Transcript: The Intersection of Blockchain and Lean

When you live in a culture you've created or you've walked into or you're living in a culture where admitting ignorance lowers your status, you've essentially got a culture where lean is not possible. If admitting a mistake lowers your status, then you have to choose between maintaining or enhancing your status or making the system better, but you can't do both. Re-claiming is a great enabler of the data transparency necessary both for active real-time collaboration of multiple parties who don't share systems and retrospective looks at when and where did that problem arise.

If you can do that in a spirit of problem solving rather than blame, I think you'll really get your converts there. Of course, the problem is we are so wired to blame when it comes to, say, an integrated construction project. How are we going to ensure that we each get the information we need when we need it? How do we raise our hand and object when we didn't get the information we needed when we needed it? How do we collectively decide who has to bite the bullet when one of us is going to have to go over or one of us is going to have to redo something?

Blockchain could be a useful tool when it's accompanied by the right human factors and the human practices. Hello and welcome to the Constructor Podcast, the best way to build it, episode number 76. I'm your host, Brittany Campbell-Turner, and this podcast is dedicated to helping property owners have certainty in their decisions about their construction projects. We talk about fostering trusting relationships, helping to understand how to lower risk, be under budget and on schedule, and most importantly, exceed your end user's desires. Last week we spoke with James Salmon, president at Collaborative Construction and executive director of the American Subcontractor Association of Ohio.

James is a lawyer by trade and is passionate about the common data environment, BIM, and integrated contract models, which just so happened to lead him to blockchain. He is very passionate about openness so that everyone sees everyone's cards on the table face up versus a closed competitive and adversarial contractual nature of construction. So if you haven't listened to that episode yet, check it out at constructor.com slash ep75. In today's episode, we're speaking with Thomas Cox, a lean leadership coach and practitioner who found himself really interested in blockchain.

He has focused his efforts and the governance aspect of blockchain because of the influence that has in relationships, resources and collaboration. He ran for governor and he has a unique view of leadership, lean and blockchain. He brings expertise in these areas. He also sees the intersection of these components working together so that an organizational culture can be created and sustained. With that, let's get into the interview.

So today we are interviewing Tom Cox, lean and blockchain advocate. Tom, welcome to the podcast. Hey, thank you for having me on. Yeah, wonderful. So could you tell us a little bit about your journey into lean for starters?

Absolutely. I got interested in lean back when I was doing software and I stumbled upon lean and agile techniques as a way of getting good software done more quickly with less overhead. And I realized that a lot of the kabuki dancing planning that we were doing where you'd make the plan, try to guess in well in advance, like what was going to happen or what was going to be needed. In your heart, you knew that you didn't know. And in fact, that you couldn't know the future.

So you ended up making what I now see as waste, which are these elaborate plans. Somebody once described it as, you know, imagine you're climbing a mountain and right out of project plan and you wouldn't write on day 72, I will need my ice axe. You don't know where you're going to be on day 72, dude. Come on. And like, oh my God, that's so true.

So agile was very attractive because it took away so many of the things that were bedeviling in my software career. And I realized that that could be done outside of software. There was this thing called lean that, of course, attracted me. And I realized much later that I have a personal value of efficiency, that efficiency, effectiveness, symmetry, beauty, minimalism are all combined for me in a kind of beauty in that that's what attracts me to it. That software background led me to just be really interested in what are better ways of doing things.

And then when I ran into my first book on systems thinking was The Fifth Discipline by Sengei, The Machine that Changed the World, some of the books that productivity press translated from the Japanese. I got a copy of Kanban and the Toyota Way. And I've always wanted to understand how to make things better, cheaper, faster, not by making people work harder, but by getting rid of dumb stuff that always seemed to me like this sort of magical victory condition. And it was always amazed that other people didn't share my fascination with that.

It's like, instead of planting more cabbage, what if we got fewer heads of cabbage to rot on the way to market, right? Then you'd be growing fewer cabbages, but feeding more people. It's incredible. It's like you lower your costs and you increase your value delivery. How are you not excited?

And of course, I obviously was, you can tell. That inner sort of childlike delight and fascination with making things better, qualitatively better by changing your thinking, changing the way you look at things has always been there for me. And Lean was a natural progression of that thought process. It was a community. It's actually the first community outside of software development where I really felt that I had a lot of shared values and not just a few.

My love of efficiency, effectiveness, and constant improvement really was a good connection. And the other thing that came up for me is I've been training people how to be good leaders for the last 15 years, because leadership to me is an area of fascination, particularly how to get software people to do work well in teams and have their leaders be effective leaders of those teams. Software is a particularly pernicious problem because so many of us are engineers in our mindset and engineers just don't understand people typically.

For few of us do. We try to engineer our way out of our people problems and it doesn't work. I thought you were going to bash engineers there for a moment, but then again, you have that mindset. So yeah, I know you're good. But I is one, right?

Yes. Out of the lean approach for me was this sort of humble acceptance that of course there's a better way out there. Let's look for it. And that, that is when I started noticing the resistance that other people and sometimes even me would have to improvement work. It would be emotionally threatening sometimes.

