What inspiration does the leaked speech by former Google CEO Schmidt bring to the encryption industry?

Original author: Meng Yan, Co-founder of Solv Protocol

These days everyone is talking about Schmidt’s speech at Stanford. I think the most thought-provoking part of the whole speech is the comparison of artificial intelligence to electrification at the end.

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

Because he did not elaborate in the speech, so I specifically checked the relevant background. It is roughly like this: in the era of steam engines, a factory usually only had a centralized steam engine power workshop 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 shaft power transmission system. The sky axis is generally suspended below the ceiling of the factory building, so it is called the sky axis. It is driven by the centralized steam engine power room and rotates above the machine. 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 the electric motor first appeared, people simply replaced the original steam engine power center with an electric motor power center to drive the celestial axis. In other words, only the performance and efficiency of the power transmission system were changed, but not its structure. It was not until thirty years later that people slowly realized that electric motors could be made in various sizes and power, placed near machines and equipment for electric running, rather than relying on mechanical power to run. This is the correct way to use electric power. Schmidt believes that the trend of electric power towards distributed systems has triggered important organizational innovation, changing the relationship between various components, which has truly changed the world.

When it comes to this, Schmidt seems to have summarized a law of technological innovation leading to technical and economic changes. 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 the early stages, and it is still very centralized. In the later stages of the Schmidt phase, the application of AI will be decentralized, similar to electrification. AI models are widely distributed in various corners of computation, collecting data, making decisions, and executing tasks nearby. Only at this stage, how long will it take to go through this process? Maybe not thirty years, but it may take more than ten years.

I can’t help but think that if Schmidt is right, investors who are investing in AI now are really living 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.

Fundamentally, blockchain decentralizes ‘self-sovereign computing’ and ‘Trustworthy Computing’. Self-sovereign computing ensures complete control over one’s digital resources, including identity, data, assets, and computational processes. Trustworthy Computing guarantees fair, reliable, and trustworthy computation results to users, preventing malicious tampering and erasure. With these two components, critical calculations involving monetary value previously centralized in banks, third-party payment platforms, Social Web, and other centralized institutions can be decentralized into individual Smart Contracts or ZK programs. In abstract terms, this process is akin to the electrification phase, dispersing power engines from centralized power workshops to various locations and devices. It is evident that blockchain fully aligns with the Schmidt process and should represent the correct direction.

Second, even if it represents the right direction, it takes time to truly succeed. If Schmidt is correct, the application explosion of blockchain and Web3 should precede AI.

Third, the innovation of blockchain still needs to be based on solving users’ problems.

Since the Ethereum killer narrative has been embraced by capital since 2017, the most valued and followed innovative projects in the Blockchain are basically starting from solving the problems of blockchain professionals themselves, and forming a relatively dogmatic concept, which affects the valuation of the primary and secondary markets. Everyone is talking about the infrastructure story without considering the 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 nowhere to reason. It’s like you brag every day about how amazing the motor can be, how much the stock price of such an amazing motor should be worth, and so on, but you never talk to us about whether the motor is used for driving, drilling, or driving hard drives after it starts spinning.

The worst outcome is that after a whole decade, no real user base has been cultivated. The majority of participants in this industry are engaged in cryptocurrency speculation, not genuine users. Without users, there is no driving force or direction for innovation. This is the main reason why the current blockchain and Web3 are trapped in an innovation dilemma. To overcome 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 Web cannot solve or solve well, and need to be solved with the help of blockchain? I feel that there are very few people thinking about such questions now, and most projects revolve around some concepts and dogmas all day long.

Fourth, the ultimate goal is Token Economy. Schmidt emphasized that organizational innovation is ultimately driving productivity transformation. Token Economy is organizational innovation, the reconstruction of interpersonal relationships, and a new collaborative mechanism. It can be said that Token Economy directly addresses the core issue. What is the situation when Web3 reaches its ultimate goal? If it creates a more convenient and free payment and financial network, it is indeed remarkable, as Musk said, solving the payment problem with blockchain is already very useful. However, I believe this is just the foundation and not the most powerful part of blockchain. After the widespread use of blockchain-based payment and financial networks, the modes of collaboration between 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.

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