Nelson Rosario
on what cryptocurrency and AI will do to the financial system
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This episode is supported by Yunusov Law and Pulat Yunusov. We are all about special litigation projects. My files range from condo disputes to oppression remedies, but what they all have in common is very special clients. Ask around and you will find out why many lawyers refer civil and commercial litigation files to me. Find out more @lotio.ca. Hello and welcome to another episode of The Yunusov Question. My very special guest from Chicago today is Nelson Rosario. And, you know, this— hello, Nelson, first of all.
Hello, how are you?
I'm good, thank you. Welcome
to Canada. Yeah, it looks very similar to Chicago.
Well, if by it you mean Toronto, then yes, but the rest of Canada doesn't think that it looks like Toronto. So yeah, I agree with you that Toronto is like a twin of Chicago. And, you know, I just, I just like how this word Chicago rolls off my tongue for several reasons. First of all, there is, there is the word chic in Chicago, and then there is the word go in Chicago, and then Chicago is also, it also rhymes with tango and largo. Which represents some sort of luxury, right? So when, when you say Chicago, you think of something luxurious, or I don't know, decadent, or hedonistic, or something like that. And I want to talk about how I found words that rhyme with Chicago a little bit later because it's related to our common interest in technology.
But before that, tell me why you like Chicago so much, because I think you're obsessed with Chicago.
Well, I do love Chicago. It's true. And I— there's a variety of reasons. So I've been here for a while now. I didn't grow up here, but, you know, Chicago kind of has everything that you would possibly want in a big city. With, I would say, not a lot of the big city baggage. So you may have heard people say that Chicago is a city of neighborhoods. That's very true. So if you visit the city, you know, most people spend their time near the Loop, you know, the downtown area. I'm not far from the Loop myself at the moment. I'm actually up at kind of the boundary of Lincoln Park and Lakeview. My office is about a 3— I don't know, a 5-minute walk to the lake.
So the city is a lot more than what people see when they just visit, right? If you were in the mood for, you know, any sort of ethnic food, I guarantee there's a neighborhood that has, you know, restaurants and a local population that is now living in Chicago, you know, where you'll get the real thing. And I love the lake, you know, Lake Michigan is right there. I think it's the city's greatest asset. Ever since I've been in Chicago, Chicago. I've never lived more than probably, I don't know, half a mile from the lake. I live on the far north side of the city. We're still in the city, but you know, I spent a lot of time running and biking along there in July.
You know, you go out along the lake and there's sailboats and all sorts of activity, and you're kind of like, where am I? You know, is this Los Angeles? You know, what's going on here? I'm not gonna be bold enough to think that anybody actually believes Chicago is Los Angeles, but it's a fun thing to say. You know, but also it's a global city, right? You know, I mean, this is the third largest financial center in the United States of America, making it one of the largest financial centers in the entire country or entire world. And you know, it's just kind of a very— it's just a no-nonsense sensibility here, which professionally I've run into with respect to the types of investments and types of companies that are made here, the types of companies that actually kind of are born out of the Chicago ecosystem, as opposed to, you know, we're gonna cure death, which is something that, you know, would come out of like Silicon Valley, or, you know, we're going to take over the world, which is something that would come out of New York.
So I could keep going on and on about Chicago the great art scene, the great culture, the wonderful people, but My guess is that's not the sole focus of our conversation today. And I do tweet on Twitter.
It can be if you want. This is— I don't know how important Chicago is to you.
That's true. I do every opportunity I get anything positive about Chicago, I'll tweet out with the hashtag #MoveToChicago, in part because we do need more people to move here but You know,
you know, Toronto and Chicago are like the bizarre versions of each other. Everything you said about Chicago also applies to Toronto. So Toronto is almost Chicago, or Chicago is almost Toronto, but with some slight imperceptible differences that are also weirdly mathematical. For example Chicago— Chicagoans think north, south along the lake. We think east-west along the lake. Your lake is Lake Michigan, right? Yes. And our lake is Lake Ontario. And we also think about how far we live from the lake. I'm always near the lake. I'm not as close as you are, but maybe right now I'm about 30-minute walk from the lake, maybe. So Chicago is really interesting to us, but I know that we are not very interesting to Chicago because because that's what Canadians expect from their American cousins.