I literally had somebody who were proposing doing some consulting work for this architecture firm to help them lead their people better. They knew they had morale problems and one of them objected right out loud in front of us. So well, if we hire you guys, then we're admitting we don't know. I'm like, okay, okay. And you say that like it's a bad thing.

All right. And it wasn't, I mean, I just, I didn't know what to say to the guy that took me two or three days of just chewing on that statement to realize that what was going on is he was worried about his status and his standing. And when you live in a culture you've created or you've walked into or you are living in a culture where admitting ignorance lowers your status, you've essentially got a culture where lean is not possible. If admitting a mistake lowers your status, then you have to choose between maintaining or enhancing your status or making the system better, but you can't do both.

It's like, why don't we just get rid of those values and replace them with other values where admitting a mistake is virtuous, but that requires leadership. It requires the leaders to be actively engaged in admitting mistakes and asking for help and admitting they don't know all the things that we don't do if we're not sure it's safe to do it. Oh, it's so interesting. The safe space that needs to be created in order for that type of leadership engagement to take place. Culturally here in the US, 2018 now, that safe space generally refers to a place where you won't be challenged.

In the lean universes, we want a place where it's safe to be challenged, where challenges are done with love, with respect, with appreciation of the other and so on. Wow, that's so opposite of what is true. When you said the phrase safe space, I thought, oh, that'll be easy to misunderstand. Which by the way, is why we're raising a generation or at least a subset of the current generation in college who are living in this safe space environment are going to be just useless when they get into the workplace because they don't know how to challenge respectfully.

They don't know how to be challenged respectfully. They don't know how to feel safe when they maybe don't know things or have to ask for help or have to admit a mistake. It's sort of that perspective of everyone individually is considering the idea of fulfilling their potential for excellence, right? Yes. It's from an individual perspective.

I think that it's encouraged these days and what's not encouraged so much is collective genius. Yes. The collective genius requires collaboration. It requires people to challenge each other and it requires for people to go down a couple of different paths and test and fail and review. Right.

The PDCA, if you will. Exactly. Yeah. I've been struggling with my own self-improvement for a long time. I was very late and I'm still not fully there to challenging myself, being challenged by others, not feeling criticized by challenges unnecessarily.

I mean, sometimes people do challenge you in a way that's really intended to be critical and to lower your status. Okay. People play status games all the time. If you find yourself in an environment where people are playing status games, I promise you A, it's not lean and B, you may have to choose between participating in the status game or somehow finding a way to opt out. The ability to reflect into self-challenge is one of the hardest things I've been trying to learn and for me, the turning point has come with journaling and in particular, creating a journaling routine or ceremony, if you will, a practice of journaling rather than just an intention to do it or I know I should journal.

I've been saying to myself, I should journal for probably 15 years, but I've been journaling consistently for about a year. Now, I've got these journals that have got entries in them that a couple of days in a row, but it's only when I created a practice and it'll tell you how my practice works, you'll see PDCA written all over this, is I said, okay, do I really want to journal, if so, why? And my answer was yes, I want to journal because A, I'm convinced I will improve if I journal and reflect and B, I keep advising other people to do it and when I advise people to do things I myself don't do, I am out of integrity and C, I want to be in greater integrity.

For me, every time I would contemplate that, I would feel uncomfortable if I wasn't doing it. If I averted my eyes and didn't think about it, then I was easy to give advice I wasn't following. But then you were feeling responsible as a leader. Yeah, well, I realized I was being irresponsible when I was giving advice I myself didn't take. There's a way in which you cultivate a really good habit, you want it to feel like, imagine yourself you're about to go to bed and you realize you haven't brushed your teeth.

If you're used to brushing your teeth at bedtime, then your mouth will feel gross and you'll be like, I can't go to sleep like this. That's the feeling you want when it comes to this kind of habit. So like, I'm going to journal in the evening, but this is an unusual evening, I was out late or something came up or like the sinks are leaking or whatever. Some weird thing happened and knock you off your schedule. And so you're climbing into bed.

If you haven't journaled, you should feel icky. Like I can't I can't sleep without journaling. And that's when you know you've got the habit. And I didn't. And so what I did was describe a minute ago is why do I want to is my why strong it was.

And then I started reciting every day in the morning, I made a little scorecard for myself, that every morning I would recite a mantra about what kind of person I wanted to be. And there's something that happens when you say out loud something about yourself. If you say, I am and I want to be a person of integrity. And when you say that out loud, if you know that you kind of haven't been lately, it'll feel bad. And that's exactly what you want to create.

You want to mine that cognitive dissonance that comes up when your words and actions don't match. I'll tell you most of my career, when I had that mismatch, I would either ignore it or distract myself because I didn't like feeling bad. It's very much like we see in the workplace, right? We know that things aren't going as well as they could. We could fix them and say, oh, but we fix them.

We'll have to confront Fred and Fred is really defensive. And I don't like when I have that kind of kind of listen to me anyway. What's the point? I'll work around Fred. OK, what did I just do?

Well, I put my comfort ahead of systems improvement. Right. And so I had to put my comfort second and put my improvement first. And that required for me that this habit of having a saying, I would say to myself and making this game and a little scorecard for myself, which included journaling in the morning and journaling in the evening. And at the end of the week, I would look over my journal and just sort of summarize my week on about a half a page and share it with my wife.

