Yorke Rhodes is the Director of Digital Transformation, Blockchain, Cloud Supply Chain at Microsoft, and he is the cofounder of Blockchain at Microsoft. Microsoft is a large Web 2 company producing software, consumer electronics, personal computers, and related services. We dive into what Microsoft is doing within the Blockchain Technology space, how Microsoft is using NFTs internally, the use case of Ethereum and IPFS inside of Microsoft, the differences and CEO leadership that Microsoft has seen over the years and we even get into the rumors of Google choosing their slogan "Don’t Be Evil" because of Microsoft. That and so much more, but first, Yorke is going to tell us what his current focus is at Microsoft.

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York Rhodes is the director of digital transformation, blockchain, cloud supply chain at Microsoft, and he is the co-founder of Blockchain at Microsoft.

Microsoft is a large web 2 company producing software, consumer electronics, personal computers, and related services.

We dive in to what Microsoft is doing within the blockchain technology space, how Microsoft is using NFTs internally, the use case of Ethereum and IPFS inside of Microsoft, the differences in CEO leadership that Microsoft has seen over the years, and we even get into the rumors of Google choosing their slogan, Don't Be Evil, because of Microsoft.

That and so much more, but first, Jörg is going to tell us what his current focus is at Microsoft.

Obviously for the last 2 and a half years approximately, I've been sitting in a strategy and transformation role in blockchain and web 3 specifically and many other technologies, but with a primary focus on on Web3.

The role actually sits within 1 of the largest supply chains in the world and this is work that I started actually in the context of my prior role, but have been sort of fully immersed in productionalizing a blockchain-based full-stack application of which blockchain and IPFS are a foundational part and a really important part.

But you also have to, in the context of a business, build a full stack application on top of that in order to enable the business processes that the business can understand.

I would love to double click into that because I think 1 of the pieces about Web 3 and crypto is that it's kind of open.

And I think this is sometimes where Web 2 and Web 3 clash a little bit because Web 3 wants to keep everything decentralized and fully open to kind of give power and control back to the users.

But it's interesting that you're kind of building that on top.

Can you tell us a little bit more about that?

Yeah, so we actually started with a thesis around blockchain and supply chain.

Really this journey started in 2018 with the first conversation.

We had some ideas and in fact, you can go back and read 1 of my blogs a long time ago, which the whole reason why I was interested in enterprise supply chains in the first place was because of the opportunity of where it actually intersects with the developing world in the raw materials context, right?

And so that's sort of what intrigued me initially as a sort of a funded way to deal with a humanitarian problem.

And then secondly, as we got into it, we started to realize the magnitude of the opportunity around traceability of high value goods.

But then on top of that, the transformational opportunity around finances of these high-value goods.

And as we've gone through this journey, we have also realized how this technical approach basically solves for a distributed system across an N party supply chain, whereas most supply chain modules, things like SAP and Dynamics, they assume a direct supplier-buyer relationship.

And in any complex supply chain, that's not the case.

And so we're actually solving for a category of things that is not solved for by existing massive ERP systems like those products among many others.

Amazing And then who would be the clients of that?

Yeah, so this is a essentially high-tech industry enterprise focused supply chain solution.

So the supplier partners are all of the commodities suppliers in the high-tech industry.

And I'll caveat that with that it now includes automotive and includes many other industries as well because all of these components now exist in the context of other computing systems and other industries, right?

And so what's interesting about this is that we have, Microsoft is essentially an anchor tenant doing this and investing in it for our purposes.

We have Lenovo as a participant, we have AMDs, Intel, NVIDIA, ZT Systems, and many other suppliers who are providing all these high value active goods in the high-tech industry, which go into essentially every computing platform, including Cloud, PCs, laptops, and phones.

Samsung as an example, obviously, as a big manufacturer in the phone space, as well as the hard drive space, is an obvious participant.

Basically, any of the active components which exist in the high-tech ecosystem are participants in the supply chain.

The benefit of doing this work in the context of Microsoft's cloud as 1 of the largest supply chains in the world consuming these components is that we actually have an incentive ourselves to drive to the end product or the end state that we're trying to get to.

