Day 1: Richard Olsen (Lykke)

Transcript

[Music] next up and I'm gonna try and pronounce this correctly Luca CEO Richard Olson Richard now to be very honest I'm very surprised that anyone is still here because the weather outside is magnificent it's beautiful to go and have a swim in the lake and thank you for the invitation to be able to speak the public as I've experienced it in the audience is very varied with some of you

come out of academia others are really kind of eager entrepreneurs trying to build something and yeah there are others very few want to invest some money and then there yet other people who you know still contemplate what is it's all about what I find absolutely remarkable is when going through the different talks and hear what people say in the hallways is the huge diversity of views it's by no means so clear what the future is all about even though everyone says I know so the key thing is with each one of you some more some less have

a certain vision of the future and how can we turn this vision into real reality so I'll tell you what I see so first of all I think few of us fully appreciate the extent to which the reality of our society as we experience it every day has been shaped and formed by the post you know where him soaked and actually the whole history of Switzerland has to do that the kind of Princess of Austria the Hopps bordered

you know kind of they tried to conquer Switzerland and actually they wrote Switzerland valleys and actually the problem was when there is a small lake and you tried to ride through with your horses farmers could just have wooden logs and kind of let them roll down than the slope and obviously the what they had to dismount and when they had to dismount you know people could go with dagger and you know make their life horse but today this is why Switzerland is here this accident of topology and this is an emergent property as Tomas would say but now in a much more subtle

way are you aware that all the business processes which we today have are shaped by the fact that the postman physically had to deliver a letter so the banks have an infrastructure that assumes that every kind of transaction and it's confirmation slip can be brought to the people person who had made the transaction but not with an SMS or whatsapp message but by regular old-fashioned mail so therefore the all

the transaction processes have a time line which means two days but not just normal two days but actually two business days now another thing also which is accident of history is we have to use Swiss francs here in Switzerland or Europe in and the European Union or dollars but the big thing is that because we're tied to those we don't have the degree of freedom so now why is this so relevant because blockchain creates as we have heard a kind of global notary service however we call it

now when you think about your dreams of the future don't think of what blockchain can physically do today because whatever you want to build or do will take one year two years three years and in the meantime blockchain technology will have evolved a great deal so I think key when we think about the future and your vision of how it to be implemented is that you have to be aware that the underlying blockchain technology is evolving at a rapid pace and now I think a big mistake which people can do is that they themselves start to think of

which solution of blockchain will come in sorry to say the Bitcoin blockchain a theorem these are prototypes the real thing is up to come but now what is going to happen I argue that literally everything will be tokenized so if we today have the discussions about Bitcoin a theorem etc some icos no think that literally every asset every claim will have a token so you have a mapping one to one of everything

of the real life and any contractual obligation to a token and obviously you can have different types of block chains so actually the same asset might have different tokens representing that asset one on Bitcoin blockchain slightly less likely one or theorem one on es so there'll be different tokens for the same underlying asset but now what is I think the big missing gap which we today have you see exchanges popping up around the world this is very

much similar to when the internet started you know every small company said oh I'll set up my small Internet I think we'd like to understand our there is a lack of understanding the degree of interconnectedness of our modern society that like if you look at my shirt it's unbelievable how many currency transactions are involved in just producing a shirt the coltan the machines the not the kind of buttons there there are the so many steps completely global and what happens when you have to kind of move one thing to

another in exchange there is a business transaction and I think we have to understand that there will not be n separate markets but actually will envisage and have one global market just like the internet itself and I think this is a very important point for all of us to account for because if there is one global internet they'll not be n times that you'll be ordered on boarded you'll be on board at once so it's there must be huge economies of scale now what is the other decisive change I mean we

know that in banking banks play a huge role in modern society I mean like 7 percent of GDP is just the financial industry and the profits which they generate and at least in Switzerland every Swiss is really slightly envious of the private bankers because you know each one of us would like to be a private banker but the future is in my view that each person each one of us has his own smartphone and his own smartphone is easy own personal private back so a complete regime change it's not that you go to a bank but you're the

banker and what does that mean for me if you're the banker is that you can issue your own token you can actually get a loan provide loans do all your investments but now I think something which people are not fully aware of is do you want to do it in a very complicated fashion now it has to be super super easy in my view the world has to be tenderized it's all like

