interviews
Democratizing The Debates | Part Two
by Kathleen Hall Jamieson
March 18, 2019
This interview with Kathleen Hall Jamieson, the Elizabeth Ware Packard Professor of Communication at the University of Pennsylvania’s Annenberg School for Communication, the Walter and Leonore Director of the university’s Annenberg Public Policy Center, and Program Director of the Annenberg Retreat at Sunnylands, was conducted and condensed by frank news.
This is part two of an ongoing conversation. You can read part one here.
I don't know many people familiar with the Presidential Debate Commission. They’re in control because they say they’re in control?
Yeah, that's right. There's no statutory authority.
I mean we've created social pressure on the candidates to debate. And the debate commission has offered a structure. But before the debate commission, The League of Women Voters handled the debates.
Right.
But the candidates want to put lots of constraints on what happens in debates. They want to dictate all sorts of things, and part of what we're trying to do with this report is say, "You know, some of those things you shouldn't get to dictate. Some of those things should actually stay more open." The League of Women’s Voters didn't want to do things that the candidates wanted, candidates basically said, "Well we're not going to come to you." Debate Commission constituted itself. Debate Commission was created by political partisans on behalf of political parties essentially. Without saying that. But look at who headed the Debate Commissions over time, it's basically operatives from the two parties.
And so could another model come up? I've expected the tech companies to put up their own debates. And basically say to the debate commission, "We've got an audience that's large enough that we're not going to work through you."
I wonder what would happen if they were seriously challenged.
Innovation is hard when somebody controls something. Because the purpose of the control is to drive out the innovation that might create a competing model. The place you're going to get the most innovation is going to be out of the digital sector because they're not thinking in the same terms as the traditional model, and I'd like to see the digital sector come to some kind of an agreement that they're going to put up their own debates.
I'd like to see a group take our model and get philanthropic funding and offer a model of debates.
It's refreshing to hear somebody so experienced, and who has spent so much time looking at this say, "Well no, actually, new debate is possible, and it would be really interesting."
Yeah, we said, "What is a debate supposed to do?"
What we want the debate to do is to reach the largest audience with the best information that creates legitimate capacities to see distinctions.
It's helpful to see similarities, too. I mean it's really important to ask what do the candidates agree about? So if you agree Afghanistan is a good war, you never debate Afghanistan. Well it was really helpful in 2008 to just put on the record, "Senator McCain, Senator Obama, you both agree Afghanistan is a good war. There are people who disagree with the idea that Afghanistan is a good war. Would you defend your position?" Because if we're trying to do this to get debates and campaigning more broadly to forecast governance, you want the areas of agreement featured as well as disagreement. The reason for agreement is they predict governance more readily than the disagreements, because the party out of power is going to support it. If the candidates support it, the likelihood is you can get it through Congress.
The way I approach debates when I do debate commentary, the first thing I ask is, "What did we learn about what they have in common?" Because it's highly likely to predict governance. I was doing live commentary for CBS in '96 in the debate between Dole and Clinton.
Clinton moves to Dole's position on exempting up to $500,000 of capital gains on a primary residence if you've held the primary residence for three years. So Dan Rather says to me, we're live, "Kathleen, who won/lost the debates?" I said, "Nobody won or lost the debates. The American people won. In particular, if you're thinking of selling your house, take it off the market. The likelihood that next year there's going to be a capital gains exclusion which means you're not going to have the level of taxation you would under the current system extraordinarily high. What you had today was that they both agreed, they were going to exclude it. I will predict that within the next six months after the election, it's going to change."
I got a letter from a woman and she wrote me and said, "You saved me an enormous amount of money."
That's the sort of analysis that's helpful. I don’t know that most people think that way.
Well most people are saying, "What are the differences? What are the differences? And who made the gaffe?" Which is a stupid way to approach debates. Because most of the things we call gaffes actually weren't gaffes.
The moment where Quayle says he's passed more legislation than John Kennedy. That's no gaffe. It's a great gotcha moment for Benson to say, "You're no John Kennedy. I know John Kennedy." John Kennedy was a completely undistinguished member of the Senate. He accomplished virtually nothing. He set up a foreign exchange program that brought four foreign exchange students from Africa, and one of them was not Barack Obama's father. That's it. His name isn't on legislation. Quayle actually had his name on a major jobs bill. Quayle is literally telling the truth, and it's identified as a gaffe because the Democrats choreographed a Benson moment in which they basically said, "John Kennedy, this icon, is not what you are." Well that's not what Quayle was claiming. "I'm charismatic." He was claiming, "I've done more in the Senate." He was absolutely accurate.
