LETS TALK BITCOIN

Episode 39 Perspective Counts

Proofreader's note: This episode was transcribed from the two episode segments individually, not the combined episode. There may be discrepancies in the transcription compared against the audio. Participants: Adam B. Levine ABL! " #ost Andreas $. Antonopoulos AA! " %o&host 'od Bec(strom 'B!& lecturer Audience )uestions A*! ABL: #i, and welcome to Let's Tal( Bitcoin, A twice&wee(ly show about the ideas, people, and pro+ects building the new digital economy and the future of money. Today,s episode is a two&parter. -n segment one, that,s this one, you,ll my tal( from the -nside Bitcoins conference, that too( place in $anhattan on the ./th 0uly. -n it, - lay up my findings on content moneti1ation with Bitcoin several moths after diving into the space and propose the open source platform that will allow any niche to leverage cryptocurrencies as a way to build self&sustaining, net&productive communities on the -nternet. -n segment two, we ta(e a trip in a way&bac( machine to an author,s 2oogle Tal( in the early 3//4 by 'od Bec(strom, a very smart guy and one of the authors the pivotal boo( in my personal +ourney in understanding Bitcoin. The 5tarfish and the 5pider: the unstoppable power of leaderless organi1ations. This hour&long tal( about decentrali1ed organi1ations came years before Bitcoin applied those same concepts to money, but the driving force and the inherent attributes are the same. -,ve decided to present today,s show advertisement&free, so send a tip if you want to support our model. 6n+oy the show. AA: 7(ay, so our ne8t presenter,s going to ma(e his way up to the stage, Adam B. Levine, and he,s from Let's Tal( Bitcoin. #e,s been as(ing )uestions all day, actually, so you guys have actually met him a few times. -,m going to hand over the microphone to him now. ABL: -n the notes, my topic is called 9:ouTube is Bro(en: 'ethin(ing %ontent $oneti1ation with Bitcoin.; That,s actually the name of a tal( that - gave at the Bitcoin 3/<. conference. This is actually a follow&on and -,m going to recap really )uic(ly, but we,re going to move pretty fast here. This is a .=&hundred&word&tal(, -,m going to deliver it in about 3. minutes. There are .3 slides, so stay with me and at the end & we,ll go through )uestions. :ou,re all familiar with the gorilla in the room, :ouTube. :outube is an open platform that invites creativity and self&e8pression. >ith over 43 hours of content uploaded to :outube every minute and a billion visitors each month, it,s a platform that gives a solid shot at audience if you,re creating )uality content. %ompensation is, however, a little bit more elusive. -t,s the model that,s the (ey. :outube is based off the old&style -nternet moneti1ation called %P$. That,s cost per thousand impressions of given advertisement. :ou can see why it ma(es sense for the networ( to follow this model. They have very simple metric to trac(, how many views, and how many people actually watch those, and a flat, predictable cost. :ou ta(e the deal or you leave it. 2iving everyone the tools to moneti1e means you,ve turned advertising slots on videos functionally into commodity? the more creators who opt in, the less valuable service

each of them provides. :outube,s growth comes at the e8pense of value to creators and it,s literally getting worse by the minute. This isn,t to say that content isn,t valuable, rather it +ust doesn,t matter to :outube, but let,s ta(e a step bac(. >hy do people create content to begin with@ :ou do it for your audience. Anown or not, we,re all creating for the people who form our tribes, who form our ideological you (now and who value the same things we do. The people who gro( you, who comment on your site and, fran(ly, care, but the fol(s who determine whether or not you,re even given the opportunities to display the advertising that leads too the potential moneti1ation don,t (now you, don,t care about you, and really have no incentives to change either of those facts. This is the second time - have spo(en about this sub+ect, but the last time it was all hypotheticals. The last time at Bitcoin 3/<., - found myself wal(ing to a diner with the videographers from 'edpill'ecording, who had filmed my tal( and half the other tal(s at Bitcoin 3/<.. Turns out they hadn,t been compensated and have basically been comped tic(ets to cover the event, and so when - as(ed when they thought when the videos would be out they (ind of +ust shrugged to me and said: 9- don,t (now, when we get to it.; &Because there was really no incentive for them to do it. - shared with them that, for the first time, you could as a video&producer ta(e Bitcoin address and code it into a *' code, and put onto your video so that anyone watching your video anywhere, regardless of if it,s on :outube or not, your site or not & any site & and at it could send a value for the value that they got from your production, and they did it. :ou can see in this picture that there is a *' code right up there a little call out to action. Their videos were out wee(s before anybody else,s videos from the conference because, again, they had this incentive. - recently ran the numbers and came up with some interesting results. A friend of mine has a three&year&old :outube channel. #e has more that ./,/// subscribers and several million views. #e earns appro8imately 3 dollars per thousand impressions and, actually, that number is inflated because in reality he earns something closer to < dollar since only about half of the people who watch his videos bothered to watch the advertisements, and if you don,t watch the advertisements, the creator doesn,t get paid. Again, this is not a problem for 2oogle or :outube because it,s +ust a numbers game for them? they don,t care. &But for the individual creator, this is actually a real problem. A total 3. tal(s from the conference generated about 3//// views and B.< bitcoins in tips. Coing math on that gives you 3B dollars per thousand impressions. >ith all the conference videos, there are no interruptions, no advertising at all. To claim that 3 dollar %P$ from :outube, you,d have to run free&roll advertisement for every viewer and every video. >ith Bitcoin tips, they achieved <3//D greater returns without running adds at all compared to :outube where every single view must demand an advertisement be played. 7ne of my goals with Let's Tal( Bitcoin is to pioneer these new models -,m so e8cited about. %rypto&currencies, however, are so new that many of the basic tools re)uired to sort of )uantify the values that we,re receiving haven,t e8isted, so - recently launched a prototype called Ta8 $y Bitcoins that gives E5 dollars cost bases information about at && you (now, an automated thing, it,s going to be online " very, very ine8pensive to develop. This allowed me for the first time to essentially )uantify the B// tips that we have so far received over the last couple of moths that we,ve been doing the show. $ore that . )uarters of listener contributions are worth less than five dollars at the time they're donate. These are amounts that simply don,t ma(e sense under an e8isting paradigm, and here, they are not only possible, but combined, these micro&transactions ma(e up nearly as much as the most popular amount which is the five to ten dollar range. 7f course, the contributions of larger tippers dwarf those of smaller tippers but that,s not the important ta(e&away here. 'egardless of the amount, each tip comes from who values the wor( that we,re doing and, lac(ing cash li(e cryptocurrencies, they have no voice. There are large portions of the people you,re creating the content for but somehow they matter in this paradigm. -t,s not +ust :outube, it,s media model that,s bro(en. Advertisers fund the platform, the platform pays the

content creators, the content creators create content for the audience and the audience supports the advertiser. That is the standard model we've have followed from smo(e signals to newspapers to radio to networ( television. -n this scenario, content creators have a direct path you can see, to the audience, but the audience & not so much. Too much noise, not enough signal. The only value&based connection to the creator they have needs to go through two intermediaries, neither of which have actually anything to do with the content you,re en+oying. 6very group in the cycle has a role but we've arrived at the solution because it wor(ed in the face of payment limitations, and these are simply limitations we no longer face. >ith credit cards, PayPal, or wire transfers, you,re not so much sending money as you are ma(ing a payment processor owe whomever you,re trying to pay. Because of this, nearly all payment systems on the web have an annoying commonality. The customer needs to visit multiple pages specifically designed to collect and verify identity payment information because the value being sent and received is reversible. After all, the debt is always sub+ect to renegotiation until the cash is in your hand. &But Bitcoin is different. As a truly ownership& based system, each transaction is a permanent change of ownership for the value sent with the only reversals or refunds coming from the voluntary agreement between the sender and the recipient. This means that all those informational steps and verification steps intended to assure that the purchaser is really who they say they are are not only irrelevant but actually counterproductive because they give the customer more time to simply wal( away from the transaction. 5o as long as the purchase is paid for, does it matter who did the paying@ 5ecurity in Bitcoin payment system actually lives on your wallet rather than on the merchant's website, so it,s not li(e your account can be compromised in a meaningful way for someone you don,t want to ma(e a purchase for li(e they can with a credit card.

$oving on, this very purple website is a creation of doctor %onrad Bars(i. At first glance, it might not seems as anything special, but Cr. Bars(i had a very good idea that he built cointagion.com around and put into the public space. Basically, %ointagion is an e&boo( store, but you don,t ever need to sign up for an account for them to buy a boo(. -n fact, there is not even a way to ma(e an account should you want to do that. 6very time a shopper visits %ointagion, a new payment address is created and assigned to every single item for every single user. That,s important. Aeep that in mind. These payment addresses are specific to not +ust the item but to the customer who viewed them. >hen the correct amount of value is detected at the address for the particular use and a particular user, then in this case, on a boo( store, a boo( essentially starts downloading in your browser immediately with no delay whatsoever & they don,t even wait for a single confirmation because these are relatively low value transactions, and again, it,s a digital distribution thing, so it's not li(e there is a cost even if someone does manage to scam you out it. There is more that you can do on that level but as a proof&of&concept, it,s really really interesting. &5o by generating a new payment address in advance for each potential use for each potential user, we can trac( and properly credit payments, tips, donations, and subscriptions in many categories all without re)uiring the user to navigate away from the page they,re currently on. %ointagion leverages this to eliminate user accounts, and in the particular use case of a catalog that lives on the web, it ma(es a lot of sense because you get around that shopping cart abandonment phenomenon. &Part where people have to go to their wallets, dig out their credit card, and fill out their personal information yet another time where it will be stored and potentially vulnerable on yet another merchants website. %ointagion is the first e8ample of e&comers that attempts to rethin( our shopping e8perience on the web by recogni1ing that cryptocurrencies simply don,t re)uire this sort of thing and eliminating it from the e)uation. >e live in a world of

commodified websites and, although 567 can ta(e you far, the real way up in search engines is to become authority on the topic. That basically means you have to be producing high& )uality fresh content and it has to show up first on your webpage. 5yndication is actually not a problem people can repost your stuff, that,s no big deal. The issue is that it originates from you, and in originating from you, draws people bac( to your site. The engine of growth, as li(e to call it, wor(s li(e this: people willing to tip for high )uality content about their passion&topic leads to content creators wanting to service those need, which results in increased search ran(ings, which leads to more audience since you have more discoverability, which means there are more people willing to tip and more eyeballs for platform advertisers, which means that more and better content creators are attracted because the values being given are higher, relatively spea(ing. People sometimes as( why people tip, and it,s basically the same reason why people do affiliate advertising. -t,s because you recogni1e that, given the options that you have in front of you, this is the one that can potentially bring value to people who are giving you value in return. The value&to&value culture is really important to (ind of understanding, and it,s something that,s getting to be a big deal now that Bitcoin has enabled these micro transactions. 7riginal content has created growth for the creators, e8posure for advertisers, engagement for the audience, and purpose for the platform. 2iven interest in the topic, this self&reinforcing cycle can help communities of any si1e in any niche completely boot&strap their way to prominence simply by being the place to be having this conversation. 5ince the audience decides who is compensated versus who is not, creators get very clear feedbac(. Again, this is another one of those things where & sometimes content creators are afraid of this because it means they might not get paid. but the )uestion is: 9is it better to treat everyone the same and have minimum level of )uality that everyone who gets paid must must... fulfill, or is it better to actually +udge people based on their merits and the content they produce@; &And - argue that every time you release a new piece of content, that is a completely new e8perience. :ou are putting it up for your audience, they may trust you, but if it,s a piece of garbage then you,re probably not going to get compensated and if it,s a piece of garbage then probably you shouldn,t get compensated. Again, it sort of fi8es that problem. -n this new paradigm, we draw a bright white line between content and the website that hosts it. %ontent creators cater solely to the community they interact with, and instead of their loyalty being split between the audiences they serve and the advertisers that finance them, their incentives are perfectly aligned with providing value to their audience, some percentage of whom cataly1e further content creation, by tipping or giving small amounts of value in return. Again, it,s a numbers game & so we have .&= thousand listeners twice a wee( and this is what we,ve been able to achieve. There are sites out there that have millions of visitors, so again, if you can see a pervasive future where Bitcoin is money on the web then you should be able to see the potential for this. Again, it doesn't need to be a large percentage " we're tal(ing about less than one percent of people. -f they actually value the content and get value bac( from it, they do give. -t's very possible with Bitcoin because you don't have that minimum buy&in phenomenon. Advertisers directly benefit from this wor(, and they finance the platforms. The platform provides infrastructure and conte8t, and in e8change for this support, the platform shares its audience with its advertisers. -t's a win&win&win&win&win. -t's better in every way that matters, especially )uality of content as far as the audience is concerned. >hat used to be a game of Telephone to try convey value bac( to the content creator suddenly became a multi&dimensional web of broadly non&verbal communication. Falue legitimately spea(s for itself. The creation of content always has costs, whether in time or money. >hen you sell your content, the only people who can meaningfully comment on it are those who have given you value through purchasing it, because lac(ing that, they haven't e8posed itself to it, so they can't really comment on it. -n the world of free content, it's very

different. -n free content " yes, the people who contribute can comment, but so can everybody else. -n a culture of free content, 9li(e; and 9disli(e; buttons are used as value +udgments for how much a person agrees or disagrees with the content, when really, what we should be focusing on is if the content is good or bad )uality. >e all have different beliefs. Loo(ing at content through the lens of 9do - agree with this, ideologically@; completely misses the point. The good content is valuable regardless of whether or not you agree with it, and especially, some of the most valuable content to people is content that ma(es you thin( about things in a way you hadn't done, which, more often than not, is content you disagree with. Again, this is what - try to do with Let's Tal( Bitcoin, and - view our show as a platform for engaged community to get their voices out.

