The Pandemic Should End Our Obsession With Centralization
The pandemic has uncovered fatal weaknesses in the systems which permeate every aspect of our lives, from logistics to healthcare to the highest halls of government. These problems aren’t new — people from all industries and the full breadth of the political spectrum have been sounding alarms for decades — but previous crises were localized enough that we could always blame a particular company or industry.
But now there’s no hiding from the bare facts: our global fetishization of “efficiency” and centralization has left us dangerously exposed. We need to start optimizing for more than simply cost and speed. We need to be able to respond quickly to problems, disseminate accurate information, and reach consensus for action even when opinion is divided and time is short. Our systems need to integrate easily with the others we build, instead of everyone working in silos. We need to start assigning the proper value to fairness, flexibility, robustness, transparency, and openness.
Thankfully, decentralized technologies are designed to do all this and more, and are maturing just when we need them most. But can we get those in power to adopt them, or are we doomed to repeat this increasingly dangerous cycle?
Efficiency vs Resilience
Efficient systems are good at doing a handful of things in a particular way. Modern manufacturing facilities will sometimes make just a single component: a single link in an intricate supply chain hundreds of steps long. Each stage in the process has equipment and people optimized to do just a few things perfectly. These are shipped to the next stage of the process only when needed, to reduce storage costs and downtime. This just-in-time manufacturing and logistics is what props up much of our modern, on-demand lifestyles, at least until the pandemic unceremoniously shut it all down.
Resilient systems can handle a wider variety of tasks, and are much less disrupted by fluctuations in supply or demand or other factors which necessitate change. This can apply to a single company, an industry, or an entire network of interlinked industries. For example, a company with multiple sources for raw materials is less likely to suffer if supply chains are cut. Countries with diversified economies, like China, have found themselves much better placed to handle disruption than those who have outsourced much of their food production or manufacturing, like the United Kingdom.
When we talk about centralization versus decentralization, this can often conjure up spatial comparisons. The manufacturing process described above, spread out across dozens of countries and factories, might seem decentralized, but that’s largely irrelevant. What matters here is how it’s controlled: a single authority telling everyone to follow a particular process in a particular way. Vitalik Buterin, co-founder of Ethereum, wrote a post on the nuances of the term “decentralized” several years ago, which is still the gold standard on the basics here.
Centralized systems can leverage economies of scale to become highly efficient. But this can lead to two classes of problems: first, the things our systems are efficient at often turn out to have unintended side-effects, particularly at scale. You can only expand your palm oil industry so far, for example, before you start creating serious knock-on effects for the wider ecosystem.
These emergent problems aren’t always physical or environmental. Facebook and Google are optimized for getting people to join their platform and keeping them there while their data is monetized, but little thought has been given to emergent problems like the rapid spread of misinformation or the erosion of privacy. Now that those issues are apparent, there are limited solutions available.
Systemic centralization can also exacerbate inequalities. People who don’t fit a system’s narrow parameters are often excluded or deemed too expensive to accommodate, a problem disability campaigners have been highlighting for decades. This is a classic bait-and-switch: you achieve the illusion of efficiency by ignoring everything — or everyone — that’s too difficult for your system to handle.
The second problem with overcentralization is lack of resilience. Systems which are highly centralized and standardized are incredibly fragile, and even the slightest disruption can cause major issues. A crisis can bring them to their knees, as we’ve recently learned to our collective cost.
Worse, these two problems can feed into each other: modern agricultural practices are highly streamlined, extremely fragile, and seem to be responsible for the fact that an alarming 80% of insects have just… disappeared. As always, the reality is more nuanced, but the explanation is hardly comforting: we’ve optimized so heavily that nature has started to respond in kind, stripping out the middle of once-complex ecosystems.
(If we weren’t all so preoccupied with coronavirus, we’d definitely all be talking about the unprecedented locust swarms which are decimating thousands of square kilometres of crops right now.)
We may not be past the tipping point yet. But there’s nothing to fall back on when something goes wrong. And of course this year something finally went majorly wrong…
The Ultimate Wake Up Call?
None of this is new, but the Covid-19 pandemic has starkly exposed many of these points of failure as our systems have struggled to reorganize in the face of seismic change.
The most obvious examples are found in top-heavy governments or corporations that don’t know how to relinquish control. The sorry saga of the UK’s coronavirus app is a classic of the genre: instead of ceding a tiny amount of control with an Open Source decentralized model, like the Swiss, the government decided to use its own people to build its own system that retained control of all the data. Now, many months and millions of pounds later, they’re switching to the Open Source model and will be ready to start sometime in winter, if they bother at all. Efficient!