It would be very hard to do this somewhere else and really drive forward.

And then tell us, you know, how did you start in the blockchain space initially?

And how are you thinking about that within the context of Microsoft?

Yeah, so I actually fell into the blockchain space in the context of my constant researching for new innovative technology waves that are happening, which you might question why I didn't fall down the AI rabbit hole versus the Web3 rabbit hole.

Certainly, the AI is a very different technology and 8 and a half years ago, approximately when I started this journey, didn't look like it looks today, right, in terms of the capabilities that we're seeing with chat, GPT, and other things like that, and from open AI.

So, I basically, you know, I constantly read, I follow, you know, social media, what's going on.

And the start of my journey was exactly that.

It was just a discovery of computer science terminology that I hadn't seen in a while.

And I started reading and I kept reading.

And as I read more and more, I realized that the context of public blockchains solved for problems that were actually quite hard to solve for in my technology career in the past.

And things that it solved for were things like unique identification of things, right?

And people outside the context or transcending the boundaries of the context of an enterprise.

And that immediately obviously led me down this sort of humanitarian road, thinking about humanitarian identity and other opportunities there.

And the intersection of the humanitarian opportunity with this novel distributed system approach that was solving for things that I found very difficult to do in my career, just sort of resonated well with me and I just started down this journey.

So I spent about 6 months sort of convincing myself that what I thought was true actually was true.

And from there, it was sort of like, well, what do I do about it, right?

Amazing, and then why are you excited about crypto and Web3, and how do you kind of view the space in general and overall?

Yeah, I think, clearly from 2015 until today, it has been a very significant journey with lots of, you know, valleys and peaks of activity, you know, whether in the context of technical adoption, changes in how we view the technology, evolution of technology, right, as you go from really something that was completely nascent at the time in the Ethereum public network to today where we've gone through the merge, which is just a massive change.

And as I think I've tweeted about something from a climate perspective, we probably will not see another organization in the world achieve that type of change effectively overnight in terms of the carbon footprint.

So it's a pretty massive historical moment.

I think actually that opens up many more opportunities because most large enterprises are very sensitive to their carbon footprint.

And so the question becomes, okay, what is our mitigation of an approach when we're building systems?

How do we make sure that those systems are not abusive and frankly against our principles and our guidelines.

I think we are, you know, you know, 8 and a half, we're going to be 10 years in pretty soon, right, in terms of like at least the public blockchain as a computing mechanism and a distributed system that supports that.

You know, I think there's huge opportunities going forward to continue to build in that space.

It's just a very different pattern than we've built in enterprise, in companies before.

Basically all systems have essentially been siloed.

And so it's a great evolution of open source and distributed systems.

Absolutely, and then Microsoft has a lot of moving parts.

So between cloud and social and developer resources and then even gaming, how does Web3 and crypto kind of fit into that?

I think it's an important 1 to sort of unpack a little bit.

I mean, Microsoft is a massive number of, well, it's a large number of massive divisions of individual capabilities, you know, whether it's our browser and Bing business, which is our search business, or our LinkedIn business, which stands on its own, essentially, and has a P&L associated with it in the context of what you call social, which I would say that's what it is, but it's certainly not Instagram and TikTok and YouTube and Twitter.

All the way through to our dynamics business, which is basically a full-on ERP type of business competing in the market alongside companies like SAP, to our gaming business, which is actually a very large business.

It's actually quite complex as well because it's a combination of studios that Microsoft owns that build products over a course of years, right?

And bring out, you know, all the things like Minecraft and other products that are, you know, just games in the category to a console business, which has always been a hardware loss leader historically, to a cloud gaming business, which we're very much been driving forward, which basically allows games to be played on any device, leveraging the cloud scale, GPU capabilities in the background.

And not to mention Office and our Azure cloud business, right?

It's a very large company with many different types of products, which is 1 of the things that makes it interesting to me.

And so to now answer your question, which is Like, how do you strategize on anything in a company of that size?

And, you know, I think the answer is largely that you can be a catalyst and an instigator, but ultimately the business has to decide when they're going to prioritize certain capabilities in their business that actually work for them, right?

