He saved credit cards, and now he inspires crypto enthusiasts

“The overall inspiration is really, how do you build and redefine money in such a profound way that the company that has done this is still so relevant half a century later?” said David Marcus, CEO of Lightspark, a company that wants to “expand the possibilities and utility” of bitcoin BTCUSD,
+2.38%.

See more: Next time you swipe your credit card, thank this legend

There are also more specific parallels between Visa’s origins and modern cryptocurrency initiatives. While Hock designed and pushed for the structures and technologies that saved credit cards from the brink of failure, he also thought deeply about money in a way that went beyond cards — and in the bitcoin era, his writings sound prescient.

“Money was not coin, currency or credit card,” Hock wrote in “One From Many,” a book in which he tells the story of Visa. “It was form, not function. Money was anything commonly used as a measure of equivalent value and medium of exchange.”

Furthermore, he wrote that money “would become nothing more than alphanumeric data in the form of arranged energy impulses. It would move around the world at the speed of light at minimal cost by infinitely different paths through the electromagnetic spectrum.”

Cuy Sheffield leads Visa’s own crypto initiatives and uses Hock’s writings as part of the training for new members of his team. “He saw the card as a form factor, but envisioned a whole world of electronic value exchange,” Sheffield said. “Once we understood that, it was clear that crypto and the principles around crypto align with Visa’s fundamental vision.”

Hock left Visa in the mid-1980s, largely retiring to a life of writing and organizational advocacy. But his fans don’t need to wade through his writings, which border on the philosophical, to get a sense of what the Visa founder would have thought about bitcoin: Hock himself was an adviser to Xapo Bank, a crypto-focused private banking service. emerging markets.

“Many people [who are] older people, they don’t understand it – or if they do, they don’t believe it – but Dee understood it very quickly, Wences Casares, chairman of Xapo, told MarketWatch.

Casares first contacted Hock in 2009, when Casares was working with a mobile payment company unrelated to cryptocurrency. When Casares learned about bitcoin in 2011, he read Hock’s book again, called him and said, “I think you designed this.” The two laughed, he said.

Visa, now the 10th largest publicly traded entity in the United States by market capitalization, began as a bank-owned cooperative at a time when there was deep skepticism about the viability of credit cards. In the late 1960s, many banks licensed Bank of America’s BankAmericard technology to offer cards to customers, but due to widespread fraud in the system, some of these banks were ready to give up credit cards altogether. Hock advocated setting up an organizational structure and ushering in an electronic age for the network, which was built around paper sales drafts.

“The early days of credit cards before Visa were fragmented, with high fraud and no standards or best practices,” Visa’s Sheffield said. Hock and the Visa unit helped establish consistent rules.

Hock recognized that the original BankAmericard program was not equipped to deal with problems such as slow authorizations, and he also believed that a radically different organizational system was needed to make the card system thrive. While Bank of America had developed the original technology and generated much of the system’s volume, Hock wanted to make it so that no one party, not even BofA, could control the new organization that would eventually become known as Visa. Bank of America eventually ceded its card program to the broader group, and Hock got the banking giant to agree to a system of committees that divided power between large and small members.

He also helped establish a set of fees meant to get banks, merchants and customers on board, while also setting rules for who would be responsible for fraud in the system.

“Maybe there’s a lesson to be learned from how Dee engineered the fee structure to encourage banks to sign up for the network,” said Jack Chong, who works in institutional DeFi, or decentralized finance, on an initiative aimed at tackling climate issues.

As it stands, organizations looking to get into crypto are paying more to software and service providers than they would to traditional financial institutions, he said. For DeFi to grow its use in the current regulatory climate, some sort of Visa-like “middleware” will likely be needed to reduce costs for participants or provide incentive mechanisms, Chong said.

From a management perspective, Hock is best known for his idea of ​​”chaordic organization”, which states that entities should be self-organizing in a way that combines chaos and order, much like what is found in nature. Under Hock, Visa, “like millions of other Chaordic organizations, including those we call body, brain, forest, ocean, and biosphere, was self-regulating,” Hock wrote in “One From Many.”

