ERP Technology Companies are Centralized Planners of the Economy
For this episode I spoke to Chris D'Costa (@cjdcosta), the founder of Totem Live Accounting (@totem_live_). Totem is building a real-time global accounting ledger built on the Polkadot blockchain to compete against traditional accounting and ERP software. I thought it was interesting to hear how blockchain could potentially be used to develop alternatives to the bureaucratic free market world of ERP systems that run global flows of information and consequently commodities. During the episode...
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Transcript
Hi, everyone. For this episode, I wanted to experiment with something a little bit different. I wanted to talk about something that may sound a bit boring for some people at first, but is actually, I think, incredibly important to the machinations of capitalism today. In fact, in my experience, it is usually the case that the more boring something sounds on the surface, usually the more important it actually is to capitalism. So for this episode, I wanted to focus on ERP systems. ERP or enterprise resource planning is essentially the management of a business's major processes largely through the use of dedicated technology, which is usually software. By major business processes, this refers to various different needs of a business, which can depend on the industry of the business, but it can include financial accounting, human resources, supply chain management, order processing, customer relationship management, or CRM, etcetera. So if you've ever worked a job in which you had to input some information on some computer, you're probably used some ERP system. So if you've ever had to log your hours into a computer, that was likely an ERP system. Or your boss may have referred to it as SAP or whatever service your company used. SAP is one of the largest of these ERP technology companies that provide a full suite of integrated modules for various business needs. They are providers of ERP technologies for some of the largest companies in the world, and they can cost these companies easily hundreds of millions of dollars to implement them and pay for all the consultants that assist in that implementation. What's also really interesting is that SAP recently released a blockchain module for companies to set up and manage blockchain databases, on Hyperledger Fabric called Leonardo. But SAP is not the only one. There's plenty of others like Oracle, Salesforce, Microsoft increasingly as well, and it's the side of the tech industry that also makes insane profits off of creating inefficiencies into their own software, but doesn't get as much attention as the usual FAANG companies do. There are some companies that have developed open source ERP systems, but many times these companies still make money off of the lack of knowledge that most have in integrating their systems. The reason I have a bit of interest in ERP systems in particular is because I think they have a lot of relevance to the socialist calculation problem, which was started by the claim from the libertarian thinker Friedrich Hayek, who claimed that the handling of the economy is just too complex, and it contains too much information to make socialism a viable system, and is why using the free market and prices as the ideal way for handling an economy, as opposed to central planning, which is used in The USSR. In the book, The People's Republic of Walmart, the authors Lee Phillips and Mikhail Razorski take on this claim head on. They show that while the success of large multinational companies and the demise of the USSR may make you think that Hayek was correct, the truth is that the economy of the West is already planned at a very large scale, and planning it at an even larger scale is certainly possible. They argue and show evidence that all of the major corporations that make up the majority of the global economy practice central planning, at least the successful ones, within their business through the use of various software programs that help them plan the ordering and transport of supplies. Our entire supply chain is hugely dependent on centralized planning. It's just that the centralized planning is largely done by companies. This past week, we were able to see the consequences of when something goes wrong whenever a giant boat got stuck in the Suez Canal, leading to companies making tremendous losses. Therefore, the question shouldn't be whether planning is possible, but whether democratic planning is possible. In fact, with the advances of information technology, democratic planning in the interest of all of humanity is more important and closer to attainment than ever before. So for the interview that I'll share with you in a few, I spoke with the founder of a project called Totem Live Accounting being built on the Polkadot blockchain because I thought it was interesting to hear how blockchain is potentially being used to develop alternatives to the bureaucratic, free market world of VRP systems. I'm not saying that the project is radically socialist or anything like that, but that it might be an interesting project for people to hear about who may be working on more radical things like networks of worker owned cooperatives and see if it would be something to consider, since we unfortunately still live in a world of today. And even worker owned cooperatives need to find and use the most practical tools to assist in their everyday business processes. So I hope you keep that in mind during the interview. Before we go into the interview, I just wanted to remind everyone listening that if you enjoy or find the content I make important, you can pitch in starting at $3 a month on the Blockchain Socialist Patreon to help support me since making this stuff isn't free in terms of money or time. By supporting me on Patreon, you'll join other patrons like Tanya, Stefan, and mister Soul, and get access to monthly Patreon exclusive episodes where you can democratically vote on and practice what it would be like to live in a democratically planned economy. On the last Patreon episode, I gave my hot take on NFTs and how the left has been reacting to it lately. I'll, of course, still be making mostly free content like this to spread the message that Blockchain doesn't have to be used to further entrench capitalist exploitation if we put our efforts into it. So with that, let's get into the interview. Cool. Let me get started then. So we're back. Hello, everyone, that you're listening to the Blockchain Socials podcast. And for this interview, I have Chris DeCosta. He is the founder of Totem Live Accounting, which is a project being built in the Polkadot ecosystem. So hey, Chris. How are you doing?
