Conversation with Lory Kehoe
Good day everyone, and welcome to another episode of the Momenta Podcast. This is Ed Maguire, Insights Partner at Momenta Partners, and today our guest is Lory Kehoe who is Managing Director of ConsenSys in Ireland. ConsenSys is an interesting and unique company that’s been doing a lot of innovative work in the blockchain and crypto markets, we’ll get into that a little later, but the background to this is, I had met Lory through a mutual friend of ours, Kelly Levalley Hunt who had recommended that you’d be a fantastic person to talk to. It was a pleasure meeting you and thank you very much for joining us.
Likewise, Ed, thank you very much, it’s great to be on this with you.
Terrific. Let’s first start with a bit of context, would love to hear a bit of your background and understand what are the formative experiences that you’ve had, that have led you to where you are today?
I started my career lecturing at a city college in Dublin, The National College of Ireland, fortuitously landed a teaching assistant job and then my boss got promoted, so I picked up hours basically lecturing strategic management when I was about 23-24, which is pretty young, but it helped me surf a lot during the Christmas break, and during the summer recess. I did that for a couple of years and I realized in my second year, ‘Hey, I really should practice what I preach’, which was all around strategy and man-management and so-forth. So, I applied to join Accenture and was fortunate enough to become a part of their graduate program based out of Dublin.
I quickly realized how technology was and is to everything that Accenture does, in terms of helping their clients get from A to B; whether it’s about saving money or helping them generate more revenue. I had a really positive experience with Accenture, stayed there for about five-and-a-half years; primarily worked in financial services on large scale IT implementation projects, doing what Accenture does best, and learning the ropes. Then I joined Deloitte to help them build their financial services consulting practice here in Dublin, I spent about another five years or so there, and I had just accepted a partner job with Deloitte in Hong Kong when Consensus came knocking on the door, and basically suggested or asked if I would be interested in starting Consensus Ireland, and building a big team here in Dublin to support the Emir network from a deliver capacity.
I was really torn about that decision and didn’t know what to do, but using Geoff Basso’s Regret Minimization Framework Theory whereby you picture yourself when you’re 80, you look back on your life and think about some of the options that you had, and what you’d regret more. So, looking back if I was never to have given a start-up a go in starting a business from one person, that’s something I would have regretted for the rest of my life. So, I turned down the partner role with Deloitte in Hong Kong and rolled the dice to start ConsenSys here in Ireland.
That’s a great background. It would be helpful for our listeners to provide an overview of ConsenSys. I’m pretty familiar with the company which has an extensive reach in terms of its activities, but what is the founding DNA principle of ConsenSys, and could you talk about some of the work and some of the things that Consensus is involved in more broadly, and I would love to get into your focus in Ireland specifically.
ConsenSys is a global technology company focused on blockchain technology, and effectively now we’ve developed a suite of products which we explain to our clients what they are, what they do, how they add value. Our clients see the value, and then we help them effectively integrate those products into their business, to help them generate revenue, or to help them save money, or both as the case may be. ConsenSys has grown up and changed over the last four years since it started, initially it was focused probably more around project-based work, and the company now is laser focused on creating really-really top-notch products, as to whether it be blockchain as a service, whether it be smart contract development, whether it be the auditing of smart contracts, whether it be in the supply chain space, and so-on. We probably have about five or six really-really well-defined products which we’re going to market with now, which our clients are using.
Ultimately ConsenSys is Joe Lubin who the founder of ConsenSys, and one of the co-founders of Ethereum. ConsenSys is the corporate vehicle to help the world understand what Ethereum is, and as per Joe’s vision is to create the world computer if you will, so to create a way in which all the world can work off a shared leisure, which will be Ethereum-based. So, that’s effectively what ConsenSys was four years ago, it’s quite different to what it is today. We also have a part of the business that focuses a lot on venturing, so where we make investments in companies, it’s effectively our portfolio company, we’ve made investments and we still listen to pitches to make further investments. We have a 50 million venture fund that are businesses we are really interested in, that may not be right in our wheelhouse or sweet spot but we’re really interested in and we’ll make an investment of those.
We have a thing called consensus academy which is all around how we set-up training programs in different parts of the world, so here in Ireland we won a government backed mandate to basically educate different companies on blockchain, and more specifically Ethereum. Then we have what I call kind of a blockchain festival called Ethereal, which is another part of our business, it took place in New York last month, and I believe is taking place in Tel Aviv in September, and London later in the year.