Now the part they should have featured was, the question that leads to that exchange, which was, "What is the first thing you'd do if you became President?" And he can't find an answer! So the inference that he was unprepared was right, but the evidence they were using was wrong. The evidence that he couldn't find the answer is what they should have featured. But it didn't digest as well. So the claim that he's John Kennedy, like John Kennedy, better than John Kennedy, that's not the issue distinction. He's better than John Kennedy. It's true, it's demonstrably true. He can't figure out what he'd do if he became President unexpectedly. That's a big deal.
And if you say, "Well John Kennedy would have figured it out." Maybe.
Maybe. But then you wonder is it the person who's best at debate that looks like the winner, and maybe not the person who's delivering the most honest or accurate information?
There's a problem with winner as a construct. You can't win at debate. I mean I'm a former debater. I can win an academic debate. In an academic debate, you have a single proposition which you argue over a one hour period in blocks of 15 minutes with a pro/con structure, affirmative and a negative structure. Then you reprise the structure. I can win or lose that, because I can assess on that argument, who argued most effectively, who used evidence most effectively. Was there a decisive argument that disabled the other side?
I can't claim winner or loser over an hour and a half. It makes no sense. The press has this construct, which is an athletic construct, or a war construct, you win or lose.
And then they come down to, "Was there a gaffe?" Well, what about the X number of minutes? And most of the things called gaffes are not gaffes.
Then they use military metaphors or they use sports metaphors in ways that make no sense. The moment someone does something that is supposedly disabling the other person's candidacy is a knockout punch. There's no such thing as a knockout punch. That's boxing, where the person is literally on the floor.
I've never seen a moment in discourse in which someone lands a knockout punch, where you just completely destroy the other side.
The person's down for the count. It just doesn't exist. So these crazed metaphors come in. Out of the ballpark home run. I've also never actually seen one of those. Because discourse is complex. You don't get that kind of really clear destruction or validation. Our whole vocabulary for looking at debates makes no sense.
The question we should ask is, "What did you learn that is of value to you in distinguishing the candidates about the ways in which they will govern?" And that can be about their issues or about their character and their temperamental dispositions. And as a result, a debate might be very valuable to you on issue or two, or one exchange or two. To me, one or two are completely different areas. I don't want to say that yours is less valuable than mine. The question is was the information accurate and did it forecast governance? If it did, it made you a better voter, probably didn't change your mind about how to vote. Very few minds are changed by debates. That is not their purpose. Their purpose is to increase the tie between campaigning and governance so that voters can cast informed votes in which the relationship is clearer to them and then you actually forecast governance. And by that standard, by the way, the debates in 2016 were good debates.
The public did know the positions of Clinton and Trump by the time they voted. They were uncivil. There's a whole lot of stuff that suggested temperament problems, particularly for one of the candidates, but people knew he was going to build a wall. Donald Trump has pretty much done exactly what we anticipated. Which means from that standpoint, it was a good election. I'm not at all surprised by the Trump presidency. At all.
Yeah.
I'm less surprised by the Trump presidency than by George W. Bush. Because George W. Bush said he wouldn't engage in nation-building. If you took that literally, you'd say, "Okay that's a bad forecast."
Trump is doing exactly what he said he would do. No surprise.
And his theme, I mean this is the band theme, promises made, promises kept. You can almost hear him checking those things off. In an odd sense, people look back at the election and say oh my God it was a terrible election. No, it wasn't. It accurately forecast the differences between the two candidates. And in the candidate who was elected, which is the only way you can assess the tide of governance, because you don't know what Hillary Clinton would have done because she wasn't elected. I presume she would have acted on her promises, but I don't know. I know with Trump. Okay at that level, it's a good campaign. You can't say people were misled. They also heard all of his uncivil discourse. Well he carried that into the presidency too. They voted knowing that. So there aren't really any surprises. The surprise is the public didn't know the extent of the Russian involvement. And I wrote a book about that.
The other criticism I hear often is that it doesn't make room for a third party to participate.
Well it does, because we've had Anderson debate Reagan, but Carter wouldn't debate.
But the threshold seems too high to some people.
Well you've got to have some threshold test. We addressed it. Basically, we would lower the threshold test. Because we think it's good to give the people the chance to have another party get the access. I mean right now you've got third parties trying to percolate up in our system. And widespread perception that it's two existing parties aren't coherent anymore. I mean there's a left in the Democratic party and there's a right in the Republican party. The right in the Republican party is being represented by Trump right now.
