Blockchain organizing: the new trust industry

Paul Bessems, 9-2-207

There’s a new and disruptive concept to organize trust in the supply and demand chain. This concept will make traditional coordination mechanism, like ‘the firm’, ‘the bank’ or ‘the government’, too expensive, almost by default. This new concept is able to organize trust, without expanding complexity. It’s a combination of a new technology with a fundamentally new organization model and we call it “blockchain organizing”. When blockchain technology is combined with a fundamentally new organization model, a disruptive way of organizing trust, our work, economy, and society will emerge. This new way of organizing also means that the IT landscape, first design and architecture and after that also development and management, will fundamentally change.

New context, new models
In the context of the twenty-first century we need new organization models to organize the work of service-, information-, and knowledge workers in way that will improve their productivity and protect our privacy. The World Economic Forum has identified blockchain as one of the mega trends. Their research shows that in 2025, 10% of the GDP will be stored on a blockchain or with blockchain related technology (see: World Economic Forum report, from the Global Agenda Council on the Future of Software & Society: ‘Deep Shift, Technology Tipping Points and Societal Impact’, September 2015). Probably more than half of the people in western societies are occupied in the so called ‘trust-industry’. Think of bankers, auditors, managers, support staff, accountants, and lawyers. Blockchain organizing can change the meaning of work profoundly, improve productivity, protect our privacy, and improve decentralization and democratization. The best idea is to start improving your own processes with blockchain technology. Make them ready to transfer them to decentralized shared transaction networks.

The trust paradox
When we do business with each other we have to trust each other. In order to do that, we want to reduce uncertainty when we exchange values or trade with each other. In order to reduce uncertainty we innovate institutions like: money, contracts, and laws. We institutionalize these tools with organizations like: banks, governments, and companies. The problem with these institutions is that they do not only reduce uncertainty, but they also increase complexity, and with that, uncertainty. We call this the trust paradox: “in order to improve trust, distrust grows”. How does this work?

trust-paradox

Figure 1: The trust paradox leads to reflexivity and active inertia.

When you want to reduce uncertainty or improve trust in the social economic order of this moment, you need more institutions and therefore more specialists. If you don’t coordinate specialists in a proper way, the world becomes more complex and in a complex world it’s harder to trust each other. So in order to improve trust, distrust grows. This trust paradox also influences our productivity paradox. As Robert Solow said: “You can see the computer age everywhere, but not in the productivity statistics”. So, if organization technology (but also HR, management etc.) doesn’t improve productivity, why are we investing in it?  Why do we innovate if we don’t become happier or more productive?

Complexity grows
According to research by Gary Hamel and Michele Zanini, more and more people are working in bureaucratic organizations (see: ‘More of Us Are Working in Big Bureaucratic Organizations than Ever Before‘, Harvard Business Review, 5-7-2016). Between 1983 and 2014 the number of managers and support staff grew 90%, despite (or maybe as a result of?) investments in organization technology, HR- and management programs, and all kinds of “lean and mean” programs. All these managers and support staff members have an important function: they reduce uncertainty, they coordinate, or they organize trust. But they also have an effect on the transaction costs. So transactions cost will rise, complexity will increase, and at the end of the day our prosperity becomes too expensive, because our productivity growth cannot keep up with the growth in costs for healthcare, education, and safety.

Solution
So how can we solve this productivity and trust paradox? An important solution is to replace trust, based on a ‘social script’, with trust, based on a ‘technical script’. It’s possible to ‘program’ trust with a protocol. That is what blockchain technology is about, in my opinion. You can see the blockchain as an extra trust layer on the internet. The internet makes it possible to share information without almost any friction. With blockchain we can do business without having to trust each other. The only thing you have to do is to trust the protocol and the people who design, develop, and maintain it. With blockchain organizing you can process transactions (profile, search, select, fiat, make contract, purchase, sent invoice, pay etc.), without almost any friction or transaction costs.

As Johan Cruijff said it: “Before I make a mistake, I know I didn’t make that mistake.” In other words: don’t make mistakes twice and learn from the past. The early internet gave us a realistic vision of a decentralized democratic world that enables information (but also value) exchange without almost any friction or the interference of institutions. But now, we all know that this didn’t happen. In contrary: corporations, financial markets, and governments became more powerful than ever. Let’s not make this ‘mistake’ again with the blockchain. Blockchain organizing is seen as a combination of new technologies and a new organization model that enables us to organize transactions between supply and demand almost without any transaction costs. And that is the basis for a successful organization form that will survive the next decades.