Tipping fills the need, but )uic(ly runs into the same problems as you do with Glattr. -t's a one&way valve, a valve that can only go up. >hether you agree with the content or not is irrelevant to whether or not you agree with it. >e've seen a movement on the web that are 9li(e; buttons in reverse because we want to ma(e the web a friendlier place, but that's li(e throwing the baby out with the bathwater because this dissent should be a valuable part of the conversation. -t's the other part of the conversation, and so, again, if you're trying to find the reality of any situation, good content has utility, even if, ideologically, you disagree with it. 7ur feedbac( systems should embrace and give voice to those who generally care and give criti)ue. 9En&tips; provide the missing lin(, and that's a name that's probably going to change because people get confused when - say 9un&tips.; They thin( that it's li(e ta(ing money away from the content creator, but that's not what it is. -t's li(e a dissenting vote where you put in any amount of value you want, but it says 9- value this, but - disagree with this,; so it doesn't go to the content creator, it (ind of goes.... somewhere else. -n some cases, again, this is built to be done on a community&by&community basis, but in some cases, you'll have people giving the un&tips to charities which are relevant to the community, and in other e8amples, you'll have it going to a pool that goes to general compensation for other writers on the site who are not the one you necessarily disagree with. -n ideologically&diverse communities, pools will naturally form where un&tips are routed to writers of oppositional content simply because they represent the other side of the argument. Tipping and un&tipping constitute a meaningful contribution to the conversation itself. The gift economy wor(s both ways, while a conventional paradigm doesn't allow for validated opinion at all. This also wor(s well for the community operator. -nstead of being the financier, they crowd&fund that to members of their audience who most care about the sub+ect and can focus entirely on deciding which creators to feature, and essentially become curators instead of editors. By separating the platform from the content that lives on it, you dramatically simplify things. The audience pays for the content, the sponsor pays for the platform, and content gets better because the incentives are very clear. Tip widgets are an easy bridge solution for this time in our history of cryptocurrencies when they're still new and not natively integrated. Basically, they're an easy, embeddable way to visually pair addresses to specific pieces of content, persons, or causes. This is not an online wallet service. The widget doesn't hold value, it's merely a conduit to permit intuitive transfers of value and display some basic information from the bloc(chain about a particular address. grabbed this, - thin(, HonI Griday, and it's up to 43, now. This the 'edPill 'ecording, what

they earned from the 3/<. conference. >hen you loo( at a tip widget, it's actually +ust the small part at the bottom, and when you clic( on it, it e8pands out so you can see the rest of it. -t gives you more rich information, so these are meant to be very small and +ust become part of the bac(ground, but something that easily conveys to you what goes on in this situation. -t's important to reali1e the act of creation is often not done alone. %ollaborations are very common, and while it's easy to e8pect one collaborator to to run a tip account, splitting it up and sending specific amounts to collaborators at appropriate times, some problems )uic(ly emerge. $ostly, we're bac( to a debt&based system, and two payments over time really become a mess because, again, with conventional +ournalism, you're paid once " and again, this is not +ust about +ournalism: this is about any content creation you do for a platform where you're paid by a sponsor " you get paid once and that's the e8tent of it, and that's great, but with Bitcoin, it doesn't have to be that way. >ith Bitcoin and good content, you'll find that as you pop up in search results over and over again as this technology becomes pervasive and people start to use it more than the several hundred thousand or million that are using it now... Again, it's very, very easy to set up these values, and the way you set it up, it will show you, with the memo in your address, what piece of content you're receiving value for, so over time, you can )uantify this " even years, decades down the road. -t's very e8citing to me from that perspective. By building the ability to split the tips by percentage to any number of addresses, you not only solve this problem, but reveals some opportunities for communities which are loo(ing for them. :ou can do things li(e " split it 4=D going to a writer, 3=D going to an editor, you could have J/D going to a content creator, and you could have a platform that's financed by the other 3/D & and again, this would be a large community " and they could do that instead of accepting sponsors at all and +ust have, again, the community finance the entire platform so you'd have an ad&free e8perience. :ou could have =/D going to the writer, =/D going to a charity relevant cause " - mean, there's all sorts of things you can do, and those are +ust the simple ones. 7nce you get into (ind of the granular level of tip&splitting, you find you can split to any number of people, and it (ind of +ust ma(es sense. This is a little bit hard right now given e8isting technology, and the tools are still being built, but once we have hierarchical, deterministic wallets, it's gonna get a lot easier, and that should be coming within the ne8t si8 months. Although it may start life on your content, good content gets around. Aggregation or curation sites don't produce anything new themselves, instead plugging into '55 feed firehoses, or pic(ing favorite bits from featured sources. -f the content is valuable, naturally, the creator would li(e to embed their tip +ar, too, but what's in it for the aggregator@ Tip& splitting provides the answer to this problem, too. Allowing the content creator to select the share they're willing to give to the site syndicating their content and delivering an already& created widget, where most of the information is served from a remote server, only one field is modifiable by the syndicator, and that would be, essentially, the payment address. :ou pop in your Bitcoin address and it's essentially a decentrali1ed affiliate system where anybody can get " and you can have it so that they get </D, or =D, or B/D & so there's a lot of customi1ation in there for the creators of the content in order to determine how much value they want to get vs. how much e8posure they want to get, and it really incentivi1es the sharing of that type of content. Again, the thing to remember here is: this only wor(s with good&)uality content. Lac(ing good&)uality content, this doesn't help you at all because nobody's forced to tip you, and nobody tips for bad service " well... - mean, we do tip for bad service at restaurants, but you

don't tip content creators for bad content. There's a lot more to this topic, and - have a limited amount of time here, so we're going to tal( about these things... - wanna tal( about display advertising, ne8t. -'m pretty e8cited about this one? - thin( it's pretty cool. -'ve been creating content on the web for a long time, and although there are a few other options, the gold standard for moneti1ation, li(e - said, is %P$ " cost per thousand impressions display advertising. This commoditi1ed system wor(s o(ay if you're big, and it wor(s terribly if you're small. -f they're not bloc(ing it already, most people are immune to conventional display advertising " and why wouldn't they be@ :ou're on a website to consume content and conventional display advertisements wants you to stop what you're doing, navigate to another site where they're going to try to sell you something. :ou can thin( of legacy display advertisements li(e a billboard. -t might loo( pretty and even convince you to buy the product or service, but ultimately, the only utility it has is giving you directions to the store. -f you wal( up to the billboard and try to hand it some cash, it can't really help you there. Applying one address per use per user to this problem changes everything. This ma(es it possible for advertisers to embed an actionable payment mechanism " such as a *' code " so the consumers can instantly purchase a product or service being advertised to them without leaving the site. >hat was a 3C billboard becomes a .C, branded vending machine, able to direct to the store through a clic(&through, but also ready to close the sale. This opens up a whole new world of impulse buying on the web, and conse)uently, has the potential to ma(e those same old billboards much more valuable to the advertisers, and they're far more valuable to the platform. %ircling bac( to %ointagion for a moment, you'll remember they have no accounts, instead opting to trac( purchasers by pieces of identifying in&browser information such as -P addresses. -n a community, this is largely unnecessary as members re)uire accounts, or at least identity, to maintain and develop that identity through comments, *KA, forum interactions, trades... things li(e that. >ith this sort of thing, trac(ing should always be e8plicitly disclosed and optional, but since it's only attribution of your contributions, rather than storing your actual financial identity, it's actually much less invasive than any modern e& commerce system. 68poses less, and is significantly easier to use. >hile legacy payment systems re)uire your true identity to ensure you have the right to spend that money, cryptocurrencies ma(e no such demand. 5o long as the bill is paid, it doesn't matter where the value came from, only that it's connected to a (nown identity and can be credited for the payment. This also allows the automated delivery of digital, but also physical, goods. 7nce paid for, digital content can not only not be accessed from your account, but +ust li(e %ointagion, it can download within seconds of ma(ing payment. This (ind of account integration also allows users who (eep a shipping address on&file be able to ma(e a purchase as though it were a digital ob+ect. >ith no interaction on the part of the purchaser, the ob+ect is shipped to the default address. -f you don't have an address stored, then it's easy for either an email to be dispatched re)uesting the information or for +ust a window to pop up, because, again, we have the ability to tie these to users, and since we can tie -P addresses to users, or logins to users, it's very, very simple. -t's actually even easier than Ama1on. Because cryptocurrencies rely on the bloc(chain, it's also easier to design window&shop spaces, which - call this innovation in advertising " -'m calling it 9window&shop; & that are not only informative, but also highly responsive. -f we're selling a physical product li(e safe paper wallets, and our production run is 3// shipped pac(s, each purchase can cause that number to tic( down, accurate to the time you loaded the page.

Low, in addition to clic(&throughs, you have the added dimension of clic(&throughs vs. on& site purchases. The primary difference between crowd&funded campaigns and charity drives is the goal. %harity wants whatever it can get, while pro+ects have specific needs, thresholds that must be met in order to continue. 5ites li(e -ndiegogo are great, but with the increasing popularity of crowd&funding, it's becoming harder and harder to actually be found. >ith thousands of pro+ects see(ing funding at any given time, these sites provide an audience to you so long as you can stand out from their crowd for crowd&funding. 'ich cryptocurrency advertising turns every single community platform into a mini (ic(starter. Pic( the community or niche that should be your primary audience and conduct the campaign right in an advertising slot. At first glance, it shows you the very basics of the pro+ects, a *' code to send support to, and when you mouse over the ad, it e8pands to show you different information: the different reward tiers, how much support has been received, etc. Li(e Aic(starter, because identity is associated with website accounts, it's easy to have a refund address on file, so in the event the campaign doesn't reach its goal, funders are not put into an aw(ward position. %harities can also leverage this infrastructure " they +ust don't need to put much in the way of the reward because giving to the cause, fran(ly, is the reward. Actually, they're not so different from crowdfunding campaigns, so my thought is that once we roll this out, we'll see application&specific charities and pro+ect&specific charities show up that really try to leverage this, where they have a certain amount they need to raise. 7nce you start thin(ing along these lines, possibilities of what you can do are really endless. -t gets even better. As a stop&gap, local accounts wor(, li(e -'ve been saying, but in the long term, we're gonna need other solutions. The first of these is multi&party escrow on the bloc(chain itself. This is very e8citing wor( that's being done, and - thin( the time&line on it is within the ne8t year, the ne8t si8 months... -'m not e8actly sure on that. Basically, this advancement allows, among other things, the ability to have very easy and very secure auctions in these advertising slots on peoples' websites where interested parties spend at a given auction with the (nowledge that, should they not be the winner, their transaction will be returned with no action on their part and no possibility of any dispute because, if you're not the winner, everybody gets refunded. Because the money is not held by the merchant or platform, but by the bloc(chain, any ris( for facilitating this type of transaction is gone. This is actually really important. -n the E5, there's a big )uestion right now about whether a company that holds bitcoins in escrow is a money transmitter, but if the the transactions are between the bloc(chain and the 9bitters,; and the platform never even touches them, then they can't be a money transmitter, so we've solved that problem. This is also " - (now it's good for a lot of you, but it's also good for the seller because, with sellers, there's a problem where if you go someplace li(e eBay " yes, you may've gotten a very high bid, but if a person changes their mind, they can +ust not pay them for it. :ou could fight them for it, but it's a problem. By prepaying everything, you create trustless, ris(less auctions that can be on any ecommerce or any community site in an advertising space with no ris( to any party involved. -t's a big deal. The cash&li(e nature of cryptocurrencies ma(e them astonishingly fle8ible. - can't even imagine the other opportunities. Again, this is a pro+ect -'ve been wor(ing on for about a month and -'ve been in this space for about four months " you span this out a year, - have no idea where we're going to be, but the one thing that's clear to me is we're not going to be where we are today. This isn't hypothetical. All these trends are in place and the dots are connecting. This is e8citing to me, but it should be +ust as e8citing to you because it means our future is one that's filled with

better and more useful content, and a path forward for the disenfranchised MMD of those who create for not very much money or no money at all. -t's said that information wants to be free, and these trends show us that, under the surface " might want to be free " but it sure wants to be high&)uality. - thin(, in our win&win&win&win&win scenario, that's really the biggest winner here: the audience, through the )uality of content. %ontent gets better because the incentive, again, becomes very, very, very clear. These capabilities and ideas together form the basis of my latest pro+ect. -'m calling it Pro+ect >atershed, although that name is probably sub+ect to change. Bitcoin is to transactions what >atershed is to content moneti1ation. 6ach shatters previously&insurmountable barriers to enable commerce as never before. >atershed is the inevitable evolution of these ideas? a free, distributed, open&source, neutral community platform to foster this transition " +ust as importantly, to ma(e it easy. -n addition to its apparent utility to the community, it also introduces cryptocurrency to those who care about the )uality of content, and it also introduces community to those who want sustainable communities. -t introduces the concept it introduces Bitcoin, basically. The point is that it gives people a reason to want to use Bitcoin and crypto&currencies, because even though we might understand that these things are incredible and Bitcoin has all these use potentials, when we tal( about it in the abstract, people are having a hard time wrapping their head around it, but if you show them these use scenarios where you can turn your advertising into more valuable space, you can turn your content to a more valuable space, and you can, fran(ly, outsource a lot of the cost associated with this... &5o >atershed is stage . of what - am building with Let,s Tal( Bitcoin. 'ight now, we,re about launch stage 3. $ichael 5ullivan, who - believe is in the audience at the bac(, is in the process of implementing our platform. Basically, right now, we do a twice&wee(ly show, but we have a problem with traffic to our site because we,re an audio show and so people subscribe or they listen HatI other places because we,re embedded all over the place and they mostly don,t come to our website, so what -,m doing with this particular technology: -,ve gotten together a group of 3/ to ./ writers and -,m going to have all of them write guest&blogs on a daily basis & you (now, it won,t be everybody on a daily basis & but we will have at least one new piece of content coming out a day. This wor(s for me as a volunteer coordinator functionally because - have no cost in this. The audience entirely pays for the content, and again, it,s not li(e they have to pay every piece of content, but in doing so, they tell me who should be on the platform and what they,re actually getting value from. >ith >atershed, we,re pretty much building this, and - was hoping that would have a more comprehensive launch today but -,ve ran out of time so it,s going to happen in the ne8t two wee(s. - am very e8cited about this, and - e8cited about what the potentials for content moneti1ation creating more e)uitable future for content creators and creating higher&)uality content for the world. That,s my tal(. - am happy to answer )uestions. A*: 2eorge Ber(, -'m from GreshPay. Adam, than(s for the tal( and than(s for all the awesome ideas by the way. Are there companies that are wor(ing on many of these ideas@ ABL: Yeah, actually, there are. A lot of people.. I mean, a man ho !po"e earl#er a$out !tan%ar%!, an% I &u!t actually met h#m la!t ee" h#le I %o#n' the f#nal re!earch for th#! tal" ( I mean, the!e #%ea! are out there $ecau!e the!e are pro$lem!, !o ye!, there are other people or"#n' on the!e !olut#on! an%, a'a#n, th#! hy I)e opte% to 'o to the open !ource an% free an% try to $e a! #nclu!#)e a! po!!#$le $ecau!e #t! not part#cularly #mportant to me to monet#*e th#! part#cular #%ea. I am a content creator,

