Author: Meng Yan, Co-founder of Solv Protocol

Editor's Note: Eric Schmidt served as CEO of Google from 2001 to 2011. Recently, he was invited to speak at a conference at Stanford University's Computer Science Department, delivering a speech titled "The Age of AI." Unaware that the conference was being live-streamed, Schmidt's speech revealed many insider truths about the AI industry. The video of the speech has since been deleted and taken down, but a full backup can still be found on Github. Meng Yan, co-founder of Solv Protocol, provided an interpretation and analysis of Eric Schmidt's speech from the perspective of blockchain development on X.

In recent days, everyone has been discussing Eric Schmidt's leaked speech at Stanford. I believe the most thought-provoking part of the entire speech is at the end, where he compares artificial intelligence to electrification.

Schmidt mentioned that after the appearance of electric motors, it took a full thirty years for people to realize the fundamental changes brought about by this technology. Electric motors of various sizes could be produced and placed in different locations, decentralizing power.

Because he did not elaborate on this in his speech, I specifically looked up related background information. Essentially, during the era of steam engines, a factory typically had a centralized steam engine power workshop to provide all the power. In order to transmit power to various workshops and adapt to the different power needs of different processes, factories would usually install a system of overhead shaft power transmission. The overhead shaft generally hung below the factory ceiling, hence the name "overhead shaft," driven by the centralized steam engine power workshop, rotating above the machines. The machines below the overhead shaft would then transmit power to the machines through gears and belts, as shown in the image below.

Schmidt said that when electric motors first appeared, people simply replaced the centralized steam engine power center with an electric motor power center, using electric motors to drive the overhead shaft. In other words, they only changed the performance and efficiency of the power transmission system, but did not change its structure. It wasn't until thirty years later that people slowly realized that electric motors could be made in various sizes and powers, placed near machines and equipment, allowing electricity to run instead of mechanical power, which is the correct way to use electric power. Schmidt believes that the shift of electric power towards decentralization triggered important organizational innovation, changing the relationships between various components, which truly changed the world.

At this point, Schmidt seems to have summarized a process law of technological innovation triggering technological and economic changes. First, there is simple efficiency innovation, replacing key components without modifying the structure. Then, structural innovation begins, from centralization to decentralization. This structural innovation then triggers organizational innovation, leading to a significant increase in productivity. Let's call this process the "Schmidt Process."

According to the Schmidt Process, AI is currently in its early stages and still very centralized. In the latter half of the Schmidt stage, AI applications will move towards decentralization, similar to electrification. AI models will be widely distributed in various corners of computing, collecting data, making decisions, and executing tasks nearby. Only when this stage is reached, how long will it take to go through this process? Perhaps not thirty years, but probably more than ten years.

I can't help but think, if Schmidt is right, then the investors in AI right now are truly like Lei Feng.

So, what about blockchain?

After reading Schmidt's speech, I believe it can provide four insights for the blockchain industry.

First, following Schmidt's thinking, blockchain and Web3 should represent the correct direction.

Essentially, blockchain decentralizes "autonomous computing" and "trustworthy computing." Autonomous computing ensures complete control over one's digital resources, including identity, data, assets, and computational processes, while trustworthy computing guarantees fair, reliable, and trustworthy computation results that cannot be maliciously tampered with or erased. With these two elements, we can decentralize key calculations involving monetary value that were previously centralized in banks, third-party payment platforms, social networks, etc., into individual smart contracts or ZK programs. Abstractly speaking, this process is similar to the electrification stage, decentralizing power engines from centralized power workshops to various locations and devices. Therefore, blockchain is fully in line with the Schmidt Process and should represent the correct direction.

Second, even though it represents the correct direction, achieving true success will still take time. If Schmidt is correct, then the application explosion of blockchain and Web3 should precede that of AI.

Third, blockchain innovation should still start from solving user problems.

Since Ethereum's killer narrative received capital attention in 2017, the highest-valued and most attention-grabbing innovative projects in the blockchain are basically starting from solving the problems of blockchain professionals themselves, forming a rather doctrinaire set of ideas that have influenced valuations in the primary and secondary markets. Everyone talks about infrastructure stories detached from users, and the more projects are like this, the more they are sought after in the primary and secondary markets, while projects starting from the user's perspective are ignored. It's like boasting about how amazing an electric motor can be every day, how much the stock price should be worth, etc., without discussing with us. After the electric motor starts running, will it be used for driving, drilling, or driving hard drives?

The worst consequence is that after a whole decade, a real user base has not been cultivated, and the vast majority of participants in this industry are speculators, not real users. Without users, there is no innovation drive and direction. This is the main reason why the current blockchain and Web3 are trapped in an innovation dilemma. To break free from this dilemma, acquiring and cultivating users is the top priority. Everyone should consider: what problems do users want to spend money to solve, which cannot be solved or solved poorly by existing internet and social networks, and need to be solved using blockchain? I feel that there are very few people thinking about these questions now, and most projects revolve around some concepts and doctrines.

Fourth, the endgame is still token economics. Schmidt emphasized that the ultimate driver of productivity change is organizational innovation. Token economics is organizational innovation, a restructuring of relationships between people, which is the core issue. What is the endgame for Web3? If it creates a more convenient and free payment and financial network, that is certainly remarkable, as Musk said, blockchain can be very useful in solving payment problems. However, I believe this is only the foundation and not the most powerful part of blockchain. After the widespread adoption of blockchain-based payment and financial networks, the modes of collaboration between people, people and AI, people and machines, the structure of digital economic organizations, and even the social structure of the real world will undergo fundamental changes. This is actually token economics, which is the endgame of blockchain.

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