What would be helpful from your perspective is, if you look at Ethereum many people are familiar with Ethereum as a blockchain that supports ether, or the ether cryptocurrency, but there’s some really important innovations that had come out of Ethereum which a lot of that has been spearheaded by the young genius founder of Italic Guderian. Could you talk about the unique capabilities or the vision that has come out of Ethereum that really drives the investments, and the project work that you’re working on, and how that’s different from for instance bitcoin which was the initial cryptocurrency application that ran on a public blockchain. How was Ethereum different, and how has that vision in those distinctions driven the unique work that you do at ConsenSys?
The way I look at this, and even the way Vitalicus and Joe explained this is, the bitcoin blockchain is revolutionary, it’s a really big deal and Satoshi Nakamoto, him-they-her whatever, is a genius. But what people started to realize is that blockchain is – and bitcoin blockchain specifically, it’s like having the internet but largely an internet that can only do one thing, so maybe that’s online banking, which is still a very cool thing but the internet would not be what the internet is today if it could only do one thing. That’s kind of what the bitcoin blockchain does, it’s really good at transferring value, or monetary value on a peer-to-peer basis but developing other applications on top of that is and are quite hard. So Vitelic and a number of other folks including Joe got together and developed effectively a programmable blockchain, and that’s the genesis, and the impetus, and the reason as to how Ethereum came about, why it’s still here today, and why it’s going to be here for many more years to come.
So, the way it’s described is, think of the big one, blockchain, almost like a [audio lost 09:20], but still very cool and serves a very specific purpose, and is amazing. However, the way to think about Ethereum is that it’s more like your iPhone, basically it’s a device in which there are many applications that exist, and you can basically download many-many-many more. That for me is the key difference between those two. So, that’s the first part of the question.
The second part is how we use it in Consensus, and what makes it important is that ultimately there’s some key features that Ethereum has. I think Ethereum really brought about the birth of the smart contract. Smart contracts are self-executing contracts when certain criteria are met, if this event happens, trigger this payment. We as a company have used smart contracts in 99 percent of the projects that we work on with their clients, whether that is to create automated workflow, whether that’s to create automated payments, whatever it may be, but they’re a big signature feature of this Ethereum blockchain and the work that we do at ConsenSys.
More locally in terms of projects that we are working on out of Ireland, Ireland and the purpose that Ireland serves from a ConsenSys perspective specifically is to basically act as a technology delivery center for Europe, and then for Europe, Middle East and Africa. What I mean by that is Ireland is quite a small country, we have about 5 million people so it’s a relatively small market, the goal of Ireland is to basically deliver on the projects that our colleagues are working on, whether that be in Paris, whether that be in Dubai, or whether that be in London. So, they will win the work and then we will support them to deliver that work for that client or consortium as the case may be. So, a good example would be the work we’re doing on a company called Komgo, you can Google it under komgo.io. Komgo stands for commodities go, and effectively it is a group of 10 banks, the likes of Citi, P&B Paribas, Mitsubishi, Credit Agricole, Rabobank, ING, and Shell is another company, Coke, Mercuria, and the world’s largest certification company SGS.
Basically, what it does is, Komgo is a trade finance platform, it enables those companies to exchange letters of credit far cheaper, far more effectively, and faster than they currently do so. So, to give you an example, in the early days in phase one there was a crude oil shipment trade which actually took three hours back in the day, using the technology we’ve got that’s down to 25 minutes, and that’s resulted in a 33 percent efficiency increase for traders, so it is significant. From an operations perspective it streamlines costs by about 30 percent. So, these entities have come together, and are…
1) Using this shared leisure technology to which blockchain fundamentally is, it’s a shared ledger; in order to drive efficiencies.
2) It’s helped them stay relevant in terms of the offering they have as trade financiers.
They initially came together and said, ‘Our business has not changed in many-many years, and either we come together and create a new way of doing business, or someone else is going to come along and destruct the way we act and operate’. So, it was either disrupt, or be disrupted, and Komgo was born. So, that is now as I said a legal entity, the solution is up and running which is a great thing we’re really proud of; in six months we went from the project start, right to the first phase going into production on 19th December 2018, and there’s now more features just being continuously built out. But there are letters of credit being exchanged on that platform right now, and the majority of the development work is taking place here in Dublin, and that’s a big part of what we do.
