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Dee Hock, Visa’s founder, died in July, but his thoughts on money and organizational structure are still revered by some in the cryptocurrency community.
Cryptocurrency enthusiasts are looking back for inspiration as they build out the future of money.
The late Dee Hock, Visa Inc. V, +2.20% founder who died at 93 this summer, had a fervent following among cryptocurrency developers. Hock’s writings about organizational theory and electronic value exchange are devoured by the students, who draw lessons from Visa’s history for the future of digital finance.
“The main inspiration is how do you build and redefine money in such a profound way that the company that did this is still relevant half a century down the road?” says David Marcus, CEO of Lightspark, which aims to take bitcoin BTCUSD, -0.99% to the next level.
The origins of Visa are also similar to those of modern cryptocurrency initiatives. Aside from designing and pushing for the structures and technologies that kept credit cards from failing, Hock also reflected deeply on money in a way that went beyond cards – and his writings sound remarkably relevant in the bitcoin era.
The history of Visa is chronicled in Hock’s book “One From Many,” in which he argues that money was not a coin, currency, or credit card. The form was more important than the function. Traditionally, money was anything used as a medium of exchange and measure of equivalent value.
Moreover, money would be nothing more than arranged energy impulses in the form of alphanumeric data. With infinitely diverse paths through the electromagnetic spectrum, it would move at the speed of light and at a minuscule cost.”
Visa’s crypto initiatives are led by Cuy Sheffield, who uses Hock’s writings to train new team members. “He imagined that electronic value exchange would encompass much more than cards,” Sheffield said. Once we understood that, it became clear that crypto and the principles surrounding it align with Visa’s founding principles.”
After leaving Visa in the mid-1980s, Hock largely focused on writing and advocacy for organizations. Despite his philosophical writings, his fans can familiarize themselves with what Hock would have thought about bitcoin: Hock was an adviser to Xapo Bank, a crypto-focused private bank.
According to Xapo chair Wences Casares, “A lot of people [who are] older don’t understand it – or if they do, they don’t believe it – but Dee understood super quickly.”
Hock was first approached by Casares in 2009 when Casares was working on a mobile-payments company that had nothing to do with cryptocurrencies. Upon discovering bitcoin in 2011, Casares read Hock’s book again, called him, and said, “I think you designed this.” They laughed.
Visa, currently the 10th largest publicly traded company in the U.S. by market value, began as a bank-owned cooperative when credit cards were viewed with caution. Some banks gave up on credit cards altogether in the late 1960s due to rampant fraud in Bank of America’s BankAmericard technology, which many banks licensed from Bank of America. After setting up an organizational structure and introducing an electronic sales draft system, Hock brought the network into the electronic age.
Credit cards were fragmented pre-Visa, with high fraud and no standards and best practices, according to Sheffield. The Visa entity and Hock worked together to establish consistent rules.
In order to make BankAmericard successful, Hock recognized that the original program was not equipped to handle problems like slow authorizations and that a radically different organizational system was needed. Hock, who developed the original technology and generated a significant portion of the system’s volume, wanted to ensure that no one party, not even BofA, could control the new organization that would become Visa. As a result of Hock’s efforts, Bank of America ceded its card program to the broader group and put in place a committee structure in which power was distributed among members of all sizes.
Along with establishing fees, he set forth rules on who would be responsible for fraud in the system, in order to get banks, merchants, and customers on board.
Possibly there is a lesson to be learned from the fee structure Dee created to motivate banks to join, said Jack Chong, who works in institutional DeFi, or decentralized finance, on a climate change initiative.
It is currently more expensive for organizations to get into crypto than to work with traditional financial institutions, he said. Chong believes some sort of Visa-like “middleware” will be needed to reduce costs for participants or to provide incentive mechanisms to promote the adoption of DeFi in the current regulatory climate.
From the perspective of management, Hock is best known for his concept of “chaordic organization,” according to which entities should self-organize in a way that combines chaos and order, much like what appears in nature. “One from Many” describes Visa as self-regulatory like many chaordic bodies, brains, forests, oceans, and biospheres.
Rasty Turek, an angel investor and CEO of Pex, a digital rights company, said such a concept resonates with crypto folks. Pex doesn’t use blockchain technology, but Turek understands why cryptocurrency enthusiasts would be interested in Visa’s original structure, which gave every bank power “even when one party represented a significant step up.”
According to Marcus, Hock’s writings on chaordic organization have proven “really relevant” to his own leadership style.
“You have to let people experiment and do things in a chaotic way, but then you need order and hardcore execution when you know exactly what’s working and sticking, and finally reaching product market fit,” said Marcus, who led Facebook’s cryptocurrency efforts before joining Lightspark. Bringing chaos and order together is “something I find very powerful,” he said, “not just for crypto, but for anyone trying to scale something.”
In recent years, decentralized autonomous organizations, or DAOs, have gained traction for applying self-governing principles to a variety of entities. One such initiative, ConstitutionDAO, made the concept public late last year when it issued tokens to members seeking to buy an original copy of the Constitution. In the end, the group was outbid.
As a result of its distributed governance model, Visa’s Sheffield says it could be considered the first DAO or chaord.
Hock’s thoughts on chaordic organization have been noted by numerous crypto stakeholders.
As Sheffield pointed out, “Dee has articulated better than anyone that decentralization shouldn’t be the end goal.” When something is entirely decentralized, it’s hard to have an effective product. The balance between the two – that’s where the crypto industry is heading.”
A former employee of Aztec, a company that offered a scaling solution for the Ethereum network, Arnaud Schenk, admired the way Hock handled issues that arose in Visa. Schenk’s inspiration came from Hock’s support of a project that didn’t necessarily benefit any one bank but greatly benefited the Visa system. Over the course of one weekend, Hock called hundreds of banks to complete the project.
According to him, “He picked up the phone and did that, which is something some people in crypto are resistant to doing.” Dee taught me that you can be a very ideological person and value decentralization and trustlessness, but as the founders, it is your responsibility to … get your hands dirty.”
Some people in the community feel icky about the direct agency.
It might seem surprising to some crypto fans that a credit-card company would be founded, but that likely reflects how people misunderstand Visa and its competitors.
Consumers think they have a relationship with Visa because they carry Visa-branded cards in their wallets, but in reality, Visa is “just a platform connecting banks to clear transactions,” he said. “If you understand that, building a network that allows money to move efficiently is an interesting position to be in.”
Although Visa is no longer a cooperative owned by banks, there is some debate over whether Hock’s vision applies today.
Casares believes Hock turned to crypto for a number of reasons, including his cynicism about Visa and the financial system generally.
As Visa works on crypto projects, Sheffield said he and his team are inspired by Hock’s “incredibly ambitious vision of electronic value exchange”. Among the ways Visa engages with crypto are through digital wallet cards that convert crypto holdings into fiat currency for spending in real life, as well as through settlement efforts using USD Coin USDCUSD, 0.00%.
Sheffield explained that having a founding vision from the ’60s that is still relevant today is a great motivator for the team today and drives excitement about what Visa crypto can be.
If crypto efforts take off in the coming years, Hock’s name could continue to be linked to success.
“Crypto works or it doesn’t, but it may be viewed as a visionary achievement by Dee Hock,” Turek said. “When you’re in the middle of innovation, it’s hard to see.”
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