The Future of Stuff Podcast: Ep.1 What is Smart Property? with Vinay Gupta
What is Smart Property? Join us as we explore the radical and perhaps inevitable idea of smart property in our world.
EPISODE SUMMARY
What is Smart Property? This impromptu discussion between Garrison Breckenridge (@gbharlequin) and Mattereum CEO Vinay Gupta (@leashless) explores the idea of smart property as an inevitable evolution of digital commerce. We explore what smart property is in practice, some widely different use cases (wedding planning?), the relationship with the sharing economy, the distribution of power in such a system, some privacy and security concerns, and the prospect of programming social interaction and value flows around goods and services.
EPISODE NOTES
Outline
- What is Smart Property?
- What Makes Smart Property Viable Now?
- The Logistical Nightmare of Wedding Planning
- Why Blockchain?
- On the Risk of Corporate Dystopia
- Smart Property as Technology for Structuring Social Interaction
- Smart Property: A Software Update for the Sharing Economy
- Smart Property Privacy & Security | Cultural Differences in Adoption
- Three Smart Property Use Cases
- Ownership in a Smart Property World: Rental vs. Sale
- Smart Property and Gold NFTs: A Starting Point
What is Smart Property? [00:00:00]
Garrison: So let’s talk about smart property. It’s something that’s been brought up, throughout the Mattereum project at various points. Mattereum is very focused on creating new ways to access, utilize property or under utilized property. So that it’s more, more widely utilized and not sitting dormant. There has been a lot of use cases in the supply chain business to business type of thing, but even like intellectual property rights around like music and stuff like that. But the idea of smart property is kind of fluid, you know, it’s kind of a, more of a mental model, the thing that the project is building towards. So I wonder if you could describe your definition, what you think smart property is.
Vinay: So smart property is property where you can buy it, sell it, collateralize it, and most importantly use it using software APIs and specifically search. So if you think of something like Uber or Airbnb, these things are rudimentary forms of smart property. You take your apartment, you bind it to an app. The app lets people rent it. And the app takes care of the payment and the availability of the bookings and pre-commitments and the identity and the insurance and all the rest of that stuff. Critical things about smart property is you have to be able to search and you have to be able to actually close the contract for being able to do it online.
And then what the contract allows you do — a typical thing is rental, but that’s only the very, very thin end of the wedge. That’s just the beginning of what smart property makes possible.
What Makes Smart Property Viable Now? [00:01:39]
Garrison: When people hear smart property, they may think of like, smart city. They may have some kind of semantic web between smart city, internet of things. People have been talking about it since the nineties, different machines, different systems ubiquitously connected over the internet sharing information and value in some way.
What makes smart property a possibility now?
Vinay: Doing anything that involves real property, you need a legal framework. So smart property, to function, has to also involve smart contracts. And it has to involve specifically smart contracts which are seen as being legally enforceable. So if I create a legal commitment to pay for a house that I’m going to rent on Airbnb, there’s force of law behind that everybody understands a contract has been formed and the fact that they don’t give you the house that’s a breach of contract on their end. And the enforceability of these contracts is critical. You can’t have smart property without there being enforceable smart contracts. And now that we have enforcement of smart contracts from Mattereum, then you can build smart property as a layer of applications on top of those enforceable Ricardian smart contracts.
The Logistical Nightmare of Wedding Planning [00:02:55]
Garrison: And so the listeners have an idea, like what smart property would be in action. What would be an example you would give?
Vinay: So the example that I give is wedding planning. So wedding planning is one of the most nightmarish activities in the entire world. Because if a single thing goes wrong, it’s the end of civilization, right? Full-scale chaos will result and it’s a million moving parts. And all of those parts are very emotionally important to somebody and there are a whole bunch of different stakeholders that have to be satisfied.
So it’s a very complicated thing. And professional wedding planners are getting paid a sodding fortune for solving that problem. So what happens if you’re trying to do wedding planning and you’ve got smart property is you could basically build up a multipath matrix of possible solutions. Here’s venue A, here’s venue B, here’s venue C. In venue A, we want to rent these tables, these chairs, we want this caterer, we want this transport solution. We want this hotel booking. We want so many rooms from this one, and then this other hotel, we want so many rooms there.
You can secure an option on every single thing that you want. So you basically say I’m going to give you 25 bucks for every day until I make a decision about this, but you have to hold this slot open for me. So you option everything you need for pathway A, everything you need for venue B, everything you need for venue C. And if you hit a point where you can’t option the stuff that you need because venue C it just turns out there’s no way to sort out the transport arrangements, then you say, okay, I’m going to execute the options that I took on venue A. Now everything will lock together. So the ability here is to build up interactions between different contracts when you need all of them to come into place before something has utility. And this happens all the time, right? A huge amount of the stress of doing anything that looks like wedding planning is the fact that we don’t have the ability to pay for options. You want to maybe go and visit your uncle who lives in Paris, right? You need to basically option a flight now. Can pay 25 dollars to option this flight. And if he confirms that his vacation days came through when he thought they were going to come through, you execute the option on the fight, and now you’re booked and everything’s great, right?