Such a concept is “resonating a lot with the crypto people,” said Rasty Turek, an angel investor and CEO of Pex, a digital rights company. Although Pex does not rely on blockchain technology, Turek understands why people involved in cryptocurrency would be interested in the original Visa structure, which gave all banks power “even when one party represented a significant step up.”

Lightspark’s Marcus said Hock’s writings on chaordic organization have proved “really relevant” to his own leadership strategy.

“You actually have to let people explore things and do things in a fairly chaotic way, but when you know exactly what works and sticks and eventually reaches the product market, you need order and hardcore execution,” said Marcus, who led the cryptocurrency effort. on Facebook before moving to Lightspark. Marrying chaos and order “is something I think is very powerful,” he said, “not just for crypto, but for anyone trying to build something at scale.”

The idea of ​​decentralized structure has gained steam recently through the rise of decentralized autonomous organizations, or DAOs, which seek to apply self-governing principles to a variety of entities. The concept found its way into the public eye late last year when one such effort, ConstitutionDAO, issued tokens as members collectively sought to purchase an original copy of the US Constitution. (The group was eventually outbid.)

“You could argue Visa was the first DAO, or the first chaord,” because of its distributed governance model, Visas Sheffield said.

Numerous crypto enthusiasts have noted that Hock’s thoughts on chaordic organization offer lessons for how to take crypto efforts forward.

“Dee has articulated better than anyone that it doesn’t make sense to have an obsession with decentralization only [as] the end goal,” commented Sheffield. “If something is completely decentralized from end to end, it is difficult to have an efficient product. Having the balances in between – that’s where the crypto industry is going.”

Arnaud Schenk, who previously worked for a company called Aztec that offered a scaling solution for ethereum, said he admired the way Hock addressed issues that arose in the Visa network. Schenk was inspired by a story about Hock’s efforts to support a project that was not necessarily in the interest of a single bank, but would greatly benefit the Visa system. To get the project over the line, Hock called hundreds of banks over the course of a weekend.

“He picked up the phone and did it, which is a good example of what some parts of crypto are resistant to,” he told MarketWatch. “The big learning from Dee is that you can be this really ideological person and value decentralization and trustlessness, but you as the founders have to take it upon yourself to … get your hands dirty.”

“Direct agency feels icky to some people in the community,” he added.

That crypto fans would find inspiration in the story of a credit card company’s founding may be surprising to some, but it likely reflects the way people misunderstand what Visa and its peers are doing, according to Lightspark’s Marcus.

“Consumers think they have a relationship with Visa because they have a Visa-branded card in their wallet,” but really Visa “is just a platform that connects banks to clear transactions,” he said. “For people who understand that, it’s a very interesting position to be in, to build a network that allows money to move efficiently.”

Admittedly, there is some debate about how Hock’s vision applies to Visa today, now that the company is publicly traded and no longer a bank-owned cooperative.

Xapo’s Casares said Hock was “in some ways a little cynical about what happened to Visa and the financial system in general,” which he believes is part of the reason Hock became an advisor to a crypto company.

But Visa’s Sheffield said he and his team continue to be motivated by Hock’s “incredibly ambitious vision for electronic value exchange” when working on crypto projects. Visa engages with crypto in a number of ways, including through cards issued by digital wallets that allow people to convert their crypto holdings into fiat currency for real-world spending, as well as through settlement initiatives involving USD Coin USDCUSD,
,
a stablecoin.

“Being able to have a foundational vision from the 60s that is still relevant today is a key motivation factor that resonates with the team today and drives the excitement of what Visa crypto can be in the ecosystem,” Sheffield said.

Although Hock died in July, his name could continue to be associated with successes in crypto if the effort takes off in the coming years.

“Crypto either works or it doesn’t, but people can look back and say Dee Hock was a visionary and figured it out,” Turek said. “When you’re sitting in a place of innovation, it’s hard to see.”