And I want to put in a word about how I thought thought up that clever quip about Chicago being associated with luxury words like Largo and Tango. So I, I thought, like, I had this instinct that Chicago sounded like something luxurious. So I went to ChatGPT and I said, I just typed in literally words associated with luxury that end in go, and it gave me a list. Yeah, like Mango, Largo, Allegro, Tango. So I love ChatGPT for that reason, you know. Anyway, so when I Googled you, you know what it looked like, the search results? The search results looked like you were competing for prominence with a football player. There is a football player.
Yeah, from Jacksonville, right?
He played it. Yeah, he played at UCLA. He was a tight end. Yeah, no, I never played college football. I'm also not 6'5" and 260 pounds, however big that guy is.
Yeah, but if you look at your Google search results, it's literally like you guys are duking it out for who's going to be at the top of the Google search results. And you know what so far you've winning. And because your LinkedIn profile— that's the power of LinkedIn— your LinkedIn profile, at least for me, is the top search result for Nelson Rosario. And when you Google Nelson Rosario, when you find, when you find you, literally almost the first thing that you see is crypto, cryptocurrency, blockchain. And all that other scary stuff. Can you tell me, can you tell me, and I know that this is a really banal question, but I'm just curious.
I think it's a, it's a great question. What is cryptocurrency?
That's, I don't know, do you know?
I, I actually had two episodes about it where literally my friend interviewed me about cryptocurrency.
Yeah, it is a good question. And, you know, I think it depends on how— what sort of kind of definition you're, you're interested in getting, right?
Yeah.
So you know, for the past 5 years I've taught— co-taught a law school class called Blockchain, Cryptocurrency, and the Law. And the way that we describe cryptocurrency is that it is a new form of digital property that's secured without a central counterparty. There's a lot more to it than that but I think that really gets it kind of like the key part of what's new in this industry and space and, and what simply didn't exist prior to Bitcoin kind of being released into the wild. And that is, you know, bits, you know, pieces of electronic information having some sort of scarcity as a consequence of participants in a network that don't know or trust each other.
Right? I mean, we all know how easy it is to copy and paste. I mean, that's the practice of law right there, right? But you know, the idea of scarce kind of digital information, it just didn't exist before. And then you layer on the top, you know, kind of like the public key, public-private key infrastructure and how you control cryptocurrency and addresses on a blockchain. And, you know, what sort of rights are actually associated with this? You know, then it gets a little more maybe convoluted. But I think at its base layer, it's unique digital property secured without the use of a central counterparty.
Well, that's a very legalistic definition. And, you know what, I'm not surprised because, hello, you're, you're a lawyer, right? But you're also, and I don't think that everybody knows that, but you're also a computer scientist. You're also a computer programmer. You are trained, you're trained in computer science. So if you wear that hat, what is cryptocurrency?
That's a great question. I never get asked that from that angle. And I do have a degree in computer science.
This is a 5-star show. We are known for asking elite-level questions here.
Exactly right. Yeah, no stone will be unturned.
Yeah.
I think it has the potential, and I'm, I'm cribbing from Andreas Antonopoulos here, but I do think that cryptocurrency is a value transfer protocol native to the internet. And, you know, when you think about the way that the internet developed and how we became a networked world and everything there were two really kind of important characteristics about participants in the network that were not really considered. One was identity, right? You know, how do we solve the identity of a sender of information or recipient? And the other was value. How do we exchange value, right? They were solely focused on, you know, how do we build a resilient network to make sure that we can continue to send information, and that obviously exploded from there.
And so I think cryptocurrency kind of can step in as that I don't really like the phrase internet of money, but I do think that it is an appropriate value transfer protocol, right? That is, I don't know if it's purpose-built for our world and our kind of especially the way the world is trending and everything. But it's a pretty good first start, right? Yeah, I don't know if that answers your question directly enough, but a value transfer protocol that kind of anybody can come and go, and you don't need to rely on that, you know, multinational bank or government for it to actually work. That's what I think it is.