That’s great. One of the interesting dynamics about the blockchain market is that it was distorted 2017-early 2018, by the rise and proliferation of initial coin offerings, or initial token offerings, and a lot of them were enabled by the Ethereum blockchain. The ERC20 standard of course has really created a dynamic that was unique for an emerging technology. You don’t have that dynamic with AI, you didn’t really have it with cloud computing, so in a sense it somewhat distorted the expectations of how quickly the industry might evolve, or how soon we would get to real viability and enterprise scalability, but the period that we’re now calling the crypto winter it’s it sounds like it’s starting to emerge that that was a period where it was a fantastic opportunity to work on applications to get into production. I would love to get your perspective more generally on the perception of how the expectations of the scalability of public blockchains has changed over the past year and a half, and again where are the areas that are providing real concrete proof-points, like Komgo, are there some other areas or industries where you see similar progress?
That ICO period was a crazy period. There’s a great interview with Joe on Bloomberg where one of the interviewers ask, ‘Joe, do you think this is a bubble?’ and Joe was like, ‘Absolutely it’s a bubble’. So, this is something from a ConsenSys perspective that we were very aware of, and that we called, going, ‘This is not a rational market, it’s going insane’. So, I think there was an inevitability that things would calm down and come back down to earth, and they did, perhaps with a bigger thud than people thought. But we’re now seeing I guess more pragmatism in terms of the price of different cryptocurrencies, because people are beginning to fundamentally look and analyze as to why the price is increasing, rather than just 100 percent pure blind speculation. So, they’re my thoughts on that.
In terms of scalability and things like that, scalability is a question that I used to get asked more and more two to three years ago, back then I didn’t really have great answers to it to be honest. I used to say, ‘Look, it’s a problem that’s being solved’, I’d perhaps try and fudge it a little bit! But now what I’m increasingly seeing and saying, and what we as a company are saying is that when our clients start looking at what they want to do, the first question we ask is, ‘How many transactions are we talking about?’ Then we ask, ‘Well, do you really need to be pushing through all those transactions to a blockchain, or to a mainnet, all the time?’ Invariably the answer that we get is that actually they don’t need to be tracking and storing those transactions to a public blockchain all the time, and that we can look to anchor sets of transactions periodically, maybe that’s once every four hours, maybe it’s once a day. So, there are definitely now intelligent ways around addressing the scalability issue.
That’s part one.
Part two, I genuinely when we look at some of the new upgrades to Ethereum around serenity and thing like this, that they are addressing the scalability issues. So, for me scalability is not really an issue unless there’s a proprietary trading company that’s coming to us, and wants to undertake high-frequency trading, and is exploring blockchain for that solution. Invariably that’s not really a deal breaker for us in any way anymore.
In terms of other sectors, to your third question, what else are we doing? Again, trade finance is a really good example, because I think it’s an industry where letters of credit are very paper based, they’re manual, it’s all about payments and invoicing, and actually the transport physically of those letters of credit in briefcases, believe it or not. So, there’s an easy win where we’re seeing the letters of credit within a trade finance area be applicable to aircraft leasing, because they use lots of letters of credit, so I think there’s another substantial win there.
Another big area where we’ve had a press-release is all around counterfeit goods. We are working with LVMH, which is the group Louis Vuitton Moët Hennessey, where we are effectively tracking how goods are made, right the way through from where they’re made, how they’re made, to the consumer, so that when a consumer purchases an expensive Louis Vuitton handbag, or other products for that matter, they’re able to ensure that the product is actually a genuine LVMH product, and therefore the price that the company is looking for is warranted and justified, and if you wanted to resell it it’s easy for you to do. Track and trace is a big area for us.
There’s been a lot of discussion around the use of public blockchain and private blockchains in the supply chain to accelerate payments. I’d be interested in terms of the dynamics you have seen working with some of the existing parties, particularly as you mention around Komgo; what have been some of the challenges in articulating a new vision, and starting to work to implement solutions that end up going into production when you’re dealing with businesses that have been doing things the same way for decades, as it were?
