Future of Finance: EY’s Brody on why tech history shows ‘there can be only one winning blockchain’

March 31, 2023, 10:30 AM UTC
Paul Brody, illustration
EY Global Blockchain Leader Paul Brody.
Courtesy of EY

Welcome to Future of Finance, where Fortune asks prominent people at major companies about their jobs, how their firm fits into the crypto ecosystem, and what this all means for how we use money.

The following is from a recent conversation with Paul Brody, the global blockchain leader at EY and author of the upcoming Ethereum for Business: A plain-English guide to doing business on the world’s largest blockchain.

Brody is a member of the Enterprise Ethereum Alliance, a CoinDesk contributor, and has done stints at IBM and McKinsey. He also has a soft spot for Swedish Fish.

(This interview has been edited for length and clarity.)

So you’re writing an Ethereum book?

I’m getting there. I started in December. I wrote like 10 chapters, and it was really, really tough. And now, there’s, like, six chapters left? The format of the book is how Ethereum works and why—why public blockchains are so important for business—specifically why they’re more important than private blockchains—business use cases, procurement, supply chain management, tokenization, carbon footprint, and why it takes so long for enterprises to adopt technology.

When you were at IBM you did some Internet of Things stuff, and some other projects that were cutting edge. Is this sort of a pattern for you, where you want to do the “cool new thing”? Is that just what’s most appealing to you?

The thing is, I am very driven by intellectual curiosity. I don’t necessarily go after every single new thing, but when I find a thing that’s really, really important, I go after it. When I was in college—I’m dating myself here—I was like, “Wireless! Wireless is the thing!” I went to work as a summer job at the first mobile network operator in Africa, in Nigeria, and I took an entire year off to work for them before I came back and went to work at McKinsey, where I can remember just telling colleagues, “Mobile data, you’ve got to invest in mobile data.”

The best perk of being a VP at IBM was you had access to IBM research. And I had a couple of amazing products, and before I did the one that got me into crypto, I did another one, which was immensely fun, around 3D printing. A lot of people do these corporate white papers—they just do a survey, they present it like it’s subjective data that nine out of 10 executives think that not burning down the planet is a good idea—they present it as if it’s factual data, and it’s not really. What I love to do is get a couple layers below that, and what’s really fun is, for instance, we’d ask, “Okay, 3D printing will transform manufacturing, but how will it transform manufacturing?”

What happened with that—the 3D printing?

We picked three products—a smartphone, an electric razor, and a washing machine—and we tore them down, literally one piece at a time, evaluated every single component, scanned them in 3D, and then tried to remanufacture as much of the product as possible using a 3D printer. And that was amazing. We came back with specific data on the carbon footprint of 3D printing, the cycle time with 3D printing, we built the economic model of what your manufacturing scales—it’s quite transformational. And the next project I did after that was IoT.

How did that lead you to Ethereum?

So I’m out at Samsung, talking to the head of the multimedia solution center, and he’s like, “Paul, we are going to go broke, the cloud is going to bankrupt us…you’ve got to come up with a better plan.” I thought to myself, this is really bizarre. Imagine a really smart light bulb with the brains of an iPhone, and it’s connected to WiFi. What is your iPhone processor doing? Like nothing, 99% of the time! So why on earth are we paying all this money to maintain massive cloud data centers, when your refrigerator could be providing cloud services, or your phone? So I called a bunch of guys and was like, “We should be able to make a cloud of computing devices that manage themselves, right?” The cloud should be in the devices.

Halfway through this project, colleagues were like, “I want you to think about using this thing called Bitcoin, because it’s distributed computing. And we’ve had lots of debates—on the one hand, it’s very computationally intensive, but then on the other hand, it’s not like these machines are doing anything else. So John Cohn, an IBM distinguished engineer, comes and says, “Paul, I’ve met this guy, I think you’d really like him. His name is Vitalik [Buterin]. And he wants to do Bitcoin, but instead of for money, for computing. So we built this thing called ADEPT–Autonomous Decentralized Peer-to-Peer Telemetry, sort of this decentralized cloud infrastructure—for Samsung, with help from Vitalik. And we showed it at CES in January 2015. That’s how I got into Ethereum. That’s how I got into blockchain. And at that point, I was like, this is going to be absolutely revolutionary.

