want to get lost in the token economy aspects of it ─ like if it's a decentralized network ─ you need to think about behavioral economics incentives because why is someone going to sign up for your decentralized network? Is there value for me to do that? Are there incentive models in place to reward the people who are good participants and highly punish the people who try to mess with it?

I think that it's a new type of person or a new type of mindset that you have to have if you're going to be building anything that you plan to productionize. I think that's the real shift. And that's something I'm always looking for in people who want to join these projects.

What's also interesting is ─ I don't mean to burst anyone’s bubble but two years ago, the only people playing in blockchain were crazy, insane, talented cryptographers.

It would have been like, “Hey, do you know a cryptographer?” That would have been blockchain talk, right?

And those are the people who have built a lot of the core infrastructure that we're seeing today behind Bitcoin and the theory. They actually adopted ledger technology out there.

I mean, the people who really designed those are pay grades above me in terms of technical capability ─ and a rare few.

But just like what we saw in the birth of low-level, seed-level programming language, then you saw what?

Libraries, frameworks ─ that's happening right now. There's this exciting wave of dev tools coming out. Developers I've interacted with in past product builds at Animal are now ─ based on their experience with us ─ going, “Oh, here's this little library or this tool that I can make to make things easier for developers in that space.”

So I actually have this part of me that ─ in a few months or years depending on how things escalate ─ the developer whom you pride right now in your organization ─ let's say, a JavaScript developer or a Haskell or a Python ─ they will be your blockchain developer because the frameworks are going to evolve in such a way where you don't need to be a Kernel dev to get the job done.

The question is, is your developer a good problem solver?

That applies today as it did yesterday and as it will tomorrow.

If you're a company that wants to create core-level protocols in blockchain, you're probably going to need someone who is at a skill level that is actually very rare because that person that you would need is probably building the next blockchain protocol. They don't want to join you per se.

And so, when you look at three layers which I always like to talk about with our clients like a triangle, the bottom layer is that core infrastructure like consensus algorithms and really crazy tech.

And then, you've got that middleware layer which, right now, I'm seeing more and more projects there like libraries and frameworks ─

DAVID: ─ abstraction layers?

JOHN: Totally! And then, you've got DAP layer. The problem is that the people are trying to jump from that bottom one and immediately put the application layer, the DAP layer right on top of it; and, therefore, your things don't scale.

There's definitely a hype cycle but I think education, no matter what, is important because I think a lot of people only connect blockchain to cryptocurrency; and, to me, that's kind of a big problem because there are more applications than just the currency side.

In fact, I'll never consider myself as someone able to process the cryptoeconomics because I'm not a currency expert nor do I work at some political building who actually makes the calls on that.

I am a technologist and a product person ─ and this is why I jumped in, friend. I just had this epiphany like, wait, this is a global computer that you can build apps on that no one owns. That's what made me go into it.

And these next generation blockchains, I actually call blockchain computers. They are a shared computer for everyone to compute against. That's what's exciting to me. It has nothing to do with the currency side.

DAVID: So that would be the bottom layer of the pyramid, and then the very first level or two of that abstraction middleware that really enables solutions to be built on top.

JOHN: Yes.

DAVID: And the usage of those solutions ─ it seems to me that there's as much work to be done there on how, where, why would I use this because I never had the ability to think about a distributed ledger and what capabilities does that have?

Maybe on the business pyramid, I'm thinking in that layer of, wow, I can abstract pieces of my business model. I can automate. I can increase productivity. I can increase the quality metrics, the ROI, the way that I track things, different KPIs.

Is that accurate? What are a couple of examples?

You talked about supply chain. What does that mean? Where does all of this go?

JOHN: Yes, sure. At Animal Ventures, we always talk about a concept of what we like to ─ and it's sci-fi 0:13:45.8 for sure, but we're heading there and we are doing our part of prototyping towards it.

But our leadership like to talk about the idea of a cognitive supply chain. Again, if you look at where things are going in automation, right now, we have robots that are assembling our cars. Actually, that's been around for a while but there used to be a very human-dependent aspect of that for maintenance and doing parts and what not.

Well, in Ethereum, for example, which introduced the idea of a smart contract that just means automated business logic or automated decision making ─ and it's making that decision based on the state of the shared network ─ we're looking at examples where a smart box that has highly sensitive pharmaceutical products in it that needs to be kept in a certain temperature range, that can't be tampered with given its context, you can have those rules coded into that small device that has sensors on it that can self-police its decisions.