And when you say value transfer, we all understand information— we all understand information transfer protocols. And well, let's first start with the word protocol. Now, HTTP is a protocol and this protocol is simply a convention. What is a protocol? It's a convention about commands or, or, or some kind of
right,
tokens that will be exchanged by parties, and the parties agree that these tokens or commands have certain meaning and will result in certain outcomes. So HTTP has very simple, very simple vocabulary, you know, GET, PUT, so on and so forth, and it's the foundation of this vast richness that we know as the World Wide Web. A very, very, very, very simple protocol called HTTP is, is really at the foundation of this whole universe that we almost live in now, like part-time. And you say that cryptocurrency is also a protocol, and it's a protocol for transfer of value. So HTTP is a protocol for transfer of information that supports World Wide Web, it follows that the information that it supports transfers of is sufficient to generate that richness of www.
And when you say that cryptocurrency is a value transfer protocol, is this protocol also sufficient to generate richness on par with the richness and the breadth of WWW but for value? And if yes, what is it going to look like down the road? Because, you know, one of the questions that we keep hearing is, show me one application of cryptocurrency that is not crime, fraud, and so on and so forth. And I remember a friend of ours, and I will not remember which one right now, but I apologize in advance, but he said on Twitter in response to those queries, yeah, like, tell me one useful application of money in the last several thousand years.
So, you know, with sarcasm, basically suggesting that money itself is a sufficient— in, in and of itself is a sufficient application of cryptocurrency. What do you think? Is cryptocurrency as a value transfer protocol— is it going to generate the same richness as HTTP, or is it just going to be money? Or is actually money the next protocol, like, I don't know, like maybe HTML or something like that, on top of which we will see finally the explosion of applications?
That's a great question. I guess In terms of trying to identify a use case, you know, that justifies the existence of this industry or why people should care, I think it's hard to, it's hard to say what that would be. And I think part of that is a function of who I'm talking to at any given moment, because the majority of my conversations are with people that are in like first world countries with extremely developed financial systems. And so they're kind of like, I just don't see the point, right? You know what my credit cards work fine. Yeah, I don't like my bank, but like it gets a job done. You know, I have investments, I have retirement accounts, etc.
But I think where it may have the potential to develop that richness, as you put it, is in the developing world. And I've always thought that if cryptocurrency is going to achieve a measure of the success that its kind of like most strident adherents believe it can, it's not going to be driven by activity in the first world, right? It's going to be driven by activity in the developing world where they don't have a full kind of financial infrastructure baggage that we do here. And so I, I do think that if we start with the— from the position that cryptocurrency is a novel way to transfer value at a distance over the internet without the involvement of a central counterparty I do think that something extremely rich will be built on top of it.
You know, I think it's a coordination technology. I think as a potential lower transaction cost consequently. And so coordination technologies enable new human behaviors, and new human behaviors usually take a long time to kind of stick, right? You know, there's— if you don't do a lot of like cross-border transactions where it's easier to use USDC as opposed to waiting for the banks to open, you know, because it's the weekend, then, you know, the value of something like crypto is not readily apparent, right? You know, it's, it's kind of, it's abstract, but it's like, I'm not going to use this in my day-to-day you know, and it's a legitimate criticism. You know, the white paper came out 15 years ago on Halloween in 2008, and, you know, we haven't seen mass adoption.
But at the same time, I don't know that we ever necessarily will at least for the kind of like money use case of crypto. I could see a future where something like Bitcoin or the market in aggregate functions as some sort of kind of alternate global reserve currency that, you know, human beings, corporations, maybe even some governments hold a certain amount. It's just kind of a hedge, right? Maybe it's not their primary concern, but it's just kind there. And I think we're sort of on track for that right now anyway. I mean, it's pretty remarkable that the price of Bitcoin is what, it's like $42,000, $43,000, $44,000 or something right, right now. And that's not much of a news story, you know.
I mean, you and I have been around long enough where when Bitcoin first kind of really entered the stratosphere in 2017, it was pandemonium, you know, and people were just kind of like, what, this is, what is this nonsense, right? And now it's just kind of like, oh, you know, well, what's behind Bitcoin's rally? Like, if you watch, you know, the financial news or whatever, and then they just kind of move on, right? So I think that the necessary kind of maybe cultural mindshare of like the concept being there enough where it's getting boring may lay the groundwork for really interesting things to happen which is why I work in the space.