It’s this ability to take processes where there are tons and tons of dependencies, turn the dependencies into option contracts, group the option contracts together until you have a solution, and then once you have a solution, execute all of the options. Bringing that kind of capability out of like heavy engineering and finance into ordinary everyday people’s lives will be completely revolutionary.
And it’s particularly true in anything that involves a whole bunch of people trying to do anything together. We want to go on some trip — seven people want to go rafting in the Yukon. If only five of the people can make it that time, then you know like you’re not going to take the trip.
So implicitly, everybody is taking out options on everything. And it’s a huge social disaster if three people have bought their tickets and then two people drop out and the whole thing goes to hell in a hand basket, because we don’t have this ability to take out options to secure the possibility of doing something and then later to execute your options once everybody else has booked their tickets and we know that it’s on. So one of the things that smart property gets to is optionality. And that’s only one of half a dozen fundamental operators that we get in a smart property environment that we don’t have in the real world right now, except inside of esoteric corners of engineering and finance.
Garrison: Yeah, I’m just imagining things that are usually like a logistical nightmare, whether it’s like a film production or a band going on tour where there’s a lot of different kind of points of interaction, different, agreements imagining what it would look like if all of those kind of just happens seamlessly where you knew exactly what the available options were.
Why Blockchain? [00:06:43]
So a great basic question for people who aren’t familiar with blockchain or cryptocurrency or smart contracts: what is it about these particular sets of technologies that make it suitable for building these smart property systems, as opposed to just, you know, more centralized databases and programmable scripts that run on those?
Vinay: So the critical thing about this is it’s just a complexity problem, right? If every vendor that you want to work with has their own API running on their own database, then your software, whatever agent you’re using, has to know all those different APIs for all of those different pieces of software before it’s able to go out and successfully do something like booking for a hotel room. The thing about the blockchain is, once you’ve gotten the capability to connect properly to the blockchain within that, it’s very simple to then trigger actions. So the blockchain forms a kind of shared backbone which all of these things interconnect to rather than having every single thing be configured differently in a way that just makes life difficult when you’re trying to get things done. It’s complexity control on the software side that is really the advantage of the blockchain here. Plus the ability to do things like escrow payments. Now that’s a very simple thing to do in a blockchain. Like literally escrow is one of the first things that the blockchain gives you. And that’s fundamentally useful when you start trying to do these kinds of very complex transactions in a much smoother and cleaner way.
On the Risk of Corporate Dystopia [00:08:12]
Garrison: Yeah, it’s also a, certainly a security thing, having a shared credibly neutral system for not only, recording transaction data, but also being able to facilitate transactions. The idea of a smart property system, that’s used widely in a lot of different contexts, different industries, all over the world. If it was run by Google or Facebook or Amazon, that’d be an incredible amount of, you know, centralized corporate power over how we create value or interact with our stuff. And that will be almost like a cyberpunk corporate dystopia situation right there.
Vinay: Yeah. Yeah. I think that’s a fair way of describing the risk. Smart property is an inevitability, everything is heading in that direction because it’s just what happens when you take software, and you take property, and the two things connect to each other. And, there’s an enormous screaming demand for it, it’s just not a demand that has found it’s language.
Garrison: It’s what Mattereum has been doing is like building a lexicon, shared language to be able to unpack these really complicated ideas.
Vinay: Absolutely. And I can’t remember whether it’s Kevin Kelly or Stewart Brand, one of the old great godfathers of the internet culture basically said, look, if you’re interested in discovering new things what to invest in, you go where they’re forming new language. Where things are happening that require you to create new words, that’s usually a fundamental, profound innovation because they’re having to invent new language to talk about what they’re doing. You know that something new is happening.
So the smart property thing is there is a dystopian version of it. And the dystopian version of it is things like Android phones: constantly reporting back to Google, gives you a bunch of services, takes all of your data, doesn’t really works for you, works for them. And they can arbitrarily decide what does or doesn’t stay on your phone. That thing where Amazon was taking copies of 1984 off people’s Kindles. Yeah. That’s an example of like smart property done wrong, but this is not what we’re trying to do.
This actually happened, there was some kind of contractual problem with that edition of 1984 and they pulled it right off people’s Kindles. That’s amazing.
Smart Property as Technology for Structuring Social Interaction [00:10:27]
I want to talk about the historical inevitability side of this, right? One of the Mattereum team has a service which holds his physical things in boxes in their warehouse, and when he needs something, they’ll just deliver it to wherever he is for a price. And this is perfect tooling for a nomad.