And she would share her week and I'd share my week. And it would be our way of winding down on Fridays, which by the way is a wonderful habit. If you're married, you have a partner or you'd like to be in a long term relationship with intimacy and self-revelation and increasing levels of self-disclosure, I highly recommend that. Yeah. Anytime my wife mentions our Friday practice of sharing our weeks with each other, her girlfriends go, oh, they wish they had that, gentlemen.

You know what, Tom? You know what I love the most about some of the conversations that we have? What takes place is you discuss your lean journey, well, at least in this case right now, you're discussing your lean journey as it relates to your entire life. Yes, it has to. It has to.

It does. But one thing I recognized was for me, now you listed off a number of the books that you were first introduced to when you started down the path. And I don't have all the books. I'm really glad that you mentioned a few that I don't have, but I have a similar shelf. We lean practitioners do.

And we get all nerded out about them and super excited about efficiency and collaboration and tracking that. Again, it comes down to leadership, like you said. Can we define leadership? Yeah, please. I found a scholarly paper not that long ago that decided to, rather than create a new definition of leadership, we just find all the existing definitions and bring them together.

The authors found, I think it was 151 definitions of leadership and grouped them into various groupings and I read the paper and it was just incomprehensibly dense and useless. So I thought, okay, that ain't helping me. But a guy named John Cotter, K-O-T-T-E-R, did, I thought, some very useful definitional work around the difference between leadership and management. So I use his definition when I talk about this, that leadership has to do with helping people face their fears, their inadequacies, their challenges and try the new thing.

I'm oversimplifying, but that's basically it. And then management consists of all the things that we do to manage complexity. So for instance, a leader will make it exciting to visit the promised land and we're going to go to the promised land. It'll be hard work, but it'll be glorious when we get there. And then the management function is to go, okay, promised land, what's the weather going to be like?

Do we have the right clothing? What kind of crops will grow there? Do we have the implements we will need to farm those crops? Who will do that work? Do we have the right mix of skills?

Hmm, we need some training. So the leader will get you there, but without management, you're just a tourist. You're going to have to go back home again because you're not prepared to settle because the complexity is beyond you. And you'll see this with leadership heavy organizations that are full of vision and they try new things, but nothing sticks. Nothing strategic or tactical almost.

Yeah. Leadership and management are like the yin and the yang or your left foot and your right foot. You need them both because you need the courage to try the new thing and then you need to manage what the result of trying the new thing. Reason lean when it works is so effective is it unites those, let's try something new, but in a methodical way. Let's come up with an experiment, try it out with heck, right?

It's very safe to try something new in a lean environment. You're sort of expected to. If you've got a good lean coach, you're like, okay, what are you going to try? I'm trying something. Yeah, of course you're going to try something.

Come on. Oh, okay. And so you're sort of expected to just try stuff. And then your coach also helps you with the reflection step. But the middle part where you, okay, I'm going to plan out the new thing and then I'm actually going to do it.

And then I'm going to check and see what happened. And then I'm going to adjust based on what I learned from reflecting on what happened. And so the structure of it is very management-like. It's dealing with the complexity. Otherwise you're trying new things all the time, but you don't have any order or structure to it.

And you never write anything down, so you never learn anything. Or you learn through intuition, which is very slow, or can be. So yeah, we need leadership in ourselves and for each other to help us get over our fear, fear of trying something new, fear of failure, fear of admitting a mistake. And we desperately need good management to help us not lose the gains. I actually draw a picture sometimes of, ever do something like on a sailboat, there are these windlasses where you crank this winch around that it pulls the rope tight.

And it goes clack, clack, clack, clack, because as you're twisting it, there's this thing called a pawl, P-A-W-L, that drops into place and locks in. As you turn it, it can't roll backward. The leadership is turning it, but management is locking it in. Yeah, good analogy there. I like it.

And we need both. We need both very, very much. So when I think about something like construction and blockchain and some of the technologies that we've got that I think would benefit enormously from a lean mindset and from lean disciplines and lean practices, I now look for signs that the team that's involved will do something like handle a report of a problem, not with blame, but with curiosity. In fact, I have an expectation I will share with you and your listeners that at some point I will, if my dream comes true, I'll be involved in some venture capital work and I'll be able to assess leadership and management teams by how they handle reports of problems.

Do they do the typical, we're uncomfortable now, how do we make the discomfort go away? Will reinterpret the report of a problem as not a problem? Or well, we have a great team, we'll tackle it. That doesn't show curiosity. It shows a desire to not feel scared.

How about, huh, we have a problem? Cool. Tell me more. That's what I want. Yes.

Excited about this problem. Yeah, let's do it. Yeah. Yes. Yeah.

Read a wonderful book by a guy who ran a Coca-Cola distribution company in the Midwest and he had more lean training wasted on him than anybody else. They kept sending him to lean training. It was before he owned the company. And he kept, you know, he'd show up and it didn't make any sense. And he'd leave and they'd send him again.

He worked for an automaker or something. And he finally, after the third or fourth time, he said, are you guys just like looking for an excuse to fire me? They said, no, we really want you to understand this stuff. He was the world's slowest learner of lean. And he finally, finally, finally got it.