tinder has to be really seamless and if it's that way then people will really start to use it a key question you might have okay this sounds fancy you know how personal bank why should actually people ever try to take advantage to the bank what is the unique selling proposition which will actually make the people switch over in the new digital world of wallets there is one feature which is quite unique for example I have a car my I own a very old car or old Volvo but even an old Volvo if you have it as a digital token

has because it's you know soon a kind of historic car has a kind of market value now of my Volvo if I value it at three thousand Swiss francs the first 500 francs if I take a loan out on these first 500 francs is that a risky loan it is obviously not the idea in this digital world is that I can get ultra low-cost loans as if I were a central bank what we know today is that the people in the street they all pay huge fees in the new digital

world no each one of us has his private bank and take up alone which is if he doesn't overspend for the first 10% of his assets gets super low interest rates so I would argue that this is a key reason why this new technology will spread very fast so I think what's essential in this new environment is that kind of integration if you are a user you don't want to have n different services everything should be out of the same kind of look and feel and the reason is if that is not the case it's

too confusing so in this new environment it's key to have a spotless user experience which makes things not in end clicks but to clicks and this necessity to provide user interface which incredibly simple that's not something which comes off easily so there is one very serious issue in this new world is that we deal with money and whenever we deal with money I mean you know you see it in some of people's eyes you know

kind of you just see a dollar sign one gets incredibly greedy it's very hard not to be greedy and because of that actually kind of there'll be it and is a lot of abuse so this is why the regulators say oops be careful you're not allowed to do certain things so for this reason it's I think the future is regulation is power of the game but the question is how will this old world with certain regulations and the new worlds how will it kind of merge the first thing which I find is very important to

mention is the new world does not need a change of regulation within the existing legal framework we can do everything that we want the bad news is it's not exactly cheap and actually try time-consuming so like we at Lucca I mean just to get fame irregular we've been working on it literally for one-and-a-half years I guess we have spent just in straight legal fees seven hundred thousand Swiss francs and we get a discount so first the existing regulatory framework can work but there is a second

thing and the second thing is that this regulatory framework is not really suited for the new world just think of all the icos how can you screen there's ratios and make sure that there is no kind of like you know that the scammers the pumpers and dumpers are filtered now Airbnb has done a very good job for accommodation because if you think about it when you go and want to rent a room in an off place it's really not fun if you're kind of robbed when you get there so the peer review system which Arabi has implement is incredibly effective so we have to

embrace similar mechanisms to introduce sanity in this new ICO emerging market now how will the regulator's start to embrace that it will be very easy the company which is highly successful has 10 million users they'll walk into the regulator and say you know by the way we have a large community and we'd like to be regulated and then what the regulator will say how do you do business please explain it to me and then how they do business will become the new regulation so I think there is one point which I

find is very very important is that we shouldn't map the old world one-to-one into this new world there is a lot of talk about the legal you know kind of you know kind of legality framework but there should be a lot more talk about reinventing law and then financial instruments in this new context so I've said that we have to token assets token share and then in the sense I'm sure of you you think of how here is the old share certificate and now I want to have this share certificate on the bhakti but

actually if you try to do that then you've run into a long list of problems because you try to do this real share certificate and if you go to the legal text there is some very specific requirements I propose let's reinvent and the reinvention is that we say we don't tokenize the physical share but we tokenize the right to receive the physical share and we call the instrument of forward at the run so it's the right for delivery of a share and that right can be for delivery in two business days one month one year or two

years or by that matter in six hours or two hours or one hour and you first say Richard is this really new instrument actually if you think about when you have money at your bank what do you really have when you have money at the bank do you literally Oh your Swiss francs there or is it not a right for delivery of Swiss francs and if you read the text carefully it's typically a right to get delivery of Swiss francs in two business days now why am i such a fan of the forward at the run because that means for any type

of token we can create forwards at the run with different maturities so we can have a forward at the run for one hour six hours one day one week one month one year and this tokens are standardized in the sense that when we trade them in the market we have fixed reference point and they only start to kind of elapse that is when you as a holder of that token you want to have triggered now I know that if I present this the first time ah

one doesn't really understand the key of what I'm trying interested in is that today we have a yield curve for euros a yield curve for dollars wouldn't it be great to have a yield curve for any type of asset and for people like yourself for economists and people interests in finance actually if you have instruments for one asset with different duration this gives a huge degree of leverage for the person who issue is it because he can do the following he can issue some for delivery in two

days but some for delivery in one month and some delivery for one year and when you have assets which are only deliverable in one year you're free you can use those assets which you have delivered for other business and you can so you can actively manage your balance sheet so you become the back so forward at the run is the legal mechanic to her in Abel literally every institution or even individual to become his own bank so now I want to briefly dwell on my personal experience so my