I bought a new printer. The printer, as far as I can tell is in continuous communication with headquarters and it will probably do things like sell me ink when it begins to run out of ink. I’m fairly sure that every time it gets a paper jam, this has been reported to HQ like, “Oh, I have a paper jam.” This is smart property, but it’s not really what we want from smart property. What I want from my smart property is I can say to my friends, “Hey, you can print things at my house. And it has an interface where I can extend you the right to print something in my house and if you’ve got something you want to show me that’s better shown on paper, it just appears boom, it comes out of my printer that morning. And to get that to work, I need to be able to give you the right to talk to my property. I need my property to be able to tell you whether it’s got the right kind of paper in it. I need to be able to indicate to my property that I’m using it for something else. It shouldn’t run your print job right now. That’s what we want. Right?
You want to be able to fix your grandma’s computer. You want to be able to borrow your friend’s car, and the way that we do all this stuff right now, it’s very hands-on, it’s uninsured, it’s complex, and it takes a lot of things which are machine to machine jobs and turns them into human social jobs. If you want to borrow somebody’s car, you could spend two hours going around and talking to them and having dinner with them. And then just somewhere at the end of that, you’re like, “Hey, can I borrow your car, man?” And it’s, “ Oh, why didn’t you just ask?” Or you could punch into the app, “I want to borrow your car: 35 bucks for the insurance, $200 for the mileage and gas.” “Hey, you want to borrow the car? Yeah, no problem. Fantastic. We just hit the option and I’ll get you turned on. Beep. Like the software supports the sociability because it provides us with a nice framework for the exchange. So we don’t have to try and construct the framework from the exchange in a society that doesn’t really have that as a norm.
This smart property becomes a thing that supports social interaction around goods rather than things that substitutes or removes the social interaction. A good example of that is like electronic dating sites. Tinder or whatever it was, there are a whole bunch of people that could theoretically been going out to bars, getting into relationships, to put it mildly. But Tinder provided them with a framework for doing that, which previously didn’t exist, and as a result it just lowered the necessary activation threshold for people to be able to go out there and have some fun.
Garrison: They were able to like filter their experience in a way, like it wasn’t like in the same way that, you know, filter search results when you’re looking for information online, online dating sites, you filter it through various settings or bits of information.
Vinay: But also it also gave them like institutional support. It provided a certain amount of structure in the interaction like eBay provides structure in the interaction. People can just post on their blogs what they’ve got for sale in their garages, and it would be equivalent to eBay once you combine it with Google search. But people sort of need a little bit of help getting over the social awkwardness of doing these kinds of things.
And that’s what the platforms fundamentally provide is they provide a little bit of social help by structuring the transactions between people. They provide a structure for interaction and with a structure for interaction, people are much more willing to interact with each other than without it. It’s actually a big support and a big help for people to have a little bit of a structure to work inside of and I think all cultures use this kind of semi-formal setting as a way of stabilizing human interaction.
Think of like formal dances. You go back 50, 100 years, formal dances go, “May I please have this dance?” That kind of structured interaction was a way of basically managing the risk of people interacting with each other. It reduced social anxiety and it’s the same thing with buying and selling.
Think of street markets, right? The street markets, you have a structured format, which is somebody rents a booth at a street market, they come down, they put all the crap out of their garage on a table. And then people knew that the purpose that they’re there for is to buy, right? The person knows that the purpose of that there is to sell.
So when it comes to the social interaction, picking the thing up and saying how much becomes very easy, right? But I come round to your house and I pick something up and say “How much?” it’s going to get weird, you see what I’m saying? So the formalism of this is a street market and the structures, the interaction between people to make it commercial is exactly like if you were on Tinder, you are here to go on dates, that means that we can talk to each other. If you’re on eBay, we’re here to sell something. If you’re on Chat Roulette, you’re here to have random interactions with weirdos on the internet or something like that. I’ve never used Chat Roulette. But what I’m trying to say is that the need for structures to lower the anxiety in doing something new socially is one of the critical things that the app economy has really gotten.
If you and I have an interaction through the car rental app, even if we are friends and we go skiing together, I know that the topic of conversation is I want to rent your car for a week. And I know that you’re interested in discussing that or you wouldn’t have it listed in the app. So the way that I see smart property is that smart property will basically take a set of social interactions between people, right? Social interactions between people about things, and it will lower the anxiety and the complexity and the risk — legal risk, insurance risk, all the rest of these kinds of risks. It will lower those risks to the point where people are willing to have conversations with each other about property. “Can I borrow your tent?” “Hey, do you have a microphone?” Obviously if you’re on the other side of the world, this is less useful, but for most people, if you’re in a city, anything that you can imagine needing is probably in your apartment building if you have the ability to ask somebody for it.