And when he became the owner of this bottling company, which is not a high tech thing, he started to roll out lean and he went through all the usual challenges of people not liking not trusting and not understanding it, whatever. By the time he was done about five years in, they were the most effective bottling company in the in North America, better than Coke themselves, better than any other Coca-Cola bottler in terms of return on assets. They did more truck runs more frequently, lots of very quick turns.

They could within 24 hours of the guy dropping off your Coke bottles at your store, he'd say, hey, I want to have a some kind of a special tomorrow. He'd write that down. They would make a sign for you on the shipping dock and he would bring it to you next day. They discovered that their retailers wanted little signs like that. And so they're just made a little sign company on the loading dock where it could be gotten too quickly.

It was wacky. These guys, they would train new people. It's called staple yourself to an order. And you would literally go through the entire lifecycle of an order so that you could see where your piece fit into the hole so you could understand where you were. You were a cog in a machine.

You were a creator of the machine. Yeah, you were part of the flow. Yeah. And then and so your work had meaning and your struggles and your challenges became interesting and curious rather than things you should just, you know, suck up and deal with it. I mean, try to imagine a government agency where people often feel very powerless.

Well, you know, that's just the way things are around here and nobody cares and blah, blah, blah. We all have to suffer through it. You know, try to imagine those same people being given a chance to take their pain and their suffering and their frustration and their discomfort, their irritation and harness those things as inputs to problem solving, inputs to systems improvement. And when you let people do that, they go from highly unmotivated and very upset and unhappy and kind of miserable and willing to sabotage this heartless organization to deeply committed.

So let me put it like this, Tom. You you've definitely made a story time here. Sorry, you get me started in a talk. I can't stop. No, no, it's good.

For those who don't know, Tom had a podcast called Tom on leadership. Yeah, we ran that for a couple of years. And you talked about leadership, obviously, and a lot of lean methodologies. And we talk a lot about lean here on the Constructor podcast because of the reasons that you're listing out. There's so many values related around just self-worth, respect for others, understanding how to eliminate waste, all the all the tactical pieces and the mindset pieces.

We covered a few, right? We definitely talked about PDCA, just getting everybody understanding that they're part of that one piece flow, getting the last planner to understand what their purpose is and how that sort of fits into everything else. Those are some key elements that we talk about here. And we also talk about integrated contracts. Yes, which is a very exciting topic.

That's my big piece. Yes. Yes. In construction, what's becoming much more popular is integrated project delivery. You know, I'm in touch with some of the folks over at Sutter Health who've issued out the integrated form of agreement, and I'm sure there are other integrated contract types.

But those have been super intriguing to me lately. And I'm at this point where, you know, I've been talking about blockchain. You know, this is the topic that I see clearly, these intersections with lean. And I wanted to really dig into that topic with you because I know that you have that similar mindset. So integrated contracts and intersection with blockchain.

So folks who don't maybe know blockchain very well, the key elements that are relevant, I think, for this conversation is that a blockchain is a ledger that is capable of having inputs from many people that the inputs can easily be faked or forged. So if I sign it with my inputs with my key, I could lie in my input. But having signed it, it's clear I'm the one who lied or someone stole my key, in which case you can't trust the signature from that key. But as long as I maintain control of my key and I put in truthful things, we have the basis for building trust.

And if I put in something that's wrong, it creates an environment where I'm invited to fix it with a later entry. But hiding the mistake isn't going to be as possible. So we're going to have greater transparency more easily. It's like a database that lives out in the open. It doesn't live in an access database on my desktop where if I leave the project, no one knows where the database went.

It's out in a shared location. It's run by multiple computers simultaneously. And when you issue people their keys or they sign up for their keys to be able to enter things, they have to attest, you know, here's me, here's Joe. I own the roofing company. These entries are from me.

And so I will say on Thursday that my guys will be there next Tuesday. Well, I can't unsay that. I can't forget it. I can't deny. Well, we never said that.

And if, you know, I put in a certain kind of shingle, we get this set up right the way I envision it. We're going to have a guy with a barcode will come up and scan it. And maybe we'll have somebody on site who cross checks me so that you don't have to take my word for it. If I'm an honest player, I want to be as transparent, trustworthy as possible. I'd love for a third party under my control to come along and do a barcode scan of whichever materials I'm using.

And that gets in there. And then, you know, three years later, someone can say, what kind of shingles were used? And guess what? Shared database. It's immutable.

Is signed by a third party who's who double checked my work. There you have it. We could even have a record of, you know, who my installers were that day. And you could double check and see whether they had credentials and whether they were certified to do the installation. I'm actually doing this broadcast from a building that had to be retrofitted because the siding was put on incorrectly by uncertified workers.

So they had to come through and do construction defect repairs. Now, we don't know who put the siding on this building and we don't know which workers they used. And I don't know that we even know the lot number of which siding they actually used, although you can kind of look and kind of guess the maker. But wouldn't it be lovely to have all that information? Now, as soon as you have that information, you need to start realizing, wow, people can get pretty defensive pretty quickly.

How do we handle our mistakes? And we're going to have to be a lot gentler with one another. And catch things early and do a lot of remedial training and a lot of, okay, your guys aren't certified to install this stuff. Let's pause a moment. Let's bring in some just in time training.

