How Tokens Are Changing Finance and Millennials Are Changing the Purpose of Business - Impressions from Nordic Next




June 9, 2017

Nordic Next

I just spent an evening and one day at one of my favourite conferences: Nordic Next in Malmö. At Nordic Next I got to meet a lot of friends who I might do deals with in the future, learn from great presentations and last but not least have great conversations with people that know much more than I do.

The event is quite small meaning everyone's not super busy. There's more sharing than usually at a larger conference where everyone is fully booked with meetings. And the relevancy of people there is really high.

Some of the themes presented that really stuck with me was how crypto-based tokens are revolutionizing investing, how AI knows how to teach and how the Friedman doctrine (there is one and only one social responsibility of business ... to increase its profits ...) is being destroyed by the values of millennials.

Crypto-based tokens

Stefano Bernardi from Mission and Market was at Nordic Next to talk about ICOs. They are token sales i.e. fundraising through an 'initial coin offering'. ICOs are soon going to surpass VC funding in the amount of $ being raised for these companies. Check out his presentation here.

It's a revolutionary way to fund companies that are building software. When buying the tokens, you are betting on that this software will be used in the future, creating a demand for the tokens which makes your tokens appreciate in value. The software runs on the tokens. The thing that makes this possible is the Blockchain technology that was first invented to run Bitcoin.

So what has Blockchain tech done so far?

Bitcoin is at least already disrupting gold, Ethereum is already at least disrupting fundraising for software and we'll see if and when software running on blockchain will start disrupting software. I think it might be that it does not. But blockchain will enable new kinds of software that doesn't exist yet.

One interesting example is which is a job market platform, built entirely on blockchain and using only cryptocurrency for payments. With 0% cut because it's all automated and there are no middlemen.

A very interesting thought here is that because of blockchain the application layer will not capture value as before, but rather the infrastructure layer. For example, a chat tool such as Whatsapp would not be that valuable but the protocol (http) would be the layer capturing the value through token value. It's because anyone could and would use the data on the imaginary 'blockchain of http' and therefore the app is not as important because the data is not owned by them but distributed on the blockchain.

There could for example be a version of Facebook where anyone has the possibility of building a new Facebook app and you can choose the one you like. And just choose to pay to use it, not worry about privacy and not see any ads. And you could choose to be in control of your own data.

So just go build a blockchain where people can store all their friend connections and be in touch in whatever way they want. You could probably start with pulling your phone numbers from your phone to get a good start and then just find 'friends of friends'.

So, the blockchain company in that case would be one that creates a blockchain which enables people to give apps access to their friend connections and the data those friends have shared. The more people would use it the more the value of the token appreciates so there's a nice network effect here. I'm sure someone is building that. I'd love to hear more about it!

AI that knows how to teach

Sana is a company that pulls in a large amount of question and answer data and from those is able to understand how learning evolves. It calculates the probability of you answering a question correctly based on your other answers, so it knows what you have to learn in order to master something... it's very interesting. Although to do real general learning about a topic you'd probably have to incorporate reading material, open ended questions etc. to really make it a learning machine.

Making learning faster and more engaging will have a huge impact.

Destroying the Friedman Doctrine

The Friedman doctrine is what has dominated business thinking for the past 40 years. It's the notion that the purpose of a company is to maximise shareholder value aka profits in money. In "Capitalism and Freedom" Friedman writes: "There is one and only one social responsibility of business – to use its resources and engage in activities designed to increase its profits so long as it stays within the rules of the game, which is to say, engages in open and free competition without deception or fraud."

However, the big thing happening now is that millennials demand more than the search for maximum profits. They crave a larger mission and impact from the work they do and the companies they work for.

It feels funny but a company (or actually the directors) can be sued for not maximising profits. If for example you could easily reduce costs by polluting but you choose not to pollute. Someone who can show that the decision reduces profits can sue you. A ridiculous thought. I think it's very clear that externalities such as pollution or human rights are not captured in all profit / loss calculations and therefore companies must also assess other factors than monetary ones. Especially in countries with less strict legislation. But that is the world that has been constructed.

Seth Bannon runs Fifty Years, a fund that invests in profit + impact companies. He says that 60% of millennials are going to switch jobs because their employers are not focusing enough on impact. So that's a real problem and a huge driver for companies to switch to impact+profit actions. Otherwise they risk losing their employees. Even director level employees are quitting.

I was interested to hear about how they assess whether a company is an impact company. The answer is that the company has to be solving one of UNs Sustainable Development Goals. Probably quite directly. We definitely need these companies and more entrepreneurs should aim to make a bigger dent in the world. However, I think every improvement has its place and capitalism works for that part. Often new discoveries lead to others so you need to be doing a lot of new things for the real innovations to come out. You can't always directly be solving a problem.

The best story about this is about books. Someone created books and then people noticed they couldn't see the text. So, lenses were invented. Then just playing around with lenses the microscope was invented. But who would have tried to invent a microscope? That was definitely not a 'UN development goal' of the time. Then because of the discoveries made with the microscope antibiotics were invented. Which has then impacted 'health' profoundly. But just trying to solve health would probably not have led to antibiotics.

(Fifty Years actually invests into these types of "groundwork". They call it "Impact Infrastructure")

These were just some of the things that I'm thinking about after Nordic Next. Would be great to hear your comments so please ping me at @rikuvs.

Special thanks to @Neilswmurray, @hash_tag_hoy ‏and all other organizers for Nordic Next.