Bitcoin, blockchain, crypto currencies—the buzz around tech’s newest—and potentially most ambitious—venture is tangible. But the general knowledge of what exactly blockchain is, how it works, and its incredible potential, is falling short of its meteoric rise.
We sat down with Jonathan Johnson, a member of the Board Directors of Overstock.com, a company whose stock rose rose a great deal in 2017, thanks in part to its embracing blockchain technology following its early adoption of Bitcoin in 2014, and president of its blockchain investment subsidiary, Medici Ventures, to get his take on why blockchain is so important right now, and what it means for the future of business.
What blockchain is and how it’s redefining our concept of trust.
Blockchain is a technology that allows for you and me to exchange ‘assets’ without going through various trust intermediaries. Today on the internet, information flows almost frictionless and freely. But if you and I want to exchange a dollar bill, a stock certificate, or piece of land, we rely on middlemen—banks, brokers, insurance companies, or the government—to make it so you and I, who have never met, can trust each other in commerce.
Blockchain is trust technology that replaces all those middlemen, so that when I send you something digitally, you know you’re not getting a copy of it—like if I sent you an email or PDF where you’re getting a copy of an asset—but you’re getting the actual thing itself, something that can’t be replicated. I can send you title to my boat or my money without any friction.
Why you should think much, much bigger than Bitcoin when you think blockchain.
The biggest misconception for newcomers to this world is that blockchain is Bitcoin. Email is not the Internet—it was the first killer app on Internet technology. Well, Bitcoin, and other cryptocurrencies, are the first killer apps on blockchain. The underlying trust technology of blockchain that powers Bitcoin is where I see the biggest opportunity.
Today, the Internet touches and changes my life every day. Within five years, blockchain technology is going to be that way, too. There will be less chance of fraud, less cost, and less friction. We’ll re-humanize how we deal with each other instead of through governments and institutions. That’s the vision I have for blockchain.
Why—and how—Overstock.com became the first major retailer to accept Bitcoin, and how it’s changed their business forever
In the fall of 2013, my then teenage son was lounging around on the couch and asked me ‘Dad, when’s Overstock going to start accepting Bitcoin?’ I said, ‘I don’t even know what that is.’ He explained it to me and I started to research it. I didn’t realize that Patrick Byrne, our CEO, had been following Bitcoin for quite some time himself. In late 2013, in one of our executive meetings, someone asked about accepting Bitcoin. Both Patrick and I had been coming at this, unbeknownst to each other, and we both said, ‘Yes, we should do this.’
The week after Christmas, a couple of development teams locked themselves in a conference room, we slid pizza under the door, and on January 9, 2014, we became the first billion-dollar retailer to accept Bitcoin.
Three things excited us about the opportunity. First, at Overstock, we’re in the business of making it easier for people to buy from us. Whether it’s credit cards, PayPal, or crypto, we want to make it so that people can spend it on our site. Second, we’re always worried there’s going to be some kind of banking crisis. And third, we’re very pro-freedom, and Bitcoin is a very pro-freedom currency.
Today, we accept around fifty different cryptocurrencies, and we keep up to 50% of our crypto revenue in Bitcoin. Our crypto revenues has been running about $150k per week.
“I think blockchain will do for the transfer of assets what the Internet did for transfer of information.”
The vision of a better future, thanks to blockchain.
I think blockchain will do for the transfer of assets what the Internet did for transfer of information. It’s why Overstock established this subsidiary, Medici Ventures, that purchases ownership in companies that are advancing blockchain technology. Our vision—and we think this is not too audacious—is that we can change the world through advancing blockchain technologies that democratize capital, that eliminate middlemen, and that re-humanize commerce. So you and I can do business, one-to-one, almost like when we were grade school kids and we spit in our hands and shook on it, and that was the deal. We trusted each other. We think blockchain technology is that spit in the hand trust technology.
Where Medici Ventures is focusing its current blockchain investments.
We’re mostly investing today in pre-revenue or early-revenue companies. We look for a few things. First, we look for a problem being solved. A business isn’t a business unless it’s solving a problem that someone will pay for. Second, we look at the people. There are three groups of people we look for: great technologists, because we’re dealing in that space, great promoters who know how to sell and create buzz while also closing a deal, but the hardest thing to find is industry expertise. You and I could come up with an idea of how blockchain could fix voting, but we don’t deal with county clerks or those that run the voting. Cracking and disrupting an industry requires a level of familiarity.
There’s often the myth of the great idea is all you need. It might be interesting, but there are a thousand other ideas that have to be fixed for it to work. Everyone had the idea for the iPhone, but there were a thousand other ideas that had to happen to make it become a reality.
A snapshot of the companies Medici Ventures is currently investing in, and their potential to disrupt business as usual.
The first company we invested in is called tZERO. When you and I trade stock today, that trade is supposed to settle in trade plus two days (T+2), but we think trades should be completed at settlement, or T+0. This is a system where blockchain can make the trade the settlement and get rid of the layers of institutional friction.
Another is Voatz, which solves all kinds of problems around voting. There are so many different systems that can fail in the voting process, and at the end of the day, I really have no idea if my vote has been counted, or counted correctly. With blockchain, you can use a fingerprint or facial recognition in a cryptographically secure system. That’s technology replacing five or six trust institutions that routinely fail.
What’s on Jonathan’s reading list.
I’m a big believer in reading the newspaper every day. News is the lingua franca of business. If you’re not current, you’ll fall behind. I read the Wall Street Journal every day, cover to cover.
My favorite business book from last year was Thomas Friedman’s book, Thank You For Being Late. An Optimist’s Guide to Thriving in the Age of Accelerators. The book talks about how there are a lot of different ways to succeed, even with a slow and deliberate pace, in the age of accelerators. I view blockchain as one of the great accelerators of our time, and I want to thrive in that.
What it means to be a leader, especially in a landscape of dramatically advancing technologies.
I think people that are successful today and will be in the future are learners. E-commerce wasn’t a thing when I was in college. Blockchain wasn’t a thing when I was president of Overstock. To be a leader, you have to be a learner, because as technology advances accelerate, we have no idea what next year or the next decade holds. So good leaders are learners.
Where a lot of companies struggle is by over-articulating goals and constraints so that the outcome is pre-determined. There is no room for improvisation or learning. I use a military term: ‘commander’s intent.’ If the goal is to take the hill, let those on the ground improvise around a central goal, because they know the conditions on the ground better than the commanders that aren’t in the battle.
I also think good leaders are collaborators. One of the things we’ve done as Medici Ventures has grown is define our culture. I put together what I thought were a good set of core values, and I sent it out to everyone in the company. Over a series of meetings, we got to a vision that wasn’t just my vision, but it was the entire team’s vision. And, it was a lot better than my original. I found if I sit alone in my office and think great thoughts, they’re anything but. At Overstock, when I’d spent time in the warehouse, with customer support reps, or on trips with buyers, that’s when I learned what our business was really about and how things could be fixed. It’s important for leaders to talk to people that are on the knowledge frontier in their organization. That’s where you learn the most.