!o th#! #! !ometh#n' that #! le'#t#mately u!eful to me #n much the !ame ay the +Ta, -y B#tco#n. th#n' #! !ometh#n' that I)e come to an% create, not $ecau!e Im an e,pert #n ta,e! or Im an e,pert #n /S co!t $a!#! ( Im $a% at math, fran"ly, $ut I nee% #t. It! a pro$lem ( hen you are try#n' to !et up a corporate !tructure, you nee% to ha)e rea!ona$le cau!e $a!#! an% !#nce e rece#)e !o many !mall %onat#on!, #t! a real pa#n to try an% 'et co!t $a!#! for all tho!e. They come at all t#me! of %ay an% all the t#me an% e ha)e no #%ea, !o #t a! really #ntere!t#n' for me to %o that. Any ay!, to 'et $ac" to your 0ue!t#on, ye!, there are other people ho ha)e #%ea! #n th#! )e#n. I th#n" that ere pro$a$ly the furthe!t alon' #n $e#n' the term! of $e#n' a$out to $u#l% #t. The co!t! to %o #t are really m#n#mal. It! 'o#n' to co!t a$out 12,333 %ollar! to $u#l% the #n#t#al platform that %oe! e)eryth#n' l#"e th#! !o #t! &u!t not har%, an% once #t! $u#lt, my a!!umpt#on #!nt that th#! #! 'o#n' to $e the $e(all, en%(all of e)eryth#n'. I th#n" that th#! #! 'o#n' to !pan a compet#t#on that #ll %o a $etter &o$ than I can. That! hat I ant to !ee4 I ant to !ee compet#t#)e mar"et for all the!e technolo'#e!. Becau!e $y $u#l%#n' the!e th#n'! an% '#)#n' people acce!! to them, ere 'o#n' to not only empo er people $ut ere 'o#n' to #n)#te a hu'e num$er of people #nto the cryptocurrency eco!y!tem, an% that, to my m#n%, #! the #mportant part '#)#n' people rea!on to care $ecau!e, lac"#n' that un%er!tan%#n', they %ont. Than"! for l#!ten#n' to ep#!o%e 56 of Let! Tal" B#tco#n. Content for to%ay! !ho a! pro)#%e% $y my!elf, author! at 7oo'le, an% 8o% Bec"!trom. -u!#c a! pro)#%e% $y 9are% 8u$en!. If cant 'et enou'h thou'ht #n the or#'#nal %#!cu!!#on rea% our %a#ly $lo' at let!tal"$#tco#n.com, !#'n up for the ee"ly ne !letter at ee"ly$#tco#n.com an% part#c#pate #n our l#!tener #nteract#on area at let!tal"$#tco#n.com:tal". See you ne,t t#me. ~~ Part Two ~~ Participants: A%am B. Le)#ne ;ABL< = >o!t 8o% Bec"!trom ;8B<( Author an% entrepreneur Au%#ence 0ue!t#on! ;A?<

ABL: ># an% elcome to Let! Tal" B#tco#n, a t #ce( ee"ly !ho a$out the #%ea!, people an% pro&ect! $u#l%#n' the ne %#'#tal economy an% the future of money. To%ay! ep#!o%e #! a t o parter. In !e'ment one, youll my tal" from the #n!#%e B#tco#n! conference, that too" place #n -anhattan on the 53 th 9uly. In #t I lay out my f#n%#n'! on content monet#*at#on #th B#tco#n !e)eral month! after %#)#n' #nto the !pace an% propo!e the open !ource platform that #ll allo any n#che to le)era'e cryptocurrenc#e! a! a ay to $u#l% !elf(!u!ta#n#n', net(pro%uct#)e commun#t#e! on the #nternet. In !e'ment t o, that! th#! one, e ta"e a tr#p #n a ay($ac" mach#ne to an Author!@7oo'le tal" '#)en #n the early A33B $y 8o% Bec"!trom, a )ery !mart 'uy an% one of the author! the p#)otal $oo" #n my per!onal &ourney to un%er!tan%#n' B#tco#n = CThe Starf#!h an% the Sp#%er ( The /n!toppa$le Do er of Lea%erle!! Or'an#*at#on!. Th#! hour(lon' tal" a$out %ecentral#*e% or'an#*at#on! came year! $efore B#tco#n appl#e% tho!e !ame concept! to money, $ut the %r#)#n' force an%

#nher#t attr#$ute! are the !ame. I)e %ec#%e% to pre!ent to%ay! !ho a%)ert#!ement free, !o !en% a t#p #f you ant to !upport our mo%el. En&oy the !ho . JCH: >ey e)ery$o%y. Eelcome to the Author!@7oo'le !er#e!. -y name #! 9oel Shu'ar. To%ay I ha)e the honor of #ntro%uc#n' -r. 8o% Bec"!trom. 8o% #! a !ucce!!ful !er#al entrepreneur. >e !tarte% h#! f#r!t company at the a'e of AF, hen he a! !t#ll !tu%y#n' at Stanfor%. Soun% fam#l#arG >e ha! al!o or"e% #n ph#lanthropy. >e #! an accompl#!he% author an% a pu$l#c !pea"er. >e ha! or"e% #n !oft are, f#nance, m#crof#nance an% the en)#ronmental mo)ement. >e #! the Cha#rman of the 7lo$al Deace Net or", a Tru!tee of En)#ronmental Hefen!e. >e #! currently the ch#ef cataly!t at a !oft are company that he #ll not tell me anyth#n' a$out. >e ha! helpe% create !e)eral or'an#*at#on! #th#n S#l#con Ialley. -o!t nota$le to me #! the S#l#con Ialley Soc#al Ienture an% al!o the En)#ronmental -ar"et! Net or". To%ay he #! 'o#n' to $e tal"#n' a$out h#! ne $oo". A! you can !ee, #t! calle% CThe Starf#!h an% the Sp#%er, a really #ntere!t#n' $oo" h#ch contr#)e! #t! e,ample! from Apache, the tr#$e of nat#)e Amer#can! to Apache the !oft are pac"a'e, that ere all )ery fam#l#ar #th. The th#n' that I, a! I a! rea%#n' the $oo", foun% the mo!t #ntere!t#n' a! hen you rea% the $oo" you #ll learn hat 7eron#mo the Apache ha! #n common #th -ary Dopp#n!. That a! my fa)or#te e,ample from the $oo". Any ay plea!e elcome to the Author!@7oo'le !ta'e, 8o% Bec"!trom. ;Applau!e< J3A:FKL RB: Than" you )ery much 9oel. Than" you !o much. It! a thr#ll an% honor to $e here #th all of you to%ay. I lo)e 7oo'le. It! an ama*#n' company an% certa#nly em$o%#e! a lot of the pr#nc#ple! that ere 'o#n' to tal" a$out to%ay. I ha)e 'ot three !#mple 'oal! that I ha)e for our !e!!#on to%ay that I hope you can lea)e #th hen ere %one. One #! ha)#n' a ne mo%el for loo"#n' at compet#t#)e lan%!cape! an% or'an#*at#on! an% #n%u!tr#e!. Secon% #! a mo%el for loo"#n' at or'an#*at#onal !tructure an% %e!#'n an% th#r%ly at loo"#n' at !tyle! of mana'ement lea%er!h#p an% colla$orat#on. Tho!e three mo%el! are hat Im hop#n' youre 'o#n' to ta"e a ay from the le!!on! that ere 'o#n' to learn from CThe Starf#!h an% other creature!. Im the co(author of CThe Starf#!h an% the Sp#%er, #th Or# Brafman. The $oo" came out #n Octo$er an% e ha% the plea!ure recently launch#n' the $oo" #n Italy, h#ch a! a lot of fun an% #t! com#n' out #n a$out ten %#fferent lan'ua'e! an% other! un%er ay. It! a real thr#ll to $e here an%, #n En'l#!h, e ha)e a !ay#n' r#'htG Ee tal" a$out hat #! the mother of #n)ent#on. Ehat %o e !ayG There #! an e,pre!!#on ( !ometh#n' #! a mother of #n)ent#onG Nece!!#ty. Ee !ay nece!!#ty #! the mother of #n)ent#on $ut I actually $el#e)e that acc#%ent! are the mother of #n)ent#on. Nece!!#ty can $e helpful an% nece!!#ty can %r#)e th#n'! $ut #t! often acc#%ent!. It! actually an acc#%ent that le% to th#! ne mana'ement theory $e#n' %e)elope% an% th#! #! a ne mana'ement theory that ere 'o#n' to pre!ent to%ay an% a ne un#)er!al mo%el for loo"#n' at or'an#*at#on! an% #t! )ery, )ery !#mple. By the en%, youll remem$er the %#fference $et een !tarf#!h an% !p#%er or'an#*at#on! an% $e a$le to u!e that a! a part of your le,#con an% frame( or" for loo"#n' at th#n'!. Ehat #! the acc#%ent that le% to th#! $oo"G Eell #t a! a pretty $#' acc#%ent. I too" th#! photo on 6:11 #n Ne Yor" C#ty. I a! there #th my #fe for a e%%#n' that ha% occurre% that ee"en% an% I a! actually on the tarmac of La7uar%#a hen the f#r!t to er 'ot h#t, on a fl#'ht that a! hea%e% to Halla! an% then on to -e,#co C#ty, for an en)#ronmental pro&ect I a! or"#n' on actually for Dre!#%ent I#ncente Mo, an% the

En)#ronmental -#n#!ter L#cht#n'er #n -e,#co. It a! !o !hoc"#n' hen the !econ% to er 'ot h#t, an% I came out of the a#rplane, an% I a! atch#n' tho!e to er! $urn, h#ch #! an #ncre%#$ly emot#onal moment I th#n" for all of u!, almo!t all of u!. Ea! there anyone ho a!nt atch#n'... Eho a! atch#n' #t a! #t unfol%e% on TI, a! the e)ent! unfol%e%G OK, almo!t e)eryone. Ee "no hat an #ncre%#$ly po erful moment that a!. Mor me, th#! a! a l#fe(chan'#n' moment ( completely chan'e% my l#fe. I% %one h#'h(tech !tuff, I ha% %one en)#ronmental th#n'!, I ha% %one ph#lanthrop#c th#n'! $ut Im !#tt#n' here atch#n' the!e to er! $urn an% I ha% run CAT Soft are, h#ch #! a f#nanc#al !oft are company. Ee ha% 12 %#fferent cu!tomer! #n tho!e to er!. You "no , a company #th all the!e cu!tomer!. I ha% $een there t o or three hun%re% t#me!. The feel#n' a! &u!t one of utter !hoc" an% a e. I ante% to 'o help the!e people. I actually ante% to 'et there !ee #f I coul% %o !ometh#n' an% then I real#*e% I cant %o anyth#n'. I cant really 'o there an% %o anyth#n'. I %#% the only th#n' e can %o, h#ch #! pray. I actually praye% for tho!e people. Ehat I 'ot #n that e,per#ence a! a !en!e that e ha% to %o !ometh#n' #n th#! orl% to #mpro)e our relat#on! a! human $e#n'!. In a !en!e, I a! calle% to !er)e peace. Then I ha% a cra*y #%ea. I !a#% Im $u!#ne!! 'uy an% I "no Im !uppo!e% to %o or" on peace !o the f#r!t th#n' I %#% a! I ent to the #nternet an% I !tarte% !earch#n' all o)er, 7oo'l#n' term!, loo"#n' for peace or'an#*at#on! an% hat %o you th#n" I foun%G Ten! of thou!an%! peace or'an#*at#on!. It 'a)e me an a$!olute hea%ache. I %#%nt "no hat to %o. Ee ha% a cra*y #%ea. I teame% up #th Or# an% I ha% th#! cra*y #%ea an% I !a#% ( Ehy %ont e mo%el a $u!#ne!! net or" or"#n' for peace an% mo%el #t onN 'ue!! hat net or"G 7ue!! hat net or" e cho!e to mo%el our peace net or" on. Al ?ae%a, e,actly. Ee ma%e that !trate'#c %ec#!#on h#ch !eeme% pretty cra*y at the t#me, $ut en%e% up $e#n' &u!t a really 'reat !trate'y. It a! the e,per#ence of try#n' to f#'ure out ho Al ?ae%a or"e% an% $u#l%#n' a net or" of CEO!, that 're to o)er F333 CEO!, ta"#n' part #n e,pl#c#t act#)#t#e! for peace acro!! the -#%%le Ea!t an% In%#a, Da"#!tan an% #n the -e%#terranean re'#on a! ell that le% to th#! $oo" an% th#! or". It a! $y acc#%ent that all th#! happene% an% #t a! $y try#n' to !ol)e a pro$lem h#ch #!, e ante% to !tu%y Al ?ae%a, $ut there a! no mo%el. There ere plenty of per!onal !tor#e!, h#!tor#e!, anec%ote! $ut there a! no mo%el, !o e ha% to %e)elop one. That mo%el #! hat youre 'o#n' to ha)e to%ay for un%er!tan%#n' human or'an#*at#on! an% %ecentral#*e% net or"!. Let! !tep for ar% an% let! loo" at !ome #ntere!t#n' parallel!, or po!!#$le parallel!. Ehat #n the orl% %oe! E#"#pe%#aN an% I a!!ume )#rtually e)eryone here, !#nce youre 7oo'ler!, you lo)e technolo'y N Hoe! e)eryone here u!e E#"#pe%#aG >o many people u!e E#"#pe%#aG >o many people e%#t art#cle!, ha)e e%#te% art#cle!. Eo , !ee that! h#'her. It! l#"e a 53O rat#o here. The a)era'e #! l#"e 2O out #n the orl%. E#"#pe%#a ( hat %oe! that ha)e #n common #th 7eron#moG #th th#! 'uy, #th th#! 'entleman #n the center. Th#! #! 7eron#mo. Ehat %oe! he ha)e to %o #th E#"#pe%#aG Ehat %oe! E#"#pe%#a ha)e to %o #th Cra#'! l#!tG I ant to %o a 0u#c" pole here. >o many people ha)e loo"e% at Cra#'! l#!t !omet#me! #n the la!t monthG OK. >o many people ha)e rea% cla!!#f#e% a%)ert#!ement! #n the ne !paper #n the la!t monthG Eo , there are no han%! up. Eho ant! to $e #n the ne !paper $u!#ne!!, $e!#%e! 8upert -ur%och. Actually, ho ant! to $e #n the ne ! $u!#ne!!G I mean Cra#'! l#!t #! a h#'hly, h#'hly %#!rupt#)e company. Ehat %oe! Cra#'! l#!t ha)e to %o #th 7eron#moG Ehat %oe! that ha)e to %o #th S"ypeG Ehat %oe! S"ype ha)e to %o #th -y!paceG Ehat %oe! -y!pace ha)e #n common #th Alcohol#c! Anonymou!G The mo!t !ucce!!ful a%%#ct#on mana'ement pro'ram #n the orl% that! helpe% m#ll#on! of people. Hoe! anyone here, $y the ay, "no ho many people are #n AAG No pro$lem, no$o%y %oe!.