Great question, genuinely great question. What I mean by that is, Komgo is really a super example of this, Komgo did not come about with me at a pitch deck going into Société Générale in Geneva and meeting their Managing Director of Trade Finance. It came about because the Lady Souleïma Baddi created her own burning platform, where she got her peers together from that trade finance ecosystem in Geneva and in London, and explained that if they don’t change, they’re going to become irrelevant. So, the burning platform came from that group of clients. They then ran a hackathon, a competitive hackathon, so there were other technology companies involved, and other consulting firms, and so forth. The list was whittled down from 10 to 6, to 2, and eventually Consensus was selected as the technology partner in order to build the Komgo trade finance platform. I think that’s a really good example as to where businesses are coming together, and they’re defining what the business problem is, and what the best solution is, and then they’re reaching out to the technology providers in that space as to who they can partner with, in order to create that solution. That’s one.
Another good example is in the soft commodity space, Komgo is all about the trade financing of hard commodities such as oil, gas, scrap metal, but a group of soft commodity players have come together, and they’re undergoing a similar process whereby they’re going through a hackathon and so forth. So, that’s another great example of where companies have come together, and they’re creating their own burning platform, rather than me I guess trying to shove blockchain down somebody’s throat, for want of a better term.
We’re increasingly seeing this, companies coming to us, especially financial service institutions, because they’ve been looking at blockchain for the last three or four years, so they’re educated, they’re motivated, and they have a vision. I think what we’re seeing now is other sectors are where financial service companies were maybe two years ago.
If I ask you to put on your strategy hat, since you have a background in strategy too, to what extent is it valuable, or is it necessary, to have a company like ConsenSys for instance showing the way for companies that are in industries that may or may not have contemplated upgrading their systems, or modernizing their systems; we do talk about digital transformation a lot on these podcasts, but I’d love to get a sense of how your strategy background informs some of the evangelization work that you do, and how much of that is still necessary to kick off projects, and how much of the work you are doing right now is just executing, rolling your sleeves up and getting your hands dirty?
I’ve been in the blockchain space for the last five years, I have given probably over 200 introductory sessions, or blockchain 101s to companies all around the world, and it has been a pleasure to do so, and believe it or not I still get a kick out of it. What I do think is that we have seen different levels of maturity based on different sectors in industries; so I mentioned financial services, they were probably to use a term, first up and best dressed, so they got to understand the technology quite early-on, and experimented with the technology quite early-on, and they’re quite far along in their journey. You can look at Goldman Sachs’ website, you can look at JP Morgan having their own blockchain as an example of this, Bank of America, Merrill Lynch, the amount of patents they have with the technology, they are all very mature in their blockchain journeys, and have great people working on their teams. Effectively what we’re seeing in other industries and sectors is they are where certain banks were, maybe two or even three years ago. So, there’s that maturity continuum.
What my job is at ConsenSys, and what our job is, is how best we can help our clients along that journey, depending where they’re at. So, from awareness and education to then explaining what it is, what it does, what it can do, and what others are doing in their industry, what their competitors are doing, and then we can have some high-level discussion on potential used cases, right the way through to where we are executing and implementing a production solution, much like Komgo and others. So, there’s a whole range of spectrums as to where folks are on that spectrum. The reality is, I try and explain blockchain without using the term blockchain as much as possible, to make it easy and accessible for everybody, and not use any terminology which is complicated, so that everybody comes away having a good understanding, that’s objective number one of mine.
Number two, it’s to get to the applications that are relevant to their business/businesses, so that they can start to see, and I can even start to see in their faces and in their heads, the ideas that they start to come up with as to where the technology will make sense. That’s the goal. So, from a Consensus perspective out job is all about how do we focus on how we create value, how we create new products, how we save money, if not all of the above; so we start with the business pieces first, and then the technology, and the blockchain piece becomes an enabler to facilitate the creation of those new products, or creating better customer experiences, that’s what the technology is all about.
Is there a difference from your perspective in the rate of adoption, or I would even say the understanding of the potential between the regions; as you look at Europe is there any way you can compare and contrast what’s going on in the US, with what you’re seeing in Europe, particularly when you overlay some of the differences in regulatory structures and uncertainty that are particularly apparent in the US.