Let's get them to pause the whole project, pull the Andon cord, stop the line. And then I'll go back and I'll say, why did I think he could do that when it turns out he can't do that? What in my process, what mistake did I make that led to this? So you can do some five whys and then get to your root causes. Blockchain is a great enabler of the data transparency necessary, both for active real-time collaboration of multiple parties who don't share systems and retrospective looks at, oh, wow, we have a problem here.

When and where did that problem arise? And if you can do that in a spirit of problem solving rather than blame, I think you'll really get your converts there. And of course the problem is we are so wired to blame. Yes, indeed. That any hint of blame energy, everybody's going to shut.

The candor is going to vanish. Everyone's going to start hiring lawyers or not wanting to sign anything until there's double, triple, quadruple check. Things go crying to a crawl. So to do this well is going to require the creation of a lot of trust. Trust, of course, comes from a lot of open communication, candor, vulnerability, demonstration of goodwill, things like that.

So yeah, blockchain is a great enabling technology, but it won't do what we want in the integrated construction space or any other if it's not accompanied by human factors that we almost never talk about. If you want one book to help you face your own personal growth challenges and give you insight into other people's personal growth challenges, the book I'd recommend is The Road Less Traveled by Emma Scott Peck. Oh man, I love that book. Such a great book. And he breaks it down to basically two things that we either take too little responsibility or too much responsibility.

Because when we take the right amount of responsibility, things are pretty cool. If you take too little responsibility, which is like, Hey, I did my bit. You know, I threw it over the fence. It's not my problem anymore. And maybe I didn't really quite do my bit, but you can't prove it.

That's one error. And when you try to be responsible for other people and you don't let them solve their own problems and don't require them to solve their own problems, then you would become guilty of taking too much responsibility, including responsibility that's not yours. You're reminding me, okay, I feel like I need to go back to that book. You know, it's funny because my husband and I read that when we were actually in premarital counseling, which was great. Very nice choice.

Yeah, it is. Great book for that. There is a purpose here for understanding the relationship dynamics that need to take place before even considering the technology of blockchain at all. And although I've been discussing the technology, the different DLTs, I think that I wanted to get across exactly what you're saying, this component of understanding how to take relationships, just how to approach them and how to be responsible for what you're responsible for and not take on too much and keep others accountable and create a space for vulnerability, create a space for trust.

All of these things are required essentially for us to work well together in an integrated model. At the end of the day, yes, if you're going to use blockchain and you don't have this, you're still going to be in the finger pointing game. Well, you might be, you might be. There's a lovely book by Jeff Sutherland called Scrum, and it's about, mostly about the software world, but it's really about this way of having daily standup meetings and clear next deliverables. And he relates a personal story where he decided to get his home renovated and he took the unusual step, became his own general contractor, even though he didn't know what he was doing.

And he required all of his subcontractors to agree to participate in the daily Scrum meeting. If you were working there at all that day, you had to be there in the morning for the Scrum. And so he had to go through a couple of candidates to get someone to say yes to that and each of the different disciplines. And he said, it was amazing. Here's what we did yesterday.

Here's what we're trying to do today. Here's the sequence of it. And inevitably the guys would say, Oh, well, that's going to require me to do this in a different order than on the first floor. Otherwise I'm going to block you by about two in the afternoon when you try to do that up on the second floor. How about da da da da?

And the other guy would say, you know, I've got nothing to do until the stuff arrives in about two hours. Let me help you with this. And they would just get into this lovely problem solving space with each other. They could like start to anticipate each other's needs, which you can't do when you're in your trade silo, not talking to the other trades and why would you talk to them because you're not there or they're not there. You don't want to get in their space or mess them up.

You shouldn't want anybody trying to take on your work. You want to do your work. And so having a structure and a method to do that kind of sharing is profoundly important, especially in small teams. It creates something that I believe it was Sutherland refers to as information saturation, which is that everybody knows what everybody knows, at least for the context of the current work. You know, you can't know everything about everything, but you could know everything about today, right?

Cause we're only doing a limited number of things today and then you can start to anticipate, you get plenty of brains on the problem and people start to go, oh, well, you know, I bet I could. And then they help each other solve the problems that naturally arise throughout the day. He got his remodel done at half the time they estimated it would take. Now, how many remodels take half the time? Normally they're double.

Exactly. Which is why he subtitled the book Scrum. The subtitle is the art of doing twice the work in half the time. And that is literally true. You can really do amazing things with cross-functional teams when you have a structure that supports information saturation.

And again, that's where blockchain could be a useful tool when it's accompanied by the right human factors and the human practices. That's going to lead me to the next topic I'd like to discuss with you. Governance. Governance is a key component to setting up a project. And I mean, we talk about a lot here in construction, you know, how do you set up a project, how do you communicate what the expectations are for sharing information, the timing and the impact.

So there's governance structures that we need to be keenly aware of in the blockchain architecture. And that for me is something I'm still trying to wrap my head around. So I really would love your perspective on that. When we talk about governance, what I typically mean by that word is a method for group of people to get together to decide on a solution to a problem or the answer to a question or a way forward, then to methodically and transparently carry out the decision once it's made, that's still governance.

And also the rules by which they will engage in these decision-making activities and the rules by which they will alter the rules over time. So what is our constitution? How does our constitution get amended? What are the rules that exist under the constitution? We have a dispute.