In this kind of situation, you'd expect a kind of Libertarian emergence on the right and you'd expect what is actually emerging on the left, which is a Green/Progressive left. And maybe then the moderates on both parties become the third party. They're just kind of the moderate.
I mean they're kind of the traditionalists. They believe in free trade. They believe in progressive taxation, but not too much, etc etc.
What I was worried about is the debate structure closes third parties out. And I don't think that's helpful to a body politic that should entertain their ideas.
Perot for awhile was ahead on the polls, so he's really a different case. I mean at one point, he was leading Clinton when he was running in '92.
What was he running as?
He was running Reformed candidate. Reformed Party. But he introduced the deficit as an issue. The other two didn't want to talk about it.
So you can plausibly argue the effort to bring down the deficit and draw down the debt was that Perot relentlessly put it on the national agenda in the debates as well as in advertising. Well that was a good thing for the country, not a bad thing.
So the idea that the third party functions introduce new ideas into the system, even if it never legitimizes and becomes a mainstream party, but you'd like it to have that capacity. Means that you should find a way to give it more access than we give it right now. And if we had a viable third party, Bloomberg would be running right now. Bloomberg can't figure out how to get through the Democratic primaries. I mean he could figure out how to win the general election. He just can't get through the Democratic primaries. And we don't have structures set up to let an Independent get the standing it takes to win. The way we've currently got it structured, it'll always draw down the support for one candidate. And Bloomberg's calculation is he'd draw down the support from the Democrat, and as a result, he'd cost the Democrat the White House, but he wouldn't win himself.
So there's no real sense in him running.
Not unless you want to have a re-election of Trump. I mean I assume that's his calculation.
There's ideological space there. And there are candidates who genuinely don't belong inside the parties. I mean Ron Paul didn't belong inside the Republican Party. You watch those primary debates and you said, "Okay, these people are Republicans and he's not." Bernie Sanders should not have run as a Democrat. Bernie Sanders derailed the Clinton presidency by running what was essentially a third party candidacy inside the Democratic debate.
And he's about to do it again.
Yeah, probably not with the same effect. I mean there are now other progressive candidates. And it's not that there isn't a progressive impulse inside the party. It's gravitated toward those positions.
He'll be looked at historically like William Jennings Bryan. William Jennings Bryan lost, but he teed up positions that became mainstream for political party.
Right.
So it's not that it was not productive that he did it, it's that it really damaged Hillary Clinton. And fights inside the party usually do hurt the nominee, not always. They sometimes can strengthen, Humphrey strengthened Kennedy in '60. That was essentially the challenge to the left to Kennedy. Kennedy was running as centrist. Kennedy was a kind of Bill Clinton. And the Republicans love to say the Kennedy tax cuts.
What do you propose for the actual structure of debate?
We've got multiple recommendations in the debate commission report. One is the chess clock model. Which is, everybody gets a block of time and you get to control the microphone by hitting the button. But if you talk at great length, then somebody's going to be able to rebut you uninterrupted because you've lost the capacity to come back. So we're trying to get equal division of time. We're also trying to get more exchange in that model.
Another is that you create 15 minute blocks in which the candidate gets to tee up her preferred issue. The other candidate gets to tee up her preferred issue. And also each side gets to tee up the issue they'd most like to attack the other side on. And then the moderator gets to put in the remaining blocks. Because sometimes you get debates in which one candidate has a really important block of ideas and the electorate needs to understand this person will try to advance them in the presidency and they never get asked about it in the debate.
But you have to have some time for the moderator because there are times in which neither candidate wants some issues teed up and the moderator's job should be teeing them up. Now we haven't been very successful about that. '88 never teed up the S&L crisis or the demise of the Soviet Union. So it's not that moderators have shown that they're particularly good about this.
2000 never teed up the terrorist threat on the Cole. The first terrorist attack. We had our first terrorist attack during that election and it wasn't teed up. Well that's a moderator failure. So that second model says, "You actually have a right to advance your strongest case at some point and let it be attacked. And to advance your strongest case against the other side. And let that exchange be heard." And if both have that, and the moderator then picks up the things that contra cast and null. We think we've got a better debate.
And it's not, "What's the most newsworthy?" What we're trying to do with that structure is get governance forecast. So the biggest indictment? Well they might be a bad President if that's correct.