Yes, it’s interesting, and I think there are elements within Europe that are ahead of the US, there’s elements in the US that are ahead of Europe, and it is not a straightforward answer. I think what we have from a European Commission perspective for example, is that they’re quite clear on their stance around blockchain technology, and cryptocurrencies, and then whatever the European Commission, and the European Central Bank come out with and say, all the members of the Eurozone have to follow suit. So, what you get then is I guess a bunch of countries following the same rules; as opposed to what happens in the US, which is obviously you guys have I guess more of a federated system based on state laws, so there are differences based on that. We’re seeing Wyoming being incredibly progressive when it comes to blockchain technology, and the adoption of blockchain technology, in comparison to some other states.
One piece of work that we are doing in this space from a ConsenSys perspective, is that ConsenSys is the European Commission’s strategic partner on an initiative called the EU Blockchain Observatory and Forum. The purpose on the three deliverables that we have with that project are…
1) Increase knowledge and awareness around blockchain technology across the Eurozone, so all the 27 different members.
2) To basically inform policy around how blockchain technology will impact society, and therefore is new policy is to be created it’s to have blockchain in mind. Also, to the extent where existing policy may have to be updated or changed, in light of blockchain technology.
3) Is to identify applications or used cases of the technology which can be rolled-out in a harmonious way across the Eurozone, so to those 27 member states.
That’s a big project we’ve been working on, it’s a two-year gig, we’ve been working on it for over a year, and they are some of the things that are taking place.
So, to go back to your question initially, the ECB Eurozone structure lends itself to creating more folks falling in line faster. Do I think we’re more progressive over here than in the US? I don’t think that’s fair to say, there are a number of cool things that I’ve mentioned, Wyoming in a public records perspective, there’s great stuff happening there. I think the SCC and the CFTC actually have quite a progressive approach, CFTC in particular I spent time with some of those folks last year, and they have a very forward leaning approach to blockchain technology. The Head of CFTC was in Dublin last week, meeting with our Department of Finance to discuss innovation.
I do think where we’re going to see people get ahead is if we look at Dubai, the City of Dubai is committed to having more public records on blockchain technology by 2021, that’s actually another project that we’re working on from a Consensus standpoint. Then we go further east and we look at Hong Kong, and we look at Singapore where they have that twin brother rivalry, but Singapore when they put something between their cross-hairs they get it done, they get it done very quickly, and its normally done well. So, for me I think we’re going to see countries or city states such as Dubai and Singapore actually increasing, and them leading the way, perhaps Europe being close behind, and then the US. But we shall see, Europe has its own challenges with Brexit at the moment, so we have a few things going on here right now.
Yes, it’s never boring as they say. I’d like to touch on one final question on Ethereum, because ConsenSys is so closely tied to Ethereum, we do live in a dynamic environment, there are new projects and blockchains that are emerging all the time, I’d love to get a sense of what is your goal for the work that you’re doing around Ethereum, and how do you look at the alternatives or the competitive projects that emerge, and ultimately what is your vision for advancing the technology and the adoption around Ethereum and the eco-system over the next several years?
It’s an interesting one. Joe Lubin’s vision on this has always been pretty amazing to me to be honest, and one of the reasons why I joined, and that is his goal was to build a big ego system. His view is the killer app for blockchain and for Ethereum is a killer ego system, and he’s done a pretty amazing job at doing that. The Ethereum community has 30 times, so that’s 30-x, 30 times the size of the next biggest blockchain community out there, which is a really big deal. That’s a very big and bold statement, and do your own research, but that is actually the case. So, what’s happening is, we have the most amount of developers developing decentralized applications on the Ethereum blockchain for a whole host of things, whether it’s from gaming, to supply chain that we mentioned, to banking, to media etc., the list is endless. So, that’s a big part of the Ethereum play and the Consensus play, and also Joes vision.
In terms of from a ConsenSys perspective, and an Ireland perspective, what we continue to do is we’re winning more and more projects, more and more mandates from our clients to build solutions for them, or to help them integrate our products into their business, so that they can help make their [audio lost 33:08] so that they can help stay relevant, so that they can disintermediate their competition, and how they can effectively automate a pile of work. One of the key things around this is, if we look at especially large businesses, they have teams of hundreds of people doing reconciliation work, and I firmly believe, and we as Consensus believe that work will be automated through the use of blockchain technology and smart contracts, and through Consensus algorithms, so that work will become far more automated, and people will end up doing much higher-value work; and Consensus and our products will be at the core of those solutions.