I don't know. It's a good question.
Great. I have a trick question for you now. Let's— I'm trying good and then bad and trick, and I'm going to alternate. So the trick question is this: when you started your answer, you said you called the financial infrastructure here extremely developed, or something to that effect. And then you continued to contrast it with the developing world. And I think your suggestion was that because the developing world's financial infrastructure is not as developed, it will be more open to cryptocurrency. And the trick question is this: so if— well, so whoever developed the HTTP protocol way back, right? We all— we can all find that RFP online. We can all read it.
Everybody, by the way, should Google the HTTP RFP and if possible read it. It's really insightful. But let's say— so let's say they added cryptocurrency transfer value— not, not crypto— they added value transfer to that protocol from day one. As a necessary element of HTTP, not as an add-on, not as a plugin, not as a dependency or whatever, just as an inherent, like GET, right? Like GET or PUT. So they say pay. Let's say there is pay in HTTP from day one. Right. Question. Do you think the internet, as we know it today would exist if they did that? Assume that it would work. Assume that they also implemented HTTP and they built something like Bitcoin, right?
Yeah. From day one.
No, no, I don't think it would.
I also think it wouldn't. So, so when you say the financial infrastructure here is extremely developed, what you really meant is it's extremely entrenched. And, and it reached a peak. I think the peak of our financial infrastructure was the credit card in the '50s. They invented in the '50s. It's really peak. It's really the— it's really a stablecoin the way I think about the credit cards, because what it is, it's just a proprietary network for exchanging IOUs. That's what credit cards are. And it was a genius invention, no doubt about it, because it encapsulated loans, it encapsulated issuing credit, it encapsulated, abstracted it away from vendors so vendors didn't have to worry about it and opened up completely new customer segments to vendors who otherwise wouldn't access them because they didn't have an ability to provide financing.
It also provided the infrastructure for pay, for value transfer by inventing these fake money IOUs that later were settled into bank balances. So that was a genius invention in the '50s. But I think it's— we were stuck there. We're stuck there. And it's a terrible system by modern standards. But I— someone I know recently traveled to Kazakhstan, and I guess Kazakhstan is not considered to be a part of the Western highly developed financial infrastructure. So the way they make payments there blew that person's mind, just blew that person completely out of the water. And that person was completely shocked. They live in the 21st century when it comes to payments. They want people to pay.
When that person thought about, thought back about making payments here in North America, the thought was they don't want us to pay anymore. It's getting so hard to pay, right? It's getting so hard to send money to people. There are so many barriers. AML, KYC, credit checks, delays, so on and so forth. And that person was in Kazakhstan and the thought was, oh my God, they actually want us here to transact. They actually want us here to do business as much as possible because super easy to send money to friends, random people like on messengers, for example, QR codes to make payments. Nothing to do with cryptocurrency, nothing,
right?
Admittedly, but a completely different philosophy of payments. So what do you think about this? What do you think about the entrenched financial infrastructure? And when we say entrenched, I think it's more fair to say that it's, it's interests that are entrenched rather than technology. Technology doesn't entrench itself. Technology is agnostic to— it doesn't have any interest or wishes or desire to stay or go. So what do you think about the, the financial system here? And do you think— what do you think the future of our financial system here in North America is? And I only want to talk about North America because Canada and the US are very similar, and Europe is actually quite different.
Yeah, yeah, I think you're right that it's entrenched. The financial system is extremely entrenched, and it's a consequence of the interests, but it's also a consequence of kind of the financialization of the economy here in North America ever since really the 1980s, right? Now, you know, I don't want to make value judgments one way or the other, but you know, that changes the way the society operates, right? Where there's less of a focus on creation that is not financial in nature, right? And so, yeah, I mean, there's It's not even that I necessarily strongly dislike the financial system. There's a lot of people in crypto that do, right? I kind of— whatever, it's just, it's a, it's a necessary evil that exists, right?
You know, and it has a fascinating history too when you kind of look back to kind of Renaissance Italy and the invention of, you know, double-entry bookkeeping and all of that stuff and how that has led to you know, New York being the center of the universe, right? And so, you know, that entrenchment— and I'm not surprised by your friend's experience in Kazakhstan because, you know, when I first really fell down kind of the Bitcoin rabbit hole, I was reading about about people using Bitcoin in Sub-Saharan Africa via their Nokia, not even Nokia flip phones, the old Nokia brick, right? And it was in part through a company called M-Pesa. And I was just like, this is amazing.