They %ont "no . It! anonymou!4 they %ont e)en "eep mem$er!h#p l#!t!. That! ho they en!ure perfect anonym#ty. You %ont e)en ha)e to re'#!ter your chapter #f you !tart one. Ehat %oe! AA, an% that anonym#ty an% that, ha)e to %o #th Youtu$eG Ehat %o all tho!e ha)e to %o #th a 'uy #n a ca)eG Alle'e%ly #n a ca)e, !ome here #n Af'han#!tan, or Da"#!tan. They all ha)e one th#n' #n common ( one )ery !#mple an% po erful th#n' #n common. Theyre all %ecentral#*e% net or"! or le)era'e %ecentral#*e% net or"!. E)ery !#n'le one of tho!e or'an#*at#on!, #nclu%#n' 7eron#mo, ho e #ll come $ac" to. Ehat #! a %ecentral#*e% net or"G Ee ha)e #n total a !en!e an% %ecentral#*e% net or" that "#n% of ma"e! !en!e, r#'htG In technolo'y &ar'on, there ha)e $een !tu%#e! of hat %ecentral#*e% net or"! are. But %oe! a %ecentral#*e% net or" mean #n the human !oc#al conte,tG Ehat #! the arch#tecture of %ecentral#*e% !oc#al net or"G >o %oe! #t or"G Ehat hol%! #t to'etherG >o %oe! #t !tartG >o %oe! #t e)ol)eG That! hat ere 'o#n' to loo" at to%ay. But f#r!t let! 'o to $#olo'y. It a! three year! #nto our or", e ere ha)#n' %#nner #th Hoctor 9ane Lu$chenco, a $r#ll#ant ocean! ecolo'#!t. Ee ere tal"#n' a$out hat e ere or"#n' on, #th the #%ea!. The peace net or" a! alrea%y $u#l%#n' an% unfol%#n' an% 'ett#n' e!teem $y then. By the ay, the net or" ha% a real #mpact #n In%#a:Da"#!tan for a 'roup of only ele)en people #n that net or", !ta'e% a !ym$ol#c $or%er(cro!!#n' on Septem$er 15 th of A335. The $or%er ha% $een !hut. It a! a ar *one. They ha% a !ym$ol#c $or%er( cro!!#n' party. The $or%er opene% an% #t! $een open e)er !#nce. They al!o $oo"e% the f#r!t fl#'ht to the ar *one #n recor%e% h#!tory an% 'ot perm#!!#on from $oth a#r force! to fly a &et throu'h the !hut $or%er an% helpe% them to %e)elop a protocol for ho you %o that. >o %o you fly a pr#)ate &et throu'h a ar *one !afely #th fl#'ht clearance from $oth a#r force!G That happene%4 they fle the &et throu'h4 #t opene% the a#r ay! to all fl#'ht!. Th#! net or" that e or"e% on, the peace net or", actually %#% a lot of ama*#n' th#n'! that e helpe% to cataly*e. The CEO! $rou'ht that to the ta$le an% hat they %#% a! really remar"a$le. Any ay, $ac" to $#olo'y. Eere ha)#n' %#nner #th 9ane Lu$chenco an% 9ane !ay! ( Youre tal"#n' a$out the!e net or"!. Youre really tal"#n' a$out !tarf#!h. You !houl% !tu%y the !tarf#!h. You)e 'ot learn a$out the !tarf#!h. Ee came up #th the analo'y of the !tarf#!h an% the !p#%er. It a! actually for a pre!entat#on that I 'a)e at Stanfor% Bu!#ne!! School #n -ay of A33F. If e contra!t the!e t o, ere 'o#n' to learn the ne mo%el. Eere 'o#n' to learn a ne mana'ement mo%el4 a ne or'an#*at#onal mo%el. Let! !tart #th the !p#%er. Superf#c#ally, the!e t o creature! loo" !#m#lar, r#'htG They ha)e a lot of arm! or le'!. They loo" )ery !#m#lar !uperf#c#ally $ut #nternally, the#r #nternal arch#tecture #! fun%amentally %#!!#m#lar. By !tu%y#n' that %#!!#m#lar#ty, e can learn a lot. Let! !tart #th the !p#%er ( fu**y l#ttle $o%y, hea% on top, four le'! on each !#%e. If e ta"e an a%ult !p#%er an% e cut off one le', hat %o e 'etG You &u!t 'et a cr#pple% !e)en(le''e% !p#%er. You can 7oo'le #t. 7o to 7o''le #ma'e!, %o !e)en( le''e% !p#%er an% youll !ee a hole collect#on came up. You can e)en f#n% !#,( le''e%. I ha)e not foun% a f#)e(le''e% !p#%er l#)#n' on 7oo'le #ma'e! yet. It! a 'oo% re!earch %ata$a!e for the!e top#c!. A !p#%er, #f you cut off a le', #t &u!t lo!e! that le', #f #t! an a%ult. OK, $ut hat happen! #f you cut off the hea% of a !p#%erG If you chop off the hea% of !p#%er, hat! 'o#n' to happenG Yeah r#'ht #t! 'o#n' to %#e. Ee "no #t! 'o#n' to %#e an% the rea!on #t! 'o#n' to %#e #! $ecau!e #t #! a central#*e% or'an#!m. It cannot l#)e #thout #t! central ner)ou! !y!tem. It ha! a h#erarchy. It ha! a )ery clear... #t ha! one !tomach4 ha! one %#'e!t#)e tract4 #t ha! one a$%omen. The !p#%er #! a central#*e%, h#erarch#cal, clearly e)ol)e% or'an#*at#on. OK, you cut off the

hea%, #t %#e!. That repre!ent! central#*e% or'an#*at#on!. Ee ha)e !tu%#e% central#*e% or'an#*at#on! #n the e!t for A33 year!. Ehen I a! at the B !chool, at Stanfor%, an% e !tu%#e% or'an#*at#on theory, #t a! al ay! #th h#erarchy. Someone a! #n char'e4 there a! a CEO, or a cha#rman, or mana'#n' %#rector4 then there a! ID! or EID! an% #t a! &u!t really clear h#erarchy. An or'an#*at#on, hether #t a! a funct#onal or'an#*at#on, or 'eo'raph#c, or matr#,, hate)er #t a!, there a! a )ery clear or'an#*at#on ( tho!e are central#*e%. The orl% ha! $een ta"en o)er $y hatG Ne "#n%! of or'an#*at#on! that are a lot more l#"e the !tarf#!h. Th#! #! a $lue L#nc"#a !tarf#!h here. It ha! f#)e arm! ( !ome !tarf#!h ha)e up to f#fty l#"e cro n(of(thorn !tarf#!h, an% other!. >o many people here 're up #th#n, !ay, t enty m#le! of the ocean, or the $eachG OK, a$out half the cla!!. Ehat happen! #f e cut off the arm of a !tarf#!hG Hoe! anyone "no G Yeah, #t 'ro ! $ac". That! pretty ama*#n'. It can 'ro $ac". The rea!on #t can 'ro $ac" #! #t! %ecentral#*e%. It! a$le to re'enerate. Ehat e foun% out %ur#n' th#! re!earch proce!!, #n !ome !pec#e! l#"e the $lue L#nc"#a, #f e cut off all f#)e arm! of the !tarf#!h, #f you cut off all f#)e arm! hat %o you 'etG M#)e ne !tarf#!h. Each arm can re'enerate an ent#re ne creature. The rea!on for that #! that the !tarf#!h #! !o %ecentral#*e%, #t %oe!nt ha)e a !#n'le, e!!ent#al, central#*e% or'an. There #! a ner)e r#n' that l#n"! the neural net or"! #n each of the arm!, $ut each arm ha! #t! o n mu!cle!, #t! o n !tomach an% that! !l#% un%erneath, ha! enou'h #ntell#'ence to r#'ht #t!elf, to mo)e aroun%, to fee% #t!elf an% to re'enerate an ent#re creature. Th#! #! a re% L#nc"#a re'enerat#n' an% there #! a hole collect#on they ha)e onl#ne of photo! that e foun% throu'h 7oo'le #ma'e! !earche!, an% other!. That !ho ! the remar"a$le re'enerat#)e capa$#l#ty of the !tarf#!h an% th#! ha! a lot to %o #th remar"a$le re!#l#ence an% po er of %ecentral#*e% or'an#*at#on!. If youre 'o#n' to 'o compete #th them, theyre or"#n' #th )ery %#fferent rule!. Ee ha)e to un%er!tan% them to $e !ucce!!ful #n %eal#n' #th them. Let! 'o throu'h h#!tory an% ta"e a loo" at hat happen! hen !tarf#!h too" on a !p#%er. Let! &ump $ac" #n t#me. Th#! #! a !tory a$out a man #n re% t#'ht!. >ernan%o CortP! ( %ont th#n" that th#! 'uy a! a !ofty. Th#! 'uy a! !o tou'h. >o many of you th#n" youre really comm#tte% to hat you %o4 to your $u!#ne!! or your cau!e!.... >o many of you th#n" youre really comm#tte%G Let! tal" a$out th#! 'uy! comm#tment. Th#! 'uy ta"e! 233 men, !a#l! all the ay from Spa#n, #n the!e $ranchy l#ttle oo%en $oat!, acro!! a fun%amentally uncharte% ocean #n !earch of 'ol% an% !#l)er. >e arr#)e! on !hore an% they %#!em$ar". 7ue!! hat he %oe! ne,tG >e $urn! the $oat!. >e $urn! the $oat! an% he !ay! ( Eere not 'o#n' home #thout hate)er !#l)er an% 'ol% e can f#n%. Eere 'o#n' to f#n% #t. Eere 'o#n' to 'et #t. Eere 'o#n' to $r#n' #t home. Any$o%y ha)e any 0ue!t#on!G There #! no more e,#t %oor, !o they march for ar% an% here #! hat they foun% ( the A*tec Emp#re. Th#! #! 233 men an% they f#n% th#! emp#re #th 12 m#ll#on people an% theyre 'o#n' to ta"e #t on an% 'et all the 'ol% an% !#l)er. No hen you loo" at th#! c#)#l#*at#on, %oe! that loo" l#"e a central#*e% c#)#l#*at#on or %ecentral#*e%. Yeah, #t loo"! pretty central#*e% %oe!nt #tG It! ell !tructure%. Tho!e are $#' pyram#%!. Someone #! #n char'e here. Th#! #! 'roun% *ero of the#r c#)#l#*at#on. CortP! a! from Spa#n. 1216 he arr#)e%. No , hat a! Spa#n l#"e #n 1216G Ea! #t l#"e a central#*e% !oc#ety or %ecentral#*e%G SorryG ;Au%#ence mem$er an! er!< It a! a "#n'%om. A$!olutely, #t a! a "#n'%om. It a! monarchy an% there #! only one pol#t#cal !y!tem #n po er effect#)ely. I am try#n' to $r#n' th#! %o n !o e 'et a l#ttle $#t le!! fee%$ac". You ha% a "#n'%om an% you ha% one church. You coul% ha)e any rel#'#on you ante% to ha)e, a! lon' a! #t a! Cathol#c. OK, that a! the !oc#ety. Th#! 'uy un%er!too% central#*e% po er. >o a!

he 'o#n' to ta"e %o n a central#*e% c#)#l#*at#onG Ea!yQ M#n% the lea%er, ne'ot#ate #th h#m ;he 'ot a l#ttle 'ol%< then he real#*e% they ha% a lot more 'ol% an% he ante% more 'ol%. -onte*uma %#%nt ant to %o more 'ol%... '#)e h#m more 'ol% !o hat %o e %oG K#ll -onte*uma. Th#! !houl% or" here. K#lle% -onte*uma4 #pe% out the royal fam#ly4 cut off the central#*e% ater !upply an% roa%! com#n' #nto the c#ty4 !tar)e% AF3 thou!an% people to %eath #n three month!4 'ot all the 'ol% an% all the !#l)er #th 233 men. >e ent $ac" to Spa#n. The!e are 'oo% )enture cap#tal return!, r#'htG I mean, youre the Span#!h K#n' of the t#me or ?ueen ( hat are you th#n"#n'G Th#! #! 'reatQ Let! %o more. The Span#!h ent %o n an% too" all Lat#n Amer#ca, )ery 0u#c"ly. They too" out the Inca! #n e,actly t o year! ( the !ame mo%el ( t o year!. They ha% a lot more 'ol% an% !#l)er. Soon they ! ept all the ay throu'h the Amer#ca! an% they thou'ht they ere 'o#n' the ! eep the hole th#n', unt#l they ran #nto th#! 'uy an% h#! #l", the Apache arr#or!. Th#! #! 7eron#mo. The Spa#n#ar%! too" on the Apache! #n 1KR3. Th#! #! a photo of 7eron#mo #n 1RR3, A33 year! later. The Span#!h fa#le% to )an0u#!h the Apache!, the -e,#can! fa#le% to )an0u#!h the Apache!, an% no the Amer#can! are f#'ht#n' the Apache!. In 1RR3, 'ue!! hat percenta'e of the Amer#can army a! focu!e% on f#n%#n' one manG A2O. A2O of the ent#re /S army a! cha!#n' one man. Hoe! th#! !oun% fam#l#ar, $y the ay ( ere $r#n'#n' #n the pre!ent conte,tG A2O an% hat happene%G Ehat happene%G Ehen they foun% h#m #n 1RRK ( they 'ot h#m, they 'ot h#m, #t! 'reat, e 'ot 7eron#moQ 7ue!! hat happene%G Noth#n'. They %#% a %ecentral#*e% !oc#ety. >e a!nt the real lea%er. >e a! a char#!mat#c lea%er. >e a! a 'uy #th an att#tu%e. >e ha% atche% the Amer#can! !lau'hter h#! #fe an% ch#l%ren. >e ha% a lot of ener'y #n th#! $attle. >e a! )ery creat#)e an% )ery !mart. You coul% follo h#m #f you ante% to. The Apache! ha% no formal h#erarchy #n the#r !oc#ety ( none. >e a! a JG none(t#neL. To%ay, e m#'ht follo Corey, tomorro e m#'ht follo Sam, tomorro m#'ht follo -#chael. Ehoe)er you ant to follo , you follo . That a! the#r !oc#ety. The Amer#can! ent after h#m ( they 'ot h#m ( no #mpact. In fact, the ran'e of the Apache! #n 1KR3, hen the Span#!h !tarte%, a! here. In 1RR3, #t a! here. They e,pan%e% the#r realm h#le f#'ht#n' central#*e% po er!. They %#% #t. >o %#% Amer#ca f#nally #nG >o %#% Amer#ca f#nally 'et to a peace treaty #n 161K, th#rty year! after catch#n' th#! 'uyQ Th#rty year!Q >ere #! ho #t happene%. It a! another acc#%ent. The Amer#can! !et up the#r Bureau of In%#an Affa#r! to correct the ron'! of the pa!t. Someone at the BIA %ec#%e% e ha)e to '#)e each Amer#can In%#an a co for e)ery man, oman an% ch#l%. That #ll '#)e them !ome ealth an% !ometh#n' to o n an% '#)e them a !ur)#)al. One 'uy ho a! #n char'e of the Apache! an% he a! l#"e ( E,cu!e me, here are the cattle for the Apache!G Of cour!e, the other people !a#% = Eere at ar #th the Apache!. They !a#% = No, ere not ere not at ar #th all the Apache!. Eere at ar &u!t #th mo!t of the Apache!. Ehat a$out the Apache! that arent f#'ht#n' u!G Shoul%nt e treat them ellG The BIA %ec#%e% ( Yeah e !houl% treat them ell. Ima'#ne hea%#n' %o n to ar%! the South( e!tern /S, #th ten thou!an% cattle, to 'o meet a %ecentral#*e% !oc#ety. Ehat! 'o#n' to happenG Someth#n' ha! to happen, r#'htG I mean, ho %o you 'et ten thou!an% cattle to a %ecentral#*e% !oc#etyG Someone ha% to %ec#%e ( Im the lea%er. Ill ta"e tho!e ten thou!an% cattle an% Ill $u#l% the cen!u! !y!tem an% ell ma"e !ure e allocate th#! for you. Any ay, the '#ft of the cattle !tarte% to central#*e the#r !oc#ety4 !tarte% to create a h#erarchy to %#!tr#$ute tho!e property r#'ht! an% tho!e a!!et!. In the en%, the people that al!o rece#)e% tho!e cattle !tarte% to !ettle %o n more $ecau!e they o ne% the!e cattle. They ha% to !tay !ome here, ra#!e them an% mo)e aroun%. Ehat happene% #!, #t a! the '#ft of the cattle that le% the Apache! to peace an% #t le%

