 Live from Las Vegas, it's theCUBE. Covering InterConnect 2017, brought to you by IBM. Okay, welcome back everyone, we're here live in Las Vegas somewhere in the Blockchain Revolution hat right here. Of course, I'm John Furrier with theCUBE and my co-host Dave Vellante. We're excited to have celebrity author, thought leader, futurist and film that's blank on the title, Don Tapscott who's the author of the Blockchain Revolution. Legend in the industry, thought leader, you and your son, a compelling new book. But, you know, you've been on the fringe of all the game changing technologies, going back with social media, we've been following your work, it's been great. Now we're at the front range of Blockchain. Okay, now it's becoming pretty clear to some of the innovators like IBM and others that it's not about Bitcoin alone, it's about the Blockchain Revolution, the Blockchain itself. Welcome to theCUBE and what's going on? What is Blockchain? What? What's great to hear, be here. The one thing you didn't mention is I play keyboards in a rock band. The most interesting man on theCUBE right now. We used to do a concert every year whether our public demanded it or not, but no we're charity band. We've raised a few million dollars for good causes. Anyway, I think along with my son Alex, we figured this out a couple of years ago, that this is the second era of the internet. For the first few decades, we've had the internet of information. And if I send you some information, PDF, PowerPoint, email, even with a website, I keep the original, I'm sending you a copy. That doesn't work so great for assets, like money, stocks, bonds, identities, votes, music, art, loyalty points. If I send you $100, it's really important, I don't still have the money and I can't send it to you. So this has been called the double spend problem by cryptographers for a long time. And Blockchain solves this problem. We've had the internet of information, now we're getting the internet of value. Or anything of value from money to votes to music can be exchanged peer to peer and where we can transact, keep records and trust each other without powerful intermediaries. Now that doesn't mean intermediaries are going to go away, but they're going to have to embrace this technology or they will be toes. I mean, this is clear. I mean, you've seen the distributed computing paradigm when we're all network guys and by training and following this revolution. But now when you start thinking about trust and value when you talk about digitize in the world. So if you go to digital transformation, that's the thesis that we're in the digital transformation. You're digitizing money, you're digitizing transactions. Explain more on the value piece because now that if everything is going digital, there now needs to be a new model around how to handle the transactions at scale. And with security problems, hackers. Yeah, okay. Well, that gets to a couple of really good points. First of all, what is digital? You know, you think, well, I tap my card in Starbucks and bits go through all these networks and different companies with different computer systems and three days later, a settlement occurs. But that's actually a bunch of messages. It's not money. Money, cash is a bare instrument. You have cash in your pocket. You are the bearer of that instrument which means that you own it. And what we're talking about is something very different here of creating digital cash that's stored on a global ledger. So rather than there being a three day settlement period, there's no settlement period because you're just making a change in the database. And this is a very revolutionary concept. And as for security, I mean, think about, I don't know, you're right, it's not about Bitcoin, but if we took the case of the Bitcoin blockchain, if I wanted to hack that, I'd have to hack that 10 minute block that has all those transactions, which is linked to the previous block and the previous block, I'd have to hack the entire history of commerce on that blockchain, not just on one computer, but simultaneously across millions of computers all using the highest level of cryptography while the most powerful computing resource in the world, the miners are watching me to make sure I don't mess around. Now I won't say it's impossible, just like I suppose it's not impossible to take a chicken McNugget and turn it back into a chicken, but it's really hard to do a lot. And so these systems are way more secure than our current systems. Yeah, it's fundamentally impossible. And you don't have a third party verification system that's also an exposure area. It's globally distributed, right? So let's go back to what is blockchain? What's the blockchain 101? Well, blockchain is a distributed ledger where anything of value, from money to votes, music can be stored, transacted, managed in a secure and confidential way. And where trust between parties is established not by a big intermediary, but by cryptography, by collaboration and some clever code. So talk about the premise of the book, sort of why you wrote it and what the fundamental premise is. Well, three years ago, three years and five weeks ago at a father-son ski trip in Montramblau over a large piece of beef and a very nice bottle of wine, Alex and I started thinking about what all this means and we decided to work together. And he wrote a very cogent paper about how this new ecosystem could