As cryptocurrency enthusiasts look to build out the future of money, some are looking back for inspiration.
Dee Hock, the Visa Inc. V, +0.13% founder who died this summer at 93, has a fervent fan club among people developing cryptocurrency products. They devour Hock’s writings about organizational theory and the notion of electronic value exchange, while drawing lessons about how Visa’s history can inform the future of digital finance.
“The general 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, the chief executive of Lightspark, a company that’s looking to “extend the capabilities and utility” of bitcoin BTCUSD, -1.85%.
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 chronicles the history of Visa. “That was form, not function. Money was anything customarily used as a measure of equivalent value and medium of exchange.”
Furthermore, he wrote, money “would become nothing but alphanumeric data in the form of arranged energy impulses. It would move around the world at the speed of light at minuscule cost by infinitely diverse 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 one form factor but imagined a whole world of electronic value exchange,” Sheffield said. “After we understood that, it was clear that crypto and the principles around crypto align with Visa’s founding vision.”
Hock left Visa in the mid-1980s, largely retreating to a life of writing and organizational advocacy. But his fans don’t have to wade through his writings, which verge 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 bank serving emerging markets.
“A lot of people [who are] older, they don’t understand it — or if they do, they don’t believe it — but Dee understood super quickly,” Wences Casares, the chair of Xapo, told MarketWatch.
Casares first reached out to Hock back in 2009, when Casares was working on a mobile-payments 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 recounted.
Visa, now the 10th largest publicly traded entity in the U.S. by market value, 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 because of rampant fraud in the system, some of those banks were ready to give up on credit cards entirely. Hock stepped in to set up an organizational structure and usher in an electronic age for the network, which had been built around paper sales drafts.
“The early days of credit cards pre-Visa were fragmented, with high fraud and no standards or best practices,” said Visa’s Sheffield. Hock and the Visa entity helped establish consistent rules.
Hock recognized that the original BankAmericard program wasn’t equipped to deal with issues like slow authorizations, and he also thought that a radically different organizational system was needed in order to make the card system thrive. While Bank of America had developed the original technology and generated a large portion 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 come to be known as Visa. Bank of America ultimately ceded its card program to the broader group, and Hock got the banking giant to agree to a system of committees that distributed power across members big and small.
He also helped establish a set of fees meant to get banks, merchants and customers on board, while setting forth rules governing who would be responsible for fraud in the system.
“Maybe there’s a lesson to learn from how Dee constructed the fee structure to incentivize banks to sign up for the network,” said Jack Chong, who is working in institutional DeFi, or decentralized finance, on an initiative that aims to tackle climate issues.
As it stands, organizations that want to get into crypto pay more to software and service providers than they would to traditional financial institutions, he said. In order for DeFi to increase adoption in the current regulatory climate, some sort of Visa-like “middleware” will likely be needed to help lower costs for participants or offer incentive mechanisms, Chong said.
From a management perspective, Hock is best known for his idea of “chaordic organization,” which says that entities should be self-organizing in a way that merges chaos and order, much like what exists 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 “very resonating with the crypto folks,” said Rasty Turek, an angel investor and the chief executive of Pex, a digital-rights company. Though Pex doesn’t rely on blockchain technology, Turek understands why people in involved in cryptocurrency would be interested in the original Visa structure, which gave all the banks power “even when one party represented a significant step up.”
Lightspark’s Marcus said Hock’s writings on chaordic organization have proven “really relevant” to his own leadership strategy.
“You actually have to let people explore things and do things in a fairly chaotic way, but then when you know exactly what’s working and sticking and finally reaching product market fit, you need order and hardcore execution,” said Marcus, who led cryptocurrency efforts at Facebook before moving to Lightspark. Marrying chaos and order “is something I find 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 buy an original copy of the U.S. Constitution. (The group was ultimately outbid.)
“You could argue Visa was the first DAO, or the first chaord,” due to its model of distributed governance, Visa’s Sheffield said.
Numerous crypto stakeholders have noted that Hock’s thoughts on chaordic organization offer lessons for how to take crypto efforts further.
“Dee has articulated better than anyone that it doesn’t make sense to have an obsession with decentralization just [as] the end goal,” Sheffield commented. “If something’s entirely decentralized end to end, it’s hard to have an effective 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 came up in the Visa network. Schenk was inspired by one story of Hock’s efforts to support a project that wasn’t necessarily in the interest of any one bank but that would greatly benefit the Visa system. To get the project over the line, Hock called hundreds of banks over the course of one weekend.
“He picked up the phone and did that, which is a good example of what some parts of crypto are resistant to do,” he told MarketWatch. “The big learning from Dee is 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 that likely reflects the way people misunderstand what Visa and its peers do, 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 connecting 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 enables money to move in an efficient way.”
Admittedly, there’s 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 that Hock “was in some ways a little cynical about what happened to Visa and the financial system in general,” which he thinks is part of the reason Hock became an adviser to a crypto company.
But Visa’s Sheffield said that he and his team continue to be motivated by Hock’s “incredibly ambitious vision of electronic value exchange” as they work on crypto projects. Visa engages with crypto in a variety of ways, including through cards issued by digital wallets that let people convert their crypto holdings into fiat currency for real-world spending, as well as through settlement efforts involving USD Coin USDCUSD, , a stablecoin.
“Being able to have a founding vision from the ’60s that’s still relevant today is a major motivating factor that resonates with the team today and drives the excitement of what Visa crypto can be in the ecosystem,” Sheffield said.
Though Hock died in July, his name could continue to be linked to successes in crypto if efforts take off in the coming years.
“Crypto either works or it doesn’t, but people may look back and say Dee Hock was visionary and figured it out,” Turek said. “When you’re sitting in a place of innovation, it’s hard to see.”
Newly solidified Federal Reserve guidelines on debit-card routing could have some impact on the financials of payment-technology companies, according to analysts, though the latest rules weren't as onerous for the card companies as they could have been.
Emily Bary is a MarketWatch reporter based in New York.
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