Transparency and technology: blockchain

Here is an interesting article on the potential usages and advantages of employing blockchain to manage supply chains. It’s an interesting piece, and deserves reading. I like the fact that the author clearly identifies a number of instances in which this is being done. But I have a fundamental question about the key claim of the article:

As a distributed ledger that ensures both transparency and security, the blockchain is showing promise to fix the current problems of the supply chain. A simple application of the blockchain paradigm to the supply chain would be to register the transfer of goods on the ledger as transactions that would identify the parties involved, as well as the price, date, location, quality and state of the product and any other information that would be relevant to managing the supply chain.

The public availability of the ledger would make it possible to trace back every product to the very origin of the raw material used.

Unless I am reading this incorrectly, the author suggests that the blockchain would impart total transparency in terms of the major pieces of information along a supply chain, by making the identities of the parties involved and the prices charged and paid publicly available. While I am not a supply chain specialist, this feels like a pipe dream.

Through my work on ethical jewellery, I was once invited to take part in a couple of workshops organised by a start-up trying to produce a dashboard software that would help companies manage their own supply chains (mostly, but not exclusively, in the textile sector). A blockchain approach would certainly help with the data gaps that stakeholders identified at the time. But it would have consequences: companies considered information about who their supply-chain partners were, and especially the prices they paid, as trade secrets. To reveal this information would put them at a disadvantage against competitors.

When new technologies come along that promise to revolutionise the way society does ‘X’ or ‘Y’, it pays to understand that we don’t always stick to ‘less efficient’ ways of doing things out of some misguided denial of the promise of the future. Economic processes are instituted the way they are for perfectly good reasons.

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ReSSI – Project Update

The team delivering the ReSSI project has recently submitted the second report to the funder (ESPON EGTC), for discussion and approval within the next two weeks.

ESPON-EGTC-logo-mdpi

The ReSSI project examines how sustainable, inclusive and smart economic development (as defined by the Europe 2020 strategy) can be promoted by local and regional authorities in Europe, in the context of evolving landscapes of territorial governance and planning.

Before the second report is made available, you can access the initial (inception) report, which details the project cases and research approach that will be taken in the project.

If you have any questions, please get in touch using the form available on the ‘Contact’ page (above).

 

ReSSI Inception Report

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Blockchain, and the construction of a (new) economy

Harvard Business Review has an article by Joichi Ito, Neha Narula and Robleh Ali about the potential of the Blockchain in reconfigure modern economies, provocatively titled The Blockchain Will Do to the Financial System What the Internet Did to Media. Leaving aside for a moment the fact that we still don’t entirely understand what the Internet is doing to the media ecosystems, and certainly cannot tell what the end results of the transformations are, this piece is a compelling read, presenting a quasi-evangelist vision of how technology can change economies.

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The argument put forward by the authors rests on two main pillars: the primacy of computer programming (‘code’), and the importance of standardisation. On the first, the paper sees the blockchain code as literally the building block of the economic:

[BitCoin] offers a compelling vision of a possible future because the code describes both a regulatory and an economic system. For example, transactions must satisfy certain rules before they can be accepted into the Bitcoin blockchain. Instead of writing rules and appointing a regulator to monitor for breaches, which is how the current financial system works, Bitcoin’s code sets the rules and the network checks for compliance. If a transaction breaks the rules (for example, if the digital signatures don’t tally), it is rejected by the network. Even Bitcoin’s “monetary policy” is written into its code

The second involves the need to harmonise protocols, in order to foster the economic potential of the code:

The internet and its layers took decades to develop, with each technical layer unlocking an explosion of creative and entrepreneurial activity. Early on, Ethernet standardized the way in which computers transmitted bits over wires, and companies such as 3Com were able to build empires on their network switching products. The TCP/IP protocol was used to address and control how packets of data were routed between computers. Cisco built products like network routers, capitalizing on that protocol, and by March 2000 Cisco was the most valuable company in the world. In 1989 Tim Berners-Lee developed HTTP, another open, permissionless protocol, and the web enabled businesses such as eBay, Google, and Amazon.

