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mediate our relationship with the world around us. Apparently this will democratise trust and reshape society, or so
the streak of technological determines that runs through society tells us. Though while technology is a significant
force shaping society, it is not the most important. There are deeper forces at work in society, and while blockchain
is a sign post that the future will be different from the past, the future we're racing toward is not the one we're being
sold.
What weve been seeing at C4tE is that the balance between technological and social determinism has tipped to
the social
The future will be shaped by a mixture of inherent human needs and cultural preferences
We can also see the outline of this future and its a lot more interesting than cryptocurrences etc. suggest
and what were seeing is a confluence of social preferences come together to reshape the commercial
landscape in unexpected ways
Its a social change, not a technological one
Kranzberg, Melvin. Technology and History: Kranzbergs Laws. Technology and Culture 27, no. 3 (1986): 544
60. doi:10.2307/3105385.
Although technology might be a prime element A common mistake is to think that solutions to technical problems are not subject to mushy social considerations
in many public issues, nontechnical factors take Many social factors are involved in what are seen as purely technical decisions
precedence in technology-policy decisions.
Its social pressure that shapes:
Melvin Kranzbergs 4th law which technologies can be / are pursued
how they can be / are used
Its rare that the objectively best technology will be the one society adopts:
Copper-cooled engines, victim of the need for short term profit
VHS trounced technically superior Beta
2
genetically engineered crops
Ford Nucleon and the optimism of the 50s
Technically sweet solutions do not always triumph of political and social forces
This is particularly true now as were seeing social change rather than technological change
no new maths in blockchain / bitcoin
no new maths in AI
Were told that we use money due to the double coincidence of wants
a pervasive assumption promoted by economists
we use money, as barter is awkward
This is unlikely though, as we forget that money is a technology for exchanging value with someone you dont or
cant trust
Exchanging value via money implied not trusting your counter party
hence dirty money and filthy rich
hHence the prohibitions on lending in all Abrahamic religions
This cultural aversion persists to this day
Skip
We went from mentioning to our friend, the cobbler, that our shoes were wearing thing to
Need-want recognition
Search
Comparison & product selection
Exchange of goods: payment at the point of sale
(post-purchase regret)
4
Over the last 100 years or so, what we think of the modern retail experience evolved
Goods on display
Prices clearly visible (no negotiation)
Amenities (to attract the punters)
all finally coming together in Le Bon Marche in the late 1800s early 1900s (pictured)
John Lewis store in Westfield Stratford City Shopping Centre, 2012. Source: Editor5807 <https://
commons.wikimedia.org/wiki/
File:Stratford_City_Westfield_Shopping_Centre_John_Lewis_London_2012_Olympics_merchandise_2.JPG>
John Lewis store in Westfield Stratford City Shopping Centre, 2012. Source: Editor5807 5
Online simply copies the offline paradigm
catalogues
shopping carts
checkouts
6
First around 2005 the consumer internet and express airfreight destroyed the mid market. Why compromise
when you have:
the cheapest
the best (at the best price)
Consumers now have more information than merchants
PacBrands et al
What this has done is redefine value at both ends of the market
On one side we have high value
Examples:
the exclusive music pack or backstage pass
the cobbler who learnt their fathers trade
the local butcher selling products from boutique producers
hand crafted furniture from sustainable forests
Source: Lisdavid89 7
On the other we have convenience
Give me convenience or give me death Dead Kennedys
We dont want to put a lot of effort in
We dont want to make decisions
We dont want to be bored
We want it cheap (though we dont care about it being the cheapest)
Ideally, we want it as a service
Examples:
music streaming: I just need background music for my life
$4 thongs at Target: for the holiday
Dollar Shave Club
Flexicar: I need to move something
Source: Lisdavid89 8
Aldi: I just need tomato sauce, dont waste my time
Were all arbitraging the difference, and individually were doing it different ways
Were also becoming more impulse driven at both ends of the the market, rather than searching
chance discovery of a service through our community
Focused on optimising the payment slicing a few seconds of weve forgotten that the bulk of the customers
wasted time is in:
going to the PoS
tallying the goods
Were seeing a few examples of companies moving the PoS to the customer, rather than the customer to the PoS
Aisle buying
Amazon Go
Advantages:
Ties loyalty accumulation to purchase (one card, not two)
Creates a sunk cost: the customer has already purchased the coffee
Disadvantages:
Need to preload the card, making some transactions more complicated
Still tied to the PoS
Source: HAO XING
Time: back in time
Advantages
Skipping the queue (some people)
Avoiding transacting (many people)
we think of the future of our businesses as being the same, but online
online retail
online
religion: you form part of the customers identity, Apple, the local butcher
You have the primary relationship with the customer, not someone elses product or brand
value is multi-dimensional
value is absolute its your product or someone elses
you dont care where the customer buys, as long as they buy your product
However, simply moving the current paradigm to the digital world runs counter to consumer preferences.