govern itself and my publisher got wind of it and said that sounds like a book. So we launched a dozen projects a couple of years ago on how this technology changes, not just financial services, how it changes the corporation and the deep structure and architecture of the firm, how it changes every industry, how it changes government, democracy. There's an opportunity to end the crisis of legitimacy of our democratic institutions, what it means for culture and so on. And then we wrote the book and it was published on May 10th last year. It's been a big bestseller. It's the bestselling book on blockchain. It's actually the only real book on blockchain. In some countries, it was ridiculous. For a while in Canada, it was competing with Harry Potter and an adult coloring book. That's the bestselling book in the country. It's the state of our culture right here. Yeah, I know. What is an adult coloring book anyway? That's a million dollar question right here. There are a lot of geeky books on blockchain. Yeah, well actually there aren't. There are books on cryptocurrency and Bitcoin. Yeah, absolutely. But the only real book on blockchain is blockchain revolution. So, but you're really focusing on the business impact, the organizational impact, maybe even societal impact. So, explain the premise. Well, where do we start? Let's start with the firm. Corporation, foundation of capitalism, based on double entry accounting. That's what enabled capitalism. Well, with blockchain, you get a third entry onto the ledger. So, you have triple entry accounting, so you don't need, say, audits every year because there's an annual audit. I have it right there. That's just the beginning. Because the reason that we have firms, according to the Nobel Prize winning economist, Ronald Coase, is that transaction costs are an open market, like the cost of search, finding all the right people and information, the cost of contracting, every little activity were a contract prohibitive, the cost of coordination, getting all these people to work together, didn't know each other, the cost of establishing trust, all of that in an open market is prohibitive, so we bring that inside the boundaries of a firm. Well, blockchain will devastate those transaction costs. So, we're talking about a fundamental change in how we orchestrate capability and in our economy to innovate, to create goods and services, and for that matter, to create public value. So, this is not some interesting little technology. This is the second era of the internet, and I think it's going to be bigger than the first era was. So, on the internet value, I mean on the value creation side, so let's take that on the digital asset side. So, as soon as everything's digitized, got IOTs out there, industrial IOT, wearables, smart cars, smart cities that smart everything, but now you've got to create value as a firm. So, let's roll that forward. We have the now somewhat frictionless transactional environment in an open market. How do firms create value out of those digital assets? Well, they'll create value in some ways that are radically different than today. So, let me give you an example. Who are the big digital value disruptors today? Well, you can start with the so-called sharing economy. You know, Uber, Airbnb, Lyft, Hasrabin. At theCUBE. Sorry? At theCUBE? That's blaspheming. Anyway, disrupting the world right now. Well, you're actually not a sharing economy company in the sense of it. Yeah, in the traditional sense, yeah. Actually, I don't think they are either. I mean, the reason that Uber is successful is precisely because it doesn't share. It's a service aggregator. So, why do you need a $70 billion corporation to do what Uber does? It could be done by a distributed ledger with some smart contracts and autonomous agents. Everything that the corporation does could be done by software. Airbnb. You know, how about, we'll call it B, Airbnb, blockchain, Airbnb. So, you go onto your mobile device and you're looking for a place and you're going to be in Vegas and all the hotels are booked because of IBM and then you find a place, you book it, and then you show up, you turn your key that starts a smart contract payment to the owner of the apartment or the room and you check out, you turn your key, it's closed. The software has a payment system built into it so the renter of the room gets paid. You enter at five star on your device and that's immutable. It's a five star rating on a blockchain. Everything that Airbnb as a company does could actually be done by the software. So, Bob Dylan, there's something going on here and you don't know what it is. I mean, people are all locked in an old paradigm about what's disruption, get ready for this. So, what's the impact? I mean, I'm talking about the impact. What's the inhibitors? So, obviously, any new technology, you've seen all the naysayers. So, obviously, this is a great vision. What's going to be the impediment? Well, there are all kinds of impediments and inhibitors and there are all kinds of ways that this can get messed up. A big one is that we're overcoming now as if people think, well, this is about Bitcoin. Well, it's not. The real pony here is the underlying technology, blockchain, and that's the biggest innovation in computer science in a generation, I think. But also, you know, I wrote this 1992 in paradigm shift. I said, when you get a new paradigm, it's a new mental