Learn Why Web3 Technology Is the Next Big Thing
Ric Edelman: You're listening to The Truth About Your Future. You have probably heard the words Web3 and blockchain digital assets, but everybody is still so confused about all of this, and understandably so. It's a brand-new tech. So to help you understand what it is and why it matters, why you need to care - I'm very happy to bring onto the program Sandy Kaul. She is senior vice president at Franklin Templeton, one of the largest fund companies in America at FranklinTempleton.com. Sandy, great to have you here on the show.
Sandy Kaul: Great to be here. Ric. Thank you for having me.
Ric: Sandy and I recently did a webinar together, and I think it might well have been the most impactful webinar I've ever done. And you can watch that webinar online at TheTruthAYF.com. Let's begin at the very start, Sandy. Web3, blockchain digital assets. What does it all mean?
Sandy: Okay, so let's break them down one by one. So when we say Web3, what this means is the next iteration of the Internet. So if you think of the history of the web, Web1 was static web pages. Think about the early days of Amazon or the early days of Google, right? Web2 became a user-centric web. Think social media, Uber. People started to be able to interact over the Internet and the presentation of material became very user-centric. And Web3 is the next iteration of this that is really focused on not just letting people be engaged with the Internet in terms of interacting around content, but they can actually initiate and fulfill their own actions on the web. So it's going to be about being able to book a car like you do on Uber, but not having to go through Uber. So that's what Web3 is. It's this new iteration of the Web where you can do commercial transactions directly without needing to go through a platform.
Ric: And this is all a result of the fundamental technological innovation of blockchain technology, which is now about a dozen years old. Blockchain's first product was bitcoin, and then that led to tokens and tokenization. So talk about that evolution that we're in, in this bigger, broader technological revolution, right?
Sandy: There's three parts and you hit on two of them. So the first is blockchain. That was a new innovation. Digital assets and tokenization are trading on top of the blockchain. And then the third piece of the puzzle are smart contracts within the tokens that describe how you are going to fulfill the transaction. So to go back to my example of being able to book a car directly rather than having to go through an Uber, it's the smart contract inside of the token that will allow you to make sure that that ride is appropriately booked and paid for.
Ric: So what's the point? I mean, what's wrong with Uber? Why do we need this new platform? Why don't we just do it the way we're doing it now?
Sandy: Yeah, well, a few reasons. Number one, it costs us more money to do it the way we're doing it now, because Uber takes a cut of everything that we pay through the platform. And so by doing it directly, you can potentially lower the prices that you're paying. So instead of Uber owning all the revenues and Uber owning all the benefits of the platform, you as a user start to own those platforms and those benefits.
Ric: Which means we're going from a role of being the fan or the consumer of that content, the user of the content - we're now being the owner of the content, which makes it more profitable for us.
Sandy: Absolutely. And it gives us a lot more control over our own data and over our own payments and over our own economic activity.
Ric: You recently published a white paper on this entire conversation, and in this research paper you said that we're now in the fourth innovation cycle. Give us a quick recap of the first three that already occurred and the fourth one that we're in now.
Get Ready for the Next Tech Wave: Decentralization
Sandy: Yeah, these cycles are really cool, right? It's when new technology comes out and as a result of the new technology, businesses can do new things. So the first cycle was in the 1960s and early 1970s when computers became commercialized. Before that, computers used to fill a whole room and they were basically only used by the military and big academic institutions. So that was the first cycle. The second was when the personal computer and the internet came out. Again, that completely changed the way that business operated. The third wave that we're in now was about social media and this ability to interact over investment platforms. And so that has been the third wave. And companies like we've been speaking about, Uber or Airbnb, where we can become both the supplier and the buyer of services. And we're heading into this new fourth wave, which we're calling decentralization. And this is all about the ability to do these commercial transactions without the need for an intermediary.
Ric: Which means that the buyer and seller will do a transaction directly. We don't need a broker, a real estate agent, we don't need a title settlement company, we don't need a lawyer. It's all done automatically through computer code directly on the blockchain. But this is really a whole new, big, different business model that's going to impact commerce on a global scale.
Sandy: It's going to enable so much more activity and allow people to have so much more control in their lives. Think about that first wave when you started to be able to use computers in commerce. Before that, it used to take 90 minutes to book a single airline reservation. And when they introduced this new computer network, it actually went up to 7500 reservations per hour. That's the kind of increase in transactional activity that we really might start to see as everyone in the world can start to set up their own transactions. It's going to really cause, I think, an explosion in activity throughout the world and a great opportunity for individuals.
Ric: Now, at the same time, though, while we approach this new megatrend, it's clearly going to be changing society and investing. But I'm also suspicious that there are going to be some unexpected or unintended implications as well. What might they be?
Sandy: So I think one of the biggest is that this idea of the crowd voice is going to get even louder. Already, we're seeing both positives and negatives from this crowd voice. But if the crowd can now set up any transactions they want whenever they want, that power is shifting to these networks of individuals, and that can have both positive and negative implications. While it's good for commerce, it may not be good for lots of other kind of more societal aspects of how people connect.
Ric: And we're clearly seeing this on Facebook, on Twitter, on Instagram, social media broadly. So from an investment perspective, if you had to guess, what do you think the investment portfolio of the future might look like?
Sandy: Well, I think the most amazing opportunity about the portfolio of the future is that these smart contracts that sit inside the tokens can give rights to the owner of the token. So it could be property rights about accessing different properties or getting into concert venues for a band that you like. Or it could be having access to a special lane on a bridge that you commute over. So that's an actual right that your asset in your portfolio is going to convey to you and it can give you intellectual property rights. So things like buying into the royalty pool of your favorite band and actually getting income from parts of your favorite bands sales, these are things that are going to become part of your investment portfolio. So the investments that you put money into that are actually accumulating wealth for you are also going to give you new benefits in your day-to-day life and make your investment portfolio to become a source of enjoyment and source of convenience for you, not just your investment portfolio alone. So that's, I think, the most exciting change we see coming.
Ric: And I find fascinating that Franklin Templeton, one of the largest and oldest mutual fund companies in America, 75 years old, managing trillions of dollars in assets for consumers all over the US is all over this new tech. This old mutual fund company is as cutting edge as it gets, recognizing that this technological innovation is going to change everything. And I'm really excited about the research that Franklin Templeton is doing. And I think investors are going to be really relieved to know that the biggest, best, most reputable organizations are not going to fall behind. You're going to continue to offer the investment strategies and solutions that investors are going to need as we go forward into this brave new world. I really encourage you to read Sandy's new paper. We have arranged for it on our website at TheTruthAYF.com. And I encourage you to talk with your financial advisor about Franklin Templeton funds and the research that they're doing led by Sandy Kaul and her team at Franklin Templeton in this new world of our megatrend. Sandy Kaul, Senior Vice President for Franklin Templeton, thanks so much for being with us on the show today.
Sandy: Thank you so much for having me. Enjoyable conversation.
Ric: Sandy and I actually spoke for longer than you just heard here on the radio. You can listen, watch or read the entire conversation. Just visit TheTruthAYF.com.