Hi. Hi. I'm really good. Thanks.
Yeah. So maybe as a as a starter, could you give us just a quick introduction about yourself and your history in the crypto space? Because I think it's I think it's pretty interesting, that you're sort of a sort of an OG. You've been around for a while. So curious to hear, your experience in that.
Yeah. That's true. Well, actually, I'm a programmer by training. I've been working in industry for about twenty odd years, mainly supporting, finance departments and building financial reporting systems. But about seven years ago, I kind of fell down the, let's say, the Bitcoin and and blockchain space, rabbit hole and, completely switched to that one once I kind of got involved. So I've been a programmer in in blockchain space as well as a a cryptocurrency advocate. But my journey actually started, a little bit earlier than that. I kind of lost my job in in the financial crisis of two thousand and eight, and I was looking for something to do. And, decided I was going to try and build a kind of marketplace for, online virtual goods. And, anybody that's ever kind of done that or at least was doing it, say, back in 2008 or or earlier would have discovered that there are issues with sort of transaction mechanisms and particularly the around the kind of transfer of ownership of of objects, if you like, particularly when you think of things doing it at scale. And as I was researching solutions to that, I actually came across Bitcoin in the month or so that it had been released. And I'd been developing on Mac at the time, and it was it would only compile to Windows. And so I just kind of dismissed it as a as just a Windows only niche project that nobody would really kind of, you know, work with if it never got ported to Mac. Back then, they these were the kind of, you know, sort of polemic attitudes that people had. You were either Mac or you were Windows. You know? It wasn't, it wasn't as kind of open as it is today. And, and, yeah, I sort of carried on with the project. It kinda didn't really go anywhere. But I kept reading about Bitcoin. And, in 2012, I came back to it again and just took a serious look at the code. And and all of a sudden, kind of the penny dropped. All of the problems that I knew existed over sort of transfer of ownership of of objects online and and sort of that general whole transaction mechanism was was solved by Bitcoin. And I knew immediately this was, like, really super important as as just a a piece of programming, if nothing else. And, and, yeah, of course, that's, as I say, when I fell down the rabbit hole, and I kind of haven't looked back since.
Yeah. Nice. It's interesting. And I think, yeah, a pretty interesting story, especially considering, I'm sure as you're aware, all of the craze around NFTs, recently and, yeah, how how people perceive it can be, people have a lot of opinions about it. Let's just say.
Yeah. This weekend, actually, I met up with a musician friend of mine, who I've known for a long time. And I was kind of just trying to explain what NFTs were and kind of how important they were. And I I think they are in the artistic space, they're definitely kind of a game changer, for for raising funds. And in particular, if we okay. We know already about art and and how that's played a big part in in NFTs. But, music hasn't really sort of taken off yet, but it still has the same possibility. Everything's recorded digitally these days anyway. So you can fingerprint your your digital creation, your your artistic musical effort, and and and sell it as an NFT. And I think it's a really interesting way for musicians to perhaps get a bit more control back over, their work, which was traditionally and even today to a certain extent, is still owned more or less by the companies that are put that are distributing the the, the music, you know, for for consumption. So people like Spotify and Apple Music, they take a huge chunk from musicians and and the creators. And I think NFTs have a have a a real good chance now of redressing that balance properly.
Yeah. It's sort of, the platform economy has sort of cheapened the work of musicians over time, and this is maybe maybe part of the solution. Of course, there are probably many different types of solutions, but this is probably just one of them, one of the weapons they can sort of use to fight back against these platforms.
But it's not it's not just single musicians. I mean, there are there are it's it's you've got the writers, obviously. You've got the the session musicians. You've got the producers. You've got the engineers who work in the studio. All of these people have traditionally not been part of the equation, and there's a sort of, you know, a great opportunity for that for that to be part of the case now. So So maybe, transitioning back to, to your project,
yeah, could could you give us maybe an explanation of what of what TOTEM is and what exactly it's trying to solve?
