Walmart is using it to track Chinese pork. AP Moller-Maersk is applying it to marine insurance. Banks hope it will simplify cross-border trade finance. BP is experimenting with it to streamline oil and gas trading.
As the blockchain expands beyond its original use as a platform for digital currencies such as bitcoin, techno-evangelists are also bigging up its potential to do more than point to the provenance of a pork chop.
“Business leaders have another opportunity to rethink how they organise value creation,” Don Tapscott and Alex Tapscott wrote in last year. Enthusiasts say the blockchain — a distributed digital ledger — could even bring down traditional management and the organisations that have supported it.
Entrepreneur Nick Tomaino, in one recent blog post, forecast “the slow death of the firm”. As the technology cuts transaction costs, he writes, it will erode the rationale of the company, laid out by Ronald Coase in 1937, as a place that can co-ordinate many activities more cheaply than if they were done outside the organisation.
Another post, on the Ribbonfarm blog, predicts the replacement of the conformist, corporate drones critiqued by William Whyte in his 1956 book by “Blockchain Man” (or presumably woman), a combination of “lifestyle business owner and free agent”.
How will the blockchain achieve this? Information about contracts, past performance and qualifications will be baked into its immutable database. Anyone will be able to find the right contractor instantly. Smart contracts will enshrine terms and conditions, ensuring automatic and accurate payment of royalties to Blockchain Man and Woman. Goodbye headhunters, middle managers and human resources departments; hello a free, frictionless market in workers.
Some of this is happening. “There is no firm behind bitcoin,” Mr Tomaino points out, “simply code . . . and incentives”. Inevitably, marketeers, hype merchants and snake-oil salespeople are already baiting their hooks with the latest headline-grabbing technology. Many experiments in decentralisation are raising money through the latest bubbly trend of “initial coin offerings” — digital tokens that can be traded or exchanged for services. I am not going to pretend that I know whether the most grandiose claims for the blockchain’s influence on management are achievable. But those who stake the claims do not really know either. Don Tapscott has long predicted the internet will break down hierarchy, but he concedes that “the architecture of the early 20th-century corporation remains pretty much intact”.
There is much to be said for distributing authority. The blockchain is, though, only one tool available. Much progress can be made through simple delegation. In any case, many of the technology’s virtues are shared by boring old databases — and, on closer examination, some of its alleged benefits are handicaps.
Garrick Hileman, a research fellow at Cambridge Judge Business School and a thoughtful advocate for distributed ledgers, says “a lot of companies got on the hype cycle, tried proofs of concept and then said, ‘wait a minute: do we really need blockchain [to do this]?’”
The old programmer’s mantra “garbage in, garbage out” applies, just as it has done since the first line of code was written. In theory, a blockchain curriculum vitae would stop fraudsters and braggarts exaggerating credentials. In practice, the risk someone could input an error, deliberately or accidentally, will remain — and be harder to reverse if discovered.
Even if I did perform woefully at school, would I want my poor grades to haunt my career? Blockchain technology would give me ownership of my record and the power to reveal only parts of it. I could stifle my contribution to the collapse of Enron, while showcasing my role in Google’s success. But that sounds no better, and significantly more cumbersome, than editing my LinkedIn page.
In addition, not everything we do at work can be easily or objectively assessed. I am a fan of 360-degree feedback, but it is an arduous way to appraise staff. Getting enough people to verify my performance on all but the most basic projects in a way that would prove useful for all future employers, and unimpeachable enough to be etched permanently into the blockchain, looks an insuperably complex task, for man or machine.
Legal and confidentiality issues are the two biggest obstacles to adoption of distributed ledger technology, says a survey by the Cambridge Centre for Alternative Finance. In time, innovation and regulation may help break them down. But there are good reasons why Organization Man, and the organisation itself, will continue to survive behind the third obstacle the survey identified: “Reluctance to change established business processes.”
andrew.hill@ft.com
Twitter: @andrewtghill
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