Here is a text of my speech to honors students at the University of Wyoming’s College of Arts & Sciences Honors Convocation on October 19, 2018. I’m a proud alumna of the school, which taught me “systemic thinking.” Satoshi Nakamoto, the inventor of Bitcoin, is one of the most important systemic thinkers of our time.
“Prepare for Complete Living” is the motto of UW’s College of Arts & Sciences. It’s apt, because UW taught me not only how to think, but how to be what I call a “systemic thinker.” The world needs more cowboys, and the world needs more systemic thinkers too.
You become a systemic thinker when you learn to search for patterns—to spot connections others may not, to work across disciplines and to fight the natural and cultural tendency to specialize narrowly. UW taught me how to do these things, and for that I’m grateful both professionally and personally.
To this day, I saved notebooks from 2 classes at UW and both remain on my bookshelf 28 years after graduation. One was called “Creative Impulse”—a class in the English department taught by Professor Ric Reverand. In a world that tends to specialize—to think in verticals such as history, art, music, literature, architecture, dance—the Creative Impulse class studied horizontals, examining all of these verticals together but during specific time periods. And guess what? Patterns observable in one of the verticals showed up in other verticals during the same time periods. For example, after the chaos of medieval times, during which architecture was sometimes haphazard and random, the Renaissance ushered in symmetry and order—almost a throwback to classical antiquity.
In Creative Impulse we traced these orderly patterns across the verbal symmetries of Chaucer’s Canterbury Tales, the design symmetries of Michelangelo’s Laurentian Library and the spatial geometry of Raphael’s “School of Athens” and Da Vinci’s “Last Supper.”
Next came the Baroque period. As the world became wealthier, thanks in large part to the spread of the Medici family’s Renaissance inventions of double-entry bookkeeping and letters of credit, Baroque excesses began to emerge. Lush detail covered every inch of painting and sculpture; architecture became grandiose; flashy gold leaf dominated design, and music crammed sometimes too many notes into short bursts of harpsichord glee. Baroque excesses were visible across all verticals during the time.
The Creative Impulse class, more than any other, trained me to notice those patterns. I would later realize that this way of thinking—what I call systemic thinking—would help me figure things out in differentiated ways.
Perhaps the greatest systemic thinker of our time—a true polymath—is Satoshi Nakamoto, who released the Bitcoin white paper almost exactly 10 years ago, not coincidentally right in the midst of the financial market meltdown. Satoshi’s invention was cross-disciplinary, solving a computer science problem via economic and behavioral incentives. I believe Satoshi’s invention set in motion major changes that will make all of our lives better.
But before I speak about bitcoin, let me define the term “blockchain.” A blockchain is a new type of database technology. Speaking at a high level, a blockchain allows multiple parties to see the same data at the same time and trust that it’s valid. Again, multiple parties can see the same data at the same time and trust that it’s valid. A blockchain is a “golden copy” of information upon which all users can rely, and in that sense it’s shared IT infrastructure.
What problem does blockchain technology solve? Expressed in practical terms, on the one hand, blockchain solves the duplication/reconciliation problem—when parties don’t trust each other, they need to keep their own copies of data and reconcile them. Expressed in philosophical terms, on the other hand, blockchain solves the trust problem. To establish trust, today we use an army of auditors, accountants, trustees, lawyers, transfer agents, registrars, county clerks, asset custodians and myriad other forms of third-party validators, and sometimes we throw in a central counterparty to stand in between, and then we duplicate and reconcile the same data across each of these parties. Until blockchain came along, there was no avoiding all this—it was the cost of establishing trust. But it’s a tremendously inefficient and resource-intensive way to create trust. Blockchain will streamline these processes massively. It’s a cheaper way to create trust.
All true blockchain systems are decentralized. This means there is no system administrator. There is no gatekeeper. There is no central target for hackers to attack.
Don’t worry if you’re still a bit fuzzy on what a blockchain is. I’ve found it takes repetition and time to grasp it, and I’m still learning about it too, several years into studying it. Some of you may find the analogy to Google Docs helpful. When you use Google Docs to write a term paper, you can share the same document with multiple parties at the same time—you can see your colleagues editing in real-time. But there’s a problem. Google controls your data, and you have no way of knowing whether Google tampered with it. A blockchain is “like Google Docs but without Google”—because no party has a controlling role in a true blockchain. No one owns the network because every participant in the network owns it.
Now let’s talk about Bitcoin, which was the first blockchain. Satoshi Nakamoto actually didn’t invent anything new in 2008. Rather, Satoshi combined several existing advances in a way no one had combined them before, and the advances cut across disciplines—spanning math (i.e., cryptography), computer science (i.e., peer-to-peer networking) and economics (i.e., game theory). The use of game theory was Satoshi’s real genius—Satoshi reinforced the technology with asymmetric incentives. For example, it’s expensive to add transactions to Bitcoin’s ledger, but cheap to verify them once they’ve been added—so it’s very easy to enforce property rights within this system. It’s prohibitively expensive to attack the Bitcoin network—it would cost billions just to re-write this morning’s transaction history—but cheap for individuals to participate in the network by simply downloading the software to become a network node.