And the only way that you and I and the four others in our industry would feel comfortable is that we all have visibility into the state of that.

So in terms of self-maintenance, in terms of meeting compliance in programming compliance into the Internet of things, those are areas where it's really applicable today for us.

Also, there's the whole concept that most of us don't think about in supply chain. Trust me, this is all new to me. I'm a supply chain experimenter. I would not take pride in saying that I'm a supply chain expert because I think it's all changing so much that it's a bad thing to be an expert.

Things have to be tested when they're imported. And most of everything that's made today from raw material into a product as it is created, that thing crosses a lot of jurisdictions. There's testing on import protocols in place that governments enforce to make sure that things are safe, to make sure that the thing that you buy is the thing that's legit and it's not going to hurt you or it's not counterfeit.

And those intentions are important behind the reason to test. The problem is that there are no shared standards. So whether it's pharmaceuticals or food or medical devices or machinery for an airplane ─ whatever the case ─ there's a ton of latency around when things pass a certain border or finally get imported. So there's actually a ton of waste, a ton of expiration that happens because there are no shared standards.

If all of the different import facilities had a shared decentralized computer, therefore, it has its own standards of the serialization, the parameters of the product, and those are being maintained in smart containers, the moment the “test” it, it shouldn’t last very long. They can see from this point to this point to this point whether things have changed or not; and that's shared in a decentralized fashion so there's security resiliency.

It's trust-less. You don't need to ask yourself, “Do I trust them?” We all can see it.

And so, this concept of shared state is an abstraction applied to any supply chain use case that we kind of focus on. Again, we're seeing the adoption on a consortium level and I think that will evolve to where, just like the Internet evolved, first, you started off with just a company’s private network; then, they shared this with their partners and, eventually, from industry to industry. And, eventually, parts of that speak to the Internet.

I think the same thing is going to happen here in the Web 3.0s. Right now, a lot of the experimentation we do is in federated blockchains which means it's a decentralized network but it's with known participants with identities.

Today, I'm in Pittsburgh essentially building the trucking computer 0:18:25.1 and that involves carriers and freight partners who benefit from having a shared state with their shipments.

There are a lot of other examples but I would say that if you ask yourself, “Where do we currently have black holes in terms of visibility into our supply chain?” in terms of IT, you should be looking in the blockchain.

DAVID: Interesting! Talent, developers, thinkers, problem solvers ─ it's going to be a while till this makes it out of the abstraction phase. We need middleware types of things to be as consumable as your JavaScript framework. It's like how native apps can even build 0:19:18.3 a cross-platform using a JavaScript framework now.

Very cool!

What is it going to look like as this proliferates? Do you imagine it's that common as something like a JavaScript framework that it just simply is and it's the new way to do everything?

JOHN: Yes. I fundamentally believe that ─ I mean, the signals are there for me. Oracle, Amazon, Microsoft, Google were experimenting with all of these. They're starting to provide blockchain frameworks.

Again, are they going to be able to scale to a pubic net like Ethereum?

Probably not, but your team right now, the devs that you have, probably know enough about JavaScript to start experimenting to understand what the stuff means.

Again, does your company need to create a cryptographic new consensus algorithm?

If your answer is “no,” then don't go looking for a core blockchain dev. Your lead JavaScript dev probably has the toolkit that he or she needs for the next while to start experimenting and preparing for the new paradigms that are coming.

And they're coming. They're coming today.

And so, I think the biggest question actually has nothing to do with blockchain; it has to do with the state of prototyping, Agile development and how fast all this stuff is increasing; and that's the scale you really need.

Who in your organization ─ whether it's in-house or you work with an institution like Gun.io ─ who is good at unlearning actually?

There are parts of this computing and development where you have to unlearn some things in order to dive into some of these current libraries and “Alright, let's spin clusters up in Kubernetes and have that run some smart contracts.”

They have to unlearn a few things from traditional web development but the skill set that they have in terms of syntax and problem solving still applies.

So I think you're really looking for people who ─ throughout other cycles of new tech ─ have been able to unlearn and pick up the new stuff and ship some interesting things.

DAVID: Sure ─ that domain-driven design and all these types of things, abstraction, microservices patterns, all this stuff that's being taken to the extreme now.

Almost every state in time is, therefore, its own instance of whatever we need which gets you in the server list. It's almost infinite layers of abstraction into the public net.