u! to one of the theor#e! of ho you can compete #th %ecentral#*e% ent#t#e!, an% that #! to central#*e them. If you ha)e a %ecentral#*e% compet#tor, or opponent, #t #! often, an% u!ually, #n your #ntere!t to central#*e them #f you ant to compete #th them. The co approach #! hat e call central#*#n' the opponent. That! the Apache! $ut let! come $ac" to the pre!ent. That! a lon' t#me a'o. Let! come up an% loo" at the mu!#c #n%u!try o)er the la!t !e)en:e#'ht year!. Ehat chan'e% #n tho!e #nter)en#n' fe hun%re% year!G One of the th#n'! that really chan'e% a! the Internet an% u$#0u#tou! commun#cat#on!4 #t!elf a completely %ecentral#*e% net or". No one #! #n char'e. It! comm#ttee proce!!4 human proce!!e!. Totally %ecentral#*e% net or", ma"#n' #nformat#on u$#0u#tou! an% ma"#n' commun#cat#on )#rtually free an% chan'#n' ho human! can or'an#*e an% colla$orate. The Internet came alon' an% the orl% chan'e%. Let! loo" at the mu!#c #n%u!try. Ee ha)e a ne chart here an% th#! #! a mana'ement chart that you can u!e at loo"#n' at any mar"et !pace. Ee ha)e central#*e% on the left an% %ecentral#*e% on the r#'ht. Ima'#ne Att#la the >un on the left or top(%o n complete %#ctator!h#p on the left an% #ma'#ne complete ran%omne!! on the r#'ht e,treme, an% th#! #! a cont#nuum. Eere loo"#n' at the mu!#c #n%u!try o)er t#me, !tart#n' up at 1RR3(1R63 up to the pre!ent. In 1R63, the mu!#c #n%u!try a! )ery %ecentral#*e%. >o many people #n the room, $y the ay, play a mu!#cal #n!trument or ha)e playe% a mu!#cal #n!trumentG OK, hat #n!trument %o you playG ;Au%#ence mem$er repl#e!< You play the clar#net, p#ano an% the 'u#tar, OK. Eh#ch #! your fa)or#teG OK, clar#net. Ehat #! your nameG Curt. If #t! 1RR3, an% e ant to hear Curt play the clar#net, hat %o e ha)e to %oG Ee ha)e to 'o !ee Curt. There #! no ay he can recor% that mu!#c. There #! no ay he can recor% that clar#net #n 1RR3. The mu!#c #n%u!try a! )ery %ecentral#*e%. There a! #n%#)#%ual art#!t! all o)er the orl% ( you ha% to 'o hear them. They pa!!e% the mu!#c throu'h !heet mu!#c !o e can pa!! !on' $ut to hear that mu!#c#an play, e ha% to 'o hear that mu!#c#an play l#)e. Then hat happene%G E%#!on, an% tho!e 'uy!, #n)ente% the phono'raph that $e'an to re!tructure the #n%u!try. No , e)e 'ot a recor% la$el that! 'o#n' to %o clar#net recor%#n'! an% Curt #! really 'oo%, !o he 'et! the contract. 7ue!! hatG All tho!e other clar#net player! that! 233 of them, #n the Ne Yor" State, they %#%nt 'et the contract. They are out of the 'ame. So #t! central#*e%. The #n%u!try ent from )ery %ecentral#*e% up on the r#'ht. By 16F2, #n Amer#ca, o)er R3O of mu!#c !ale! ere %one $y f#fteen la$el!. By A333, f#)e '#ant mu!#c compan#e! o ne% R3O of 'lo$al re)enue! ( total central#*at#on of the #n%u!try. 9u!t a $#' mo)e from %ecentral#*e% %o n to that !#%e. Then Sean Mann#n' came alon'. Sean a! hat e#'hteen hen he !tarte% Nap!ter = e#'hteen or n#neteen. A fre!hman ant! to help h#! fr#en%! ! ap -D5 f#le!. It! a real pa#n to %o #t. You ha)e 'ot $e hac"er to %o #t ( or a co%er. You)e 'ot to "no ho to u!e !ome th#n'! an% he #! l#"e ( Ill ma"e #t really ea!y. >e ma%e Nap!ter !o any$o%y can ! ap mu!#c for free an% #t e,plo%e%. It e,plo%e% to o)er F3 m#ll#on u!er!. Nap!ter! arch#tecture #! a l#ttle $#t central#*e%, thou'h. Yeah, I mean #f they ha% up to 13 m#ll#on !on'! or more, an% #f I ante% to f#n% Kurt! clar#net !on', Schu$ert! cla!!#cal recor%#n' of clar#net ;I %ont "no #f Schu$ert e)en %#% clar#net mu!#c $ut Im !ure there are )er!#on! of that<. If I ante% to 'et that, I oul% ha)e to 'o to Nap!ter4 'o to the !er)er4 !earch on Schu$ert clar#net4 f#n% the !on' an% then #t oul% l#n" our DC!. I oul% ha)e to 'o to a central !e)er an% a l#n". Ehat %#% the mu!#c #n%u!try %oG I mean, a! th#! a pro$lem for the mu!#c #n%u!tryG Eell, they hate% the!e 'uy!. They hate% Nap!ter $ecau!e the#r re)enue !tarte% fall#n'. 8e)enue! fell A2O #n the mu!#c #n%u!try $ecau!e of th#! f#le ! app#n'. They too" #t all the ay to the Supreme Court. They

!ue% them4 there a! a la !u#t4 then #t ent to appellate court an% then #t ent to the !upreme court ( -7- )er!u! 7ro"!ter. M#nally -7- on. They ere !o e,c#te%. H#% #t matterG H#% #t matter that -7- put a l#ttle peer to peer f#le ! app#n' 'roup out of $u!#ne!!G >ec" no, #t %#%nt matter at all. It a! a hu'e !trate'#c m#!ta"e $ecau!e Nap!ter a! try#n' to central#*e an% 'o le'#t#mate at the t#me. Ehen Nap!ter %#!appeare% hat came upG Ehat poppe% up ne,tG Ke*aa. Ke*aa came out #th a %ecentral#*e% arch#tecture. That l#!t of 13 m#ll#on !on'! a! not on the !er)er! #n San Mranc#!co at Nap!ter. It a! hereG It a! float#n' acro!! all of our mach#ne! #n the commun#ty. They $ro"e #t #nto a l#ttle th#n', l#"e encyclope%#a, #th all tho!e %#fferent )olume! ( ta"e 13 m#ll#on !on'! an% $rea" them #nto a thou!an% l#ttle p#ece!4 you)e 'ot a m#ll#on u!er! onl#ne r#'ht no , repl#cat#n' each one of tho!e )olume! a thou!an% t#me!. You p#n' each other ( that! ho the %#rectory or"e%. Ke*aa ha% no central !er)er!. None ( e,cept for a%(!er)#n' $ecau!e they %#% !er)e up a%!. E)en that a!nt totally central#*e% $ut #t a! mana'e% central#*e%. That! hat Ke*aa %#%. Then !ome people %#%nt l#"e that, !o they %#% Ke*a l#te4 ma%e #t e)en more %ecentral#*e%4 too" #t out of control. Ehen e attac" a %ecentral#*e% net or", #t ten%! to $ecome more %ecentral#*e%. That! the me!!a'e. You)e 'ot $e )ery careful #n ho you compete #th the!e, alr#'htG Let! loo" at your #n%u!try. Ee %ont ha)e a lon' t#me $ut let! th#n" a$out !earch for a !econ%, an% ho e u!e% to !earch for #nformat#on. I u!e% to 'o to the Yello pa'e!, f#fteen year! a'o, ten year! a'o actually, pre C62, pre C6F ( 'o to the yello pa'e!. No , you 'o onl#ne. If you loo" at 7oo'le, #f you loo" at Yahoo, you loo" at %#fferent !earche!, 7oo'le !trate'y #! a fa!c#nat#n' m#,ture $ecau!e #n many ay! Yahoo !eeme% more %ecentral#*e% than other approache!. You %#%nt ha)e to 'o to all the!e %#fferent e$!#te!. They% 'o an% '#)e you the!e l#!t#n'! an% they ha% e%#tor!, an% they% ha)e the#r top l#!t#n' l#n"! an% you% 'o to #t ( the l#n" l#!t, an% you% 'o !earch an% f#n%. Ehat %#% 7oo'le %oG 7oo'le %e)elope% !ome al'or#thm! ( !ome 'reat central#*e% !earch #n%e, al'or#thm! that le)era'e% the #ntell#'ence of a %ecentral#*e% net or". That loo"e% at ho a! po#nt#n' to ho. That e)entually loo"e% at here traff#c #! an% all the ma'#c !oup that you put #n the al'or#thm! no . Th#n" a$out #t. It! here people cl#c" an% hat they loo" at that! %r#)#n' the $u!#ne!!4 that! %r#)#n' the !earch re!ult!. It! %ecentral#*#n' the proce!! of ran"#n' $ecau!e the al'or#thm! choo!e a ran" $ut #t! all $a!e% on that e,ternal %ata that! out at the e%'e of the net or". That! le)era'#n' tremen%ou! po er of %ecentral#*at#on. Ehen #t refer! to the para%o, of central#*at#on an% %ecentral#*at#on, !omet#me! ha)#n' a clean l#ttle al'or#thm an% a l#n" #n the m#%%le, can help a hu'e %ecentral#*e% commun#ty come to'ether. You can u!e th#! tool on your o n pro&ect! hate)er youre or"#n' on #n any area of the $u!#ne!! or e)en out!#%e the $u!#ne!!. All or'an#*at#on! arent e#ther a !tarf#!h or !p#%er. The truth #! there! com$o(!pec#al!. I %r#)e a $lue Dr#u! ( I %ro)e #t here to%ay, from Dalo Alto. I! #t an electr#c carG Eell, !ort of. I! #t a 'a! carG Sort of. It! $oth. Not e)ery or'an#*at#on #! e#ther a !tarf#!h or a !p#%er. The !tarf#!h an% the !p#%er %ef#ne the en% po#nt! of the cont#nuum. They %ef#ne the en% po#nt!. Then here you are %epen%! on hat your !trate'y #! an% ho you loo" at your #n%u!try an% ho you loo" at your compet#tor!. Let! '#)e you a 0u#c" mo%el ( a 0u#c" f#)e(factor mo%el for un%er!tan%#n' the %e)elopment of %ecentral#*e% net or"!. There ha! to $e an un%erly#n' ener'y to create a net or" that #! then cataly*e% $y !omeone, or !ome !mall 'roup of people #nto creat#n' a ne type of net or". They !et the )alue! an% the #%eolo'y, or $r#n'

)alue! an% #%eolo'y to the ta$le. They then !tart c#rcle! that then can lea% to net or" protocol! unfol%#n'. Let! !tep throu'h each one of tho!e 0u#c"ly. The ener'y can $e anyth#n' $ut pr#mar#ly three cate'or#e!: pa!!#on!. Ee ha)e pa!!#on! l#"e, you "no , Kurt lo)e! mu!#c4 !omeone el!e ant! to help !a)e the orl% an% the poor Afr#ca4 !omeone el!e ant! to $u#l% 'reat !earch al'or#thm!4 !omeone el!e ant! to $u#l% 'reat #ma'e, par!#n' rout#ne!, or analy*#n' rout#ne! for !earch. Ee all ha)e %#fferent pa!!#on!. Ee al!o ha)e pa#n. You %ont &o#n AA for pa!!#on. You &o#n AA $ecau!e you ha)e 'ot a pa#n that you ant to %eal #th. Then e al!o ha)e phy!#cal nee%!. There ha! to $e a fun%amental ener'y %r#)er. If there #! not an ener'y %r#)er, a real net or" #! not 'o#n' to unfol%. Then a cataly!t ha! 'ot to come alon' ( !omeone ho #! 'o#n' to help or'an#*e th#! net or" or '#)e #t !ome !tructure. Hoe! anyone reco'n#*e th#! omanG It! a )ery #mportant oman #n Amer#can an% orl% h#!tory an% none of u! "no her. It! $ecau!e !he #! a cataly!t. It! El#*a$eth Kat#e Stanton. She #! the mother of the omen! !uffra'e mo)ement #n Amer#ca. She %e!#'ne% the net or". She recru#te% Su!an B. Anthony. Ee all "no Su!an B. Anthony $ecau!e !he a! -#!! E,ternal4 !he a! the pu$l#c !pea"er4 !he a! the champ#on. El#*a$eth Kat#e Stanton a! the arch#tect an% a! the cataly!t ho !tarte% the net or". She oul% ha)e foun% Su!an B. Anthony, or !omeone el!e to 'o %o #t, $ut Su!an B. Anthony a! an e,cept#onal per!on ho too" the $all an% ran #th #t. The le!!on #n that #! that cataly!t! can $e )ery har% to !ee !omet#me! $ecau!e they are not al ay! $o#!terou!, or lou%, or e,h#$#t#on#!t#c. >ere #! another cataly!t $ut th#! one you pro$a$ly "no . Eho #! th#!G E,actly, Cra#' Ne mar" = a )ery 0u#et 'uy4 )ery $r#ll#ant 'uy an% he ha% )alue! h#ch a! he ante% to !hare hat! 'o#n' on #n the commun#ty #th other people. >e "ept mo)#n' that !er)#ce to hate)er people ante% #nclu%#n' e,chan'#n' pro%uct! an% !er)#ce!4 meet#n' up4 ha)#n' e)ent!. Ehate)er #t #!, hate)er you ant to $uy, !ell, tra%e or connect to other people #th. >e create% th#! platform that the la!t t#me e hear% a! #n FA2 c#t#e!. That a! a fe month! a'o, !o #t! pro$a$ly #n FB2 $y no . >e ha! a !et of )alue! that are )ery %#fferent than D#erre Om#%yar! )alue! ho al!o ha% e,cellent )alue! for creat#n' th#! onl#ne mar"etplace. >e )alue% anonym#ty. D#erre %#%nt. D#erre )alue% commun#ty an% tru!t, an% $u#l%#n' tru!t #n the !y!tem. H#fferent !et of )alue!. Tho!e )alue! ha)e %r#)en that net or" &u!t l#"e D#erre! ha)e %r#)en E($ay! !ucce!!. You)e 'ot a cataly!t. Ehat #! a cataly!t l#"eG Are you a cataly!tG Or are you more l#"e a CEO #n ho you run your pro&ect!, or ho you run your 'roup an% ho you or" #th other!G The tra%#t#onal CEO e th#n" a$out !ome$o%y ho #! !mart, %ec#!#)e, %r#)en. Th#n" of !omeone l#"e Ste)e Ballmer, a $r#ll#ant 'uy an% )ery %r#)en. >e ha! #%ea! of ho he #! 'o#n' to run that or'an#*at#on = %ec#!#)e, rat#onal. That! a tra%#t#onal CEO ( po erful. Cataly!t ten%! to come acro!! l#"e a peer an% #t! a or" on tru!t an% emot#onal #ntell#'ence. They can $e $r#ll#ant too $ut they ha)e a %#fferent ay of lea%#n' an% 'u#%#n' an% pro$a$ly, Larry an% Ser'ey are 'reat e,ample! of cataly!t! #n ho theyre lea%#n' th#! or'an#*at#on. But #t! %#fferent. The!e are on the e,treme! a! ell. You)e 'ot one on the central#*e% !p#%er e,treme ( the CEO, an% o)er on the %ecentral#*e% e,treme, you)e 'ot the cataly!t. You can $e'#n to th#n" a$out e)ery mana'ement %ec#!#on that e ma"e #n or"#n' #th other!, ere typ#cally mo)#n' e#ther to ar%! central#*at#on an% ta"#n' po er $ac" to our!el)e!, or %ecentral#*at#on an% colla$orat#n' #th a 'roup4 )ery %#fferent mana'ement !tyle!. The cataly!t come! up #th an #%eolo'y an% a !et of )alue!. L#"e #n th#! 'reat or'an#*at#on, #t !eem! to me one of the prem#er )alue! #! &u!t fanta!t#c !earch an% #ncre%#$ly 0u#c"ly. It! ne)er fa!t enou'h4 #t! ne)er 'oo% enou'h4 you ha)e to $e the $e!t on the planet. It! a !et of )alue!. -any other )alue! aroun% that, that le% the or'an#*at#on to unfol%