"The biggest thing I want to do." Well you're going to try to do it. Let's find out if it's any good. Both get to do that. And then these are really important things that will face the country. You both are going to tell us what you're going to do about it. That's essentially the model under the block concept.
I would love to see a chess clock model in practice.
It's happened in France.
On the same scale?
Yeah, and it worked really well. So we've got one example, but most people can't speak French, so they don't know how to watch it. There was a chess clock model in France. We've been trying to get the consultants to pioneer some of our models at the state level when they're running gubernatorial, when they're running senatorial. In part because some of the stuff is always good to pilot before you move it to a Presidential election, although we think the status quo is so bad that we don't think this could be any worse.
We know what problems we're trying to solve. On the chess clock model, you're trying to solve the gaming that comes with you get a question, I get a rebuttal, you get a surrebuttal, because you are then going to take the end of your surrebuttal to engage in a gratuitous attack that I will have to respond to when I get my next question and it makes learning hard. So the game playing is what we're trying to get rid of. We're trying to get rid of the fact that the candidates will just railroad through and take extra time, which isn't fair either and moderators have failed to shut that down. And you can't really shut off the microphone although I think it would be a good idea at some point. It's hard because what if a person is right in the middle of an idea? You're going to look like you're politically biased against them.
Right.
So then they're going to coach candidates to look like they're victims. I mean the idea behind the chess clock, that does shut your mic off –
But it does it on its own.
Yeah, right.
It's not somebody's hand.
Yeah. I mean we've got to prevent people from thinking that the process is unfair even as we make sure it isn't fair. So sometimes it can look unfair when no, that's just structural. You just built the crazy in. So I'd like to see these things tried at some level other than the Presidency.
The problems we're trying to solve in Presidential debates are real. They are real.
And this game playing, I mean you put these consultants who are the best on both sides in the room and they all coach their people to do exactly the same things.
And I'm the academic. My job is to say, "But wait a minute. The public can't learn what it needs to learn if you play that game." But they have to play that game because that disadvantages their opponent. So you want to change the structure so they can't play the game, and so that their opponent can't play it against them.
Why do you do it to your opponent? Because your opponent can do it to you. You don't want only one side to be able to do it. So some of these things you look at from a learning standpoint and say, "That makes it harder to learn. Okay how are we going to fix it?"
I'm really pleased with the structural moves in this debate commission report because they start out by saying, "That doesn't work." Now what would work that we could get the candidates to buy into because if they don't buy into it, they're not going to debate. And we actually thought that most of these reforms benefited the candidates substantially enough that if the model were put up, they would accept the model. And this was in the view of the people who were from the debate process. They coached on both sides for all these years.
Every time somebody put up an idea, we would say, "Would the candidates accept that?" And somebody, "Oh, the candidate's disadvantaged if the candidate doesn't. Because here's how my candidate gets hurt when that bad thing happens. And here's how I hurt the other candidate." So we asked everybody to come to this thinking from the perspective of the electorate. And we got the commission to formulate most of the recommendations before they started signing on to candidates because sometimes you can say, "Well my candidate, that person would be advantaged by this." And, "My candidate would not." As opposed to let's just forget that. Let's just say, "How do we get maximum time between campaigning and governance." That was the objective.
I was astonished to be in closed session with these very smart people to listen to the extent to which they would really like the debates to be good for democracy. As opposed to trying to get them game for their candidates. They think on average they've got the better candidate.
And they would do better with this better model.
Yeah. But because they're traps for the candidates regardless of side in the current system. And they're gamed as a result. And trying to get beyond that. I mean the second big goal is you want more people to get more access to more content.
The challenge in our system is the system rewards short-term thinking. It doesn't reward the person who says, "We're going to do this now because the cost of not doing it now is greater if we delay. Or the cost of doing it later means that we're going to deal with a far more difficult problem or we won't be able to deal with it as well and we're going to have these downsides to dealing with it."
The person who says that doesn't get elected in our current system and the question is how do we create a structure that elects that person because we're thinking about children and grandchildren. And successive generations and the well-being of the planet. The largest proportion of the electorate that votes at the highest percent isn't gonna be alive to experience it.
There aren't many people that don't have any successors. So there has to be a way in this process to get that kind of engagement. It doesn't come in the short-term in the debates, because they will all say, "Free lunch." They do. Every time Jim Lehrer asked the question, "How are you going to pay for it? Where is the trade-off?" They basically answered, my translation, "Free lunch."