How shall we resolve our dispute in a rapid, timely and reasonably fair way? And so on. All of those have to do with governance. You can think of it as the legislative, executive and judicial. It's how do we decide what the rule is?

How do we carry it out? And how do we handle misunderstandings and disputes? How do we tweak our system over time? And then there you have it in a nutshell. Now applying that, that sounds pretty abstract because it is.

So when it comes to say an integrated construction project, how are we going to ensure that we each get the information we need when we need it? How do we raise our hand and object when we didn't get the information we needed when we needed it? How do we collectively decide who has to bite the bullet when one of us is going to have to go over or one of us is going to have to redo something? It's like, you gave me this information and it's, you know, on the plan, it doesn't match the actual and now I'm off and it's your fault.

Well, fault is blame. You okay, let's flag that for root cause analysis and let's solve the current problem. But again, how do you do that? What are the information clearing mechanisms? What are the speed resolution mechanisms?

And setting that up, getting people up to speed on it and then reinforcing it over time. To me, all that is governance. Those are human factors. The concepts that I've been aware of and I'd love you to dig into as it relates to blockchain are the value of the consensus model. You're going to care about this.

So if you're shopping for blockchain technologies, it's actually going to matter to you. So let me describe proof of work is I call that the law of the jungle. You've got people with hash power and they're fighting each other to be the first to make the block. Whoever makes it first wins and they get the block award. Haha, I beat you out and you throw lots of compute power at proof of work and it's a negative sum game because the more the other guy throws out, the more you have to throw at it to match him.

But the award doesn't go up. Just the investment goes up. So proof of work is highly secure. And from a user perspective, it's great. But from a resource perspective, it's horrible.

They're currently guessing that proof of work computation is going to take up more electricity in Iceland than all of the people of Iceland. It's like a vampire sucking up all the electricity on the planet. And it's doing it to create a fixed amount of Bitcoin every day. It's like, why are we throwing more and more resources to get the same thing done? Isn't that anti-lean?

And of course, yes, it is. Contrast that with proof of stake and delegated proof of stake. I'll have to describe the delegated proof of stake case because it's the one I'm most familiar with. The people who quote unquote own the blockchain in a DPOS, delegated proof of stake situation, are the people who own tokens. This case, this thing called EOS.

If you owned 10% of the EOS tokens on a particular EOS blockchain instantiation, then you could vote for who would make the blocks and this public permissioned system. So it would be people out there in the world making these blocks, pooling their resources over the wild internet to create a reliable blockchain. And rather than fighting each other to be first to make the block, they're hoping to get votes from the token holders to be elected to be a block producer. And then they're competing to use the fewest resources they can and still be reliable so as to maximize their profit.

And you will vote out the unreliable ones and vote in the reliable ones. And they serve at the pleasure of the voters. And so these delegated proof of stake block producers have to cooperate. Having been elected, they now have a seat at this round table. 21 block producers each taking turns.

And if you miss your turn, you miss your block award. And if you can't cooperate with the other block producers to keep things going well, you'll lose your position entirely. So rather than fighting other people to make as many blocks as you can, you're cooperating with the other block producers to make exactly your blocks when it's your turn. It's very energy efficient and it's very much of a cooperative game. And you are this custodian or the delegate or the agent of the token holders.

You're there on good behavior. If you start to misbehave, you will be voted out. So that means that the awesome powers of block production are held in check by the fact you only have those powers because someone gave them to you temporarily and they'll take them away in a heartbeat. So delegated proof of stake chains like BitShares and Steemit are two that are operating today. And eventually EOS when it goes live will perform faster, better, more reliably with far fewer resources and less centralization than either Ethereum or Bitcoin.

That's kind of a big deal where I come from. It does mean that if you were to create a private chain using that same software, you would need modest servers and it would be a very orderly system. And those are all good attributes of software. Yeah, that's really helpful. And I think that we've had probably enough conversations about value of implementing a private blockchain onto potentially a construction project by understanding that there would be a key group that is selected in order to do the verification process.

Just to kind of go back to maybe your siding example, right? If there's a confirmation of yes, this is the siding type that you should be making sure to order, okay, this standard order process is going to release the order once the purchase order is made on X date. Sort of having that track record and that verification process by those selected people. Yeah, it's a combination of ERP and workflow and a whole bunch of things could be hung off of there for verification. Yes.

And what we're talking about logistics, we're talking about chain of custody, we're talking recently to an Australian winery consortium who want to sell their high end luxury wines from Australia into China. And the problem is that the Chinese buyers don't trust the Chinese food supply chain. It's rife with fake goods, with fake labels and crummy ingredients and you know, horse meat passed off as luxury steak and who knows what's in the wine bottles, but he's making a quality product. But how does he reassure the end buyer deep in the heart of China that the bottle in front of them is a good one?

And blockchain is going to let him do that. That he'll be able to put a unique holographic label on each bottle, scan it when he fills it with wine, track it all through the shipment process, all the way to the retailer and you as a buyer can go up and zap it with your phone and get the entire order in an immutable, unfakable registry. That's a big deal for him. And that's going to be worth millions of dollars. The consumer benefits, the seller benefits, the people in the middle benefit, the people trying to rip folks off will certainly be unhappy with that.