They don't have bank branches, they don't have any of this, but they're using Bitcoin. How is this even possible? And that's It's because there isn't all of that entrenched interest and there isn't all of that infrastructure that they're kind of competing with. And they're solely kind of in that situation, we're competing with, hey, it's easy to send money from person A to person B, right? Whereas here in North America, there are so many intermediaries and other people that are kind of like offering solutions somewhere along the value chain, but nothing is a fundamental shift really, you know. And so it's just kind of like, I mean, to use, I guess, maybe a technical term, it sort of ossifies the financial system, right?
Because there's all this other stuff built on top of it and top of it and top of it and top of it, and there's no Like if you and I were like, well, let's reinvent banks in North America, we would get no money, we would get kicked out of every meeting, you know, and it wouldn't even matter if we had a great idea, you know, maybe we did have a genius idea of how to reinvent a bank, no one, that's a non-starter, you know, and so, you know, that's part of why I think, well, if something that's so alien like crypto is able to be successful. It can't, at least initially, and not anytime soon, I don't think.
It can't compete with that huge leviathan of, of the financial industry here in North America. It's just not possible.
I think that your hypothetical about starting a bank is a really good illustration of how we do not have a free market in the financial services industry. Because if you try to start a, a bank today, chances are they will say no. And when I say they, I mean the Federal Reserve or the Bank of Canada. It's These are the organizations that decide if a bank is to exist or not. And why? So think about starting a business and any other business, you just register corporation and it's a 5-minute thing even in Canada. Oh, maybe actually it's easier to start a corporation in Canada than in the US. I just registered corporations a few days ago.
It's just like 10 minutes through some wizards online, whatever. But if you want to start a bank, you have to go, you have to make an application, you have to ask for permission. And then they will look at a bunch of things and they will probably say no because they don't need new banks. They don't need new banks. Why would they need new banks? So that proves that banks don't exist first. They don't exist first for their shareholders' value. They don't exist first for the abstract market. They exist first for for the interests of, of the central bank. They are agents of the central bank, and they implement central bank's policy. And if you think about the mechanics of how money actually works, then you understand why, because commercial banks are responsible for database entries that say how much money you have in, in your account.
So they have to be they have to be full trustees of, of the central banks that actually generate and issue the bank deposit dollars. And if they're not, then they cannot participate in the system. So if you look at, at, at the banking system, then from the perspective of the central bank, then your thinking goes, why do we need another bank? It works. I mean, the more banks you have, the more risk we have in the system because we have to share trust with more people. And the people that are already there are good enough to support our monetary policy, to support our payments. Policy and so on and so forth.
So you and I, why would we even want to start a bank? Why would we even want to be part of the entrenched infrastructure other than, you know, to share in the fruits of of the, of, of this, of the circle of the system that is, is milking every transaction in the country? So if we're not creating a bank, then what would we create? If you and I were to start something in the financial services industry today.
Oh gosh. Anything that doesn't seem like a financial service at all. You know, I think that if you're, I think it's useful to kind of look at culture in a certain way, particularly internet culture and the way people interact on there, if for no other reason it's a generational shift, right? You know, the people, most people younger than you and I would say are more internet native, although I think you and I are pretty savvy with respect to that given our backgrounds. But You know, so I would look at how people are, are acting there, and that is, I think, a way in which kind of crypto startups have good intuition, like, oh, people want to exchange X, Y, and Z, right?
How can we help them facilitate that exchange? Where they kind of completely go off the rail is that they don't necessarily take the world as it is, they take it how they would like it to be, and so they use financial coded language in whatever product or service offering they have, and that automatically kind of trips alarm bells and raises their legal risk profile. Now, I'm not saying that by just using the right words and magic incantations, you can avoid kind of legal risk. But you can do yourself a favor by not, for example, calling yourself a bank, right? No, we're not doing that. We're a community, whatever, you know. And I think that there is an opportunity to, to perhaps recreate some of the kind of traditional value exchange or value sharing organizations is maybe too strong of a word, but ways that human beings had done things in the past with respect to sharing resources that really kind of existed on a very hyperlocal level or at a, like, a tribal level, because now we finally kind of have the tools where distance matters far less than it ever did, especially online, right?