Garrison: Yeah, like borrowing a specific tool instead of, just ordering on the first link you find on Amazon and it’s being shipped in a container, like all of those resources that went into summoning an object to you, you could just, if you had the means, you could just have it in your hands in an hour within a quarter of an hour where where live.
Vinay: And gone again after you stop needing it. The critical thing is getting rid of the stuff afterwards. You need a colander right. You have six people coming over for dinner and you’re going to cook a bunch of spinach. Your colander is not really big enough. It’s going to make a heck of a mess so you want to use it for the presentation of the dinner. The spinach is in the big colander. “ Anybody in my apartment have a colander?” “Oh yeah. Flat 37. They got a colander.” You go down and you’d knock on the door. They hand you the colander. You have a two minute conversation with them. You go, you use it, you wash it, you bring it back. Their life has slightly improved. Your life has substantially improved. You pay them $1.50 for the privilege of using their colander.
Sounds ridiculous right now. Sounds ridiculous right now. But you’re an American. The older generation, right? The kind of Americans over probably 70, 60, grandparents’ age, they’ve got like two metric tons, three metric tons of stuff in their garages and attics right. Ubiquitous. And the older Americans are the more physical things they own, and a lot of it’s in boxes that haven’t been opened for 20 years. Industrial mass production, advertising, but no automated inventory management. They own so much stuff they can’t even remember what they own. And the result is chaos. If that generation had smart property, where they could just have borrowed these things from their neighbors when they needed them one time. You want to trim your hedges, how many hedge trimmers does a neighborhood need?
Garrison: Just one.
Vinay: Just one. And so for our generation the place where this really comes into its own is things like video projectors. Half a dozen times a year, you probably would quite like having access to a $3,000 video projector. And if you could get access to a $3,000 video projector for 30 bucks a night or something like that, you’d probably do it fairly casually, and it gets delivered just like the pizza and the beer get delivered.
Smart Property: A Software Update for the Sharing Economy [00:18:37]
Garrison: Yeah, this kind of like communal inventory management example that we had there, it reminds me of the sharing economy. What’s the link there?
Vinay: The thing with the sharing economy is the sharing economy never really worked and it never worked because it had an inventory problem. You needed to manually list all of your stuff inside of the sharing economy databases. They weren’t interoperable. And there was always this question of who owns the data. The way that smart property will work is the manufacturers will provide the initial asset passports for the physical objects that you’re buying. So I go to Amazon, I buy a chainsaw, right? They ship me the chainsaw to my house. And into my wallet they also ship an NFT, which has a connection to an asset passport, which has all of the attributes of the chainsaw: what it is, how powerful it is, where you get spares for it, how it has to be maintained, safety instructions, all of that stuff arrives in a bundle attached to the NFT that’s now in my wallet. If I decide that I’ve used this chainsaw for a season, then actually what I need is an electric one, not a gasoline one. I just take my chain chainsaw and I drag it onto the eBay icon on my phone. I take my chainsaw NFT, I drag it onto the Ebay icon in my wallet. Are you sure you want to sell this item?
Yes. Auto creates a listing. Makes me go through a quick questionnaire. Whether the thing is in the condition that it was when I bought it from, how often I’ve used it. Twice. How long did you use it for? Two days each time. Have you ever had to change any of the components? No. Go through the little inventory check. Boom. Sold. So if I have to go and put all of the attributes of the chainsaw into the system in the first place, the inconvenience is enormous. Selling the thing becomes work. But if all the information is prepackaged with the chainsaw, we don’t have to take responsibility for creating the asset identity for the chainsaw. All we’re doing is passing the asset on. So we take all the labor of creating the initial asset passport to define the thing and all that goes to the manufacturers because they’re going to do it once for every chainsaw they make. And this is the critical thing that was missing in the sharing economy model. All the labor that had to be done to document what was for sale is the thing that killed the sharing economy. It was the hardship of trying to figure out what was going on. Whereas if I have something that simply digs through your email box and pulls out every single thing that you’ve bought from Amazon and asset passports it for you automatically if there’s already a template for that object, it’s just reduce the inconvenience and reduce the inconvenience and reduce convenience. We make it easier and easier for people to get paid. And at some point there’s a crossing where suddenly smart property is a thing.
Smart Property Privacy & Security | Cultural Differences in Adoption [00:21:23]
Garrison: Yeah. I’m just imagining like in video games, like MMO RPGs, like when you drag your inventory, you hold click and drag it to someone. And then that character, who’s an actual person behind that avatar has that digital artifact. Thinking of almost like the same thing but with actual, like actual ownership of the physical object being transferred in that interaction is really interesting.