JOHN: I would say that we have a set of devs on our prototyping builds. We hand-select one or two developers inside of that client’s company. By the end of the twelve weeks, by prototyping alongside of us, they know a lot. They could start experimenting.

Whom we have to spend the most time on, my friend, are business leaders because, actually, this technology has the biggest impact on an economics government industry agreement that it's really business facing.

So if you're an executive being told, “Oh, you need blockchain developers,” actually, the first thing you should do is go learn about blockchain.

DAVID: Why do I need blockchain at all?

JOHN: Or how is this going to truly change my industry? Start thinking about new business models or ancillary business models that it introduces.

Our leadership actually spends the most amount of time on that social engineering because the tech stuff is going to get easier; and the idea of decentralized computing has been around for 30 years. It's just that we finally saw the right tools come to place to make it scalable.

But not that it's scalable and there are more and more abstraction layers, it's going to really start changing business. And so, the people wearing suits and have the title of “CEO” and “Head of Supply Chain” drive the strategy of the company; and so, they need to be thinking about what's next.

Your developers today are going to follow. This stuff is not that hard for them to wrap their minds around. It's really hard to wrap your mind around how you might have to cannibalize yourself and start a new company, in a way.

DAVID: And you could think about all kinds of support functions, too. It's not just logistics. What else is a set of rules that you can execute without humans? How about accounting?

JOHN: Yes. A lot of back office use cases ─

DAVID: Back office ─ if all marketing becomes data driven and sort of interactions with customer, well, customer success is essentially a contract to you.

You get a little crazy and you go down, down, down but you quickly get to where it hits the AI pathway because it's just going to be such an amazing amount of data ─

JOHN: ─ and immutable trusted data.

DAVID: Right ─ that you can, then, make leaps and assumptions and massive changes in the way we're making decisions. It's a neat stuff.

JOHN: I remember when I first dove in when I realized Ethereum was not just a technical paper and that it's this real thing and we started playing around with it, that was the moment I was fully convinced we're on the path for IoT and machine learning because if you think about how you teach ─

You have kids. When you tell your kids that red is red, it's red. And if you're training a machine ─ let's call it “Teddy” ─ Teddy needs to feel confident; and if you're going with a deep learning model, what you're referencing it, what you're training it on, it can assess across a network that that this is what it is; that is the thing; that is the standard.

In a decentralized world, I think we'll just see more and more standards being developed. Therefore, you can create more intelligent processes because, again, you can see reputation associated with the standard. There's a way around that.

And then, again, there's a really exciting security side and some of our projects have been solely focused just on network resiliency. So there are parts of blockchain computing that introduces and IoT is exciting as it can be. I think we have to also have sort of the Debbie Downer outlook which is like, “It's actually a very scary world of cyber security.”

You've got to think about that. And so, I think the underlying distributed ledger tech starts making those two fields much more reachable, in my opinion.

DAVID: Sure. You're deploying a device that can connect to the Internet on every single square inch of humanity in the world, all of which are, then, are tech factors.

You can quickly imagine how that could become a nightmare.

Excellent! Inspiring as usual, much appreciated! How about a last philosophical thought for us?

JOHN: Sure. There is this book and this is not a sponsored statement. Since we love decentralized tech, Animal Ventures is actually a very decentralized organization. And Gun has been incredible for us in terms of finding people who just understand the way we work.

I think what's been great about that is ─ this is kind of a separate vision of where things are going. There's this book ─ I think his name is Richard Florida. The book is called “The Rise of the Creative Class.”

He was way ahead of his time of predicting the gig economy and by 2025 you're looking at the majority of the world that's freelance.

I think that's true and based on how fast technology is going, I think what's left for us is project-based work.

And so, I've really appreciated working with your teams. Again, I think it's not a blockchain developer; it's not a machine learning developer; it's not a cryptography you need - glitch - and good at prototyping because if you invest too much time in a skill, too much into shipping the product, likely, by the time you're done building it, everything else has changed. And so, in a way, it's obsolete.

And so, having people who are very used to kind of rapid cycle is what's valuable; and you, guys, have been able to provide that for us.

I think other organizations should really be thinking about that.

DAVID: Much appreciated! Thanks for the commercial. Finch, nice spending time with you!

JOHN: Likewise, my friend!

DAVID: We're going to get those out on the site and we look forward to more stuff together with Animal Ventures.

JOHN: Happy creating!

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