But they should be, right? We want them unhappy. We want the fraudsters to lose. And it's that same idea of a chain of custody. We ordered this kind of siding, but when I scanned what came off your truck, it was this other stuff.

Hang, hang, whoa, whoa, whoa, whoa. I can't put this up. It's the wrong stuff. You know, help me out here. And now we get into problem solving mode, but at least you're catching it because you've got data transparency, because you've got shared data in a shared system that is decentralized and accessible to all parties.

If the applications are set up properly, anybody who's authorized can get in there and enter their data about what they did or what they asked for. I think that sums it up. I did want to ask, we talked a little bit about governing the comments and the common pool resource concern. There's that consideration. And I wanted to hear your perspective on the common pool resource challenge.

Let me define what a common pool resource is. So imagine that we live in a coastal village and there's a fishing ground right off the coast and it's reachable by our small boats that we own. And of course we, you know how fish are, there's a certain number of fish. And if you fish too many, there's not enough left to reproduce and make more fish for next year. But if you fish too little, you're just letting go what you could have had.

And then the challenge is if we each have our own boat, I have an incentive to take as many as I possibly can take, you know, why would I leave more in the water when you're just going to take them? If I do that, you can rapidly over fish and then we all starve next year. So how do you get that to not happen? The common pool resource more generally is there's a resource, you can't allocate it before you harvest it. And it's easy to over harvest and it's hard to stop people from taking it.

Right. And if I take a particular fish, it's not there for you to have. Now it's different from a public good, which one person consuming it doesn't make less for somebody else. Like a weather forecast. If I listen to the weather forecast, that's not one less weather forecast out there for you to listen to.

There's an infinite number of them, right? That's a public good. And common pool resource, there is a common pool, but it's a resource and you can deplete it. So think of it like the golden goose. You need a healthy golden goose.

And if you take too many eggs too quickly, you make the goose sick or it can die. And at the same time, while you're trying to keep the goose healthy by controlling, you know, not taking too much too quickly and feeding the goose well, you also want to make sure that the eggs, the golden eggs coming out of that goose are distributed fairly. So we all feel fairly treated as neighbors and as, you know, people have the shared interest in this resource. And human beings have been struggling with that challenge for centuries and centuries.

And there is a place on the coast of, I want to say Eastern Spain, where they've got an irrigation system that's been continually operated for over a thousand years. And the farmers cooperate with each other to allocate the water out of this irrigation system. When the guys upstream have every incentive to take more water than they really need, because it didn't cost them anything to take more water, but it certainly costs the people at the tail end. You'd think that'd be every reason to over consume at the top.

And yet they find ways to cooperate. Analogous to that in construction, whether the common resource is time or maybe the common resources, physical space to stage your equipment or your materials, or who knows what? I wish I knew more about construction and I could make the analogy tighter. Well, even the dollars on the project, especially if you're an integrated model and there's a concern around the way I understand it. If we approach it in a way where there's a pool, a budget pool, and there are different trades selecting.

Figure out who's got what costs and who should be taking what money out of the pool. Not only that, but even as, as you're selecting the building systems, right? Are you using a furnace where you have forced air or using a boiler? You know, when you're making those design selections themselves, you can start to go through this process as to what is the priority. But you make the selection on what is priority for you to incorporate based upon your building engineers, based upon the efficiency of the design itself, the energy utilization.

So that's priority on design. But in addition to that, that is budget and allocation. And then the idea of shared risk, shared reward, your incentive at the end of the day. I'm not going to be able to say much about construction, but I can tell you true stories about how clever humans who don't have advanced degrees, fishermen and subsistence farmers with, you know, primitive irrigation systems and people living in Swiss villages who have to share the harvesting of trees out of a shared coppice managed forest and have to graze their cows on a shared meadow.

That they've figured out ways to work together well to maximize the total yield of the shared resource while fairly allocating the costs of maintenance and fairly allocating the outputs. And of course, fairness can be subjective. So you may have, you know, may have some disagreements and some struggles there. Here's what these systems all have in common when they work well. Number one, somebody went to the trouble to set them up and that's not trivial.

It's actually quite a challenge to get things rolling. But if you're born into it and the system's already running, well, that's one thing off your plate. Then there's making sure that there's a barrier around the system that members of our village get to do this. You can't just come walking in from the outside and start playing along. In fact, in the specific Swiss village that's covered in Eleanor Ostrom's book where she describes this, you can buy property in the village and move in, but you don't get any rights to the common pool resources just for buying land and moving in.

You have to do other things to demonstrate essentially your long-term commitment to the group and to the resource. And then it's up to a vote of the current resource sharing folks, whether to let you in or not. And then when you are let in, you're let in with the expectation that you will defend this resource as well from outsiders and from overuse and misuse. There's kind of a big deal to have this. It's like being led into a club, right?

You can be voted in, you can be voted out, but you don't just get to show up and you start acting like a member. There's that aspect. Then there's, you know, how shall we make our decisions and how shall we enforce our decisions? And who will inspect? Inspection's crucial.

If I can't see how many fish you caught and you can't see how many fish I caught, then boy, that's going to be hard to police this. And so we might have a tradition where everybody unloads their boat in front of everybody else. Or in the case of one place, they have fishing locations. There were the fish were known to congregate. And what you could do, they could inspect where people were.