Because I like to always explore the you know the kind of light and dark or the complex things that will inevitably arise around these things. I’m really interested. If you have a global inventory management system, obviously the notion of privacy — if someone had like a profile use the MMO RPG, as an example, some games, you can go walk up to another character and you actually see what they have. You can literally see their inventory and negotiate a trade or something like that.
Now the parallel with the smart property system, if you’re able to do that, then you would know what everyone owns or at least the things that they own, which is part of the smart property system that could potentially lead to some people, depending on objects that they have, as vulnerable to theft or potentially violence. For example, using like the gold-backed NFTs for example, if you knew that someone had tokenized gold bullion with the capability of literally taking physical custody that’s obviously kind of a target.
Vinay: Somebody come around to your house and steal it from you.
Garrison: Yeah. Looking at like, you know, the parts of the system that would need some particular attention in terms of like security. Have you thought about how do you protect people? Obviously there’s an open participatory nature and there’s a lot of communities that would like thrive on that. I’m thinking like co-ops for example, different cooperatives around the world because that social structure by by its nature is already in tune to that idea of sharing what we have for the betterment of everyone in the co-op. But there’s other contexts where people will look at that as opportunity to prey upon people. So I wonder if what would have to be built to safeguard. I guess it’s like radical transparency versus radical privacy in relation to smart property. What are your thoughts on that?
Vinay: This is going to be very culturally dependent, culturally sensitive. Norway for example, till pretty recently, you could recently inspect the tax register to figure out what everybody in Norway was paid. It’s only very recently that they stopped doing that. Whereas if you did that in America, that would be an unthinkable invasion of privacy.
Japan, a super low crime society. Dubai, super low crime society. These systems could be pretty transparent. You try and do this stuff in Brooklyn, you’re going to have a whole different set of problems. Gary, Indiana. It’s like, hmm, okay. Maybe I don’t want to tell my neighbors quite so much about what I have for sale. So the way that I would see it working in tougher societies is that you’re going to do this with intermediaries, right? I say, “Hey, I need a colander. Or take something like a diesel generator. I need a diesel generator for three days. System says somebody has a diesel generator. We can have it delivered to your house. Yes or no. Yes: a courier arrives, hands me the diesel generator, I use the diesel generator, a courier arrives, picks it up, takes it away. End of story. Simple as that. Simple as that.
Three Smart Property Use Cases [00:24:46]
Garrison: Yeah, the smart property thing there’s so many ways to look at that topic, examine it. For you personally, are there like use cases that you find very interesting? Obviously there’s everything from the business- to- business and supply chain side of things. There’s friendly neighborhood inventory management with colanders. But is there anything in particular that you find interesting?
1. PARENTAL INVENTORY MANAGEMENT [00:25:11]
Vinay: So the places where I think this is completely revolutionary are basically three things. The first is everything to do with parents, right? Parents are just the most burdened-by-stuff people in society. The kids constantly grow out of everything that they’re wearing and they get bored with their toys. And the kids have no notion that things need to be new and special and fancy. They’re not like teenagers, they’re not whiny about that stuff. You get them pair of pants they’re going to put the pants on. So pretty much everything for children under about the age of 10 should be smart property. The clothes, the toys, the push chairs, all the rest of that stuff. All of it ought to be just a free floating pool that parents just pull things out of, use, and then get rid of when their kid grows out of it or gets bored with it. And that alone. Think of the quality of life difference if you can constantly lease for your kids new things and all it costs you is getting rid of the old things and having to pay 20p. Because it could be incredibly cheap. If you have some squeaky rubber duck, that thing is going to be in good shape for 15 years. The cost per hour of play with the squeaky rubber duck by a three-year-old kid is like a millionth of a cent. Whereas the cost of buying it, storing it when the kid gets bored, negotiating with the kid about getting rid of it, and then finally get rid of it, dumping it in a charity shop. It’s twenty-five dollars in addition to the price of buying the thing. So everything to do with kids, just a seamless surface of smart property and an enormous pool, sterilize it with UV light or whatever it is before it’s given to the new parent. No problem. So that’s pool number one.
2. PROFESSIONAL TOOLING [00:26:56]
Pool number two is what I would call prosumer tooling. I quite like the idea of screwing around with a 3d printer. I don’t want to spend two grand on a 3d printer. If somebody would rent me a 3d printer for a month, with all the bits that go with the 3d printer for $200, I would probably have to have $200 worth of fun with the 3d printer, and then somebody would come and take it away again. You want a chainsaw. You want a router. You want a big printer. You want a video projector. The ability to casually rent high-end equipment for one-off occasions or for experiments or for projects. If you live in a big city and you could get hold of basically everything manufactured by capitalism for say 1% or 2% of its cost per day of use?