#nclu%#n' not ha)#n' too much !tructure an% not $e#n' o)er(mana'e%. Shona Bro n rote a 'reat $oo", Compet#n' on the E%'e. Your SID of $u!#ne!! operat#on!. Th#! $oo" tal"! a$out ho you nee% chao! #n your or'an#*at#on an% not to ha)e too much !tructure. If your mana'er! can han%le e)eryth#n' theyre %o#n', theyll ha)e too much control. You ant to '#)e them more to %o than they can han%le, !o you "eep them a l#ttle $#t out of control. That! le)era'#n' chao! theory, or le)era'#n' th#! not#on of %ecentral#*at#on to further empo er the or'an#*at#on $roa%ly. It! a )alue that th#! or'an#*at#on ha! that %r#)e! #nno)at#on !o ell. The cataly!t typ#cally !tart! a c#rcle. It u!ually !tart! #th a c#rcle. AA a! the f#r!t chapter an% the Eomen! Suffra'e -o)ement a! a c#rcle, or #n E#"#pe%#a #t a! the f#r!t !et of art#cle! #n En'l#!h an% the f#r!t contr#$utor!. You !tart a c#rcle4 you !tart a net or"4 a 'roup4 then #f that! !ucce!!ful an% you learn from #t, you !tart to %e)elop protocol! for the net or". E)ery net or" ha! a common !et of protocol! ( human net or". There are rule! on mem$er!h#p. -y!pace, hat! the mem$er!h#p ruleG Any$o%y can %o #t. Any$o%y can %o #t. Any$o%y can come #n. You)e 'ot to %o le'al act#)#t#e!. There are certa#n th#n'! you cant %o $ut anyone can come &o#n an% then there #! the proce!! of remo)al. If you a$u!e a !y!tem, youre thro n out. E)ery net or" ha! !ome "#n% of rule! ( hate)er #t may $e. You ha)e c#rcle! an% peer 'roup! that you create #n tho!e. The net or" #t!elf ha! rule!. Ehat! the connect#on $et een tho!e pa'e!, or $et een tho!e #n%#)#%ual!, or $et een the or"#n' 'roup! an% c#rcle!G Eho fun%! homG Or #! there any fun%#n', or hat fun%! that net or"G Then hat are the 'o)ernance rule!. Im loo"#n' more on the human an% !oc#al !#%e r#'ht no $ut the !ame appl#e! #n technolo'y. You ha)e a !et of protocol! aroun% th#!. You ha)e protocol! an% net or"!, an% ho you %e!#'n net or"!, an% ho they or", an% ho they unfol%, an% the appl#cat#on! that you may $u#l% on top of net or"!. That! a !#mple f#)e(factor mo%el. No , ho %o you competeG There #! only three ma&or !trate'#e! for compet#n' #th %ecentral#*e% net or"!. You can or" at the le)el of #%eolo'y $ecau!e the net or"! are %r#)en $y )alue! an% #%eolo'y an% that! all a$out human p!ycholo'y. If youre f#'ht#n' #th Al ?ae%a, are you 'o#n' to #n $y ar'u#n' #th them a$out the#r $el#ef !y!temG No. It! &u!t 'o#n' to loc" them #n $ut you can flan" them, or you can !h#ft the !oc#al c#rcum!tance!, focu! on e%ucat#on, focu! on m#cro(len%#n'4 %o the "#n% of 'oo% th#n'! that 7oo'le.or' #! or"#n' on to chan'e the !oc#al en)#ronment4 to chan'e the un%erly#n' pro$lem!. M#r!tly, #%eolo'y an% en)#ronment4 !econ%ly, you can central#*e them ; e tal"e% a$out the co approach #th the Apache!<4 th#r%ly, you can %ecentral#*e your!elf. You can %ecentral#*e your!elf. If youre the /S m#l#tary an% youre f#'ht#n' a %ecentral#*e% terror#!t opponent, you %o more !pec#al operat#on! #n !mall 'roup! of people #n the f#el%, a! oppo!e% to lar'e central#*e% con're'at#on! that feel !afer $ut actually ma"e $#''er tar'et! an% then %ont relate to !oc#ety #n the !ame ay. The 'eneral! lea%#n' th#! ar real#*e that. Theyre re#n)ent#n' the ent#re /S m#l#tary r#'ht no $a!e% on the th#r% pr#nc#ple ( %ecentral#*#n' them!el)e! #th #nformat#on, %#!tr#$ut#on of po er #n the f#el% etc. Or you loo" at your or'an#*at#on an% you loo" at #nno)at#on. Loo"! l#"e a lot of people here are pro$a$ly #n en'#neer#n'. You 'et a %ay a ee" to or" on hat you ant to %o. That! %ecentral#*#n' creat#)#ty #n your or'an#*at#on $ecau!e you 'et to %o hat you ant to %o that can contr#$ute to the $u!#ne!!. It! )ery empo er#n' an% #t unlea!he! the po er of all the #n%#)#%ual! an% en'#neer! #n your or'an#*at#on to contr#$ute. That! another e,ample of %ecentral#*#n' your!elf #n a fa!h#on an% that! hy I lo)e the #nter)#e that a! #th Larry an% Ser'ey. I cant remem$er #f #t a! Mortune or Mor$e!, $ut !ome$o%y a!"e% them (

Ehat! your !trate'y for the ne,t f#)e year!G an% they !a#% ( Ee %ont ha)e one. Ee #ll !ee hat our !mart people %e)elop. That! the truth, r#'htG You %ont "no e,actly hat! 'o#n' to $e the "#ller app or the "#ller h#t pro%uct you come out #th #n three, or f#)e, or !e)en year! t#me. It! 'o#n' to come out of the !mart people #n th#! room an% the re!t of the or'an#*at#on, or the other! that &o#n #n the future. That! here #t! 'o#n' to come from. Tho!e are the three "ey !trate'#e!. Im &u!t 'o#n' to tal" a$out pro&ect! #n the !lum!. -#cro( len%#n' #! a 'reat tool. -#cro( len%#n' %ecentral#*e! $an"#n' for the poor4 #t %ecentral#*e! cre%#t r#!" %o n to the $orro #n' c#rcle! of typ#cally, f#)e people, u!ually f#)e omen $ecau!e you are co( #n!ur#n' each other. -#cro(len%#n' #! $a!#cally ma"#n' !mall $u!#ne!! loan!, l#"e S133 per per!on, or S533 to the poor, to run a $u!#ne!!. M#)e of u! oul% come to'ether #n a c#rcle #n m#cro(len%#n' an% e ha)e to create a 'roup to'ether an% #n!ure each other! loan!. Ehen e en!ure each other! loan!, ere ta"#n' re!pon!#$#l#ty for the cre%#t r#!". Ee &u!t %ecentral#*e #t %o n to our c#rcle a ay from a $#' fat $an" that the poor m#'ht not pay to. There #! arch#tecture that can $e u!e% here e)en #n f#nance. E( loan an% Dro!per. Dro!per.com #! an e,ample h#ch #! try#n' to %ecentral#*e the len%#n' mar"et #n the /S. Other !tor#e! ( th#! #! a c#ty an% "ey that! 'o#n' to $e $u#lt. Im 'o#n' to %o a couple !l#%e! on ne or" that Im %o#n'. Im actually or"#n' on a ne,t $oo" that! 'o#n' to $e calle% pa!!#on net or"#n'. Im 'o#n' to %o th#! really 0u#c". Ima'#ne th#! net or" arch#tecture that you)e !een an% e)e tal"e% a$out %ecentral#*e% net or"!. No let! $r#n' #n the human component. There #! a re!earch 'roup acro!! the h#ll! here o)er, I th#n", at Melton Cal#forn#a. They u!e the!e electron#c e0u#pment to mea!ure the human heart. H#% you "no that they can mea!ure the human heart from 12 feet a ay no G They can p#c" up your EK7!. No hat %oe! th#! ha)e to %o #th net or"#n'G Eell, heart! ha)e a lot to %o #th net or"#n' $ecau!e #t! a$out our pa!!#on! an% hat e choo!e to %o, an% hat 'roup! e %ec#%e to &o#n onl#ne, or not &o#n an% not %o. The $a!#c not#on of pa!!#on net or"#n' ;an% Im 'o#n' to !"#p the !l#%e for the !a"e of t#me<, #! ho %o e #%ent#fy other people! pa!!#on! #th#n an or'an#*at#on, or acro!! !oc#ety an% help $r#n' to'ether or"#n' 'roup! aroun% tho!e pa!!#on! to %r#)e per!onal l#fe chan'e, !oc#al l#fe chan'e, or $u!#ne!! chan'e. E)en #f you ta"e the mo!t e!oter#c #ntere!t #n the room, l#"e collect#n' hun%re% year ol% $utterfl#e! form Afr#ca. You ta"e any e!oter#c #ntere!t !omeone m#'ht ha)e, there #! pro$a$ly !omeone el!e #n th#! or'an#*at#on of 13,333 people aroun% the orl% that m#'ht $e a$le to relate to that, an% feel pa!!#on a$out #t, an% ant to !hare, or e,chan'e #%ea!. Ehere the #nternet #! 'o#n', here I !ee the !oc#al net or"#n' %oma#n 'o#n', #! #n help#n' people to really l#n" aroun% the#r pa!!#on! more %eeply #th hate)er le)el of pu$l#c#ty or pr#)acy that they ant to ha)e $ecau!e pr#)acy an% anonym#ty $ecome! )ery #mportant a! ell. I th#n" e)e !een an e,plo!#on of the peer to peer tran!act#on! on the e$. The one to many mo%el, l#"e the 7oo'le !earch en'#ne, to a $#ll#on u!er!. Ehat ere 'o#n' to !ee ne,t #! c#rcle! com#n' to'ether ( !oc#al c#rcle!. The 0ue!t#on #! ho %o e %o that aroun% people! pa!!#on!, aroun% the#r pa#n, or the#r #ntere!t an% %o that #n a ay that! mean#n'ful to them an% create the!e ne !pace!G Eere !tart#n' to !ee a f#r!t ne $unch of compan#e! popp#n' up, the N#n'!, an% the other!, try#n' to !upport th#! an% here -y!pace an% Mace$oo" are e)ol)#n'. I th#n" #t! 'o#n' $e a real art an% !c#ence here that! fa!c#nat#n' of ho e l#terally net or" aroun% our pa!!#on!. That! the o)er)#e an% #f anyone nee%! to reach me, Im at 8o%@Bec"!trom.com an% hat I oul% l#"e to %o no #! an! er any 0ue!t#on! you)e 'ot on the