Nothing immensely groundbreaking there, but it is clear that specific ideas of how the economy should be are built into the blockchain, but that these are yet to crystallise. The blockchain economy is a ‘work in progress’.

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The value – and uses – of BitCoin

You may have heard that the value of BitCoin has hit a number of all-time highs in the last week. Just yesterday (9th May 2017), the crypto-currency made the news when the value of a single BitCoin topped $1,700 for the first time. Less than a day later, it has now passed $1758. You can see from the chart below what a wild ride the last week has been.

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Context: on January 1st 2017, BitCoin was trading just under $1,000 USD. Given that the USD does not seem to be depreciating in any meaningful way, the rise in the value of BitCoin has to be attributed to the actual value of the currency. Right?

Determining the value of a good is always a difficult issue. Markets are supposed to be the mechanisms by which we do this in modern societies. But what are market actors basing their valuation work on?

Coindesk has a couple of interesting reads on two types of analysis used in financial markets, fundamental analysis and technical analysis. Leaving aside the latter for now, it is interesting to focus on what an analysis of the fundamentals of BitCoin might look like. Fundamental analysis is the very bedrock of investing*, as it tries to understand the factors that might affect the value of an asset.

The author identifies 3 key factors affecting the value of BitCoin: demand, supply and major events. These choices are interesting in and of themselves. Demand and supply can be characterised as market functioning variables, and they should probably be analysed together. There is evidence of some increase in BitCoin for transactions which involve actual economic activity, while at the same time supply is limited by the Blockchain protocol – it is written into the currency’s design. So there might be something there.

More interesting are the major events. There is some evidence that political and economic upheaval has led to a growth in interest in BitCoin, as people try to protect their money by exchanging some of it into a store of value perceived as being untaxable. The Greek financial and economic crisis is frequently mentioned in this regard. In these circumstances, BitCoin can become a hedge – a bit like gold.

These ideas are fine, of course, but I don’t think they tell us all the story. To me, there is a fundamental question which still needs to be addressed: what is BitCoin for?

 

*unless you happen to be a High Frequency Trading bot, in which case – hello there!

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Building Sustainable, Inclusive and Smart Economies: The ReSSI project

Economic development remains perhaps the most important topic in public policy discussions. There is constant debate about how to quantitatively grow the economy, as well as about the qualitative aspects of that growth. Increasingly, there is an express desire to build economies which deliver both growth and better outcomes for all.

One particular example is the Europe 2020 desire to achieve smart, sustainable and inclusive growth. This implies developing economies which are, in turn, based on knowledge and innovation; promote resource efficiency, becoming greener and more competitive; and foster high-employment, thus delivering social and territorial cohesion. A tall order, made more difficult by the fact that the European project offers only a menu of end-points, but fails to indicate pathways get there. To make matters even more complex, whatever changes are required must be implemented in the shifting social, political and economic landscape of the post-2008 economic crisis.

A changing world

Over the last decades it has become apparent that economic development is best delivered by coalitions of actors and institutions, rather than left to specific ‘growth engines’ (such as the services industry, exporters, or the State alone). Growth – of whatever type – requires that people of all walks of life come together to imagine the economy they desire. This puts a special focus on the communication and knowledge flows amongst public bodies, private businesses, third sector organisations and the public. It is in the intersection of those flows that sustainable, inclusive and smart economies can be built.

In addition, a paradoxical aspect has been noted: in the globalised world, the geographical scale at which economic growth is better promoted is the region. However, regions remain the most contested scale of governance, caught between the legislative power of central government and the implementation imperatives of municipal power. All of this makes the construction of sustainable, inclusive and smart economies a difficult proposition. The Regional Strategies for Sustainable and Inclusive Territorial Development (ReSSI) project aims to help address these difficulties.

An extensive research project

ReSSI consists of an extensive collaboration between territorial stakeholders (regional and local) and universities originating in four European countries:

  • UK: Coventry City Council and Coventry University – Centre for Business in Society;
  • Denmark: Region of Southern Denmark and University of Copenhagen – Department of Geosciences and Natural Resources Management;
  • Italy: Municipality of Turin and Politecnico di Torino – Interuniversity Department of Regional and Urban Studies and Planning;
  • Portugal: Municipality of Oeiras and University of Lisbon – Institute for Geography and Planning.