But most importantly, unlike every other form of money used in human history, growth in the value of bitcoin doesn’t cause more bitcoin to be produced. Growth in the value of gold causes more gold to be mined or growth in the value of the dollar enables the Federal Reserve to print more of them. Rather, growth in bitcoin’s price ONLY makes the network more secure. There will never be more than 21 million bitcoins, regardless of how high its price goes. As more people join the Bitcoin network, it simply becomes more immune to attack.
And Bitcoin has never been hacked successfully—it is almost certainly the most secure IT system ever built. Wait, you might be thinking, what about the hacks I’ve read about? Those hacks happened within insecure applications built on top of the Bitcoin blockchain. The underlying Bitcoin blockchain itself—the base ledger layer—has never been successfully hacked. And it’s worth $113 billion, so there’s quite a hacker’s bounty! Bitcoin’s success from a cybersecurity standpoint is even more notable when you learn that Bitcoin is not protected by a firewall. It lives in the wilds of the Internet and hackers constantly try but fail to penetrate it. Why? Remember, Bitcoin works because it’s a beautiful balance of technology and economic incentives—hackers would spend a lot more money to hack it than they would gain from doing so.
It took a systemic thinker—with top-notch skills in cryptography and computer science AND a keen understanding of game theory, monetary history and human behavior—to concoct such a beautifully-balanced system. And in doing so, Satoshi solved a problem that the computer science field had tried to solve for decades, called the Byzantine Generals Problem. Put simply, how would generals fighting on a Byzantine battlefield know that messages they received from other generals during battle weren’t tampered with during their journey across the battlefield? This was considered by many to be an unsolvable problem in the computer science sub-specialty of distributed systems, but Satoshi solved it. Perhaps if the computer scientists had spent more time talking to economists and behavioral scientists all along, it might have been solved a lot sooner!
Many people ask how I came across bitcoin, and I must credit my training in systemic thinking, mostly at UW, with why I found it in 2012 as well as how I fairly quickly came to understand its historical significance.
The systemic-thinking journey that ultimately brought me to bitcoin in 2012 began in the heat of the financial crisis, during the fall of 2008. I was asking the big questions—why did the entire economics profession miss seeing the financial crisis coming? Why was there such a cluster of errors? So many businesspeople made the exact same error of financial calculation, in the same direction, and at the same time—WHY? And then I spotted a big contradiction. Treasury Secretary Tim Geithner admitted during a PBS interview that the Federal Reserve had held interest rates too low, which was a direct cause of the crisis. But then, in a different interview, he was urging the Fed to lower interest rates even more. Geithner’s logical inconsistency really got me digging. I devoured a wide range of alternative schools of economic thought and—importantly—allowed myself to question everything I’d learned in macroeconomics, and to see the flawed premises of mainstream macroeconomic thought. Most economists today still don’t see the contradictions in their theories and haven’t been held responsible for missing the financial crisis so badly!
But, as it turns out, there were a handful of economists who accurately predicted the financial crisis in 2008. Most of them had something in common—they were adherents of a somewhat-obscure school of economic thought that traces its origins to the Scholastics working in Salamanca, Spain during the Spanish Golden Age and then wound its way via the Hapsburgs into Austria. It’s known as the Austrian School of Economics, and it’s not well-known—in fact, in that 2nd class notebook from UW that still sits on my bookshelf, which was the History of Economic Thought, the Austrian School wasn’t covered. But I would later find it along that journey to figure out the financial crisis, and it was through Austrian School circles that I found bitcoin in 2012—thankfully, much earlier than most.
The gist of my quest to understand what really happened during the financial crisis is this: the status quo financial system was inherently unstable and unfair in 2008. It still is today. Most Wall Street people are ethical and well-meaning, but most are not systemic thinkers—they stay in their narrow swim lanes and can’t see that today’s Wall Street system is unethical at its foundation. Until bitcoin came along, all of us were trapped into using Wall Street’s system and storing our savings in it—we had no choice. But, thanks to bitcoin and the further innovations it has spawned, each of us now has the option to opt out of the status quo system with some of our wealth, if we choose to. I make no recommendations here, other than to encourage you to do your own homework. There are thousands of cryptocurrencies and securities are now beginning to be issued on blockchains—I’m excited about the financial fairness implications of all this! But do your homework. Managing money is one of life’s biggest challenges, and there’s no substitute for educating yourself. The amount of materials available to you is vast, and most are free.
I was encouraged to see the results of a recent Coinbase survey of college students, which found that 18% of you already own some cryptocurrency. That same survey, incidentally, found that 34% of computer science students were interested in studying blockchain technology, but even more social science majors—47%—were interested in studying blockchain. I think you social science majors are onto something important! The UC Irvine professor who conducted the survey said, “Students today are really thinking deeply about economic issues and alternative economic futures.”