But the pandemic has also highlighted more subtle cases of systemic overcentralization, where everything is optimized to be done a particular way or at a particular speed or magnitude, leaving no room for flexibility when those parameters change.
The surge in demand for personal protective equipment (PPE) is a simple case: despite mounting evidence earlier in the year that there could be a huge spike in the need for PPE, everyone was left scrambling to source equipment, with tragic results. Standard supply lines became overwhelmed, while people who were able to switch to manufacturing PPE were often unable to distribute it effectively, often because they were unable to integrate with procurement processes that are designed to operate in just one way.
Often the problem isn’t a rise in demand, but a sudden shift in the context for that demand.
Take the recent flour and toilet paper “shortages” which swept Europe and the USA. Apart from an early blip of panic buying, there was never really a shortage of these staples. The problem was distribution. There are two completely separate supply chains for wholesale and retail, and no easy way to switch between them. Whatever the glut of Instagram sourdough pictures might suggest, people aren’t actually consuming significantly more flour. They’re certainly not using the bathroom more. But the same amount of base products are suddenly needed in completely different environments, and our systems just aren’t flexible enough to make the switch.
This is the problem with “just-in-time” production, which permeates so much of modern manufacturing. Reduced idle time and storage costs sound good on paper, but not if you have to plow those savings back into the system tenfold whenever there’s a crisis. There’s really a clue in the name: if I said I’d caught my flight “just in time”, does that paint a picture of someone totally efficient or someone who was just minutes away from a major problem? This probably explains the shift towards the term “lean manufacturing”, but euphemistically renaming a problem isn’t the same as fixing it.
So what’s the answer? Decentralized approaches, where governance and methods of production and transportation are differentiated and widely distributed, add more resilience and flexibility while eliminating single points of failure, but historically this comes in exchange for increased redundancy and high costs.
A Centuries-Old Trade-off
Humanity’s development has been characterized by increasing efficiency and centralization. As technologies and processes improve, we can achieve more with fewer resources and less duplication of effort.
For centuries, our optimization journey was slow, haphazard and generally beneficial. It would mostly fall under the umbrella of “progress”, and rightly so.
Things first got dicey in the 18th and 19th Centuries, as industrialization allowed rapid world-changing levels of centralization and resource exploitation for the first time. For example, reliance on whale oil in everything from shipping to soap took whale populations from abundant to threatened in just a few decades.
Ironically, we shifted our focus to petroleum just in time to avert a major environmental disaster. But we didn’t learn from our mistake. It just turns out crude oil is more abundant than whales.
Things have only gotten worse as we’ve moved into the digital age. The invention of instantaneous global communication and mass automation through computers and the internet has allowed us to centralize and optimize at a completely unprecedented scale, with almost no thought for the consequences.
It might seem like we have to choose: high-risk efficiency or costly resilience. Streamlined centralization or ponderous distributed solutions. The pandemic would suggest we have the balance all wrong: isn’t it worth accepting the costs of decentralization up front, rather than paying many times over when a crisis hits?
That would certainly be better than the current cycle of false security followed by disaster, but it’s still setting the bar too low. The advent of decentralized technologies such as (but definitely, definitely not limited to!) blockchain, combined with a new ethos of building systems which don’t require us to trust a centralized entity, allows us to have our cake and eat it too. For the first time in history, we can build systems which are both efficient and resilient.
But you can’t just spackle a blockchain on your existing setup and suddenly everything is fine — this requires a whole new way of thinking about systems design and the notion of efficiency.
Breaking the Cycle
One dubious advantage of a crisis is it sets people looking for solutions. This pandemic has shown the folly of our centralized approach to everything, even if people haven’t yet accepted this diagnosis, or how deep the problem goes.
The pandemic didn’t come out of nowhere: people have been warning about our lack of resilience for decades. But while there was a shred of possibility that bad things won’t happen, there was always an incentive to put our fingers in our collective ears and pretend everything is fine. When everything is about optimizing for efficiency, and people are rewarded handsomely for short-term success, everyone in power is incentivized to pass the buck.
“Sure, a crisis will come around eventually, but if I can just hang on a bit longer, at least it won’t happen on my watch.”
We can’t survive many more cycles of this.
But things do feel different this time. Unlike previous financial crashes or even wars, there are no excuses anymore, no way to minimize the issue or hide from the true problem. This has directly affected everyone on the planet.