Consumers dont seem to want e-wallets, no matter how many times we present them. Even Apple Pay is having
trouble driving adoption, and is willing to pay $5 per user.
Despite optimising the payment (or hiding it with gift wrapping) we cant ignore the fact that, in a world where
consumers know the firms they deal with, that consumers dont want the payment in the middle of the
relationship.
We forget that the payment cash was a solution when customer and merchant didnt know, or couldnt trust,
each other, and that is no longer generally true.
So if the old trust architecture is on the wain, then what is the new trust architecture?
Through the magic can build Dapps that are more transparent and equitable
Money Identity Reputation Marketplace
(payments) (accounts) (ratings) (catalogue) There are a few issues with this
Most problematic though, is the idea of introducing tokens to fund many services
or even the creation of personal currencies
For example:
Filecoin: p2p file sharing funded by a token
p2p payments: p2p payments funded via a token
Its assumed that these currencies can be pegged to something like AUD to avoid exchange problems
this is foolish and misunderstands how money functions
16
All these additional currencies and consequent exchange rates and required services is a drag on the
economy
we seem to forget that using currency comes at a cost
So if blockchain (technology) wont shape our future trust relationships, then what will?
17
Well, in the short to mid term, theres probably three, rather than one, based on the emerging trust relationships.
First, we might burry the payment in the social platform that consumers use to interact with the merchants, with
settlement via a low-cost mechanism (BPay? NPP?). In many all? cases the act of ordering will trigger the
Social groups (platforms)
payment, as with Uber. Our social platform(s) of choice become our remote controls for the world.
Trust for both customer and merchant has moved from currency to platform (though we still use a currency
as a unit of value).
Payments are moving away from the point of sale, to happen seamlessly in the background.
Buy it now buttons on Pinterest.
Ordering products or services via a social platform: WeChat Skip, Uber etc.
Payments are moving away from the till to be seamlessly executed at the point where the product is consumed.
Music streaming
Dollar shave club
and so on
Third, where customer and merchant have a less transactional relationship, payments may be via an evolved
loyalty scheme, a shared store of value, with any settlement via a low-cost mechanism (BPay? NPP?)
Social groups (platforms) Payment for a service A shared store of value
Value is now multidimensional, rather than solely focused on transactions.
Customer and merchant know each other.
Both want the payment moved to the edge of the relationship.
A shared store of value commitment by mutual debt just like before the Industrial Revolution
Merchant rewards customer for prosocial behaviour, not just transactions
Customer commits funds to create a sunk cost and show commitment
Acts like a complimentary currency, which means that the banks might be best positioned to offer white-label
services.
The rational behind Dapps is that theyre the logical extension of the old tension between firms and markets
Pipe vs platform
Market Firm
Coase told us that the choice between firm and market is driven by the cost of: discovery, coordination &
contacting
Firms:
The old value chain stuff goes from left to right
Producers find materials, create value, and deliver to customers
Miserly with communication/coordination as everything is predefined and mandated from above
Markets
Edward Lloyd's Coffee house, Londres, par William Holland (1789) 1924 Model T assembly line
Platform businesses -> the hot thing at the moment Producers and consumers gather in a market
More choice, but requires more communication
22
Uni Cal saved something like 50$ million moving their procurement process to a market
it was industrialisation and the explosion of the mass market that pulled the vast majority of people into the
monetary system
23
Village fair, Richard Brakenburgh, 1650-1700, oil on canvas - Villa Vauban - Luxembourg City
so we need to consider these on a continuum
Community Market Firm
communities were great, but they didnt scale
markets enable us to create communities around topics, but we need to go looking for them
firms are efficient, but you can have any colour you want as long as its black
most of industrial history has been a shift from local markets to global firms
more recently weve seen the shift from global firms to (global) markets, right-to-left
as communication technology has caught up
24
its like weve shifted right, and then bounced off the end, and now were heading back the other way
the interesting question is what the digital village might look like
Bitcoin, Blockchain
& distributed ledgers:
Caught between
promise and reality
25
This publication contains general information only, and none of Deloitte Touche Tohmatsu
Limited, its member firms, or their related entities (collectively the Deloitte Network) is, by
means of this publication, rendering professional advice or services.
Before making any decision or taking any action that may affect your finances or your
business, you should consult a qualified professional adviser. No entity in the Deloitte Network
shall be responsible for any loss whatsoever sustained by any person who relies on this
publication.
Peter Evans-Greenwood
2017 Deloitte Touche Tohmatsu. Fellow, Deloitte Centre for the Edge