And so, you know, you can have a very micro-targeted you know, resource pooling service that just wasn't even that possible, wasn't even possible a decade ago or more, you know. So I would want to create something around there. You know, unfortunately, most of those kind of like use cases are related to games and, you know, other media and kind of cultural consumption. And although I think that's important, that's not where my personal interests necessarily lie. And I don't think we'll see kind of like the structural changes that impact kind of how society is organized until much later.
Well, another new kid on the block today is artificial intelligence, AI, and we can't be talking about cryptocurrency without talking about AI because I guess it's the thing, right? So if you're in cryptocurrency, then you should also try being in AI a little bit, and I'm half skeptical, but there is some truth to this. Both are at the very external edge of thought and technology, both crypto and AI. And I think that some people simply by their nature or by the way they were brought up are constantly live or search for such edges. They just have to be there because they are obsessed with the future and the present sucks so much that They can't help— yes, they can't help probing whatever is the cutting edge today.
So nothing wrong with that. So thinking about artificial intelligence and AI, and having just finished talking about the financial system, do you think that AI will make a dent in the financial system? Do you think that AI will do to cryptocurrency what many cryptocurrency enthusiasts, human as they are, failed to do.
So are you asking, will AI kind of be able to pick up the torch and actually get the job done?
Yes.
That's an interesting idea. You know, with respect to crypto and AI, I've thought for a while now that DAOs— decentralized autonomous organizations— That the really interesting potential use case for DAOs may be allowing human beings and AI bots on the internet to interact in ways that they couldn't otherwise, right? So if you think of a DAO as a kind of pseudo-corporate entity that exists online and has a rule set governing the interactions and powers that participants in the DAO have, right?
Yeah,
That's fertile ground for an artificial intelligence bot to know, okay, well, this is these are the rules for this game and it has these resources associated with it. So if I want to interact with this DAO, this is what I can do, this is what I can't do, right? Human beings get much more creative kind of because they're, you know, not constrained by the rule set, let's say. Some people think they're constrained by the rule set, other people realize they're not. But I do think that AI will maybe kind of accelerate the financial aspect of crypto because it's just going to become so easy for people to automate kind of profitable trading strategies, let's say.
And I've always thought the kind of financial aspect of crypto is one of the least interesting, right? I'm much more interested in what it enables and how people can interact in ways that they couldn't interact before. And I don't think that AI will necessarily change that. So, you know, it would be kind of a funny consequence of AI developing, and then for whatever reason, a bunch of AI projects start to rely upon crypto, and then the value of crypto goes up as a consequence. I mean, I suppose it's possible. I am always looking towards the future, and I can think of a couple of different sci-fi stories are in the neighborhood of that scenario.
But, you know, will it decimate kind of the traditional financial system? No. Will it decimate kind of backend bookkeeping and everything and maybe a lot of jobs that are not public-facing? Yes, I definitely think that's happening already, right? Yeah, I don't know. It's an interesting it would be funny if crypto just starts going way up and the human beings have no idea why and nobody can explain.
Yeah, let me, let me probe this a little bit and see if I got it right. This is very interesting. Sure. I've always thought that in the war between innovation and the entrenched financial system, the weakest link on the side of the innovation was always the humans. Someone, a person, right? It was never the quality of software. It was never the technology. It was never the ideas. It was always people. And there are two ways in which people are the weakest link in crypto. The first and the most obvious one is just, just people tend to be fraudsters, thieves, liars, and all other sorts of bad characters. So, and it's people who apply crypto in accordance with their human nature, and we end up with criminals, we end up end up with fraudsters, we end up with scams, and people go to jail for a good reason.
People don't go to jail when they should, right? And crypto in general gets a bad rep. So the second aspect of humans being the weak link is that governments are not always benevolent or competent, and they sometimes use regulation to to entrench the entrenched even more, or to advance special interests, or to facilitate something that is not good for the progress, right? So no one's perfect, fine. And then it's the person behind the project that will be the weakest link. You arrest the person, the project is dead. You You charge the person, the project is dead. You segregate the person financially, the project is dead. You close his bank accounts, the project is dead, right?