Okay. So so in short, we refer to TOTEM as a peer to peer accounting system. Generally, accounting systems exist in isolated silos, and they don't talk to each other outside of their own silo. And what we're trying to do is create a system that allows people or allows accounting the accounting function to talk to any other random party in a peer to peer way, but also, obviously, to array to array to arrive at consensus over the content of the accounts. Traditionally, the gaps between accounting is where accounting fraud takes place. But if you don't have gaps, if you have two parties that have arrived at consensus over what those values should be, there's no way that one party could, corrupt that process because the other party would at least be able to say no. Hang on. This this was a different value when you sent it to me or whatever. So it there are interesting sort of things that fall out of being able to do this. Yeah. So I guess,
in short, to me as well, it sort of sounds like, it takes at least a big chunk of what ERP systems do for for businesses today and, you know, all types of businesses have to use some sort of ERP, just in order to organize all the different accounting functions that they have to deal with. But I think I think it's interesting that, I mean, for people who aren't aware, the ERP industry is largely made up of these very large tech companies like SAP, Salesforce, Oracle, and they make a ton of money off of the fact that you cannot do joint accounting with other companies very easily. And so they sort of have a bit of a monopoly over that space, and they benefit from the inefficiency of being able to exchange data between their various business partners.
Absolutely. That that isolation itself is is their business model. As long as they can maintain that isolation, then they can sell the same license over and over again to different companies. And and they're quite brutal about it as well. Something that they may give away for free this year will be a license fee next year. They're all kind of competing with each other as well. That's an that's another aspect. So even if you wanted outside of what we're doing, even if a company like SAP or Xero or or QuickBooks wanted to be able to offer a kind of peer to peer mechanism, they would still expect that everybody involved paid a license fee, And that's really not where we're coming from at all. We're we're sort of, as I say, from the the blockchain space where we see we see people being able to connect to a blockchain network for free and read information for free. So you can have sort of passive users who don't so it doesn't cost them anything. And you can have active users where, okay, they make a transaction and there's a transaction fee involved. But that fee can be rerouted back to a treasury or to validators on the network. And so it's an entirely different economic model. It's not intended, for example, to go to a central party that's created this software. It's really for the good of the community.
Yeah. Maybe, could you explain a bit more how the TOTEM accounting system would potentially work if I'm, for example if if I'm a single user on the TOTEM network, what what are the next steps that I would need to do in order to, for example, start making exchanges with with other people?
Okay.
So it's it's possible to operate TOTEM as a single user if you if you wanted to. Which is important distinction since, like, e r like, s you cannot get, like, a single package for ERP. You don't have, SAP on your, personal laptop or something like that.
That's right. You you you don't. So so TOTEM works essentially by attaching a a full accounting system to a blockchain identity. So in this case, an identity is equivalent to an address. So the functionality is embedded into the blockchain that allows you to make a transaction that that can do something specific, not in your not just in your own accounts, but in somebody else's accounts. And we call those accounting recipes. To give you an example, we have a a task module in in TOTEM today where we can create what is the equivalent of an order. So I can sort of ask somebody to do a piece of work for me, and I can set aside an amount of funding for that person. The first step is obviously that I make a transaction and it takes the funds from me, and it records some information into my accounts that those funds have been set aside in an escrow account for an a particular person or for for a particular identity on the network. And the person who has that identity can choose to accept that task, carry out that task. And when they actually finish the task, the normal process would be to invoice. But as soon as they create the invoice, it's also created in my accounts. And as soon as I accept that invoice, the payment is also credited to the to the other party, and and is updated in my own account. So all of this information happens within a single or within two transactions, in fact. So these rules can be set up so that accounting postings actually happen invisibly and automatically under the hood, and you don't need to do anything yourself. But it happens in a in a consensus driven way so that we know that, for example, you know, I had the funds originally to do that, that the funds were set aside in an escrow account and then were paid on to the to the, to the person doing the work. Traditionally, that would have been many steps. Yeah. Although I've described it in just, the the mechanism itself, traditionally, that would have been, a purchase order being created. I would have had to have made a bank transaction to set aside the money. If I was going to put it into escrow, then the other party would have had to accepted the purchase order. Then they would have had to have done the work, created the invoice, emailed the invoice to me. I would collect it from my email inbox. I would then encode it into my own accounting system and so on and so forth. You see that there there's that whole sort of mechanism does it still exists because it's part of the recipe, but it doesn't exist in the way that it there's manual coding that the encoding that needs to happen, to to put that into your accounts.
