What can Schmidt’s leaked speech teach us about blockchain?

Author: Yan Meng @ Solv Protocol | ERC-3525, Source: Author Twitter @myanTokenGeek

These days, everyone is talking about Eric Schmidt's leaked speech at Stanford. I think the most thought-provoking part of the entire speech is at the end, which compares artificial intelligence with electrification.

Schmidt mentioned that after the emergence of electric motors, it took people a full thirty years to realize the fundamental changes brought about by this technology. Electric motors of various sizes can be made and placed in various places, thereby decentralizing power.

Because he did not elaborate in his speech, I also went to check the relevant background. It's roughly like this: In the steam engine era, a factory usually had only one centralized steam engine power workshop to provide all the power. In order to transmit power to various workshops and adapt to the different power requirements of different processes, the factory usually installed a set of sky axis power transmission system. The sky axis is generally suspended under the ceiling of the factory, so it is called the sky axis. It is driven by the centralized steam engine power room and rotates above the machine. The machine under the celestial axis transmits power to the machine through gears and belts, as shown in the figure below.

Schmidt said that when the electric motor first appeared, people simply replaced the original steam engine power center with an electric motor power center and used the electric motor to drive the celestial axis. In other words, it only changed the performance and efficiency of the power transmission system, but did not change its structure. After thirty years, people gradually realized that motors can actually be made into various sizes and powers, and put into machines and equipment nearby, so that electricity can run instead of mechanical power. This is the correct way to use electric power. Schmidt believes that the distribution of electric power has triggered important organizational innovations and changed the relationship between various components, which has truly changed the world.

Speaking of this, Schmidt seems to have summed up a process law of technological innovation triggering technological and economic changes. First, there is pure efficiency innovation, replacing key components without modifying the structure. Then structural innovation begins, from centralization to decentralization, from centralization to decentralization. Then this structural innovation triggers organizational innovation, bringing huge productivity improvements. We might as well call this process the Schmidt process.

According to the Schmidt process, AI is still in its early stages and is still very centralized. In the second half of the Schmidt stage, the application of AI will move towards decentralization, just like electrification. AI models are widely distributed in all corners of computing, and AI collects data, makes decisions, and executes data nearby. Only at this stage, how long will it take to reach this process? It may not take thirty years, but I am afraid it may take more than ten years.

I can't help but think that if Schmidt is right, then the investors who invest in AI now are really Lei Feng.

So what about blockchain?

I read Schmidt's speech and think it can be inspired by four points for the blockchain industry.

First, according to Schmidt's ideas, blockchain and Web3 should represent the right direction.

In essence, blockchain is the decentralization and decentralization of "autonomous computing" and "trustworthy computing". Autonomous computing is the ability to fully ensure the control of one's own digital resources, including identity, data, assets and computing processes. Trustworthy computing is the ability to guarantee to users that the results of the calculation are fair, reliable, trustworthy, and will not be maliciously tampered with or erased. With these two things, we can disperse the key calculations involving the value of money that were originally concentrated in centralized institutions such as banks, third-party payment platforms, and social networks into smart contracts or ZK programs. In abstract terms, this process is like dispersing the power engine from the centralized power workshop to various locations and devices in the electrification stage. It can be seen that blockchain is completely in line with Schmidt's process and it should represent the right direction.

Second, even if it represents the right direction, it takes time to really succeed. If Schmidt is right, the application of blockchain and Web3 should have exploded earlier than AI.

Third, the innovation of blockchain should still start from solving users' problems.

Since the Ethereum killer narrative was sought after by capital in 2017, the most highly valued and most watched innovative projects in the blockchain have basically started from solving the problems of blockchain professionals themselves, and formed a set of quite dogmatic concepts, which have influenced the valuation of the primary and secondary markets. Everyone is talking about the big story of infrastructure without considering users. The more such projects are, the more they are sought after in the primary and secondary markets. Some projects that start from the user's perspective are ignored and have no place to argue. It's like, you brag every day about how awesome the electric motor you can make is, how much the stock price should be worth for such an awesome electric motor, etc., but you never talk to us about whether this electric motor is used to drive a car, drill a hole, or drive a hard disk after it turns.

The worst consequence is that after a full decade, no real user group has been cultivated. Most of the participants in this industry are speculators, not real users. Without users, there is no motivation and direction for innovation. This is the main reason why blockchain and Web3 are currently in an innovation dilemma. To get rid of this dilemma, acquiring and cultivating users is the top priority. Everyone should think: What problems are users willing to spend money to solve, but the existing Internet and social networks cannot solve them or solve them poorly, and need to be solved with the help of blockchain? I feel that few people are thinking about such problems now, and most projects are circling around some concepts and dogmas all day long.

Fourth, the end game is still the token economy. Schmidt emphasized that organizational innovation is the final driver of productivity change. The token economy is organizational innovation, the reconstruction of the relationship between people, and a new collaboration mechanism. It should be said that the token economy is directly aimed at the core problem. What will Web3 look like when it reaches its end game? If a more convenient and freer payment and financial network is created, it is certainly amazing. As Musk said, blockchain is already very useful if it can solve the payment problem. However, I think this is just a foundation, not the most powerful part of blockchain. When blockchain-based payment and financial networks become popular, the mode of collaboration between people, people and AI, people and machines, the structure of digital economic organizations, and even the social structure of the real world will undergo fundamental changes. This is actually the token economy, and this is the end of blockchain.