model and these things cause dislocation and disruption and uncertainty and they're nearly always received with coolness. I mean, you guys know what it's like to be received with coolness as you introduce a new idea as do I, going back to the 70s. But invested interests fight against change and leaders of old paradigms have great difficulties embracing the new. So, you think about a company like Western Union that can charge 10% for remittances that take four to seven days. Well, with new tools, they don't take four to seven days. They take minutes and they charge, based on blockchain, and they charge a point and a half. So, it's the old innovators, the women. They got to get their solutions out there so that they could go after and eat some of the lunch. Well, they have to eat their own lunch. That's their own work. Well, Western Union could be tried to buy a new entrant, right, so you got a new entrant coming in or they got to cannibalize themselves. That's one of the tips if there are enough disruptive interests, right? So, it's all those inhibitors to change and for the IT people that are at this event, this is an exciting opportunity, but you do need to learn a new kind of knowledge base to function in this distributed ledger environment. You need to learn about hyper ledger for starters because that's the real enterprise platform. All right, so folks watching like my son who helps us out sometimes as well, you have a father-son relationship which is super inspirational. He's, say, he wants us to get involved in blockchain. He wants to jump right in. He's kind of a hacker type. What does he do? How does he get involved? Obviously, read the book, Blockchain Revolution, get the big picture. Is there other things you'd advise? Well, buying the book in massive volume is always a good first step. No, seriously. Well, one thing I always say to people is personal use is a precondition for any kind of comprehension. So just go get yourself a wallet for some cryptocurrency and download it and you'll learn all about public key encryption and so on. But I think in a company, there are a number of things that managers need to do. You need to start doing pilots, sandboxes, developing and understanding use cases and our new Blockchain Research Institute is going to be a big help in that. But also for an IT person, is your son an IT guy or he's more an entrepreneur? No, he's 21, 21 years old. He's 21. He doesn't know anything about IT. Cloud data. He's a computer scientist. He's born in the cloud. He doesn't know IT. He's like, can't spell IT. IT's for old guys like us. Yeah, I know. We're telling him what he should do. He should be here. That's why we hired him. He's a little guinea pig. Digital natives. We're digital immigrants. We had to learn the language. But for the IT people, it's all about not just experimenting, but about moving towards operational systems and about architecture. Because our architectures are based on traditional computing environments. And this is something from Paradigm Shift. You remember I interviewed Max Hopper, who was invented the Saber Reservation System for American Airlines. And he says, the big problem, Don, is that if I don't have a target architecture, every time I spend a dollar, I'm building up my legacy. I'm making it worse by investing in IT. And so that's where I came up with this formulation. Yeah, God may have created the world in six days, but he didn't have an installed base to start with. So what we need to do is to start to think about architectures that embrace blockchain. And this is an historic new opportunity for anybody who cares about IT. Is the disruptive enabler for blockchain the fact that we are now fully connected as a society? Or is it something else that we don't see? What's your view on, what's the real wealth-creating disruptive enabler? Well, you can sense that the rate of change is a lot faster for the second generation than the first. 1993, 1994, when I wrote The Digital Economy, it was dial-up, eBay. 14-4. Amazon didn't exist. It existed. 9,800 pot, I think it was. When I wrote that book, Google was five years away. Facebook was 10 years away. So, but now we've got wireless. We've got IT everywhere. We've got mobility. We've got the cloud. We've got all the preconditions for this new innovation to happen a lot faster. And that's why, I mean, a year ago, there wasn't a lot of talk at this event about blockchain. Today it's the big buzz. I wonder if you could talk about other applications. We talk about Hyperledger. It's a great place for a starting point, especially for IBM, but one of the areas I'm excited about is security. You know, like the MIT Enigma project and there are others. Security is such a problem. Every year we look back, John and I would say, do we feel more secure? And no, we feel less secure. What about the application of blockchain in security use cases? Well, blockchains are more secure in a number of ways. One is they're harder to hack than traditional servers. And people say, now our company, we're bulletproof. Right. Tell that to J.P. Morgan and home detail. Target fidelity, I mean. In the Democratic National Convention, but also tell it to the CIA. I mean, if the CIA can be hacked, then any of these traditional server technologies can be hacked. So that alone is a huge case to move towards Hyperledger and these other type platforms. But you said, I feel less secure these