Yeah. The it's sort of like, you may in in a normal world, so, you know, in in a normal, I guess, business transaction, you'll have to you have your own format for you making a transaction, and then the person that you're dealing with has their own format in which they make transactions with, in which you both put into your own systems. And then there is the process of going in between and, you know, manipulating that data so that you could fit it into your maybe one has SAP and one has, you know, another system. And so it's this whole convoluted process of of data manipulation in in which, there is a chance that someone messes up on accidents.
Yes. Yeah. I mean, it's not just a chance. It happens very, very often. More more often than you think, even in large systems like SAP. And in fact, there are there are whole jobs that are created around that. The financial controller job is exactly to find the mess ups and correct them before they publish the accounts at the end of the month. And they spend three weeks every month just doing that, just finding errors and correcting them. So it's
And and and I guess the the alternative, as far as I understand, in my experience is that even if you have, like, two people can have, the same ERP system. Like, two business can both have SAP, and they could link their SAPs together through some sort of EDI, which is like electronic data interchange, I think is what it means. But then that still requires both parties to have SAP and to pay, like, the thousands of dollars or however much it is to have SAP.
Absolutely. I've built I've built some of those EDIs myself, and they're hugely complex. And when they go wrong, they're even more complex to try and find out why information got lost along the way. So, again, it is it comes down to this core problem that blockchain solves about the communication of information and the fact that, okay, a transaction may not get included in the block. But that's okay because you know that it hasn't been included in the block. There's no there's either it's either there or it isn't, and the network arrives at consensus as to whether that's happened or not. And if it doesn't get included or it gets rejected for any reason, then that's also, you know, allowable in this context. Whereas you look at EDI systems, when things go wrong, it's not always clear that something has gone wrong. And and like you say, you could connect these systems together, but there's a lot of consulting that's involved in trying to identify the APIs that are required between the two businesses to talk to each other. And, you know, again, that's a whole money making machine. So That's a whole that's a whole other
issue part of that industry.
Well, I come out of that world, so I kind of know I know what it was, how what it was designed to do and So then,
what if we take our, you know, our left wing hat on and we try to think about how to use TOTEM or use, I mean, the the basically, what an ERP system does, but apply that into a more, I guess, egalitarian and a more democratic model. So how would, say, like, a worker owned cooperative be able to take advantage of TOTEM? What what would that look like? Because I imagine, you know, any type of business, worker cooperative or not, you're going to have to keep track of your expenses. It's just like a basic reality of of life at the moment.
So the identities on TOTEM don't, necessarily connect anybody together. Don't doesn't relate identities just as any any blockchain identity doesn't do that. Blockchain addresses don't kind of connect each other. Okay. In Bitcoin, it's possible to to make that relationship because of its structure. But in in TOTEM, it's it's designed not to have that those the connections between parties. That's that's kind of one aspect. So when you own a piece of information, it's just about the information that you deal with yourself. The other part of it is that you can create structures by just association with other people. So you could theoretically build a society around individuals who have their own accounts, And you would be able to monitor the the accounts as a whole for that society, but only by those people who are part of that society. It's also possible to within TOTEM itself to have, multisig. We we use the the snore signature, algorithm. So the secret multisignature addresses are also possible. So these kind of things benefit societies as a whole. But the the the thing that's probably really interesting is that you don't have to be in one location to be able to benefit from this. You can build societies kind of around the world and still make use of TOTEM. There's there's no borders, no limitations. And as I said, each individual has their own accounting with whatever that they do. And within a sort of community or society, you could sort of allocate individuals to have certain responsibilities for certain types of activity within that society, and still have, let's say, an overview of what's what's going on from an accounting perspective. This would be really difficult with traditional accounting software because, as we sort of said earlier, you would need some kind of software license or everybody would need to be using, the same software, and everybody would need to be paying the same software license. And then you start to get into issues about how how the money is shared and how how it's assigned within that society. It can become quite complicated using traditional accounting systems. But with TOTEM, because each identity has its own set of accounts, it can it can be done sort of fairly easily. So I think it facilitates this idea of moving towards, let's say, a global cooperative of some kind. I know we kind of spoke briefly about the the platform cooperative cooperatives Yeah. Where it's not just limited to a locale, which it was in the past, where where the whole history of, cooperatives come from, usually sort of in small towns and villages. And now we can sort of envisage that happening on a kind of global scale, not not in a kind of globalist way, not in the pejorative sense of globalism. But but certainly, we're able to sort of build societies as we do today in in Reddit, for example, though those are effectively societies. But maybe we can take that one step further and actually do something with those societies, something meaningful, and have the ability to account in ways that we couldn't with traditional software. So then, like, the the most basic or smallest units on the network is, of course, going to be the individual,
or at least the individual wallet. But from that place, you can quite easily build, cooperative, I guess, economic structures within the totem network that represents the cooperative maybe like shared account in which, you know, you have already set up the rules for who is allowed to use the money.