What important lessons or ideas from other projects or jobs have you applied to ones on the blockchain?

We’re heading toward this world where the marginal cost of almost everything is zero. One of the most brilliant things that I heard when I worked at McKinsey was if you want to think about the future, try to imagine some important process or input is free. Just imagine, like, what if electricity was free? What if airfare was free? What if phone calls were free? Like 25 or 30 years ago, this idea that phone calls would be free, it was ridiculous. And yet, we sort of forget. One of the reasons we liked Ethereum was it comes with account payments and smart contracts. And we used to joke that we don’t know what anybody will actually pay for in the Internet of Things, but, eventually, someone will figure out how to monetize it. And when they do, they’ll be so glad this architecture has payments and contracts built in.

Has embracing the blockchain helped EY from a competitive standpoint?

In the world of audit, we only have three competitors. So my “fair share” of any sort of global audit market is 25%, but it’s actually been better than that because I don’t think any of our peers have taken this space quite as seriously as we have.

So where is this leading? Can you tell me more about plans for the blockchain?

A lot of tech systems are natural monopolies. That’s just how they are in a world where the marginal cost is zero for products. And then with Metcalfe’s law—the value of a network grows along with the number of participants—at a certain inflection point, your network becomes so valuable you’re effectively a natural monopoly. And that’s hugely shaped our strategy here because it led me down the path to believe there can be only one winning blockchain. There can’t be 50, can’t be 100, and it almost certainly will be a public blockchain. All paths lead to a dominant chain. And when you look at the history of computing platforms, that dominant chain usually becomes clearly visible within a decade of an ecosystem starting.

And Ethereum’s that winner?

Ethereum was really the only programmable smart contract chain out there that was really dominant. So I said, “Okay, we’re making a play.” It’s a theory, a bit of the GE mentality where if I have a limited budget, am I going to spread it around, am I going to be okay with a bunch of different blockchains? Or am I going with the best?

What prevents the rest of the Big Four from just copying what you’re doing at some point?

Obviously, in a decentralized system, you can’t do that. And that’s really tough. I’ve long accepted that. Even if we win this race, there will be no moment where we can just put our feet up and say, “Well, we’re a monopolist now. Great.” We will have to keep running hard.

When clients come to EY, is it more often, “Oh, hey, by the way, we hear you have this blockchain guy”? or do they walk in like, “We’re here because of the blockchain guy”?

It comes in both forms. All the time, I’ll sit down with clients, and they’ll come over, like, “We had no idea you guys knew how to do this stuff.” And that’s great. I love that. And it makes me very happy. And, absolutely, you know, our senior people, it’s great when somebody writes to the chairman and says, “I just had this guy, Paul Brody, come in and talk to my clients—totally blew their minds. Like now they think of UI differently.”

So what’s next—both on your end, and more generally when it comes to the future of finance?

If you were to boil down all of our aspirations into a single sentence, it would be this: We believe that blockchain will do for networks and enterprises what ERP did for organizations. It was transformational. Before ERP, the left hand and the right hand didn’t really know what was going on.

With smart contracts on the public blockchain, I can create tokens that represent all the assets, that connect the buyers and the sellers—and that automatically enforce the processes. Like if you have a volume discount rule, when you achieve your targeted volumes, it automatically gives you a discount. This sounds like a small thing, but, actually, it just happens. No one has to remember. And think about an insurance contract, like in health care, and how after your deductible expires you’ll be referred to specialists, and then the logic just gets more complicated, more challenging. So my goal is to get to the point where we can take any arbitrarily complex business agreement and run it on the public blockchain.

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.