background is kind of the first venture which I did kind of it was Olsen associates we built a real time information system with using tick data out of that there came a spin-off which is O&O which is a market maker in foreign exchange which from there I learned that actually the financial system is far more broken than you'd ever guess and it's there that we introduced in 2001 second by second interest rate payments and that was for me a political statement to perform the capital markets either work and it's unfortunately only in 2011 that I suddenly understood ah Bitcoin it's not about be current it's about blockchain

and then finally in 215 it was time to really start the project because one of the things which I had done wrong in my you know previous benches is I was always far too early and when you're early it has a big disadvantage I shouldn't say it too loud but you get mostly second-rate people you don't get the really top people because many of the top people want to only jump ship when they have certainty of success and if it's still too early and no one can imagine it then it's just very hard so the first two years was very exploratory

I knew we were facing a big wave which was coming but a lot of things were completely unknown so I had no clue of how the regulatory environment would evolve also we thought Bitcoin if we're a little intelligent we can make that scale so we first started building a dis semi decentralized exchange argue that off chain settlement could be the trick to make it really scalable but we proven wrong it's actually you know will take quite some time to make it truly scalable and it's

the centralized exchanges that have been the big success so what we have now done we have been consolidating but and ready for the real start because what I find and maybe some of you share that is we have seen a big wave and now a consolidation but actually where the very start the really exciting wave is to come so what is the kind of underlying vision of looking the vision of the case obviously you know as I explained I say a big market is evolving it will be a market across all asset classes it will be fully regulated and

so obviously at lately we're building that and we're building that as a fully open source environment now key to that success is to have awesome user experience it really has to kind of be really kind of sorry to say a little bit sexy and has to be completely smooth the second very important point is liquidity it's an issue which we're currently addressing and which will be key for success so now you all many of you have your own visions and you know kind of want to bring that to a success so how

do I think about the current environment so first of all I think we have to be very clear technologies in a complete flux the later you can take decisions on an issue the better because if you start too early like in our case we started a little early and our first block 10 which we used was Bitcoin we should have directly gone to a theorem with been better so the same thing is the later your start in a sense is better the second is I think regulation is there trying to just remain out of the legal framework I think it's not

advisable because it will somehow catch up but what's important to understand is that the big guy will influence regulation so we shouldn't be so arrogant and say you know how we have to be kind of Orthodox to fulfill the law we have to be unorthodox create products that work that are seamless that people love but then be aware that we should use that cloud to influence the regulator as mentioned previously with the forward of the run let's reinvent law and the financial instruments let's come up with things which are truly more

efficient and leverage and give us more opportunity I think a key issue that we all face is we have to build teams and when you build a team you know there is a one sorry thing about as human beings with just human beings and you know we have egos we have lack of experience we kind of boast what we can do I think there is an important mix of what we have to do is we have to give a high degree of autonomy trust to the people who contribute but put them into an environment where each group or

individual depends on the other to create cooperation so combine two orthogonal principles then in early days you would have to say just raise money and everyone knew that you got to go and talk to the VCS or the angel investors today funding is so much more open so if you get your future users to kind of buy a utility token we maybe regulated as a security but it's still a utility token then let's do that so funding has a much broader service and then I think there is another important aspect I think which we mostly

get forget about is let's be data-driven you know your preconceived idea of my preconceived idea don't count at the end of the day it's the user and try to find objectively what he really thinks to build a community is key but to build a community a key thing is you as a person who builds his business has to follow his North Star be true to his true values don't jump around be true to yourself and then something which even though Roger Federer

the tennis player is very famous coming out of Switzerland and actually the Swiss don't really do that is when you are in business and build a business play close to the net make sure that some of your balls definitely go into the net and then as a tennis player don't blink with the I take the setback and do it again so there is one point which I think far too few people really leverage and I my career have definitely not done as well on that side as I should have is sometimes luck plays in your favor and sometimes bad luck it's

so important to any bad luck play it and turn that bad luck to your favor so really kind of may take full advantage of all setbacks and I think that is I think one of the most important attributes to make a business a true success so let's step back and think where are we today we're really at the start of a dramatic innovation and dramatic change and now because the change will be so huge have the courage to kind of truly disrupt and don't build a business that's just so close to the next guy

because you know it's a huge earthquake then don't position yourself next to the big building so thank you very much wish you a nice evening Thanks [Applause]