Martin Köppelmann — Perspectives On Organizational Change

Mike Parker
Apr 7, 2018 · 7 min read

“I think, there’s still room for leaders”

Martin Köppelmann, CEO of Prediction Market platform Gnosis, was kind enough to find time from his busy schedule to talk to me about how blockchain technology may disrupt current organizational structures and how Prediction Markets might be able to help organizations transition to new ways of not just working, but existing.

Martin is an entrepreneur and thought leader in the blockchain space for more than 5 years, Martin co-founded Gnosis, a decentralized platform for prediction market applications. Martin has also done research on decentralized market-driven governance mechanisms, the economic incentive structure of different consensus mechanisms, and scalability solutions via state channels.

Mike:
Hi Martin, first of all let me thank you for making the time to do this interview.
What I’m exploring in this series is the possibility that we are faced with every organization needing to make major changes in order to survive the rapidly changing context in which they are operating.

Martin:
I think there is a useful theory that a company exists because transaction costs can be lower within it. So in an open market, in theory you should be able to get the best offer via a Buyer’s Market, but of course there are some costs attached to it to contract, or to engage with someone you don’t know yet, or don’t have a relationship with. Inside a company, by contrast, you don’t have those costs because you are dealing with someone who is part of the same company.

So from that perspective, I would say that what Blockchain is now doing is reducing transaction costs or costs of making agreements, or arrangements, significantly. So I would say that the Internet reduced the simple cost of sending information. It’s now feasible to send trivial information like, “I like this picture” across the continent, because that has pretty much zero cost. Now with Blockchain, it will eventually become extremely cheap to make those transactions/contracts.

So that will, in my view, significantly challenge the role of companies, because you could argue, why should we have companies at all, why are we not just all independent contractors, workers, finding kind of spontaneous agreements across networks that coordinate work. In this context, tokens offer the option to essentially become a shareholder of an idea, of a project, of a network, at a very low cost. So right now, if you already have stock in a listed company, well then it’s not that hard to transfer shares, but if you are not yet listed, then you would need to go to a notary, and it would cost hundreds if not thousands of dollars to set up.

And right now with Blockchain, you create an address, you send a token, and it costs a few cents, basically, to make someone a shareholder of your thing. So yes, I think we’ll move towards people in networks, instead of companies. People will be part of many networks in parallel.

Mike:
What do you think will happen to legacy organizations in that environment? Do you think that they will transform or disappear?

Martin:
Yes, it’s really hard to forecast whether legacy companies will just disappear and completely new things will arise, or whether some of them will actually do the transformation. I think it’s quite hard for them, to be honest, to transform, because it’s such a different approach…I have a hard time imagining how for example BP or a major bank might transform.

Mike:
Let’s take the example of BP, or Shell, or any other company which has about 70,000 people working for it and is a global multi-national. They’re not just going to disappear overnight, right? So I imagine that there will be some kind of process of transition. I am interested in whether you see prediction markets having a role to play in legacy organizations in terms of helping that transition?

Martin:
Yes, I mean, one way to look at prediction markets is as follows: If you think of the transition of legacy organizations from being monolithic, closed systems, towards more networked or more open systems, where there’s no clear distinction between being in a company and being out of a company, then I would say, yes, prediction markets can help a company especially during the transition phase. It can still be a somewhat closed company, but by basically asking questions via a prediction market, they can open up, or they can gather information from everyone who has access to this market. That’s one theme, or goal with Gnosis that everyone has access to that market and can contribute information, which then can be used to make better decisions within the company.
So in the end, the decisions are based on the global information situation, and not just on the information that is available within the company.

One more addition here: specifically interesting in my view are those conditional prediction markets where it’s not just the market asking, will this happen or wil this not happen, it’s the market asking, if we do this, what impact will this decision have? It’s a concept described as Futarchy, which proposes that with a well defined problem, market mechanisms are the best way to find the dominant strategy for solving said problem within an open group. To achieve this, conditional information markets are levied and participants are motivated by their own economic benefits.
For more on this see the Gnosis blog.

Mike:
I agree with you, and I’m actually, I think it’s actually much more interesting not to ask questions, which necessarily have black and white outcomes. That’s a very interesting point there.
But I was wondering when introducing a prediction market into an organization, or getting an organization to use a prediction market, whether that requires a kind of change of mindset in the leaders in those organizations?

Martin:
Right, so one thing just to consider, in the simple setup, if you ask a question, and probably you get a good forecast from the market, then this information, or forecast, is public. So if you are trying to use a prediction market to get a competitive advantage, that may be perceived as a problem, but really you need to use it in a different way. For example, there are plenty of decisions or results from a market where you still gain, even if the information is public.
The other thing is just accepting the fact that there might be people in the world that know better than you.

Mike:
Yes, do you think that one of the problems with usefully using collective intelligence is the legacy inheritance of leaders and leadership as involving superior understanding and knowledge? So you can have really good results from a prediction market because it is actually the result of collective intelligence operating well, but none of the outputs get actioned because it wasn’t invented by the leadership of a particular organization?

Martin:
I guess definitely personal pride always plays a role, but I would also say there are probably things, (and I am not 100% sure where the line is) but I think there are things where you still need leaders for. So for example, the Apple iPhone, before it existed if you had asked the crowd, “Do you want this, or do you want that?” they would probably have just said, “Okay, we want this feature phone with more features, instead of coming up with something relatively radically new.”

Mike:
A good point, it reminds me of Henry Ford’s great quote, “If I’d ask people what they wanted, they would have told me faster horses.”

Martin:
Right, so I think, there’s still room for leaders.

Mike
I’d be really interested in knowing if you think that the implementation of a prediction market, in terms of how you do it, the questions that you ask, and the access that you give to it, is actually an expression of the values of the organization?

Martin:
Yes, you, of course, have a great influence by those choices you mentioned. You influence things by how you ask the question and what kind of outcomes you’re suggesting. Where do you market the question? Who has effectively access? You might set it up so that everyone could have access, yet in the end, of course, only a subset of people know about the market.
So yes, that is definitely one more challenge. Even if you have the intention to be open and to gather all the information, those things will still lead to some biases. And those may be big biases at this stage through the limitation of technology, and access to the technology. Who is actually capable of participating in such a market? Because it’s still not as easy as we want it to be.

Mike:
That’s a very interesting area, thanks for those insights.
You must be pretty busy as the founder of Gnosis. Would you give us a brief idea of what an average day is like? Do you have an average day or they’re all completely different?

Martin:
Most of the time I am with our team, and I try to do this on purpose. There is a temptation to be travelling or at conferences and meeting people outside, and I do really like to do that. But that doesn’t build products, and that’s what our core mission is, to actually build those things we talk about.
So right now I’m here in our Berlin office. It’s a new Blockchain co-working space, and we’ll be over 100 people just building stuff. So I try to be heads down and building stuff with the team as much as possible.

Mike:
So if people are interested in finding out what Gnosis are doing, they can just go to the website and check and have a look.

Martin:
Yes. Yes.

Mike:
That’s great, Martin. Thank you so much for making the time to do this. I really appreciate it.

Liminal Thought Leaders

A collection of articles and observations from the leaders pushing the thresholds of organizational design.

Mike Parker

Written by

MBA innovation and strategy post-graduate studies in Systems Thinking and Governance. Qualified Solutions Focused therapist www.liminalcoaching.co.uk

Liminal Thought Leaders

A collection of articles and observations from the leaders pushing the thresholds of organizational design.

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