In this next set of exchanges, if you conventionalized it, offered a kind of post-debate debate, you'd be able to push those issues. And just simply say, "Name the three things that you're gonna trade-off." And then if somebody doesn't, you just say, "Now look, this is really important to this person." Now they've promised here and here and here. The trade-offs are there.
I'd like to see, if we were a really mature system, a candidate who stood up and said, "Look, I'm going to increase taxes. I'm going to make cuts here and entitlement to those of you who are okay and and and, because my priority is I'm going to build the infrastructure so the water is clean and safe. The roads are clean and safe. The bridges are not going to fall down. We are reducing the amount of carbon and we're putting these abatements in because because because." That candidate could get elected.
I think you're starting to see some of that with young Congress members, right? Like an AOC?
She's not telling us how to pay for it. She wins my debate, and then she's got to go into the accountability structure.
I can tell you what the trade-offs can be. It's can you be reelected if you say, people like me who do not need Social Security are going to be phased out of it. People have been counting on this process, you say, "Look if you make over this amount, we are going to ask you to not take your Social Security. In fact, we're going to take it away from you. You plan for it for the next two, three years and then we're going to take it away because you've got enough money to make it."
And that money is going to go over here because these kids have to get college debt for. I work in a university. We don't need to have the salary levels where we're at in universities. If we dropped upper administration salary levels, yeah maybe some people would go to business, but probably you have a whole lot of qualified people left. We've got to start cutting the cost of college. And the solution is not going to be government comes in and subsidizes that structure if that structure doesn't dramatically rein in its costs. We've increased above the rate of inflation for way too long. It's unacceptable. It's irresponsible for my sector of the economy to work that way because it's killing off the people who are the future of the country and we can't do that. Somebody's just got to throttle these things back in the name of protecting the next generations.
And when AOC starts telling me how we're going to do that, I will be much more impressed by her. Right now, I love her aspirations, but somebody's got to pay for them. And I think the climate is a crisis. I mean we could say, "What are the things we have to worry about right now?" We have to. But also have to worry about college debt. We have to worry about increasing the likelihood that everybody has access to higher quality healthcare-
Yeah.
I mean we're taking human costs that are simply embarrassing and the value we're clawing out of people's lives is morally corrupt.
The idea that we do not have the same infant mortality rates is something that we oughta wake up in the morning and just be profoundly ashamed of. We've now got declining rates of longevity. You're saying my kids won't live as long as I did? What's wrong with this picture? So all of that is going to cost. And money's going to come from some place, or we're going to squeeze out other things. And somebody needs to sit down and say, "Here's how." Clinton should have gotten Simpson-Bowles through in '98. Instead, the Lewinsky scandal basically derailed the last two years of a presidency that could have taken on the entitlement problem at which point, I would not be getting Social Security.
Right.
And Medicare. You know, I'd be paying that on my own because I can afford to. But you know the kids coming out this year in college wouldn't be carrying the kind of burden they're carrying either. And we have more people covered with insurance than they did before. So I'm waiting for somebody to have the courage to just smack the public into awareness. And that means a whole lot of taxation for people in my income bracket. And people in my income bracket have to say, "Fine."
Yeah. It's going to be the group of people saying, "Okay." I mean it's the Warren Buffets. And when Warren Buffet says that, people say, "Good, so you pay the extra money that I'm not willing to."
Yeah.
And the other piece that we have to get right, we've now got a threat around the world that we haven't had before. Because you've got nuclear capacities in the hands of people who are not stable. So your generation, the generation coming behind you is going to start living the '50s again. When kids actually believed they could be blown up at night because it's plausible now.
That's awful.
Which means some of the expenditures that we could think that we could cut back on, some of the forms of military expenditures, that may not be the place the cuts are going to be able to happen. If what you're trying to do is to stand down some of these other activities. Because the counter capacities that are needed to make sure that the missile doesn't reach the United States are going to be expensive. It's time for somebody with real courage to stand up and our structures need to accommodate a discourse of what's gonna happen. So the debate commission report's a little piece. It's not the whole piece.
And demand it to happen more, right? Not only provide space that allows this to work, but to say, "This is what we expect of our leaders. And this is what we expect of our citizens."
We need to produce the leaders from the generations that are affected who will tell the truth.
And basically, force the people who have the income to take a reduced standard of living because they're already fine. In order to pay back into the system. But that's a hard message.
Absolutely.