$6,000 camera, right? If you have a $6,000 camera and it costs you $60 a day to rent that camera, that might be worthwhile at the one percent point. it went from the 1% point to the tenth of a percent point, right? If the camera is going to be used solidly for five years, the camera per day could be rented for thousandth of its value. Five years would be 1800 days. The camera’s being rented every day. Somebody going to pay a thousandth of a percent of the camera for using it. So at that point, maybe it’s $6 a day to get access to a $6,000 camera. And at that point, for sure, this is worthwhile
Garrison: Yeah, it’s a tighter coupling of the use of a thing and the value of the thing.
Vinay: Exactly. And at that point, like how much more experimenting around would you do with high-end systems if you could rent them for somewhere between a tenth of a percent and one percent of their asset value? You want to do some mountain biking, you’ll have the best mountain bike, then you get rid of it. You want to watch some movies? Hey, my cousin’s coming over. My cousin’s a film buff and he’s going to be here for three days and we’re going to watch the whole Star Wars trilogy. Boom. We’re going to rent a high end projector. You’re having a party, we’re going to have a real PA, right?
You want to brew beer, right? But he’s going to come round with 3,000 bucks worth of brewing equipment and they’re going to charge you $42 for the six weeks. You’re going to pay a few hundred bucks for high-end equipment or brewing beer.
Point is we want to try things. We want to do experiments. We want to reach out. We want to do things which are novel. And right now the only model that we have is you buy all the equipment, you don’t know whether you’ve got everything you need, you try and use it, and at the end of that process, you either get stuck with it or you have to resell it. And it’s a pain in the butt. It’s almost like turning stuff into part of the experience economy. I want the experience of owning a laser cutter. I don’t want to own a laser cutter. I want the experience of owning the laser cutter. Then I want the laser cutter to go away. Unless I suddenly discovered that I’m a laser cutter hobbyist and I really want to have one, and then I buy it. And this is just a different way of relating to the fruit of capitalism.
Garrison: The design space around all this, all, this is really fascinating because it’s so embedded in not just objects, but like the social structures around them and the spaces in between objects, not necessarily the objects themselves. A book I started reading recently, Medium Design by Keller Easterling, is about that very thing. How, like there’s a whole, you know, design space around how we structure like infrastructure or build cities. And there’s actual like, you know, power relationships that are woven into how things are built. It’s almost like a call to action to, look at interdependency of things within a system and building in such a way that you account for that. It’s a very like cognizant thing that you’re doing. So I imagine smart property is like a building block towards building these things is you can kind of, to put it one way, program interactions around objects depending on what your goal is.
You set the parameters and it’s this, digital, physical artifact. It’s this object that has like a digital counterpart you know, exchanging hands. Yeah, it’s just super fascinating. Like the use cases around that are basically limitless.
And then you get into intangible property because we’ve talked a lot about physical property in this conversation, but intangible, like intellectual property, for example, could use the same tooling
Vinay: It certainly could. I’m obsessive about physical property because physical property is the nut that we have to crack if we’re going to fix our environmental problems. But you can certainly imagine doing this for intangibles.
3. SPECIAL PROJECTS [00:31:41]
I want to talk about the third thing. I said there were three big areas of use, right? So everything to do with kids, everything to do with access to pro equipment, the third category is everything to do with special events. And I don’t just mean special events like weddings, funerals, this kind of stuff. I also mean special events, like projects. You’re going to move house. For the first six months in a new house, you want a big box of tools to fix all the things in your new house. You want a drill. You want a saw, you want some saw horses. You want a big ladder. You might want plastering kit. All the rest of that stuff, new house stuff, six months of being in a new house and having all that stuff. You’ve done everything you’re going to do to that place, you’ve painted and you’ve waxed and you’ve polished and all the rest of that stuff. And at that point, you don’t need the new house kit anymore. All you can use one small toolbox with a screwdriver and a spanner.
So there are large projects in people’s lives. I am going to build a deck. Bring to me the deck kit. You use the deck kit for three months. You have successfully built a deck. Everything is done. Get rid of the deck kit. And that model, right? You’re going to build a garden shed, right? You’re going to need a bunch of garden shed tools. You’re going to build a deck. You’re going to do a bunch of deck tools. You’re going to paint the outside of your house. You’re going to need a bunch of stuff there. So a human makes an intention to do a big, special, complicated thing. The human is then going to do that big, complicated thing in exactly the same damn way that every other human did it.
You’re going to go to YouTube. You’re going to watch the same video that everybody else does, they’re going to tell you how to do it the same way everybody else does, and then you’re going to be left buying the same things that everybody else bought. Just close the damn loop. I am Bob. I’m going to show you how to build a deck, by the way, you can get Bob’s deck building kit from any of the following places. They’ll deliver it to your house. You will use it. When you’re done, they’ll take it back again. Boom, boom. So we take the knowledge, the tools, the raw materials, and we integrate these into new class of services.
