The End of the Blockchain
My personal history with blockchain began in 2014 when I was the Chairman of a new venture capital company called Green Visor Capital. It was started by a fellow Cornell MBA named Simon Yoo and I agreed to help him launch by signing on as a General Partner and, indeed, by serving as its first Chairman. That situation existed for about a year and then I passed the title over to Joe Saunders, the recently retired CEO of Visa, who Simon knew from their vacation homes on Hawaii. Green Visor Capital was entirely focused on what is called FinTech or Financial Technology companies, a new subset of finance which was just a speck at the time, but growing fast. The biggest pat of the new FinTech space was in the realm of payments and it was a head-on competitive threat to the big credit card companies like Visa, Mastercard and American Express. The other arenas of FinTech were Peer-to-Peer Lending, Robo-Investing and the new and burgeoning adolescent in the crowd, cryptocurrency (a.k.a. Bitcoin). We all knew very little about crypto at that time, but we did understand that it revolved around the concept of a blockchain ledger, whatever that was.
At the first annual anniversary of the launch of the fund in 2014, Simon planned to have an Limited Partners meeting to tell all the investors what we had done and where the FinTech arena was going. There were lots of good things to tell and it was at that time that he wanted to announce Joe Saunders coming on as the new Chairman. I was happy for this development and more than willing to step into the shadows, but that was not to be right away. The format of the gathering involved having Joe give the Keynote speech and then several panels, one of which was a VC panel that I would moderate. I planned to fly from NYC to San Francisco for the event. One day before the event and the day I planned to fly out, Simon called to say that Joe was incapacitated by some minor surgery that he had had and that I would have to step in to give the Keynote speech. Now I am an experienced public speaker so this did not throw too much until I asked the planned topic. Joe had been billed as speaking on Bitcoin, a subject I knew very little about and may have had even less belief in. I spent the five hour flight out to San Francisco frantically reading up on Bitcoin and modifying Joe’s speech, which had been written for him by the Green Visor Capital team, knowing that I would have only a few hours once landed to get to the meeting venue.
The meeting was being held at the offices of one of the big Silicon Valley law firms and the auditorium was prepared for about 125 guests. It seemed that there was high interest in Bitcoin in Silicon Valley as the techies had determined that crypto currency was going to be their bailiwick and not get usurped by the evil gnomes of Wall Street. I was supposedly one of those evil gnomes and what I had to say on Bitcoins mattered to more people out there than we had realized. When the speech began, I was sweating peanut butter because it wasn’t just a full house, but an overpacked house with about 450 people there hanging from the rafters to hear what this Wall Street villain had to say about this tech-driven phenomenon.
I have rarely been so intimidated by a public speaking engagement and I have even more rarely known less what I was speaking about than I did that day. I spoke about the fantastic growth of crypto (puny when compared to what’s happened since), I spoke about the recent debacles (Mt. Gox failure) and had the good enough sense to say that such things always happen with new financial tools, and then I punted, as they say in London, by telling the audience that I thought crypto would have its day, but not for a while and that the immediate FinTech play was in the payments arena. It was a reasonably safe if somewhat uninformed and unimaginative speech, but I survived with minimal embarrassment.
Since then we have seen cryptocurrency ebb and flow and grow like a weed. It has attracted interest from many notables and become a critically important leg of the FinTech stool, eclipsing everything except perhaps payments in its momentum. Almost everyone has been smart enough to separate the volatile price action on the particular cryptocurrencies, which are hard at best to rationalize, with the fundamental lasting value of the blockchain ledger concept as a primary tool of new age finance. The advent of what are called smart contracts and the hands-off nature of DAO’s (Decentralized Autonomous Organizations) are elements that most people agree are keys to the future integrity, privacy and trustworthiness of the new arena of digitized finance.
Back in the days (the late 1980’s specifically) when the derivative monsters roamed the earth, I had the good fortune to meet a young man named Jim Dowd, who worked for me in the Bankers Trust Derivatives Department. This is the closest thing to ground zero in what Warren Buffet erroneously called the arena of Weapons of Mass Financial Destruction. I was there and contributed to the creation of derivatives in the early 1980’s (when I was CEO of BT Futures and Options Corp.) and had come back to run Global Derivatives in 1989. Jim was the exotic derivatives trader for the department at the ripe old age of 25. That meant he was at the leading edge of the leading edge at the leading edge firm of one of the most powerful tools the finance world had ever seen. Jim was a derivatives prodigy, a veritable savant of the art.
Over the years since then, Jim and I have stayed in touch quite actively. I sent him of rom NYC to London and then his career took him to Japan and then China where he learned to trade in the belly of the great gambling beast that is Asia. He returned from all that relatively unscarred and came to work with me at Bear Stearns in 2004. From there, as I spun out of Wall Street with more than a few boot prints on the seat of my pants, Jim went off to start his own firm in Salt Lake City. I introduced him to my new Green Visor Capital partners and they chose to invest a small amount in his firm. Since then, Jim and his firm have blossomed and I’m sure my GVC partners wish they had invested more.
Jim is at the leading edge of finance once again working on the safekeeping and record keeping of crowdfunding businesses and now various blockchain-driven ventures including NFTs (non-fungible tokens), the hottest space today in finance. In designing my Advanced Corporate Finance course this summer, I decided that it needed to end on a leading edge note like blockchain finance. I could think of no one better than Mr. Leading Edge himself, Jim Dowd to come and give that final lecture to my students. I am whisked back to 1989 when I re-entered the derivatives world and had to have young pup Jim school me on exotic derivatives. Tonight I will listen intently to what I know will be a fascinating lecture and case on blockchain finance by one of the best forward-thinking professionals I have known during my career. I’m not sure this represents the end of the blockchain, but it certainly is currently the whip-cracking bit that is getting everyone’s attention.