Why do we organize work?
From the early days, when humans started to organize work, the main reason why we organized our work was to raise the standard of living. When we were hunters and gatherers, we discovered that the division of labor and coordination led to better hunting. Even animals that where much larger or faster could be caught, thanks to specialization (divide tasks), collaboration (communication and transactions), and focus (finalization). So it doesn’t matter what kind of work you have to organize, there’s always specialization (supply), coordination, and finalization (demand). And the form with the lowest coordination costs or alternatively the form with the highest efficiency will succeed.

So I believe that when you organize IT management or work, or more general supply and demand, there’s always specialization, coordination, and finalization. And in our digital society the best way (with lowest friction) to coordinate work or transactions is no longer ‘the firm’, ‘the hierarchy’ or ‘the manager’ but new forms like shared networks and decentralized, almost autonomous organizations, based on blockchain technology.

Conflicting policies
But technology alone won’t change much. Since World War II, the US and their allies see mass unemployment as an existential threat. So if we combine a policy of innovation (e.g. blockchain innovation), with a policy of full-employment, we create, as David Graeber calls them, “bull-shit jobs”. Productivity, complexity, and trust will not improve with this conflicting policy. So we have to start thinking again and think of a new definition for work, unemployment, and the role of income in our society. Blockchain organizing alone will not solve this problem.

New concepts
But what we know is that blockchain organizing will affect the IT industry. New systems will be designed and built. They will not be based on company borders and own databases. They will be based on an ontology and taxonomy, with the two smallest building stones (humans and their tools), and transaction at the core. Organizational models will be based on organization principles like: ‘programmable institutions’, ‘structured flexibility’ and ‘apart together’. IT systems will be built with these new organizational principles as the starting point. We don’t need a database per company, we need an ontology that captures the attribute of the values we want to sell or buy. It architectures will be based on concepts like: Privacy by Design, Personal Data Service (PDS), Data As A Service (DAAS), Data Logistics, Decentralized Autonomous Organizations (DAO’s), Attribute Based Encryption (ABE),and encryption- and distribution concepts like Sieve and Enigma from Harvard and MIT.

Conclusion
If we keep organizing trust, our work, and economy with our differences as a starting point, we’ll proceed in making our world more complex. Our productivity growth will not keep up with our cost growth. And that doesn’t make any sense. blockchain organizing  can help to make the world less complex, and less frightening for a lot of people. What we need is new hope and new trust that we, as human beings, are capable of solving the problems that we created ourselves.

 

 

 

Advertenties

NOMAD program

 

New Organization Models, Analysis and Design
(NOMAD program)

– Institute for New Organizational Thinking –

Paul Bessems, 23-04-2013

With new organization models/concepts as blockchain organizing professionals, organizations and partnerships can improve their purpose of work, productivity, privacy and power balance between individuals and institutions.

In the context of the twenty-first century we need new organization models to organize the work of service-, information- and knowledge workers in order to improve their productivity and their contribution to a more sustainable prosperity. Two examples of a new organization forms are hybrid organizing and blockchain organizing. Hybrid organizing is a cross between make (do it yourself via the institute), and buy (contracting out via the market), or between private and public. Blockchain organizing is a way of doing business, without trusting each other, you trust the protocol. Both concepts take the smallest building blocks (people and tools) and the connection/transaction between them (chain) as starting point and unity of analyzing and design. Both concepts are scalable and flexible at the same time and it will improve the productivity of information workers. The surplus time can be used to organize a more sustainable prosperity.

Within the Nomad program, it is possible to start a more theoretical research project for further understanding and development of new organization models and design with the blockchain or hybrid organizing concept. Your organization, or a group of organizations, can also define a more practical and custom made development project as part of the Nomad program.

These projects together are called: Nomad Program. This program is initiated and supervised by the Institute of New Organizational Thinking (IFNOT), part of the Weconomics Foundation.

The main goal of the Nomad program is to set up projects in order to improve purpose and productivity of our work (especially in information intensive organizations), and restore privacy and power for individuals. The main goal of this paper is to inform project leaders and professionals, organizations and partnerships about this program in order to explore their possible contributions to the program in general and their development or contribution to a specific project in particular.

See here for full proposal

Blockchain organizing: towards a new paradigm

Imagine there is way of organizing your work so powerful, that it will make the default ways of organizing obsolete. A way that is so disruptive that not only traditional roles like sales, purchase, legal, finance, HR and management will change or even disappear, but also has the potential to make ‘the firm’, as the main organization form, obsolete. This new form exists and is called: blockchain organizing. It is already mentioned by thoughtleaders that blockchain organizing now, has the same potential as the Internet in the nineties. All that blockchain organizing needs are the smallest building stones: a human and a tool, demand and supply and a meaningful, reliable and secured connection between them. That’s all! It’s a perfect way for working together in a smarter way, not only within organizations but especially between organizations. The beauty of this disruptive organization form lies in its simplicity and its balance between fundamental organization drivers like scalability and flexibility, motivation and coordination, supply and demand.