Garrison: And you’re able to bundle these services in a way — not only the services, but the resources underlying them — in a way that it’s more efficient. You’re not, there’s people that undergo like a bunch of, projects like building a deck or something. And they, they either buy, because they’re not experts, they buy too much or they buy so many different tools. They may not even end up using them, but they still have them. And there’s just laying dormant.
Vinay: Oh, you finished the job. And at that point you’re not going to build another deck. Why do you need the professional screw gun? And if eBay worked the way that we want it to work, all this stuff would just go to eBay and it would vanish and there’d be no problem. That’d be fine. But it doesn’t work that way because we don’t trust the condition of the things we buy on eBay. And eBay doesn’t think in systems. And yet when we do things, most of the things we do much like the way other people do them. We need most of the same things that we need. How hard can it be? You’re going to fix your bike. You’re going to need the bicycle repair kit. It has all the things you would require to disassemble and reassemble a bike. At the end of that process, you know that the oil has run out almost on the bike repair kit, the next person to rent that kit, the oil has been replaced by the time they rent it. And if this stuff is available in the short delivery time, like three hours, next day at worst, but let’s say three hours, you’re out your bike breaks, walk home with your bike, and by the time you’ve arrived home, the bike kit is already ordered, and it will be there in an hour and a half, and now you can fix your bike.
It requires population density to be able to do this. We’re not going to be able to get this kind of relationship with matter in rural areas until you’ve got like magic drone delivery, but in a big city, how easy is life if it works this way? And then you also get spaces. So suppose that you’ve got something like car repair, car repair, you might need more stuff than anybody is going to deliver to your house, and you might need things like those kind of lifting jack things that you use for things like pulling out an engine.
If you take smart property and you extend it to the notion of smart locations… I need to do the following thing to this car. What are the places I can rent where they have the tooling to allow me to do this? I want to rent a place where I can make a dress, right? Lots of women into dressmaking. They’d like to do it. They don’t want to keep all the stuff in their house. They only do it once in a while. They decided they’re going to do that. You rent 16 hours of dressmaking time over three or four weeks in a place where everything is there, right? Rentable, shareable studios and workshops: smart property.
Sharing economy looked at doing all of this. Sharing economy just didn’t have the necessary technologies and platforms. Too much complexity, too much cost. The overheads are too high. It was just too hard. Blockchain, asset passports, NFTs, smart contracts, enforceable smart contracts, blockchain based insurance. I can make my way down the list of all of the new things that we’ve got now we didn’t have 10 years ago in the first run to talk about sharing economy. There just wasn’t the infrastructure. Now there is. As a result, dramatically easier to do this. It’s still going to be one of these things where we’re going to start and we’ll do a bit and do a bit, do it, do a bit, but if you ask me where we’re going, we’re moving into a relationship with physical matter which is almost as fluid as our relationship with information.
And what we’re talking about is something that looks like streaming property rather than having to buy property.
Garrison: Yeah, really interesting. I never heard that framed that way. New language. We’ve come up with new language.
Ownership in a Smart Property World: Rental vs. Sale [00:37:18]
But one thing I want to dig into because I think it’s really important is the idea of ownership in this sort of, kind of fluid property system where everything’s circular and very efficient, but who owns this stuff? It could be worrisome if somehow you know, for example, if like Amazon looked at it like a growing smart property system and was like, “ Oh, why don’t we just buy all this stuff? And then we’ll earn profits on what everyone’s doing. You understand what I’m saying?
Vinay: Right. What happens if the people own nothing and everything is rented. So what you have is a constant concentration of wealth in the hands of the people that actually own the property.
Garrison: Yup.
Vinay: What is the price of renting everything? Do you wind up in a position where you just don’t have any access to stuff because you don’t own any stuff? This is why it’s critically important that these systems are peer to peer.
If we’re in a position where the only way that you could get access to the vendor side of these smart property systems is by being a big corporation with massive insurance and regulation all the rest of that stuff, you wind up in a kind of dystopia where nobody can afford to buy anything and everything is rented all the time where people are constantly poor because the property bills are impoverishing them. Think of our camera example, right? A high-end DSLR is certainly good for five years. I think all of my camera units, at least 10 or 12 years old. I bought it very secondhand on Amazon. It’s fantastically durable, nothing wears out. It’s solid state. As old as the lenses aren’t broke, they last forever.