days. And that's a really interesting statement because I think that in many ways, the security of the person has been undermined by the internet of information as well. That first of all, we don't own the data that we create. That's a crazy situation. We all create this massive new asset. It's a new asset class, probably more important than industrial plant in the industrial age, maybe more important than land in the agrarian age. We create it, but these data frackers. You know, like Facebook. Facebook. Own it. And that's a big problem. The virtual you is not owned by you. So we need to get our identity back and to manage it responsibly. And people will say to me, well, don't privacy is dead, get over it. This is foolishness. Privacy is the foundation of freedom. And all these things are happening in our world today that undermine our basic security. Our identities being taken away from us. Or the fact that things happen in this digital world that we don't know what are the underlying algorithms. If I take this and I drop it, that's called gravity. I know it's gonna happen. But if I go onto Facebook and I do certain things, I have no idea what are the algorithms that's determining what happens with that and how the data is used. So. Hello, fake news. That's how fake news came about. Yeah. People don't know what's to trust. And it's like, wait a minute. Exactly. And well, this has led also to a total fragmentation of public discourse where we've all ended up in these little self-reinforcing echo chambers where the purpose of information is not to inform us. It's to, I don't know, give us comfort. Yeah. And divide people. Yeah. So I'm not saying that blockchains can fix everything. In fact, they can't fix anything. It's humans that fix things. But the key point that Alex and I make in the book is that once again, the technology genie has escaped from the bottle. And it was summoned by this person that we don't even know who they are. At a very uncertain time in history, but it's giving us another kick at the can to sort of fix these problems. To make a world where trust is embedded in everything and where things are trustworthy and where people are trustworthy. And maybe we can rewrite the whole economic power grid in the old order of things for the better. And that's really important. My final question for you, and this is kind of a thought-provoking question. Every major revolution you've seen, big one, you've seen a counterculture, 60s computer revolution, PC revolution. Are we on the edge now of a new counterculture developing? Because the things you're kind of teasing out is this new generation, is it the 60s version of tech hippies? Or is there going to be a, because you're getting that radical reconfiguration, radical value creation. This is good evolution and fast. So you can almost see young generation, like my son you're talking about, teaching us how to do it. That's a counterculture. Do you see it that happening? First of all I see this change in culture profoundly. So artists can get fairly compensated for the work they create. Imogen Heap puts her song on a blockchain platform and the song's inside a smart contract that specifies the IP rights. And you want to listen to it, maybe it's free. You want to put it in your movie and cost more. The way she describes it is the song acts as a business and it has a bank account. So we can profoundly change many aspects of culture, bringing more justice to our culture. But I'm not sure there'll be a counterculture in the traditional sense. Because you've got people embracing blockchain that want to fix a bunch of problems. But also people who want to make large organizations more competitive and more effective. The smart banks are embracing this because they know they can cut their transaction costs in half probably. And they know that if they don't do it, somebody else will. And IBM's embracing it because they write software and they service all those firms with technology. Well, IBM, the case of IBM is really interesting. And I'll end on that one. That if you think about it, and I go back, I mean there were only mainframes when I started and IBM was the leader of the Mudge, right? And then all the bunch died but IBM somehow reinvented itself and it got into many computers. And then we saw the rise of the PC and IBM invented the IBM PC. And then we got into the internet. And once again, all these companies died off but somehow IBM was able to find within itself the leadership to transform itself. And I won't say I'm shocked, but I have to tell you, I'm really delighted that IBM has figured this one out and is driving hard to be a leader of this next generation of the internet. And they're driving open source too to give IBM a plug. Don Tapscott, great to have you on Cuba. Good luck with your speech today. A legend in the industry. Great thinker, futurist, amazing work. Blockchain is the next revolution. It will impact, it's an opportunity for entrepreneurs. This is a disruptive enabler. You can literally take down incumbent businesses, changing the nature of the firm, radical, economical change. Thanks so much for sharing the insight. Nice hat too. I got a nice hat, I got a free bowl soup with this hat as they say. It's all about the blockchain. It's all about the blockchain. Back with more blockchain cube analysis as we disrupt you with more coverage. I'm John Furrier, Dave Vellante. Stay with us.