Maybe blockchain organizing seems to be far away from your role, profession or organization. But it is inevitable that many of the existing jobs and organizations will soon become obsolete. The question is: how do you prepare for this? How can you continue to add value? How does the future of work look like for you? Maybe this paper will help you to find answers. Blockchain organizing is not technical or difficult. It mainly requires a different perspective, a different way of ‘looking’, thinking and organizing. If you become part of this new disruptive development, you can play a key role in the organization of work in the future. Investing in blockchain organizing now means: taking a lead and secure your position in the future of work.

This white paper is not so much about technology, but more about the question: what is the future of work? What is work and how will it be organized? This paper will address mainly the role that the smallest building stones, and their connection, play in the way we organize our work in a digital age and our needs for organizing a more sustainable prosperity. In this paper I will answer questions as: What is blockchain organizing and why it is increasingly important for the organization of your work? What are the fundamentals of blockchain organizing and how do blockchain organizations look like? What is the relationship between specialization, coordinating and finalization with blockchain organizing? How can you apply blockchain organizing in your own organization and finally, what kinds of resistance can you expect in relation to blockchain organizing?

>> Go to white paper

Why we have to reinvent the concept of competition and run faster than the futures comes

Paul Bessems, 6-6-2015

We have to reinvent the concept of competition. We think that we are in competition with people from the same generation, but that is a very limited, unwise, selfish and not so sustainable. First we thought that we were in competition with our neighbors, then with companies within the EU and now we think that we are in competition with low-wages countries. But wages in China and India will rise and what then? Only Africa is left and after that? We are not in competition with people from the same generation, we are in competition with the future. We have to run faster than the future comes. Before the future starts we have to organize our prosperity in a more sustainable way. Not only our energy supply and climate control, but we also have to balance prosperity costs and benefits. We have to organize a society in a way that our children can choose a same level of prosperity than we have now. We have to organize a sustainable prosperity before it is too late, not for us, maybe not for our children but at least for our grandchildren and their children.

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Why the 2008 crisis is not over

Paul Bessems 15-6-2015

More and more we see news articles that the 2008 crisis is over, but most of the politicians don’t understand the fundamentals of the problem or they do and just want to fool us with good news. And as Mark Twain said: ‘It is easier to fool people than to convince them that they have been fooled.’ So politicians can deal with the real problem later but the costs to deal with it later are much higher. The real problem that is still not solved is weak productivity improvement in combination with rising prosperity cost (cost of healthcare, education, safety etc.). 2008 was not a financial problem but a debt problem. Since the eighties our prosperity cost and benefits were not in balance and the gap was filled with printing and borrowing more money and that ended in 2008 because we don’t trust governments anymore that they can pay back.

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From Financial Capitalism to Human Capitalism

Paul Bessems, 05-10-2010

A couple of years ago I started a research project to find out whether our politic economic system – I call it financial capitalism –  is capable of solving the major problems we have to deal with in the twenty first century. These problems are at the surface now but if not solved, will destroy our society within a few generations. We have to choose now whether our society will fail or survive. Postponing the solution is the worst solution of all, and that’s what governments, companies and banks do. The reason: they cannot solve the problem because the try to solve the problem within the system……

But the system is the problem!!

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Hybrid organizing: towards a new paradigm

Paul Bessems, January 2014

We live in a time where physical production (and consumption), more and more is replaced by digital pro­duction and consumption, especially by the Internet. We live in a time where information and knowledge are the most important production factors. But most of the organization forms we organize our work with were designed in the early twentieth century. They are especially suitable for physical production in large numbers and in a relatively ‘quiet’ and local market. Traditionally we organize our work within companies (make), or we organize it by markets (buy). Institutes are scalable, but no so flexible, and markets are flexible, but often not so scalable. In the context of the twenty-first century we need hybrid organization forms that are scalable and flexible at the same time. Hybrid organizing is a cross, between make and buy, between do it yourself and contracting out, between the institute and the market. Hybrid organizing has a new unit of analyzing and design. If you organize your work via the institute, the unity of thinking is the institute. The institute borders are literally the border of your thinking. With the market, the market transaction is the unity of thinking. The unity of thinking in hybrid organizing is organizing capability. Organizing capability is the meaningful connection between the two smallest organization building blocks: men and means (human and tools). You and your laptop, you have and therefore you are organizing capability. From this smallest building stone, we can build any organization by connecting and disorganize by disconnecting. The question is: why are we going to hybridize work organizations? What is hybrid organizing and where does it work and where not? What are the fundamentals of hybrid organizing, how do hybrid organizations look like? How do hybrid organizations work and why is working smart together so important within the hybrid research field? This whitepaper will answer these questions.

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