What inspiration does Schmidt's leaked speech have for the Blockchain?

These days, everyone is talking about the leaked speech by Eric Schmidt at Stanford. I think the most thought-provoking part of the speech is the comparison between artificial intelligence and electrification at the end.

Schmidt mentioned that it took a full thirty years for people to realize the fundamental changes brought about by this technology after the appearance of the electric motor. It can produce electric motors of various sizes, place them everywhere, and thereby decentralize power.

Because he did not elaborate on the speech, I specifically looked up the relevant background. It’s roughly like this: in the era of steam engines, a factory usually only has a centralized steam engine power plant to provide all the power. In order to transmit power to various workshops and adapt to the different power needs of different processes, factories usually install a trap sky axis power transmission system. The sky axis is generally suspended under the ceiling of the factory building, so it is called the sky axis. It is driven by the centralized steam engine power plant and rotates above the machines. The machines below the sky axis transmit power to the machines through gears and belts, as shown in the figure below.

Schmidt said that when electric motors first appeared, people simply replaced the original steam engine power center with an electric motor power center to drive the celestial axis with the electric motor. In other words, only the performance and efficiency of the power transmission system were changed, but not its structure. It wasn’t until thirty years later that people slowly realized that the electric motor could be made into various sizes and powers, placed near the machines and equipment, and let the electricity run instead of relying on mechanical power. This is the correct way to use electric power. Schmidt believes that the trend of electric power towards decentralization has led to important organizational innovation, changing the relationship between various components, which has truly changed the world.

When it comes to here, Schmidt seems to have summarized a law of technological innovation leading to technological and economic change. First, there is simple efficiency innovation, replacing key components without modifying the structure. Then structural innovation begins, from centralization to Decentralization. Then this kind of structural innovation leads to organizational innovation, bringing about a huge increase in productivity. Let’s call this process the Schmidt process.

According to the Schmidt process, AI is still in its early stages and very centralized. In the latter half of the Schmidt stage, AI applications will become as decentralized as electrification. AI models will be widely distributed in various corners of computation, collecting data, making decisions, and executing tasks locally. How long will it take to reach this stage? Perhaps not more than thirty years, but probably at least ten years.

I can’t help but wonder, if Schmidt is right, then the investors who are investing in AI now are truly Lei Feng.

So what about blockchain?

After reading Schmidt’s speech, I think there are four inspirations for the blockchain industry.

First, following Schmidt’s thinking, blockchain and Web3 should represent the right direction.

Essentially, blockchain decentralizes ‘self-sovereign computing’ and ‘Trustworthy Computing’. Self-sovereign computing ensures complete control over one’s digital resources, including identity, data, assets, and computing processes. Trustworthy Computing guarantees fair, reliable, and trustworthy computation results, immune to malicious tampering and erasure. With these two elements, critical financial value calculations previously centralized in banks, third-party payment platforms, Social Web, etc., can be distributed into individual Smart Contracts or ZK programs. In abstract terms, this process is akin to the electrification era, dispersing power engines from centralized workshops to various locations and devices. Therefore, blockchain fully conforms to the Schmid Process and should represent the correct direction.

Second, even if it represents the right direction, it takes time to achieve real success. If Schmidt is right, the explosion of blockchain and Web3 applications should have happened before AI.

Third, the innovation of blockchain should still be based on solving user problems.

Since the Ethereum killer narrative was embraced by capital in 2017, the highest-valued and most followed innovative projects in the blockchain are basically based on solving the problems of blockchain professionals themselves, forming a rather dogmatic concept that influences the valuations of the primary and secondary markets. Everyone talks about infrastructure stories detached from users, and the more projects like this, the more they are sought after in the primary and secondary markets. Projects that start from the user’s perspective are ignored and have nowhere to reason. It’s like you guys bragging about how amazing an electric motor can be, how much the stock price should be worth, etc., but never talk to us about whether the motor is for driving, drilling, or powering hard drives.

The worst consequence is that after a whole decade, a real user base has not been cultivated. The vast majority of participants in this industry are engaged in Cryptocurrency Speculation, not real users. Without users, there is no driving force or direction for innovation. This is the main reason why the current Block and Web3 are in an innovation dilemma. To break free from this dilemma, acquiring and cultivating users is the top priority. Everyone should consider: what problems do users want to solve with money that the existing Internet and Social Web cannot or cannot solve well, and need to be solved with the help of the Block? I feel that there are very few people thinking about these questions now, and most projects revolve around some ideas and dogmas all day long.

Fourth, the ultimate goal is Token Economy. Schmidt emphasizes that organizational innovation is ultimately driving productivity transformation. Token Economy is organizational innovation, the reconstruction of relationships between people, and a new collaborative mechanism. Token Economy directly addresses the core issue. What will be the situation when Web3 reaches its ultimate goal? If it creates a more convenient and free payment and financial network, it is certainly impressive, as Musk said, blockchain is already very useful in solving payment problems. However, I believe this is just the foundation and not the most powerful part of blockchain. After the widespread adoption of blockchain-based payment and financial networks, the modes of collaboration between people and people, people and AI, and 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 Token Economy, which is the ultimate goal of blockchain.