Each of the four territorial stakeholders has defined a set of knowledge needs, which the research partners will address in the course of ReSSI. Territorial stakeholders and the respective research partners will work in close partnership to make sure that the lessons and conclusions of the project are implemented, thus assuring impact in the long run.

The project is financed by ESPON EGTC, as part of their ‘targeted analyses’. The research team is coordinated by CBiS, and co-led by Dr Carlos Ferreira and Prof Stewart MacNeill. Mr Kevin Broughton and Prof Nigel Berkeley are also part of this research team.

The Coventry case: electric and autonomous transportation

At the time of writing, the research team has submitted a first (inception) report to the funders, and agreed on the specific of the cases in each of the territories. In the case of Coventry, the case study will address the Future Transportation Strategy, currently being devised and implemented by Coventry City Council. This strategy involved collaborations with regional actors such as the Coventry and Warwickshire Local Enterprise Partnership and the newly-formed West Midlands Combined Authority, as well as businesses, non-governmental organisations and citizen groups. In particular, the research will analyse projects to launch a fleet of electric taxis; to conduct autonomous vehicles trials; and the respective infrastructure developments required. All these projects contain aspects of sustainable, inclusive and smart economic development for the region.

The ReSSI project began in November 2016, and has a set duration of one year.

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Project: Ethical Jewellery

Throughout 2014 and 2015 I had the pleasure of being part of a team working on a project about ethics in the jewellery industry. At the time we produced a report of findings; the first part of the report deals with the pressures on the industry, the second reflects on findings about consumers. You can see the report below:

I also co-authored an academic paper, published in the Journal of Business Ethics back 2015. It is titled Understanding Ethical Luxury Consumption Through Practice Theories: A Study of Fine Jewellery Purchases. You can find it here (behind paywall).

This was the first long-term project I was a part of after finishing my PhD and starting an academic position as researcher. I felt it was a particularly interesting project, as it analysed the path to implementing CSR in a very specific market from both sides of the market – businesses AND consumers. There is precious little work of done which comprehensively covers the two types of economic actors with respect to what happens in an economic space (such as jewellery SMEs).

It was very interesting to note how jewellery consumers and jewellery businesses fed off each other, each expecting the other side to make the first move, to the point that implementing CSR in this space looked quite difficult. There are many cases such as these – where a ‘good idea’ is not becoming reality back because both consumers and businesses hold back until the other makes a move. The result might be a lot of policy interest, which struggles to translate into economic reality – see the case Electric Vehicles, for example.

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Article: Untangling the trust-control nexus

An article co-authored by myself has recently been published in the European Management Journal. Titled (deep breath!) Untangling the trust-control nexus in international buyer-supplier exchange relationships: An investigation of the changing world regarding relationship length, it explores how trust between organisations changes over time. It was the result of a now-completed project with colleagues Ann-Marie Nienaber (Coventry University – Centre for Trust, Peace & Social Relations) and Max Holtgrave (WWU Munster).

Here is the abstract of the paper:

Control and trust are the primary governance mechanisms buying organizations rely upon to organize and maintain their collaborative exchange relationships with foreign suppliers. But the question of how control and trust interrelate and should be pursued seems entangled and practical advice remains largely elusive. Based on empirical data on 212 recently- and long-established buyer-supplier exchange relationships in the textile industry, we test the relationship between three practices of interorganizational control (output, process, and normative controls), two dimensions of interorganizational trust (competence and goodwill trust), and relationship performance. Using structural equation modelling, we demonstrate the value of controls for building and validating trust to depend as much on the specific control practice deployed and dimension of trust observed, as on the temporal stage of the exchange relationship. Moreover, we reveal distinct performance effects of the different control practices and dimensions of trust. Herewith, this study allows for a comprehensive understanding of the trust-control nexus in collaborative exchange relationships between buyers and their foreign suppliers. Addressing managers, we reveal how normative controls can be used to build trust and promote performance at the start of the relationship, whereas output controls need time to reach their full potential. Process controls, in turn, are found to have adverse effects.

You can find the article here (behind paywall).

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