frame or", the !tarf#!h an% !p#%er frame or". I !houl% actually !ummar#*e ( let me !ummar#*e really 0u#c"ly. Three th#n'! e)e tal"e% a$out. A mo%el for loo"#n' at compet#t#)e !pace, l#"e e loo"e% at mu!#c #n%u!try, $ut e can loo" at the !earch #n%u!try, or the e(ma#l #n%u!try, or the 'olf #n%u!try, or the roc" 0uarryN e can u!e any #n%u!try an% u!e that map = central#*e% to %ecentral#*e%. Ee tal"e% a$out, #th#n the or'an#*at#on, ho %o e !tructure th#n'! on that !ame cont#nuumG Ee can loo" at our o n pro&ect! an% act#)#t#e!. M#nally, a mana'ement mo%el of the cataly!t )!. the CEO an% th#n" a$out hat are e an% here %o e ant to $e, an% here e ant our pro&ect! to $e. Tho!e are the three tool! that I hope you 'ot out of the pre!entat#on. No , I oul% l#"e to ta"e any 0ue!t#on!. JF3:F5L AQ: -y 0ue!t#on #!... m#c or no m#cG Becau!e I %#%nt th#n" a$out #t unt#l you u!e% the e,ample of the !tarf#!h that re'enerate! the hole re!t of the !tarf#!h from one arm, !o that ma%e me th#n" hat %o the arm! 'et out of each otherG If an arm can l#)e all $y #t!elf hy %oe! #t nee% the other arm!G An% I th#n" the analo'y #! hy, #n a %ecentral#*e% or'an#*at#on, %o the cell! nee% other cell! = l#"e, hat %oe! that really helpG JF1:36L RB: 7reat 0ue!t#on. The f#r!t th#n' that I ant to ment#on #!... Im !orryG You ant me to repeat the 0ue!t#onG The 0ue!t#on a! #f one arm of the !tarf#!h #! cut off or all f#)e are cut off, or 13, or A3 can re'enerate a ne !tarf#!h, hy %o they nee% each otherG An% hy %ont they &u!t choo!e to $rea" offG Eell, 'ue!! hatG In !ome !pec#e!, they %o $rea" off )oluntar#ly. Some !tarf#!h actually #ll repro%uce $y r#pp#n' them!el)e! #n half. Theyll r#p them!el)e! #n half an% re'enerate. It! one techn#0ue they ha)e for repro%uct#on. The truth #! tho!e arm! %ont nee% the other arm! e,cept forN 'ue!! hatG It! the team or" an% colla$orat#on. Actually, let me tell you !ometh#n' #ntere!t#n'. It! ho the !tarf#!h hunt! for foo%. You)e 'ot f#)e arm! an% each one ha! 'ot a !en!e of !mell an% each one ha! 'ot a !en!e of temperature an% te,ture. They)e 'ot all tho!e !oft touchy th#n'! #n the $ottom of the !tarf#!h that not only !t#c" to th#n'! $ut they can feel th#n'! throu'h tho!e. >o %o you choo!e, let! !ay youre on the !#%e of a p#er. Youre on the oo%en th#n' on a p#er an% there are oy!ter! a$o)e an% $elo , or hate)er #t #! that! han'#n' on the !#%e of that p#er. >o %oe! a !tarf#!h choo!e h#ch ay to 'oG -ay$e $oth arm! are touch#n' !ometh#n' that #! lunch. They commun#cate. They commun#cate #n the term! of the #nten!#ty of the !#'nal4 of ho 'oo% that lunch appear! to $e4 ho l#"ely #t #! that #t can $e on an% 'ue!! hatG There #! a t#e($rea"er ( one arm #! a t#e($rea"er. There #! an alpha arm. They %ont "no h#ch #t #! $ut there #! an alpha arm that can $e the t#e($rea"er. If the !tarf#!h #! loc"e% $et een t o arm! pull#n' #n oppo!#te %#rect#on! one can !ay = OK, ere 'o#n' that ay. It! "#n% of l#"e our team or". Try#n' to or" #th con!en!u! or"! really ell, mo!t of the t#me, $ut #f e 'et completely %ea%(loc"e%, e)e 'ot to 'et un%ea%(loc"e% an% e)e 'ot to let !omeone $e the t#e($rea"er, or !omeone ha! 'ot to "#n% of !urren%er an% 'o #n a %#rect#on. Starf#!h are really fa!c#nat#n' an%, of cour!e, there #! not that much "no n a$out them, Im !ure compare% to hat ere 'o#n' to learn o)er the com#n' year!. They are fa!c#nat#n', fa!c#nat#n' creature!. 8eally #ntere!t#n'. Than" you. JF5:1RL AQ: Eh#ch or'an#*at#on! are ell !u#te% for central#*e% !tructure! an% h#ch are ell !u#te% for %ecentral#*e%G JF5:AKL

RB: 7reat. The 0ue!t#on #! ( h#ch or'an#*at#on! are ell !u#te% for central#*e% !tructure! an% h#ch or'an#*at#on! are $etter !u#te% for %ecentral#*e% or'an#*at#on!. Let me '#)e you an e,ample. -y %au'hter &u!t playe% #n a nat#onal lacro!!e &am$oree Amher!t, -a!!achu!ett!. I ha% to fly $ac" here on Sun%ay. I too" 9etBlue. It ha% the $e!t connect#on from Bo!ton to San 9o!e. No the 'uy that a! !#tt#n' $e!#%e! u! on the a#rplane ;a youn' 'uy<, he m#'ht ha)e $een !tu%y#n' to $e a p#lot. >e m#'ht really ant to $e a p#lot. >e m#'ht ha)e lo)e% the #%ea of 'o#n' up #nto the front of that &et, ta"#n' o)er the control!, fly#n' u! home. >e m#'ht ha)e felt completely capa$le of %o#n' that, part#cularly #th the automate% na)#'at#on !y!tem! the!e %ay!. >o %o you th#n" I felt a$out thatG No, I %ont ant h#m fly#n' the a#rplane. I %ont ant any$o%y to fly the a#rplane. I ant 9etBlue to ha)e a proce!!, a central#*e% 0ual#ty control proce!! to choo!e 'oo% p#lot! that ha)e a lot of e,per#ence. I ant that per!on to fly the a#rplane #th a co(p#lot, or co(capta#n ho #! al!o tra#ne% an% e,per#ence%. That! an e,ample ofN no on the other han% 9etBlue #! #ntere!t#n' $ecau!e they %#% the $e!t &o$ at %ecentral#*#n' the t#c"et#n' an% the !eat a!!#'nment th#n'. I a! annoye%. You cant 'o up to the counter an% a!" for a chan'e of your !eat#n' a!!#'nment. 9etBlue ere l#"e ( Ee %ont %o that. 7o $ac" to the "#o!". Ee %ont chan'e !eat#n' a!!#'nment! up here. I a! l#"e = EhatG Youre "#%%#n' meG They %#% that to pu!h the re!pon!#$#l#ty $ac" out to u!, the u!er. Iery %ecentral#*e%, )ery !oph#!t#cate% net or"#n' approache!. I not#ce% the 9etBlue p#lot! %ont ha)e to carry the!e hu'e $r#efca!e! #th ton! of %ocument! #n them. They carry laptop! that plu' #nto the &et that recor% the hole fl#'ht e,per#ence an% only 'o#n' $ac" to a central off#ce, they 'et to "eep the#r o n cop#e!. Iery !oph#!t#cate% net or". Any ay, !o that! one e,ample. Ee cant !ay that central#*at#on #! $etter or %ecentral#*at#on. Ee can !ay the tren% #! to ar%! %ecentral#*at#on. Let! '#)e another e,ample of here e ant !ome central#*at#on. Ban"#n'. I mean, loo" at E($ay a! an e,ample. In the E($ay mar"et place, ho %o you %ec#%e ho 'et! to $e a $uyer or !ellerG Any$o%y can re'#!ter to $e a $uyer, or !eller. You %ont e)en ha)e to put your a%%re!! #n to $e a $uyer, or !eller. On Day(Dal %o you ha)e to re'#!ter ho you are an% here you l#)eG Oh yeah, an% your !oc#al !ecur#ty num$er an% your e,act $an" account!. EhyG Becau!e ere mo)#n' money. It! not enou'h to !ay, ell 8o% th#n"! Kurt! really hone!t. You "no or -#"e! really hone!t, you "no G That! not enou'h. In the %ay to %ay f#nanc#al tran!act#on!, !o you ha)e 'ot to ha)e !ome central#*e% control an% you)e !een all the!e $#' me'a mer'er! $ecau!e the $an"! ha)e to ha)e all of th#! #nfra!tructure o)erhea% to run a $an" an% you can cut out half of that #nfra!tructure, you %ont ha)e to repl#cate #t, hen you mer'e them to'ether. 7et the!e econom#e! of !cale $y $r#n' them to'ether $ut at the !ame t#me you)e 'ot pro!per.com com#n' out that! creat#n' a %#rect peer(to(peer mar"et for loan! an% mort'a'e! an% you)e 'ot K#)a. K#)a.or', a 'reat 'ame(chan'#n' play #n m#cro( len%#n' that allo ! you to 'o loo" at the prof#le of 9o!P #n 7uatemala !ell#n' ru'! an% K#$e #n Na#ro$# runn#n' a !hoe(repa#r !hop. You 'et to rea% the prof#le of a poor per!on an% choo!e hether you ant to fun% them, or not an% part#c#pate #n that fun%#n'. You '#)e a *ero #ntere!t loan on your cre%#t car%. They ent from a m#ll#on loan! la!t year h#ch a! the#r f#r!t year of %o#n' loan!. They #ll %o, may$e, ell lot!N a hu'e mult#ple of that th#! year. Theyre e,plo%#n'. It! a 'ame(chan'#n' e,per#ence #n m#cro(len%#n'. Any ay, there #! not one an! er an% #t %epen%! $ut I oul% !ay that #n 'eneral, the more %ecentral#*e% e 'o, the more po er e 'et out of the people en'a'e% #n the act#)#ty. Ee ha)e to ha)e enou'h !tructure to ma"e #t or" an% ma"e #t a !u!ta#na$le !y!tem. I th#n" #n f#n%#n' that $alance #! hat e call

the ! eet !pot. Ne,t 0ue!t#on ( any other 0ue!t#on!G Ye!, e,cu!e me, oh o", 'o ahea%. JFB:13L AQ: Ill let !ome$o%y el!e $e f#r!t. JFB:1AL RB: Alr#'ht. JFB:15L AQ: Yeah, the 0ue!t#on #! ( #! #t true that central#*at#on '#)e! you more pay(off #n a !et ca!e here youre really #n a !tat#c !#tuat#on, youre try#n' to opt#m#*e, youre try#n' to re%uceN youre try#n' to mer'e to re%uce your o)erall o)erhea%, herea!, %ecentral#*at#on oul% $e more a%)anta'eou! here youre #n an uncerta#n !#tuat#on an% you ha)e &u!t choppe% #n t o an% therefore you nee% to $e a$le to $e more fle,#$le. Hoe! that mean that you really nee% #! the a$#l#ty to mo)e $ac" an% forth a! the !#tuat#on e)ol)e!G JFB:FFL RB: Sure. So the 0ue!t#on #!, #f youre central#*e% %oe! that mean, #n 'eneral, you !houl% 'o throu'h more mer'e! an% ac0u#!#t#on! an% putt#n' a $#''er th#n' to'ether !o you can hac" out tho!e central#*e% co!t!. Ehat %oe! that mean for central#*at#onG I! there a corollary there, #n term! of may$eN e)en thou'h #t %oe!nt ma"e !en!e, !o JGGL !tatement, OK. 7oo% 0ue!t#on ( #ntere!t#n'. M#r!t re!pon!e ( I mean, on the central#*e% or'an#*at#on mer'er !#%e, clearly the more central#*e% the ent#ty, #f that #nfra!tructure #! repl#cate%, clearly youre 'o#n' to ha)e a co!t !a)#n'! #f you can el#m#nate that %upl#cat#on. That! l#"e a no($ra#ner. That! 'o#n' to "eep %r#)#n' -TA, unt#l the $ur%en of o)erhea% of central#*at#on, h#ch #! may$e a lac" of touch an% feel #th local commun#t#e!, hate)er #t #!, out e#'h! #t. That! a'a#n here tho!e or'an#*at#on! ha)e 'ot to f#n% $alance too. I a! &u!t at a $ra#n!torm#n' e,erc#!e #th a $unch of CEO! #n Am!ter%am an% !omeone ha% rolle% up f#)e %#fferent ma&or #n!urance compan#e! an% e ere tal"#n' a$out th#!. 7#)en the mo%el of the $oo", hat !houl% the#r !trate'y $eG Ee tal"e% a$out $#furcate% !trate'y $ecau!e #n the $ac" en% there !houl% $e #n%#)#%ual #nner! that are $e!t at cate'ory #n the %#fferent central#*e% proce!!#n' area!, $ut hen you mer'e ent#t#e! you)e 'ot to %#!tr#$ute that !ucce!! an% fa#lure !omeho . You %ont ant one 'roup to completely lo!e out, or you may not ant to, #n the term! of moral. Ee tal"e% a$out the cu!tomer #nterface an% they !a#% ( One of the $#' %#!cu!!#on! e ha% #! %o e ant to ha)e one $ran% out there that! l#"e th#! hu'e th#n'G They %ec#%e% no $ecau!e #t! le!! per!onal an% people ha)e relat#on!h#p #th the#r ne#'h$or ho ha! $een !ell#n' them health #n!urance for A3 year! for All!tate, or hate)er the e0u#)alent oul% $e #n >ollan%, an% they %ont ant to chan'e that. In fact, #n the %o nto n area, there #! an All!tate off#ce an% there #! a 7e#co or hate)er off#ce. Ee %ont ant to chan'e that. In the#r ca!e, #t a! a $#furcate%N I th#n" #t! an #ntere!t#n' 'eneral 0ue!t#on on #f you)e 'ot a couple of %ecentral#*e% or'an#*at#on! oul% you !t#ll ant to $r#n' them to'etherG Then the 0ue!t#on oul% pro$a$ly $e ( are there !ome 'reat !yner'#e! out of hate)er #ntellectual cap#tal they create%, or hat $u!#ne!! momentum or mar"et po!#t#on they ha)e, that can come to'ether a! a re!ult of the un#on of that net or". Then al!o, of cour!e, #n %ecentral#*at#on hat you)e al!o 'ot #! people ho #ll $rea" out an% %o the#r o n th#n'. I mean, a! the f#r!t 0ue!t#on referre% to the !tarf#!h r#pp#n' off #t! o n le'. L#"e I !ay, people lo)e Cra#'! l#!t. They lo)e #t a! lon' a! #t '#)e! them th#! free mar"etplace to chan'e th#n'! an% #f they turn on the t#c"er to char'e you money, an% then Sally! l#!t come! out an% #t! &u!t a! 'oo%, you m#'ht 'o to Sally! l#!t. 9u!t l#"e they "#lle% Nap!ter #th