There are already calls to make supply chains more robust: countries that used to be manufacturing powerhouses are waking up to the fact that they’re now reliant on distant countries like China for huge numbers of essential healthcare equipment and medicine. Decades of worship at the altar of just-in-time production and economies of scale have revealed them to be false idols, as countries suddenly find themselves with no storage capacity and entire industries have ground to a halt because they rely on components with only a single source.
The ludicrous prospect of negative oil prices, because it’s cheaper to not be responsible for oil than have to find somewhere to store it, should be proof enough that we’ve taken a drastically wrong turn. Having a stockpile, or an alternative mode of production, shouldn’t be a sign of failure and inefficiency.
There are moves afoot to try and claw us back against the trends established by history, to inject some much-needed resilience into our systems, even if it means giving up some of those oh-so-tempting efficiencies. More and more countries are adopting policies which prioritize metrics other than GDP.
In business, people are finally realizing that remote working can be just as productive as being in an office.
These are all positive steps, but they’re still too-often framed as part of the old mindset: a band-aid to try and fix the fundamentally unfixable.
And we’re missing out on something far better.
A Third Way: Decentralized Technologies
Throughout this post, I’ve tacitly accepted the assumption that there always has to be a trade-off: decentralization vs centralization, resilience vs efficiency. Thousands of years of history seem to have shown us that.
But the problem with patterns is they can constrain your imagination. The only reason that pattern has held for so long is because we lacked the proper technology to break free. With blockchains and other decentralized technologies, we finally have that opportunity.
One of the main problems with decentralized systems is that they’re historically hard to coordinate. Those single points of centralized failure are a huge problem when things go wrong, but when everything’s running smoothly, they can be great: everyone knows what they should be doing and who’s in charge. How can a distributed system possibly compete? With flat hierarchies, how does anything get done?
While that argument might have held in a pre-Internet age, the advent of near instantaneous global communication means the coordination problem is no-longer a physical matter of distance or time: it’s a systems design problem, pure and simple.
Now that talking to someone in Indonesia or Argentina is fundamentally no harder than having a conversation in a physical office, the problem shifts to one of trust: if we distribute our systems, how can we be sure that everyone is pulling their weight and following the rules? Traditionally the answer was to create an entity in charge of coordination and oversight, but that’s just a new centralized point of failure.
Blockchains and distributed consensus mechanisms solve this problem, and they’re such an extraordinary departure from what’s come before, that people still don’t understand their true value.
At heart, a blockchain is a way for people to coordinate without needing a central authority to arbitrate and own the system. This is known as a trustless system, which can be a slightly confusing term for the uninitiated. A trustless system isn’t a system which you can’t trust, it’s one that doesn’t rely on trust. As a result, it’s extremely trustworthy. You can be confident it will work because its workings are transparent and no-one can gain enough power to manipulate it.
The concept of an organization that anyone can join or leave at any time, where everyone and no-one is in charge, and that you can trust precisely because there’s no-one in charge, isn’t just different, it’s almost literally the opposite of everything most people think they know about how people organize to achieve things. But it’s extremely powerful.
For example, until recently, the rule of law was the only way to protect the individual, the real world economy and social welfare from the consequences of over-centralization and under-resilience. Recent developments in decentralized technologies are providing a new approach. Technology, not laws and regulations, can protect us from the downsides of centralization without opening us up to inefficiencies.
This isn’t a repudiation of law and regulation, far from it! One major problem with the first wave of blockchain enthusiasm is many people got over-excited about the possibility of tearing down entrenched systems and implementing a technological solution instead. But that’s just the centralization bait-and-switch trick again: if you try and translate literally all of human interaction into something that can be described in blockchain transactions and smart contracts, you have to sweep all the inconvenient edge cases you can’t deal with under the carpet.
Decentralization gives us the flexibility to be confident we’ll have a solution for every problem. Not everything needs to come before a court, not everything needs to end up on a blockchain, and not everything needs to be seen as a regulatory problem at heart. We can build systems that make use of the best of all of these.
Winning Hearts and Minds
So why haven’t decentralized technologies taken off? If blockchain and decentralized technologies are such a game changer, why haven’t they changed the game? We were promised decentralized applications (dApps) and freedom, and a billion unbanked migrating to the blockchain. We got some mildly cute and extremely expensive cats and a whole lot of cruddy ICOs with embarrassing celebrity endorsements. Somehow the pitch of “eliminate expensive middlemen” got translated into “pay Floyd Mayweather and Paris Hilton to promote us for no some reason”. Blockchain has gone from being something you’d try and shoehorn into every pitch to an embarrassing taboo.
