Of Telegraphs and Blockchains

We have truly entered the disillusionment phase of the blockchain hype cycle with several outlets such as Gartner’s writing about “blockchain fatigue”—although as with so much written about blockchain, the promise of fatigue is forecast some years into the future.

The central argument for the disillusionment with blockchain centers around the fact that there has yet to appear a business model that makes it worthwhile. Who pays for maintaining it? How does that get purveyed into profit? With so many players with diverse needs, who sets the standard for how much and what kind of information requires blockchain transparency?

All this presumes that the complete transparency possible with blockchains is even a good idea. Has anybody considered how having every action observed in real time will impact the behavior of suppliers and customers? A supplier who knows a customer will call within 30 seconds of an unexpected change might be less willing to innovate and try new ideas; certainly if contracts reward certain behaviors, they will have less incentive to try to change processes when that means that potentially dozens of other players must be coordinated with, and unexpected behaviors might be punished before their consequences can be appreciated. Yes, that’s a bit extreme, but we have all seen such “groupthink”.

I see a parallel to the early days of the telegraph. The first working telegraph system and book that hyped telegraph’s potential were authored by Francis Ronalds in 1816, yet the first commercially successful telegraphy company didn’t appear until 1837, and the first trans-Atlantic cable completed in 1866. This period of half a century of development exhibited struggles to find a business model to keep telegraphy in business.

Telegraphy meant that information finally broke its ties to physical transportation, and the world could be connected in real-time for the first time in human history. Railroads served as a key early market for telegraphy yet it was to be the news and information industries that played a key role in making telegraphy ubiquitous. The Associate Press is a great example of an organization that pooled resources in order to make information affordable to all newspapers.

Blockchain seems likely to develop in much the same way, as major shippers and 3PL’s provide an early market. Eventually, industry cooperatives analogous to the Associated Press will arise as groups of companies in key industries develop specialized “knowledge management” strategies. They will target industries where information needs are largely standardized, or at least specifiable.

The point is that getting blockchain right will generate tremendous rewards and share risks across globally spanning supply chains—getting it wrong may stifle innovation and erode trust. Companies are discovering that it’s hard to create a coherent blockchain ledger when you don’t know who needs to participate and what needs to be in the ledger.