And why wouldn’t you? Each of you was born into thousands of dollars of debt you implicitly owed from the moment of your birth—and that doesn’t even include the student loan debt many of you borrow for higher education. And you recognize that centralized institutions everywhere—from Silicon Valley tech giants, to TBTF banks, to giant healthcare bureaucracies—have abused your trust. Your generation got a raw deal, but I have good news for you. Blockchain technology is both a reaction to and a solution to these problems. It’s about decentralization—networks with no gatekeepers, networks based purely on voluntary consent, networks governed by the laws of math rather than the laws of man. I believe a big power shift away from centralized institutions has begun, and it makes me optimistic.
You may not realize it, but Wyoming is a leader in blockchain technology. The legislature passed 5 bills during the 2018 session enabling the technology and paving the way for companies to move to Wyoming or domicile here. As a thank-you to Wyoming, the blockchain industry sponsored WyoHackathon on campus last month. A hackathon is a software competition, and it attracted some of the most successful blockchain luminaries and more than 300 competitors to the Fieldhouse. They wouldn’t have come here had Wyoming not chosen to lead in this field, and had UW not already been teaching blockchain classes. As the billionaire co-founder of the Ethereum blockchain said, “There’s no reason that the next Google can’t be built” in Laramie. He’s right. Sponsors donated prizes worth more than $110,000, and I was especially tickled that a team of 3 high school students from Shoshoni was among the winners. As their teacher said, they barely understood what blockchain was before the hackathon, and now all of them plan to pursue careers in the field—and will be mentored by a team of engineers based in Switzerland and Slovakia. From Switzerland and Slovakia to Shoshoni—I love it! Something really special has begun here in Wyoming! It has been a labor of love to take this year off—to work as a volunteer—on these “passion projects” for the state and university to which I owe so much!
Before closing, I must take a moment to honor one of Wyoming’s pioneering women, Thyra Thomson, for whom this honors convocation is named. She was a grande dame and I had the honor of serving on the A&S Board of Visitors with her for many years. She was Wyoming’s first female secretary of state, serving from 1963-1987. When I asked her how she ended up in that role, I expected her to give an answer that reflected the pioneering nature of her accomplishment and her fight for equal pay for women in the 1970s, but instead her answer took me aback because it didn’t fit that narrative. She told me she did it out of necessity—because she was widowed in 1960 at the age of 41 and had 3 children to raise as a single mother. She embraced her circumstances and became a Wyoming legend—elected 6 times by Wyoming voters and serving as acting governor on several occasions.
And there’s even a blockchain connection. During her tenure as Secretary of State, Wyoming was the first state to create a new form of business entity—the legal liability company—in 1977. That changed Wyoming and the business world for the better. Wyoming’s leadership in LLCs is one of the important building blocks that made it easy for Wyoming to take the lead in blockchain. Boy, do I wish Thyra were alive to see that Wyoming’s Secretary of State office will probably be the first in the US to register LLCs on a blockchain!
The A&S College benefited greatly from Thyra’s support as well as her longevity, as she lived to age 96 and passed away just 5 years ago. She attended Board of Visitors meetings almost until her death, and her son Bruce remains active on the Board today.
Let me tie the story about Thyra back to my point about systemic thinking. One of the benefits of disciplining yourself to think this way is that you question your own assumptions and biases and open yourself to connections and layers you may not have seen before. That is, I believe, what “Complete Living” means.
To illustrate, Wyoming—the Equality State—has a storied history of advancement of women—the first woman governor, the first woman to vote, the first woman justice of the peace, the first all-woman jury, the first woman bailiff, and of course, Thyra’s story. But only years later did I understand the nuances. Just as Thyra became a pioneering woman not so much as a statement about gender but because of necessity, there’s more to the story about how Wyoming became the “Equality State.” You see, Wyoming risked not becoming a state due to its insufficient population—it needed to attract more citizens, so when it became a territory in 1869 Wyoming’s men decided to give women suffrage as a strategy to attract more women to move here. But that wasn’t all—for some legislators, there were racial motivations to ‘balance out’ the impact of the state’s new black and Chinese voters, who had recently gained the right to vote. For other legislators, there was the practical reality that railroad construction and the gold rush had left 6 adult men living in Wyoming for every 1 adult woman. Some legislators even thought that suffrage would be temporary, and the legislature actually repealed suffrage two years after it passed—though the governor vetoed it, and his veto stood, and that was that. It turns out only a small minority of legislators approved suffrage because it was the right thing to do. Regardless of the complicated back story, the strategy worked—Wyoming became a state 21 years later, in 1890, and rightfully earned its status as the Equality State.
You see, very few things in life are black and white—there are layers, nuances, hidden patterns to most things you will encounter in life. It’s true that Christopher Columbus was one of the great explorers of history who single-handedly changed the course of the world, but it’s also true that he was an enabler of slavery; by most metrics Bill Clinton was a successful president, but he was also a sexual predator—both realities co-exist, in both cases. As you go off into the world, I hope your UW education allows your mind to be open to seeing these layers, even if they lead you to unpopular views, and to spotting how the puzzle pieces fit together in ways others may not. That is what critical, systemic thinking is all about.
Best wishes to all of you and thank you again to UW for the kind invitation to speak to you today!
Bitcoin/blockchain, ex-Wyoming Blockchain Task Force, 22-year Wall Street veteran.
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