So how much should it cost to rent a camera? 10% of the camera’s value a day? 1% of the camera’s value a day. A tenth of a percent of the camera’s value a day? Somewhere in there, there is the real costs of renting a camera. Let’s add 10% to that for profit. Hell, let’s add 30% to that for profit. So 5,000, $6,000 of camera, five years of use, five years worth of days. You know, what is that? Just about 2000 days, right? 2000 days, $6,000, $3 per day, profit call it two dollars, 40% profit margin. Actually one dollar 30% profit margin. So now it costs $4 a day to rent a $6,000 camera.
The only reason that’s not how the world works is because we keep losing the cameras or they get stolen or people treat them badly and so on. So all those things create problems. There is another way of structuring the smart property economy that doesn’t have these problems, and I’ll come to that for a second, but I want to talk through the price thing for a second. So right now if you look at professional camera rental, it’s not $4 a day for a $6,000 camera, right? It’s brutally expensive. So if you’ve got a situation where there’s very little regulation of these markets and people can just do what they like, the prices will be kept low because people that have equipment will rent the equipment. Competition will keep the prices down and the quality up and the systems will be reliable. That’s basically the hope. That what you don’t wind up with these monopolies and oligarchies that are artificially inflating the price of rental for physical equipment.
Garrison: Less distortions.
Vinay: Less distortions. Now, the other way of doing this is we actually don’t do rental at all. And this is my preferred way of doing smart property. My preferred way of doing smart property is not to have rental markets at all, and to have everything be sale. And this is really where we close the loop on where the blockchain comes in.
This part is real important. So I want to get access to a $6,000 camera. I could rent it. The problem then is if I break it, I now owe $6,000 to the person that I was borrowing the camera from and we’ve got insurance claims and complexity and so on. And I might be careless because it’s not mine. I’m just renting it. It’s just a rental. Drive it like a rental. So the alternate model here is that I don’t drive like a rental because I bought it. I see a camera. It’s had 53 previous owners. It’s got a recent condition report from somebody that runs a camera shop. I buy the camera for $6,000. I use it for three weeks. I sell it again for $6,000. Why? It’s a $6,000 camera with three more weeks of wear on it. Maybe it depreciates by $3 a day for that period. So I bought it for $6,000 and I sold it for $5,900, having used the camera for three weeks. $3 a day depreciation. If the camera has a life span of five years.
So if we turn it that way around, where everything is being bought, used, and then sold again. And we have perfectly efficient markets for buying and selling these things, then we don’t lose a bunch of value because eBay charges 10% and because people doubt the goods on eBay and the doubt discount is 20% because you’re going to get ripped off once in a while. If we correct for all of those systems so the resale value is very approximately the same as the purchase value plus appreciation plus wear and tear, then you can build this entire model of this kind of streaming asset economy without having to take the step of turning everything into rental. And it massively simplifies the legals. It massively simplifies the politics. You don’t wind up with nearly the same opportunities for exploitation. And at the end of that process, you just wind up with secondhand markets which are so efficient they replace the rental markets. And the only way that we could get that kind of efficiency that I’m aware of is to use the blockchain for this stuff. Scaled blockchains will make this possible.
Garrison: Sounds good.
Is there anything else we want to cover?
Smart Property and Gold NFTs [00:43:09]
Vinay: The first piece of smart property that we have believe it or not is gold bars which are being sold by our partner Lohko from a vault in Singapore. And what you buy is an NFT on OpenSea for an ounce or a 10g gold bar. And pretty soon it will be a kilogram gold bar. And after that will be a 400oz gold bar. But what you buy when you buy the NFT is the right to have the physical bar delivered to you or equivalent value, if you choose. And it’s a numbered, allocated bar, so when you buy the bar, you own the bar. Your bar with your number is in the vault and they owe you that bar.
Now that is an approach, right? That is the simplest form of smart property because the smart property never leaves the vault except one time then it’s no longer smart property. It’s just plain old property. So if we were in a position where we were doing this at scale, the thing in the vault it might not be a gold bar. It might be a Rolls Royce or a caravan or a jet pack. And, you buy and sell the NFT. “Hey, I might need this jet pack, so I’m going to buy the NFT for the jet pack, and I’m going to rent the NFT to other people that might want to use the jet pack, but I’m going to be the owner. And then when I need the jet pack I’m just not going to rent it in the days when I need it and then I’m going to go down there and use it.
And the line between the gold bar that sits in the vault and the jet pack that is constantly being taken in and out of storage and maintenance. It’s literally just some escrow contracts and some storage and maintenance. Legal frameworks. The semantics. Everything else. It’s exactly the same model. Here’s the NFT. Here’s the physical object. The NFT gives you the right to use the physical object. It’s just we start with the simplest example, which is gold where it stays in the vault and people tend not to take it out. Over time, more and more, it will be things which are moving in and out of storage, and then things which have no storage they’re just always in the hands of somebody who currently uses them.
