tl;dr: It’s supply chains all the way down. A newfound appreciation of them and what it means for DeFi.

I was reading Remystifying Supply Chains by Venkatesh Rao, who is one of my favorite writers and thinkers, bar none.

A self-described “supply chain nerd,” this piece helped me think about the issues we are facing today (backlogged ports, chip shortages, and shipping delays) at a much more abstract level.

Then, once he did that, he basically showed me that, well, since “no man is island,” the converse of that is “everything is a supply chain”

It’s not easy to look at things this way:

It takes some temporal imagination to see the material conditions of your life this way, because so much of the flow we inhabit is so slow to change and move.

It oozes past your attention rather than zipping past.

Things pause in our living rooms on their way from factory to landfill or reprocessing center long enough that we see them as fixed elements in our environment.

However, once you do, you realize that the supply chains today, though many of them go along the ancient trade routes, are completely novel entities which “evolve over time.’

All the reporting and analysis seems to adopt the posture that we are talking about a crisis of mismanagement in a well-understood old technology rather than a crisis of understanding in a poorly understood young one.

In other words, supply chains as we know them are living, breathing entities. They are organisms that respond. They are, as Venkat writes, a supply chain

is a homeostatic equilibrium created by billions of sourcing decisions made over time, by millions of individuals at businesses around the world making buying and selling decisions over time.

The realization that supply chains are emergent phenomena, adjusting at different paces, based upon millions, if not billions of decisions, makes you realize that:

Viewed this way, the internet is just one supply chain among many, a bits-and-bytes-specific member of a cohort of technologies that date approximately to the 1960s.

and “Containerization is like TCP/IP.

which, naturally, leads me to crypto.

Crypto and Asset Containerization

If the Internet is a data supply chain, then crypto is set to become the financial supply chain.

Think about it.

We have “just in time manufacturing” and “lean processes” (which contribute to our supply chain backlogs), but it still takes 3 days for an ACH transfer and a week (or more) for international wires?

Gen 1 blockchains , i.e. Bitcoin and Ethereum (which isn’t to say they won’t make it), rely on the ledger as the core element to keep track of ownership of assets, which is the critical foundational piece, but I’m starting to wonder if it doesn’t go far enough.

If you go back a year on this blog to Digital Shipping Containers and the Data Economy, you’ll see my write up of Ocean Protocol and why I was (am) so excited about their model. What they have done is created a model that supports the containerization of data, so it can be used as assets and shipped/moved wherever they are needed. (Disclosure: small Ocean holding)

This is what Radix is doing at the Layer 1 of DeFi as well, as I wrote here (discl: advisor). By creating an infrastructure to allow for the containerization of any asset (at the foundational level as opposed to the 2nd level, where Ocean resides), they are reorienting the distributed ledger around the notion of containerized assets, as opposed to blocks which record transactions.

It’s a subtle, but important architectural shift and, if you cornered me, I’m pretty sure I wouldn’t be able to explain it succinctly or even accurately, but I sense that this is what is going on. Anyway, this post isn’t about a Radix or Ocean pitch.

What it’s about is thinking of the DeFi movement as a “leveling up” of the flows of finance/money/value from the shipping routes that dominated the world from 1500s-1945, to the integrated, highly globalized, complex, interconnected (and interdependent) supply chains of today.

The problem in the physical world, aside from not being able to magically transport containers from Shenzhen to Singapore with the snap of your fingers, is that these supply chains still run on the “rails” of the previous era with the paradigm of the previous supply chain era as their guides.

Today, we’re seeing the stress of this system and, well, it appears to be broken, which sucks in the short term, but (hopefully), will benefit all of us in the long-term.

Meanwhile, DeFi is watching all of this and (un)consciously recognizing that the financial supply chains of the future are being built in front of our eyes.

The question/challenge as DeFi watches is to what extent the old paradigm will cloud the thinking of the new paradigm versus the challenge of building a new paradigm for finance when there’s no existing model to copy (unless you count containerization revolution, which is maybe all you need).