And older people vote at a disproportionate level. And everybody's functionally selfish. This is true.
Right. Thank you.
I admire what you're trying to do, good luck.
Thanks very much.
interviews
Michael Casey on Blockchain and The Grid
by Michael Casey
February 20, 2019
This interview with Michael Casey was conducted and condensed by frank news.
Michael Casey is a writer and researcher in the fields of economics, finance, and digital-currency technology. He is a Senior Lecturer at the MIT Sloan School of Management and Senior Advisor for the Digital Currency Initiative at MIT's Media Lab, where he explores blockchain applications that advance financial inclusion, economic development, and resource efficiency.
We look to define terms as we enter new themes, incorporating blockchain and what it represents within energy democracy would be especially helpful.
To start, how do you define energy democracy?
There's a spectrum of things that would encompass it. The one we've been most focused on, in terms of how it impacts blockchain, is the idea of the ability of the user, and therefore the pro-sumer [the person who is consuming and producing power], to have the right to sell and buy at a market determined price. As it is now, utility is in the middle, purchasing power at a rate they predetermine. There's no capacity to sell to an alternative, other than a single provider.
A world in which I can enter into agreements that have my power purchased at a particular rate, whether that is literally delivering the electrons, or is a contract in which my provision to the grid is compensated at a rate that is determined by the demand for that particular quality of power, is something we're really focused on.
Which is the way the current structure is. You build onto that notions of broader democracy. The right to go off-grid, the right to establish your own systems for setting smart meters, for determining what devices are used and when. There's something of a spectrum in the concept, but the starting point we care about most is price, at least that I do.
What about ownership?
That would fall into it for sure. Yes, we definitely would put that into that same spectrum. The idea that the assets can be owned by an individual. There’s varying degrees to this. One is ownership and the other one is finance. The ability for me to finance the acquisition with whomever I can tap, rather than the electricity infrastructure I depend upon, being itself dependent upon the financing vehicles of utility. That I, or my community, can tap external sources to fund what is essentially our contribution to the broader infrastructure. You can get broader and broader with it, but the right to own and control those assets would be part of it. The right to determine how and who finances it is another part.
Where does blockchain come in?
I'll speak to it from the projects I've been specifically involved in. One is a microgrid we are experimenting with in Puerto Rico. I look at it in two ways. First is this concept of finance. I can tap my home or community and establish a microgrid. How might we have that financed by some sort of external direct investor, a social impact investor or investment fund? The blockchain creates the capacity to form what are known as smart contracts.
Are you aware of that term?
No.
Blockchain is a distributed ledger. It, in a decentralized manner, without any particular entity in charge, records the sequence of transactions and then, through a consensus mechanism, every node, every computer, within that network, each maintain their own version of the ledger, and update that ledger through this consensus process.
If you think about how we might move to a world where my transactions, my sale of power, my provision of power, and the funds I receive for those, are not being dictated by centralized utility – then the idea that we’re now no longer going to have one entity in charge of those transactions, and who gets to set those prices and who doesn't, starts to move us into this direction of decentralization.
We might, as a community, decide we're going to nominate some party to be in charge of the ledger, but again you're now trusting that entity to do so. Maybe the community appoints one household to run the ledger, and they're billing everybody, they're acting essentially as a local utility. You really haven't changed the model that much, you've just made it smaller, but it's okay. That could be a more efficient way to do things. Once you bring an outside investor in who says, "I want to make sure my collateral, some claim on that power, and the income that's generated, is being managed in a way that I can trust. I'm external to the community. Who am I going to trust to do that?"
A distributed ledger that nobody can change, gives me the capacity, potentially – I always use the word potentially, because all of this stuff is completely and utterly, in experimental phase right now – it gives us the potential to have my transactions verified without me having to trust the community member that is in charge.
You can imagine a situation where there's an investor in the United States, let's say in Seattle, who has put a five-year bond into the financing of a local community's grid in Africa. He's going to want to have some assurances that asset is being managed in a way that is in the interest to what they paid for. This is one principle idea to think about. Decentralization gives us the capacity, not just for those inside the community, but also outside, to have a relationship like this.
A smart contract is the idea that in addition to managing transactions, in the plain vanilla notion of what that is, payments of money, the actions that are taken by software to instruct devices to do things, or manage a set of contracts, can be executed without any one computer being in charge.
A smart contract is a bit of a misnomer. It implies that the contract is what's going on. The contract is an agreement between you and I. A smart contract says that you and I enter into an agreement and neither you nor I have any power over the computers executing the terms and obligations of that contract, to manipulate it.