I would suggest that the problem isn’t the technology, it’s the mindset. Hardcore evangelists have been singing the praises of decentralization for decades, and with blockchain it seemed like the real world was finally getting interested, but it turns out we were talking past each other.
Decentralized technologies are a foundation for a whole new way of communicating and transacting. They’re the starting point for building something completely new. The old world heard about blockchain and saw it as an end point: the final thing missing from their creaky old systems to make them seem young and fresh again.
People are still thinking of these technologies in the context of “How can we make what we’re already doing more efficient? How can we use this to squeeze a few more percentage points off our costs to make our shareholders happy?”
This is a centuries-old mindset, so it shouldn’t be surprising that people haven’t adapted overnight. And of course any solution which tries to dissolve entrenched power is going to be met with suspicion and resistance.
But I think there’s reason to be optimistic.
First, the pandemic has shown that decentralization isn’t as alien as you might think. The past few months have been disruptive for most and devastating for many, but it’s extraordinary to see how quickly we’ve been able to make sweeping changes with limited direction from those supposedly in control. As a species, we’ve managed to disseminate information and collectively adopt sweeping behavioural changes, often while centralized authorities were slow to react or even outright harmful. We’ve all seen first-hand how decentralized mechanisms are extraordinarily powerful even when they’re emergent and haphazardly adopted — just think how much more useful they could be if adopted with more purpose and foresight.
The pandemic has also occurred at a time when there’s increased appetite for change among the general public, even if people don’t fully appreciate that it’s resilient and decentralized solutions that they want. People are upset with the state of the climate, with deadlocked bipartisan politics, with creaking systems like education, healthcare and policing which seem to benefit the few not the many. There may be disagreement about the goals, but people across the political spectrum are calling for radical change, for new kinds of systems which are robust and open and fair. People want new ways to reach consensus, and to make their voices heard, even as discourse seems increasingly fractious and fragmented. These are all problems which decentralized technologies are designed to solve, and which they can solve, provided we make them foundational to our systems rather than trying to bolt them on top.
“If you BUIDL it, they will come…”
So what can we do to ensure we learn the lessons of the pandemic and start to make proper use of these wonderful new technologies?
First, we need to understand that we all generally want the same thing: systems which are both resilient and efficient, and which are optimized for a wide range of values.
We may not agree on why we want these systems, but that’s fine too: decentralized technologies can help us reach consensus even when we disagree!
We need to promote systems which are open, trustless, and interoperable, meaning that they integrate easily with each other. (Returning to the flour shortage example from earlier, if those two supply chains had exhibited greater interoperability, it would have been much simpler to switch between them when demand suddenly shifted.)
Those of us who are already in the business of making things need to build and demonstrate as many examples of these technologies as we can and show them off. Decentralized systems are weird and counterintuitive, and the best way to convince people of their utility is with working examples.
We also need to show that decentralization doesn’t begin and end with blockchain. First, blockchain is far from being the only decentralized technology, and second — say it with me everyone! — not everything needs to go on chain.
Bitcoin and other blockchains have started providing ways for certain transactions to be settled bilaterally without committing them to the blockchain. Examples include the Bitcoin lightning network or Ethereum-based Matic, Loopring or MatterLabs.
This is a completely intuitive way to operate. Promoting transparency and accountability doesn’t mean we need to check up on literally everything. People can, by-and-large, be trusted to behave well even in disputes. A well-developed legal system allows parties to settle their issues among themselves instead of everything ending up in front of a Supreme Court. We don’t need full consensus on everything: we just need to know that the option is there for when we do need it.
And we’re seeing these kinds of developments throughout the industry. My project, HOPR, is focused on messaging and data transport, but there are projects for every layer of the decentralized stack: with good system design, decentralized approaches can be just as efficient as their centralized ancestors, with the huge advantage of massively increased resilience.
Decentralization gives us the flexibility to be confident we’ll have a solution for every problem. Blockchains such as bitcoin were the first step in that direction. The Web3 built on decentralized file storage, computation and communication platforms are next, all informed by a shift towards resilience, openness, collaboration and interoperability. We’re finally ready to take these ideas mainstream, and with any luck the pandemic will have made the mainstream far more open-minded about what needs to change.