So I don't think that any technology consumer-level technology has been attacked by government regulation to the same extent that crypto has been attacked. Now, if artificial intelligence replaces the human link, we kill two birds with, with one stone, assuming that artificial intelligence is programmed ethically and responsibly, which is a big assumption. And also knowing that artificial intelligence is immune to government regulation— technologies cannot be regulated, only people can be regulated. Then do you think that that will result in an explosion of innovation in the financial system? Because it will simply grow from the grassroots where some, some, you know, where once media and established newspapers ruled their industry, now we have citizen journalism and whatnot, with of course a lot of criticism of that.
But the landscape has completely changed in that department from the grassroots, regardless of any regulation, so on and so forth, just because technology was mixed with human intent. Do you think AI will immunize cryptocurrency from scams and regulation on both, on both sides, and that will result in an explosion of cryptocurrency and progress in the financial sphere?
If somebody can find a way to make money off of it, maybe. If only because, you know, I kind of— it's an interesting idea, and it's— but it's not apparent to me exactly how it would happen. Even at like a genesis level, right? Because it's like, who's going to be motivated to build some of these solutions, right? And I think given the interest still in the crypto markets and of course the interest in kind of like AI solutions, you know, what you have described, I would say, is more akin to kind of like public utility type plays that are maybe their consumer level, but it's not let's get rich quick. And I think it's something that is definitely possible and, and may come to fruition eventually, but I'm just not even sure what that would, what that would look like.
You know, it's all, it's almost like kind of, and correct me if I'm wrong, but it, it sounds like you're describing somewhat services like, like Plaid or something, right? That provides this like financial interconnection between institutions, whether it's a startup that's using Plaid to connect to your bank or something like that. And nobody really even knows outside of people that pay attention or work in that industry that Plaid even exists. Does that make sense? Kind of what I'm trying to— because if you're trying to eliminate the human scam element, right, then AI needs to be more in control. And the question is, what exactly is it going to be in control of? And so— and this is not even getting to, well, how do we program it in an ethical way?
Personally, I think that that's a— is a fool's errand. I think maybe a better framing, at least the way I think of kind of like when clients are trying to do something is kind of, well, let's assume that it's going to break. And how do we work from that assumption, right? What, how do we get to a level of comfort where, well, we know at least right now, these are kind of like the 3 problem areas, but we've minimized from a, you know, problem area set of 7 down to 3. So like, you know, it's that concept of minimizing the attack surface that's sometimes talked about with respect to blockchain networks. I think Nick Szabo was the one who came up with that.
And, you know, I think if you take that approach, you have discrete problems and you deploy AI solutions and yeah, definitely. But again, how is somebody going to make money? You know, these are not necessarily altruistic endeavors. You know, I think part of what made the internet successful is that a lot of the initial infrastructure-level innovation was in part funded in terms of actual like time and sweat and money from academic institutions, right? It was researchers, right, who didn't have the same motivations. You know, it was, it was much more public-private innovation, whereas like the crypto space has been solely private, at least up to this point. And so then you throw in something like AI, which— so it's just funny to talk about AI because it's so old, number one.
You know, I mean, Turing was thinking about AI You know, and, and now we finally have kind of like enough data and tooling and compute power to actually realize like a lot of these really old dreams. And so similarly though, you know, how are you going to create services that eliminate scams? You know, like how would you pitch that? I don't even know what it would be, you know, and we service similar client base and they all, you know, want to, they have different ways of making money. Let's put it that way.
Do you think lawyers foster innovation or stifle innovation?
Generally stifle. I think that they can foster it, but that requires lawyers to really lean into more being a counselor and a trusted advisor. Well, I tell clients that all the time. It's like, hey, this is your money, these are your resources, you can spend it how you see fit. But I think this is— this could be a problem.