So, our team certainly from a product delivery perspective, and project implementation perspective here in Dublin has grown from one person, me, a year ago almost to the day, and now there’s actually 42 of us. The reason for there being 42 people is based on client demand, I’m just giving you one example in one country, but there are hard facts and data to our growth. Of all our people – I’m probably the sore thumb, I’m the only person who’s not working on a live project right now.
Those are some really exponential numbers there. My ears always perk up when I hear a growth curve like that, it’s got to be a lot of fun to be in the middle of that.
I would like to ask a broader question about what you’re optimistic about as you look forward, being in the middle of this incredibly dynamic and innovative industry, what are some of the things that make you most hopeful for the future, and are there some concerns or considerations that keep you up at night?
For me the megatrend within blockchain technology at the moment of what I’m excited about is how we move from physical assets to digital assets, and how we move from illiquid assets to liquid assets, effectively this is through this whole thing for your listeners, a thing called tokenization; so how do we basically make a building, how do we turn it into tokens, and then how are those token sold or made available not just to institutional investors, but also even to retail investors. This has already taken place, there is a property in New York which was tokenized and then made accessible to a whole pile of people that would have never had access to make an investment in that building before. This is the beautiful part of the technology where it democratizes assets, so if I want to purchase a plane right now, one day hopefully, for me buying a plane of $40 million and I cannot afford that, but I’d love to understand how I can buy part of a plane so I can get some of the upside to it, as to how it generates revenue.
I think this whole area of tokenization is going to be a significant part of blockchain’s future, and in the not so distant future this is one for the medium term, it’s not one for the long-term; we had a client come into us here in Dublin where he came in and said, ‘Look, I’ve been looking at three different technologies over the last year, AI, VR, and blockchain, and I think blockchain’s going to change the world, and he wants to develop a tokenization platform, and wants our help to do it. So, I guess this is another good example where a client is picking up the phone to us, rather than me wearing shoe leather out.
What’s keeping me up at night? To be honest I actually sleep pretty well, so I’m not that worried! What I think is important, countries, this is where countries see the opportunity in this, and one of the reasons why the European Commissioners, so interested in the technology is because it sees it bring in an awful lot of benefit and value. So, for me and an Irish perspective, what I want Ireland to do is to look at the technology, see the opportunity behind it, and how we as a country can embrace the technology, and how we can capitalize on it, so how we can attract businesses to setup here, and how that can create jobs around the technology here. So, without a shameless plug, I’m the founder of a government backed initiative here in Ireland, called Blockchain Ireland, which has two simple goals;
1) To make Ireland a global blockchain hub, and
2) To help create jobs around blockchain in the blockchain sector.
Well, as a Maguire whose family originally came from Monagh, I’m very happy to see that. I’m excited about the potential for blockchain in Ireland, and happy to see all the successes that’s possible.
This has been a really fascinating conversation, I always like to close with a question about a book or a resource that you might be able to recommend for our listeners, it doesn’t have to be tech or blockchain related, but something that you would share with a colleague or a friend.
I’ll see you one and raise you. The Truth Machine by Casey, it’s a great book on blockchain which is accessible to everybody. Sometimes people are put off by blockchain and give up before they even get an understanding of it, that is a great book and it breaks it down for everybody, so that’s number one.
Number two, the best book I’ve read from a business perspective is Influence by Cialdini, I love that book. From a business perspective, if you’re only ever to read one business book, that’s probably it, it’s all around how you deal with people, how you communicate, also how you convince people.
A third book on business and life which I recently read is a book called Principles by Ray Dalio.
Those are fantastic recommendations and I have to say, I think I have read them all but nobody else has recommended them on our podcast, so it’s a good chance to get them in front of people. Those are terrific recommendations, we always like to do that because good ideas come from books, it’s so enriching to be able continue to self-educate.
Just to wrap things up here, again we’ve been speaking with Lory Kehoe, the Managing Director of ConsenSys in Ireland. I’m Ed Maguire, Insights Partner at Momenta Partners. Lory, thank you so much for taking the time, it was fascinating, really exciting and wishing you the best of success with ConsenSys and all of you projects in Ireland.
My pleasure Ed, thank you very much for the opportunity, and thanks everybody for listening.