How does this work in terms of smart property? I've got collateral, even though I'm living in Seattle and the microgrid I’m financing is in Nairobi. If payments are not met, it's a form of foreclosure or default protection. I funded this thing at a low interest rate because I'm protected. If the payments are not being made, at a certain point the system recognizes this because those payments are digital, they have programmable money qualities, and they stop. A device – a smart meter, one of the devices within the system, can divert that power back to the grid for example, so that the user is no longer using it. You can create a pay-per-use type of structure.
We thought long and hard about this from a social impact, developing world scenario. Could you build tiers into it so that certain devices always stay on because they have to? The hospital needs to have its power. Various things need to stay on, but you could then have some sort of structure in which the least necessary, or least important devices, can be turned off. And that power is diverted back to the grid until the loan is renewed and payments are revived.
You're creating a certain amount of de facto property rights that is the structure of so many other forms of lending. That's the way we think we can drive down the cost of lending. Rather than having to depend upon very centralized public finance models, in which infrastructure is built with access to Wall Street's funding, we now have the capacity, potentially, because I don't need to trust anybody in terms of the execution.
In that structure we can potentially bypass all of that, and have pools of social impact investors have direct stakes in, and help to fund the development of these smaller off-grid or on-grid types of microgrids. That's what we're working on in Puerto Rico right now. That access to finance. How do we create a sufficient level of protection? There's always the capacity that somebody could monkey with the smart meter. There's various things that could go wrong, but any investment has these factors.
The other part of it is, if you have a true transactive grid, it's not just a two way transaction with me and utility. I'm actually trading with my neighbors and setting up transactions and relationships. Then potentially the blockchain could be there as a way to tokenize the rights of that electricity. The transaction is between each of the participants in that network which itself would also be managed in a decentralized way. There's no utility. There's no large national or state level utility, nor is there even a local community utility. The utility in a sense, is the blockchain. There has to be built into it some sort of price mechanism. People are only going to enter into deals if you can potentially program devices, inverters and like, to accept or divert power over their prices, and meet whatever parameters you've set.
All that functionality, do I transact, do I not? Has the transaction been recorded? So there's no way I could do a deal with one person and actually divert the power somewhere else, and essentially double dip on the thing. All of that needs to be managed to keep the system in balance. That is where we see the second layer of a decentralized blockchain to come.
I feel at this stage, after a long time looking at all this, unconvinced that transactive systems like this are necessarily going to work. I do believe that in some shape or form, if you're going to reach this true energy democracy idea, something like this is where we need to go. But we're not there now. I think that's partly because we have these big, sensitive, national grid structures and it's not clear that the power loads and various sensitivities that go with how you keep the grid alive, and not kill people, can be managed entirely by this sort of structure.
This is just my thinking at the moment. It's not as if the broad principle of a more decentralized way to manage transactions between users and the grid isn't something we should be striving for. I am a believer in the finance part of it. Transactive systems, certainly in on-grid environments, are going to have to be capable of interacting with the demands of large service operators needs.
What about working on microgrids, or moving off the grid? Do you think that creates a better opportunity at moving towards decentralization?
Harvey [Micahel] is actually more of a visionary when it comes to the broader idea of energy democracy. A lot of his thinking has helped me on this sort of stuff.
There's certainly potential in off-grid settings.
Can we have a hybrid? Where you have an off-grid community based microgrid? It's not plugged into the national grid, except at such times when it needs it. So the national grid becomes the back up. That would be ideal. There's a huge political move. You'd need to get these utilities to really step back into a different role. While the grid is functioning in it's off-grid strategy, that is the microgrid, if you wanted to manage transactions within that community in a decentralized way, the blockchain could step in and be that management protocol for that system.
It seems like the private sector and academic institutions are the ones leading this thinking. Do you think the public and the political follow private sector investments?
That's a really good question. I think there are two barriers at arriving at this broad image of energy democracy. The first is that incumbents have a lot of power. Public utilities are heavily regulated. We find this in banking as well.
The regulators are told they must regulate the grid in such and such a way, and that is defined by default, under this current centralized paradigm. You have a lot of inertia from regulators who don't want to disrupt the model because you'd obviously have to design completely different regulations for a world in which these decentralized microgrids are built along the lines I just described. That's one barrier.