Well, this sounds like a good segue into part 2 because we hit our time limit. And I don't really want to end on this note, lawyers stifle innovation, although I completely agree with you. I agree with you 100%. And I don't, but I don't think that it is inherent to lawyers to do that. I think that it's really on a lawyer-by-lawyer basis. And, but generally, yes. Look at the law practice itself, how innovative it is, right? And technologically advanced it is. Look at how lawyers do their own business. But I think that lawyers can contribute to the conversation, and in that respect, your idea about DAOs being fueled by artificial intelligence. If I understood you correctly, this was really what you were talking about, where autonomous, decentralized autonomous organizations become autonomous not only from regulators or from corporate boards or something like that, but they become autonomous truly from humans.
And consumers will choose AI-driven financial services organizations to do business with based on their reputation and based on what we know about this particular AI and how it operates. I think even now generative AIs, different generative AIs already have developed certain reputations. Among consumers. You know, ChatGPT has a reputation of, you know, being maybe too conservative on some things. And also its reputation has changed over the even just mere months, right? So don't you think that in that respect consumers have a shot at finding and sticking with with a reliable artificially intelligent financial system. And maybe we will even have parallel financial systems that will compete with each other, and scammers or governments will not be able to do anything about it.
Just like today, it's too late. The government can hardly do anything about email, for example. That's it. What can the government do about email? I mean, other than the brute force at the last mile,
right? Yeah. No, I think it's definitely possible. And I think that, you know, the AI as advisor in whatever domain is where we'll see the most value initially. You know, when I first started practicing law, I did a lot of work on the use of neural nets in medical imaging. To try and improve diagnostic outcomes. And every single— all of the research out there is like, if you have a human doctor and AI analyze imagery together, you are— it's, it's always better, right? Either one alone is never good enough. And I think in domains that are where there's a judgment element that's dependent upon wisdom, shall we say, that is gonna continue to be the case, right?
And AI can mimic, you know, ChatGPT can mimic being smart, but it's not gonna give you like wisdom on how to live your life, right? Or anything like, or what's the best decision out of, you know, this set of decisions for you, right? And so I do think that, yeah, consumers may be able to, and I could see a future where they sign up for an AI service that's like, we'll take care of your financial life, you know, connect your Chase Bank, connect your credit cards. Okay. Or do you consider yourself a conservative investor, an aggressive investor? You know, we already have robo-advising services. This would just take it to the next level. Right.
And a lot of those annoyances and everything else, like plugging in your credit card at websites, if you're purchasing stuff, that service will just do it. I mean, you know, it could be a browser extension that's hooked up to some mainline server, you know, I mean, there's a lot of different ways that you could do it, but I could see something like that, right, where it, it would cut down drastically the amount of fraud potential. You know, we don't have to remember as much stuff. I just started reading a book called— well, here, I'll show you. It's— and it was talking about this point right at the beginning. A Brief History of Artificial Intelligence by this Professor Michael Woodbridge— Wooldridge.
But he was saying like there's 3 things and it's directly relevant to this. He's like, I want you to know that computers are very fast. He's talking about how they can perform 100 billion instructions every second, right? And how that's just markedly different They don't, they can follow simple instructions. They don't actually really make mistakes all that much. You know, the people programming them do. And so that those sorts of combinations, I mean, you're right. I think that our financial lives like could be greatly improved by leveraging those benefits, right? Minimizing mistakes, speed. Yeah. But you need to, you know, it kind of reminds me of those services, If This Then That, you know, where if you built an If This Then That AI financial service, actually, that's the company we should start right now is an If This Then That AI financial service, right?
Yeah, you could probably print money doing that.
Well, I think this is a much better note to conclude our conversation.
So we can
at least show that at least some lawyers foster innovation, at least these two, hopefully. We're trying. Yeah, we're trying. We're doing our best, people. I want to thank you, Nelson. This has been really fun. It's almost like chatting in a coffee shop or something like that, except we're across two lakes from each other. And yeah, I hope to visit Chicago. I know you're never gonna come to Toronto because People always say I will come to Toronto, but they hardly ever do. But I definitely have been to Chicago several times. I drove through Chicago on the way to your other home state of Minnesota. I, I made that trek. Yeah, from Toronto to Minnesota by car.
So Chicago is the midpoint and that's where I spend the night. So yeah, the connections are there. Anyway, thank you so much for this wonderful chat. And we'll be in touch.
Yeah, thank you, Pulat. This is great. Look forward to doing it again.