The money can go into x place because 50% of people voted for such a thing to happen or something like that. Yeah. And this is actually quite it is one of the reasons why we're building in the Polkadot ecosystem because the governance mechanism inside blockchain networks that are built in Polkadot is really, really good. It's I don't know if you know at the moment that Polkadot network is completely community governed. When it was initially launched, there was a kind of administrative user, but that was removed after a certain period of time. And now even changes, for example, to the to the code go through a governance process where there's voting and decision making as to how that network, the Polkadot network changes and evolves. And you can see very similar sort of things happening because, because we can. Because we can do this. We can have this kind of a global governance structure where everybody takes part in in deciding the future of the network or deciding the ways in which money is spent or divided or how however you want to do it. There's, you know, the notion that if you wanted to vote on something that was a bit altruistic, you were giving back to the community. That's also possible, with networks that are built, in inside the Polkadot ecosystem.
It it actually comes with the substrate framework, which we're we're building on. So Maybe briefly, could you tell us why you chose to use the the substrate and and Polkadot's, infrastructure as opposed to maybe other protocols like Ethereum
or the various other blockchain, protocols out there. Is it a parachain? Like, TOTEM itself is a parachain, I believe. That that's the aim. We will we will eventually become a parachain. It the projects are working towards that at the moment. So so, basically, TOTEM started as a fork of Ethereum. And what we originally intended to do was build a smart contract, but we realized that that was still dependent on the Ethereum network in the sense that, if something was to happen with the Ethereum network, and at the time we didn't know what, but we know today what it is, being the gas the huge gas prices that you pay for executing, smart contract code. But it it that's that's part of the problem. You your smart contract would be entirely beholden to whatever was happening to the underlying blockchain network. And we we started to look at it's not very well known, but there are things called precompiled contracts that exist within Ethereum, which is the which helps perform some of the underlying functionality. And we were thinking, okay. Well, let's fork Ethereum and then build our own precompiled contracts so that the code was actually native to the blockchain network itself. This is a kind of very technical kind
of conversation. I don't know if it's a No worries. I I think some of them will like it.
And, and then I saw the presentation by Gavin Wood in in October 2008 in Berlin, where he basically presented Substrate as a tool for building blockchains, where all of the complex mechanisms of networking and block production and validation and authoring of blocks was taken care of by code that was built and tested by Parity. And, the other part, the business logic, if you like, of the blockchain could be built completely from scratch by anybody who wanted to do it. And immediately, as soon as I saw that fact, I suddenly realized Ethereum was not the way to go anymore. This was. Because once you have control of the business logic and you're able to do it in an environment where you can have sort of consensus reached over the information, that that's ideal, because you can build anything. I mean, literally any platform can have a blockchain like consensus mechanism behind it, validating data that you would normally put on blockchain. But, you know, you don't put everything on blockchain. But there are certain parts that require the consensus, can be plugged into any any possible application that you could build. Because we already had our idea, we already had a lot of documentation and research behind us, we knew this this was the way to go, and this would be the way to build, build what we wanted to build.
Polkadot allows for, I would say, in comparison to Ethereum, more manipulability, I guess that's the right word, of the business logic,
that you can project, like, on your network. Yes. It's More flexibility. Maybe Yes. More flexibility in building any kind of business logic you want. Obviously, you still have to take into consideration some technical aspects like, is my transaction that is executing this business logic going to be expensive from a processing point of view, and is that gonna hold up block production? All of those kind of things you still need to have in the back of your mind when you're building this thing,
but you still have the ability to build almost anything you want to do. Cool. So maybe for for the last question, where can people keep up with you and the progress of the of Totem?
Okay. So we we mainly have a Discord channel that we use primarily for our own discussions, some of which or most of which are public. And we also have a Telegram channel. If people want to reach out to us, they can, sign up on our website. We have, from time to time, newsletters and information. We're planning a crowd sale at some point this year. So that would be a good way to to get information about that. And, yeah, they can reach out to me directly on Twitter or or totem underscore live underscore. That's our Twitter handle. That's the
the the way to reach out to us on Twitter. Okay. Sure. Yeah. I'll I'll be sure to add those into the, the show notes. But, yeah, thanks a lot for the conversation, and,
and good luck on your project in TOTEM. Yeah. Well, thanks very much for having me. I've really enjoyed it. Thanks.