Then of course, the utilities themselves have their own political clout. If we want to depend upon their infrastructure, all that expensive capital that’s been invested into it, so that their wires are the ones we use to transact amongst each other, how are we going to compensate those utilities? There's an interesting question about how we might do so. It could be that they cease to be the providers of the power, or at least the sole providers of the power, and instead are just service managers and they take a service fee. One way to think about it might be to think about how the US telecoms industry was deregulated in the middle of the '90's. The baby bells were broken up and the like, there was a mandate that the pipes had to be provided to all comers, there would be a fee that would be paid, but there was no way you could prevent, as the owner of those cables, other providers from providing services along that infrastructure. That's one model that might be interesting when you think about it. But those guys, nonetheless, because the way their current profit models are built, and because of their political clout, are a barrier.
It’s probably at this stage, too marginal. There's not a big enough change in my savings or my profits as a pro-sumer, to really exist. It just hasn't got that "gee whiz", great motivator behind it. I think that's essentially the problem with lots of business models. It's just too incremental. How do you make this big shift if there are a lot of inconveniences involved? On the other hand, I think there is something wrong with that to some extent. We're not thinking hard about how, if we do decentralize, there's all these other business models and ideas that can be built on top of a more decentralized energy democracy system. Rather than thinking about the savings or profits, that I as a household pro-sumer may or may not make on my existing usage and sale of electricity, how do we incentivize bill systems? We now have all this information generated around price levels and the use of IOT devices, and we get more and more sophisticated, down to the device level – there is a way to actually build all these other services in the community. You treat the excess electricity that's produced as a way to then produce batteries. There's a way to fuel electric vehicles that run bus routes around the system, and those buses end up being almost like a back up battery component to the system. You end up running a much, much cheaper traffic system because there's a dual purpose here. You're the backup, you're the recipient of the excess power, and you're providing a service.
How does that get baked into a model that makes the provision of those services cheaper and regulated through this decentralized price signaling mechanism that is a combination of IOT and blockchain, that renewable decentralized energy systems could provide? I don't know what that looks like, but I can envision some very smart, econometric design systems that bring in smart IOT devices that turn on here, turn off there, and create a really rich pool of data around optimizing power, and where and when. There's a whole lot of benefits that could be derived, in a future model that we're not yet visiting, beyond the pros and cons of using it under our current structure.
The problem is people just can't think beyond their monthly power bill. To do that, you need communities to be really forward thinking and experimental in what they could build in the future.
Utility is massive and ubiquitous, but still weirdly opaque, which leaves most people confused. I never think about my utilities bill. Where does trust come into play? Especially with blockchain. Does the public have a distrust in blockchain?
If designed appropriately, and if we reach the point where software and the models and protocalls that are being developed and constantly refined and proved, are trusted to the extent they should be, then they're actually a trust replacement system. That's exactly what they're supposed to be.
When I was talking about how a social impact investor in Seattle can feel confident that their interests are being protected in a smart property financing structure with a microgrid somewhere else, the question of trust is key. I can't trust the local village chief to act in my interest. We just cannot. We have all these barriers to trust around our economy built on those things. Just as there's no reason why the villagers should trust that if I had control over the devices, I wouldn't manipulate and divert the power to my own interests.
It is precisely the problem of trust you're trying to resolve through a blockchain solution. But you asked the right question because we're not yet there in terms of the public perception of blockchain. I personally feel there's a host of misplaced narratives and a deep level of misunderstanding. Some of which is promoted by vested interests who don't understand what's going on.
There's also a lot of really shady, funky people working in this space that have done some bad things. And they've been able to do bad things because the technology itself isn't advanced enough to be able to give the right level of protection. The good news is there is a lot of work being done on security and improving the system so that we're going to reach this level where a) the confidence that people can have that they won't loose their phones is higher and b) they can do so in a way that they don't actually have to trust a custodian. Because right now in a blockchain, bitcoin type solution, the broader ecosystem around it is still being serviced by entities who have control over your money. It's a bit of a hybrid that's not necessarily reliable.
Systems that have a more decentralized, but also highly reliable security model are coming, and that is going to hopefully bring people around to start placing better confidence and trust in the system itself.
If you just look at the way Puerto Rico’s public utility was run, and the abuse, it's hard to say I should trust that. Wait until you see PREPA and what's happened there. There's no trust in the system. One of the reasons why I think Puerto Rico looks like a really good opportunity for us to explore this is because there's such a breakdown of trust in the publicly run system. They're looking for alternatives and we're able to dive in and explore ways we can make it fairer for everybody.