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Blockchain technology to disrupt financial, legal fields

Technology policy expert Alec Ross predicts blockchain technology will remove 'enormous amount of friction' from legal processes within the next five years.

In 10 years, innovation that's now being nurtured and mined at companies all over the world will have led to enormous...

changes in how people live their lives and how companies operate, remaking the global economy. That's according to Alec Ross, former innovation adviser to Hillary Clinton during her term as U.S. Secretary of State, who lays out the thesis in his new book, The Industries of the Future.

According to Ross, a decade hence, robots will take care of the elderly, displace Uber drivers, release radiation inside the human body to treat cancer, and automate sedation of patients undergoing colonoscopies, among other tasks. Automation will kill many jobs but create other jobs as well as economic value.

Ross, a distinguished visiting fellow at Johns Hopkins University, said that advances in genomics will enable doctors to target cancer cells with unprecedented precision using personalized medicines, diagnose tumors from a blood test and predict who is at high risk of suicide with much better accuracy than current methods.

Meanwhile the technology underlying the cryptocurrency Bitcoin, blockchain technology, will greatly reduce the friction in financial and other transactions.

As the weaponization of code grows more lucrative and more destructive, cybersecurity will grow into a large industry.

And big data, he said, will eliminate language barriers and thereby accelerate globalization on a massive scale. Big data will transform consumer banking. It will also increase food production by improving agricultural techniques, which in turn promise a major reduction in air pollution.

I talked to Ross about what these developments will mean for CIOs and other technology leaders. 

This interview has been edited for length.

Alec RossAlec Ross

How should CIOs and other C-level execs prioritize all the technologies that you cover in your book? Are any more important than the rest?

Alec Ross: I think it really depends on which sector you work in, [but] one thing that any CIO -- anybody who is working at a senior level in IT -- broadly has to understand is blockchain technology. Bitcoin was viewed [initially as] a stateless currency, then it became a speculative asset, with wild gyrations in the cost of Bitcoin, so people looked at it as a spin of the roulette wheel. Now with the benefit of going on eight years of its existence, we've learned that the real breakthrough innovation of Bitcoin is the blockchain technology [on which Bitcoin is based].

In a blockchain-enabled marketplace, what today might be $12,000 or $13,000 in closing costs could be a $120 closing cost.
Alec Rossauthor, Industries of the Future

Blockchain technology is going to enable disintermediation in a great many fields that until this point have largely not been digitally disrupted. Blockchain technology ... could take an enormous amount of friction [out of] legal processes and legal costs. One person's friction is another person's profit. I also think that banking and financial services could be significantly changed by the integration of blockchain technology.

One thing that I predicted in the book, which is now happening: Goldman Sachs recently filed a patent for creating its own digital currency, which is really sort of a walled-garden use of blockchain technology, to settle foreign transactions and asset settlements, from stock sales to wire transfers and the like. Goldman Sachs is quintessential Wall Street. To see Goldman Sachs move in this direction I think portends a lot of what is to come.

You mentioned the blockchain in the legal field. What would that look like?

Ross: When my wife and I bought a home in 2014, the process was no different than when my parents bought a home in the 1970s. There was a lawyer, there were two stacks of legal files, each about 9 inches tall, there were about 50 signatures that had to be executed. There were closing costs of over $10,000. The whole idea of how we transfer property in the United States has not changed terribly over the course of a hundred years. What blockchain technology could do is bring five nines -- 99.999% -- assurance in transactions so that instead of having a guy sit at a conference table and have two 9-inch-tall stacks of paper beside him and charge over $10,000 in closing costs and spend two hours signing 50 documents, all of that could be done at the click of a button.

[That money doesn't benefit] either the seller or the buyer of the property. It's going to people who stay in between the seller and the buyer. So ... in a blockchain-enabled marketplace, what today might be $12,000 or $13,000 in closing costs could be a $120 closing cost. And what today takes six weeks could take six hours.

How far off in the future are you suggesting that that scenario will play out?

Ross: I think it'll be three to five years. There's a lot of investment by forward-leaning venture capitalists right now going into fields like this, into so-called smart contracts and other things. So the technology is being built, the companies are being formed, the partnerships are being executed. What they'll need is one to three years to productize, commercialize and go to market. And it'll then be three to five years for it to go mainstream.

So the closing process -- and all the expertise that now entails-- will become a commoditized service?

Ross: Yes. I think that that's right. On the one hand, [blockchain technology is] going to displace all of those individuals and institutions that previously provided settlement services. But what it creates is consumer surplus. If a series of banks, title companies and lawyers suddenly no longer benefit from $12,000 in closing costs, it certainly hurts those banks, title companies and lawyers, but by the same token you've created $12,000 of consumer surplus that benefits the buyer and seller of the house.

What should a CIO at a big legal firm be talking to the CEO or the managing partners about?

Ross: It's time for the geeks to educate the non-geeks about the changes to come. So in the same way that during the 1990s there were a lot of interesting conversations between technical staff and executive staff about this crazy thing called the Internet, so too today and tomorrow there need to be interesting conversations between technical staff and executive staff about tomorrow's technologies ranging from big data to ... blockchain technology.

During the 1990s, it was normal for CxOs to not have a computer on their desks. ... It wasn't really until 15 years ago that pretty much everybody at the top echelon of corporate America really understood the force and effect of digitization. Those who understood it earlier were able to adapt earlier and compete and succeed. Those who were slow, or who were late, tended to get eaten alive. So, I think a lot of the emerging technologies that are out there -- in particular big data -- the sooner that nontechnical executives choose to educate themselves about tomorrow's technologies, the better off their companies will be. Good stewardship inside a large enterprise today requires people to get outside of their natural comfort zone and geek out on some of what's to come.

In Part 2 of this article, Ross talks about the impact of cognitive robotics and the outlook for U.S. companies trying to compete on a global scale.

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