la !u#t!, ell then e)ery$o%y %#% mo)e to Ke*aa $ecau!e they ha% the )alue!. The )alue! the commun#ty ha% a! ( e ant to ! ap mu!#c for free. Ee %ont th#n" e !houl% ha)e to pay S12, or SA3 a CH. Im not 'o#n' to 'et #nto the moral &u%'ment of hether that! le'al or not. Clearly #t! #lle'al $ut hether #t! moral or #mmoral I &u!t can 'o an% %e$ate o)er $ut the commun#ty ha% that )alue that e ant to ! ap mu!#c for free. The net or" pro)#%er a! 'one, that protocol a! 'one, the ne,t protocol came r#'ht #n $ecau!e the ener'y a! there, the net or" a! there, an% #t ante% a ay to fulf#l #t! tran!act#on! #th #t! )alue !y!tem. That! hy the!e %ecentral#*e% net or"! are !o po erful an% %#!rupt#)e. 9u!t l#"e 7oo'le #! a %#!rupt#)e, po erful ent#ty of the a%)ert#!#n' an% the onl#ne a%)ert#!#n' an% !earch role. I mean, #t! an #ncre%#$le 'ame(chan'#n' th#n' that ha! happene% throu'h the al'or#thm! an% throu'h the full !et of pro%uct! an% !er)#ce!. Ye!. J21:13L AQ: In the cour!e of your re!earch, %#% you come acro!! any e,ample! here an or'an#*at#on that !tarte% #n#t#ally a! more %ecentral#*e%, m#'rate% an% $ecame central#*e%, or )#ce )er!aG J21:A5L RB: Ee)e mo!tly !tu%#e% e,ample! of %ecentral#*at#on $ut actually, hen I th#n" a$out #t, there #! !ome #ntere!t#n' e,ample! of central#*at#on e loo"e% at. Let! loo" #n the 16B3!. The $#' cra*e #n the !toc" mar"et #n the B3! a! )ert#cal #nte'rat#on an% the con'lomerate!. If youre #n the !teel $u!#ne!!, $e #n the m#n#n' $u!#ne!! an% then 'o #nto the !teel part manufactur#n'. There a! a lot of )ert#cal#*at#on that happene% #n the B3! an% there a! a lot of con'lomerate! that came to'ether. They oul% &u!t $uy all the!e compan#e! an% they al ay! ha% the !ame ar'ument ( Eere 'o#n' to ha)e the!e !yner'#e!. Eere 'o#n' to 'et the !yner'#e! or"#n' $et een our pro%uct!. -o!t of tho!e con'lomerate! fa#le%. Let! loo" at one that or"e%. 7E. 7E too" a %#fferent !trate'y. It $ou'ht all the!e %#fferent p#ece!. It rolle% them up to'ether an% then 9ac" Eelch came #th the follo #n' !et of protocol!. >e !a#% ( Eere 'o#n' to run th#! th#n' a! completely !eparate $u!#ne!! un#t!. You, the CEO of th#! $u!#ne!! un#t, youre re!pon!#$le to $e num$er one, or num$er A #n your mar"et an% run #t prof#ta$ly an% then eth#cally follo the!e $u!#ne!! rule! o)er here, you can %o hate)er you ant. 7ue!! hatG You %ont ha)e to %o any fa)or! to other 7E %#)#!#on!. You %ont ha)e to !ell to them at a %#fferent pr#ce4 you %ont ha)e to !ell to them )!. !omeone el!e. Youre #n%epen%ent4 youre on your o n. If you ant to partner #th them, f#ne, $ut you can compete #th them. You can compete #th another %#)#!#on. Ho hat you ant to %o4 you ha)e to !uccee%. You)e 'ot to $e num$er one, or num$er t o, or e #ll !hut you %o n, or !ell you an% you)e 'ot to $e prof#ta$le. It or"e% $r#ll#antly. It or"e% $r#ll#antly an% 7E #! an ama*#n' or'an#*at#on. I a! on a fl#'ht #n Europe once. It a! -un#ch to Lon%on, or !ometh#n'. There a! a youn' 'uy !#tt#n' $e!#%e me, AR year! ol% an% I a! l#"e ( Ehat are you %o#n'G Im pre!#%ent of a !teel m#ll ;I th#n" #t a! the C*ech 8epu$l#c<. Im l#"e ( EhatGQ >e 'oe! = Yeah, I or" for 7E. Im l#"e ( >o %#% you $ecome pre!#%ent of a !teel m#llG In C*echo!lo)a"#a, e $ou'ht #t really cheap an% I)e $een tra#ne% on ho to run $u!#ne!! un#t! $ac" #n the State! an% I or"e% #n the metal $u!#ne!! !o they !ent me o)er here an% Im pre!#%ent of the company. Im l#"e ( 8eallyG >e 'oe! = Yeah, I &u!t 'ot $ac" from Ch#na an% Im %e)elop#n' ne $uyer! o)er there. Ee f#'ure% out from th#! l#ttle m#ll that e can pro%uce !ome %#fferent !pec#alty !teel! that arent )ery common an% ere 'ett#n' tho!e to'ether $ecau!e there #! a %eman% for the!e #n Ch#na to manufacture the!e ne part!. I a! l#"e ( Youre "#%%#n' me. Youre %o#n' thatG >e a! l#"e = Yeah, Im try#n' to $uy ne

technolo'y an% ne !melter! $ecau!e ere 'o#n' to !tart %o#n' th#! to otherN Im l#"e ( Th#! #! ama*#n'. Th#! 'uy #! AR year! ol%. >e #! completely runn#n' the !teel $u!#ne!! #n the C*ech 8epu$l#c. I can tell he #! 'o#n' to turn th#! aroun%. 7E ha! the mana'ement !y!tem to %e)elop tho!e lea%er! to run that %ecentral#*e% $u!#ne!! mo%el. No , '#)en that mo%el, hat %#% 9effrey Immelt chan'eG Eelch #! famou!. Eelch %#% a 'reat &o$ lea%#n' 7E. >e #! 'one an% 9effrey Immelt came #n, I th#n" l#"e year A333:A331. No , hat %#% Immelt %o to the co%eG >e a%%e% one ne rule. You)e 'ot to $e num$er one, or t o #n the mar"et4 you)e 'ot to $e prof#ta$le4 an% you)e 'ot $e #n a h#'h('ro th $u!#ne!!. If youre not #n a h#'h('ro th $u!#ne!!, ere 'o#n' to !ell you $ecau!e ere #n too many !lo 'ro th $u!#ne!!e! an% #t! e#'ht#n' %o n our )aluat#on a! a company. Ee)e 'ot 'et #nto h#'h('ro th $u!#ne!!e! an% that! here e ant to put our cap#tal. It! or"#n' $r#ll#antly. It too" a lon' t#me. 7E 'ot h#t, a! a lot of compan#e! %#% #n A333. The#r !toc" a! ay %o n4 $u!#ne!! $ecame tou'h4 a! 'ro #n' !lo 4 they !tarte% !ell#n' off %#)#!#on! l#"e pla!t#c! an% other! that they %#%nt )#e a! h#'h('ro th4 no the#r 'ro th #! "#c"#n' $ac" #n. >e a%%e% a th#r% ne "ey protocol. That a! a hu'e central#*e% or'an#*at#on that u!e! )ery %ecentral#*e% mana'ement pract#ce! #n a floc" of or'an#*at#on! that %#%nt try to %r#)e !yner'#e! throu'h a !trate'#c plann#n' %epartment that fa#le%. That! an e,ample of a "#n% of a $#' central#*e% player %ecentral#*#n'. There #! a lot of 'oo% e,ample! of that. J22:31L AQ: Are there any e,ample! of the re)er!eG J22:35L RB: Of a %ecentral#*e% or'an#*at#on $ecom#n' more central#*e%G E($ay #th the ac0u#!#t#on of DayDal, #n !ome !en!e. Loo" at E($ay an% the hole mo%el a!N $ecau!e hen D#erre !tarte% the mar"etplace #t a! free. >e create% the E($ay mar"etplace a! a free !er)#ce for h#! #fe an% other! that ante% to tra%e DEU %#!pen!er!, an% other th#n'! an% #t &u!t !tarte% to e,plo%e an% !#, month! later, hene)er ISD calle% h#m, they ere l#"e ( Ehat are you %o#n'G You ha)e #n!ane amount! of traff#c. You ha)e 'ot to pay u!, $#' $uc"!. >e a! l#"e ( >an' on, Im offer#n' th#! free !er)#ce an% no I)e 'ot to pay a lot for #nternet acce!!G Im 'o#n' to ma"e people pay. I th#n" A2 cent! a l#!t#n'. It $ecame a $u!#ne!!. Then hen people !tarte% to r#p each other off an% compla#n ( >eyQ That 'uy !ol% me a $ro"en DC. >e !a#% #t or"e% $ut the >DDC a! $ro"en. Ehat am I 'o#n' to %oG D#erre f#,e% #t. D#erre ma"e !ure I %ont 'et r#ppe% offQ 7et the !coun%rel! out of th#! commun#ty. D#erre, not $e#n' a control(frea" 'uy $ut $e#n' a )ery $r#ll#ant cataly!t, )ery h#'h emot#onal #ntell#'ence !a#% ( The "no le%'e #! #n the commun#ty. Let! let people rate each other. If people &u!t !tart rat#n' each other #th u!er rat#n'! on the tran!act#on!, the hone!t !eller! #ll percolate up an% $a% !eller! #ll 'et cleane% out of the !y!tem. Iery %ecentral#*e%, #n 'eneral. Then they $ou'ht DayDal. A'a#n e tal"e% a$out DayDal. I th#n" DayDal ha! o)er 1333 employee! that are &u!t %o#n' frau% %etect#on e)ery !#n'le %ay, or 1233 #t! a lar'e num$er. They ha% to ha)e a %#fferent culture #th#n the or'an#*at#on. I %ont "no #f #t central#*e% the hole th#n' $ut clearly that ac0u#!#t#on #n that 'roup operate! #th a more central#*e% !ort of control! an% $eha)#or! than the o)erall or'an#*at#on. Other %ecentral#*e% or'an#*at#on! $ecom#n' more central#*e% = there! other !tor#e! out there. I mean, e)en 7rameen Ban", #n !ome !en!e, "#n% of the p#oneer creator of the m#cro(len%#n' #n%u!try. It ha! $ecome !o hu'e, #t! a ma&or f#nanc#al #n!t#tut#on no #n Ban'la%e!h. It! central#*e% #n !ome !en!e4 e)en lo %o n at the coal face #t! pretty %ecentral#*e%. 7ro th can lea% you to ha)e to ha)e control !tructure!. A'a#n they ha)e that con!tra#nt on the

en)#ronment of $e#n' a f#nance company that nee%! to ha)e tho!e control!. Ye!. J2B:11L AQ: Your th#r% !trate'y for a central#*e% or'an#*at#on to compete #th a %ecentral#*e% or'an#*at#on a! to %ecentral#*e your!elfG RB: Ye!. J2B:ARL AQ: Im ha)#n' trou$le com#n' up #th e,ample! of here th#! ha! or"e% or un%er!tan%#n' compet#t#)e %ynam#c! $et een t o %ecentral#*e% or'an#*at#on! try#n' to #pe each other out an% ho that coul% e)er happen. Are there e,ample! that come to m#n% here th#! !trate'y ha! $een !ucce!!ful you can tal" a$outG J2B:FBL RB: The th#r% !trate'y %ecentral#*#n' your!elf. Sure yeah. There are a lot of e,ample!. One #!, clearly, the m#l#tary. The /S m#l#tary #! ha)#n' much more !ucce!! no here theyre mo)#n' to ar%! !pec#al operat#on! hen theyre f#'ht#n' th#! %ecentral#*e% opponent. There #! actually a country #n the -#%%le Ea!t, a ma&or country that 'ot a hol% of our Do erDo#nt pre!entat#on from Stanfor%, #n A33F, $ecau!e !omeone from that country a! #n the room an% a!"e% #f they coul% ta"e #t $ac" to the Dre!#%ent, the hea% of the#r country. They %#%. Ba!e% on our pre!entat#on, they create% the#r o n %ecentral#*e% counter(terror#!m net or" #n!#%e the#r country an% foun% that #t a! !ome here $et een 13 an% 133 t#me! more effect#)e, #th a t#ny amount of the re!ource!. Ima'#ne #n!tea% of ha)#n' the e!tern e,pert!, or other !ecur#ty e,pert!, come #n an% try to help you f#'ure out your Al ?ae%a cell! are, or hate)er, #n!tea% you create commun#ty($a!e% or'an#*at#on! #th#n the !lum! an% #th#n the local commun#t#e! to %eal #th the #!!ue!. That! a concrete e,ample, "#n% of #n m#l#tary an% pol#ce force an% #ntell#'ence. There are a lot of e,ample! #n $u!#ne!!. I ha% )ery #ntere!t#n' con)er!at#on! #th -cHonal%!. -cHonal%! #! a tra%#t#onal or'an#*at#on that too" th#! pro%uct !et that people really !eem to en&oy ( ham$ur'er! an% fr#e! an% co"e, or !o%a!, an% rolle% that aroun% the orl%, #th a )ery Amer#can mo%el ( Amer#can #ma'e, culture, mo%el, mana'ement !y!tem!, e)eryth#n'. They %ec#%e%, not !o many year! a'o, to really 'o local#*e. They h#re% a 'uy #n S e%en, ho a! a !uper!tar, ho en%e% up open#n' A33 ne -cHonal%!, $ut he cu!tom#*e% them to local c#rcum!tance!. They $rou'ht h#m $ac" a! an SID, ma%e h#m an SID ( $r#ll#ant 'uy. They h#re% other people that !a#% ( You "no hatG The pro$lem #th u! #!, ere !en%#n' people out of our area here, all aroun% the orl% from the -#% Ee!tern /S to 'o aroun% Ch#na, to 'o aroun% 9apan. They %ont !pea" the lan'ua'e4 they %ont !pea" the culture. They are 'reat mana'er!. They oul%nt ha)e 'otten ay up the !y!tem $ut they %ont "no the culture!. Let! 'o chan'e the hole mo%el an% only h#re local!. Ee ha)e m#ll#on! of employee! = they ha)e 1.5 m#ll#on employee!. Ee clearly ha)e mana'ement talent out there. No , all the#r #nternat#onal re'#on! are run $y local!. 7ue!! hat! happen#n'G Bu!#ne!! #! flour#!h#n'. They ha)e %#fferent pro%uct! on the menu. They ha)e a %#fferent loo" an% a ne arch#tectural %e!#'n of the !tore!. They may "eep the 'ol%en arche!, $ut #t may loo" more l#"e a pa'o%a #n Ch#na, than #t loo"! l#"e a -cHonal%! %o n the !treet here of >#'h ay 131. They !ucce!!fully $e'an to really %ecentral#*e the#r or'an#*at#on. There #! I th#n", a lot of )ery !ucce!!ful e,ample! of or'an#*at#on! %ecentral#*#n' them!el)e!. A'a#n, I th#n" that hat th#! or'an#*at#on #! accompl#!h#n' #n %o#n' on the #nno)at#on !#%e #! a 'reat e,ample that a lot of other or'an#*at#on! coul% follo . Althou'h, you)e 'ot ha)e the true cataly!t lea%#n' that tran!#t#on to

ma"e #t real. Than" you any ay. That! la!t 0ue!t#on, r#'htG Than" you !o much. ;Applau!e< J1:33:FAL ABL: Than"! for l#!ten#n' to Ep#!o%e 56 of Let! Tal" B#tco#n. Content for to%ay! !ho a! pro)#%e% $y my!elf, Author!@7oo'le an% 8o% Bec"!trom. -u!#c a! pro)#%e% $y 9are% 8u$en!. If you cant 'et enou'h or#'#nal thou'ht an% %#!cu!!#on, rea% our %a#ly $lo' at .let!tal"$#tco#n.com. S#'n up for our ee"ly ne !letter at .the ee"ly$#tco#n.com an% part#c#pate #n our l#!tener #nteract#on area at .let!tal"$#tco#n.com:tal". See you ne,t t#me. J1:31:1AL