And so they allocated fishing spots by lottery and everybody got to fish in each location on a different day and you would rotate through. So everyone would have a chance to fish in each spot, but on a different day than everybody else. And so you can monitor that really easy. You know which spot you're supposed to be in. Everyone knows what spot you're supposed to be in.

It's published. It's on the wall. You know, everyone can see it. So, you know, figuring out how do you make it inspectable? How do you make it clear and easy for everyone to see, you know, what the rules are and who's following them.

And then the sanctions have to be quick and easy to administer. You can't have a very long, slow, expensive process for wrapping somebody on the knuckles. When they start to skirt the law a little bit, there is a, a Japanese example. They had a particular kind of resource that needed to be collected, kind of wood. If you collected the wood, then you could harvest your crops and dry the wood on the framework made by them.

But the head guy who's supposed to decide what's the one day when we're allowed to start harvesting. Cause if you harvest too soon, you'll take more than you're supposed to. Well, he set the day too late. So everyone broke the rule because they didn't believe him and they had elected in this rotating election to say who will enforce the rule. And if you're the enforcement guy, then you're not playing the game.

You're enforcing the game. You take off your uniform, you put on stripes. So he went out there and he saw not one rule breaker, but he saw the entire villages out there harvesting. Well, shoot, this is a vote of no confidence against the guy who said the harvest later. He has discretion on how to find people.

And so instead of finding the money, he required everybody to give a donation to the school, which they were all going to do anyway. And so that's, it's one of the ways in which you inject some humanity and some flexibility into your structures while still having the structure while still maintaining the integrity of it. It's a complex dance that we're dancing. As you're talking, my wheels are turning for sure. As to the many different applications here in the corporate real estate and in the construction approach, it's truly applicable.

I'm going to dig into that book, governing the commons a bit more. So thanks for sharing. My pleasure. It's a terrific book. If you want to learn more about how systems for human cooperation arise, if you want more of the theoretical background, there's a great book by Matt Ridley, who was the former science editor for The Economist.

He wrote a book called The Origins of Virtue, Human Instincts and the Evolution of Cooperation. That's another great book. For those of you who need more books. Of course. And I'll put those links in the show notes as well.

I love the resources. If I'm a lean practitioner that would like to stay on the course of continuous improvement, and I would like to just start looking for different areas in my organization, even if I'm not thinking about using a blockchain model right now, even if it's five, 10 years down the road, what do I start thinking about? How do I start pulling together the next steps to progress in that journey? I don't know what it's going to be like for other people. I'll tell you what I've been doing and maybe you'll find something in there for yourself.

And that is to ask myself, how am I doing the things I would need to do to live a lean life and to have a reflective and self-improving life? If I'm not improving myself, how can I realistically improve the systems outside of me at work and so on? And here's what I mean by that. Do I have the courage to be challenged and not take it personally? Do I have the courage to challenge myself before somebody else does?

Do I have the courage to challenge somebody else when they need it, even when I know they're kind of prickly? And so where do I find the courage for that? And then how do I build the relationship with that other person so that they're willing to let me challenge them so they can feel the love in me that wants that them to be better? If you're challenging people from a place of love, they will absolutely let you do it, but you're going to have to demonstrate that through your actions, through your listening, through your proving that you understand where they're coming from by being able to listen to them so deeply that you can state their position better than they can state it themselves.

If you can do that consistently, you can frame up your challenges of others from that place of love and you can love yourself enough to challenge yourself to grow, to face your flaws, to face your fears, face your over indulgence in letting yourself off the hook too much. You can face yourself for, you know, trying to control things that aren't yours to control. When you can do that consistently, you're living a kind of enlightened lean systems thinking life, and that gives you the power and the integrity and the moral and emotional authority to be able to lead lean from any position on the org chart in your organization now or at any time.

I wanted to give you an opportunity to share where people can contact you and learn more about what you're doing. LinkedIn Thomas B Cox or Twitter T B C O X. I'm pretty easy to find. And you can email me at thomas at Uday.biz. T H O M A S Thomas at Uday.

E U D A E.biz. And Uday is short for Udaemonism, which is a Greek word meaning the feeling of the state of euphoria you get from achieving your full human potential. All right. Thanks. Such a pleasure.

I look forward to the next one. That's a pleasure. Bye now. Thanks for listening to this episode with Tom Cox. Find out more about Tom and what he's up to at constructor.com slash E P 76.

If you learned something valuable in this episode, please share it with your friends and colleagues. You can also let me know if you enjoyed our discussion by connecting with me on Twitter at Brittany underscore CT or find me on LinkedIn. Or you can just email me at Brittany at constructor.com. That's B R I T T A N I E at construct double R. Dot com.

Next week, we will be speaking with Maggie clout business development manager at Siemens. She is the lead business developer for 17 project wins of New York State Energy Research and Development Authority, New York prize community microgrid program. She is the key team member for the New York prize and microgrid feasibility study and other high profile microgrid projects. She has presented and moderated various known microgrid conferences and events as a subject matter expert to support the establishment of Siemens thought leadership position. I really look forward to sharing this interview with you guys next week.

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