And so 1 of the things that I always say is that like product teams will have their own cycles and they'll do what they wanna do from our prioritization perspective.

What we have to do as innovators is basically educate, make sure that there's clear understanding on what the capabilities are and the advantages are of an approach in a particular category.

And then take the opportunities where they exist, right?

And drive forward where those opportunities are.

And so a great example of that is the decentralized identity work that exists in the context of our identity engineering organization, where since 2016, they've been incubating the concept of DIDs and how that would facilitate itself into product inside of Microsoft.

And it now exists actually in general availability under the umbrella of the Entra Identity Suite of products that Microsoft offers.

And, you know, there were some initial choices of how that was built, Not the choices that I would have made, but they were basically designed as decentralized identity trying to achieve the value proposition of uncorruptible identity systems by a single party.

And that party could be an enterprise that gets taken over by a changed regime, for example, or which obviously would be very bad, right?

I think what you'll also see, as you've seen in some other companies, is the concept of just digital certificates or digital assets and digital ownership rewards.

Whether people will call them specifically blockchain tokens or Web3 tokens or not, I think actually is beside the point.

I mean, it's useful for the industry for people to know what they are.

But I think in the context of any individual business, what those businesses do with it, how it shows up is I think where we're going to see a lot of fluidity in terms of terminology across product teams both at Microsoft and elsewhere.

I'm sure it's kind of challenging because you probably get questions from everyone all across the curve, 1 day in gaming, 1 day in social, 1 day in crypto, but I'm sure it's also equally exciting.

And then how would you say, because I know a lot of companies, a lot of individuals within larger companies are experiencing similar, where they want to kind of push something up the curve.

Maybe it's having tokens on the balance sheet, as an example, which has been challenging for a lot of companies and also venture capitalist firms to kind of keep up with the innovation.

How would you say, I'm sure you've kind of built a craft when it comes to educating the company and getting things pushed through.

Any advice you would have for anyone who's maybe trying to do something similar in their company?

Um, so a long time ago that, um, when I started this journey, um, you know, and I asked this question earlier in our discussion, like, what next, right?

And so what I did was I, you know, interestingly, I had been teaching, you know, entrepreneurship for enterprise for enterprises in the context of my teaching role at NYU and developed some courseware on this.

But what I essentially did was I turned my startup instincts internally and decided that, okay, how would I do this if I was a startup and the ecosystem was outside of a company, right?

And so I basically translated that into, well, let's assume that the ecosystem that I have to do this in is in the context of a large corporation.

And all of those same instincts and qualities that you need in a startup actually are required in the context of doing this in any ecosystem and even inside of a company.

percent of the time, the answer will be no.

And so what does that mean from a from a startup founder perspective?

And resilience is a core quality, I think for success in anything, but particularly on an innovation journey where

of the time you're hearing negative answers, right, on things.

And so I would say that's the number 1 thing.

Like understand the business and understand that there are business reasons for making decisions and this is how I sort of talk about it from a product lens perspective.

And those decisions really are prioritizations based on what the business needs to achieve.

And then from there become, the technical approaches to those things, right?

So if you go back to, where you never wanna be in a startup that has to make revenue is educating the market.

Well, we're certainly still in the area where you have to educate all the time.

And so, internal discussion forums actually run a weekly crypto briefing series.

I'd love to have you on, talk about the graph at some point, where we basically do weekly 1 hour sessions where we invite in founders to talk about the work that they're doing and record it and provide it as a library internally.

There are lots of discussion forums that I often feel very repetitive when I'm posting in them because I want to make sure that the, you know, the information is in multiple different channels.

And yeah, it's just, you know, it's a journey.

Resilience and perseverance, but good for you for kind of putting up that fight internally.

And then I know you started what, 2015, 2016?

Was it difficult kind of keeping up the excitement inside of Microsoft, both for yourself and for the company?

Companies all have sort of default behaviors.

And innovators have very different default behaviors.

And so the challenge is that those things diverge, right?

Like people who are not innovators always choose the easy path, right?

So I'm just gonna do that, you know, whatever the default is.

And I think this is actually, you know, 1 of the largest challenges with innovation in an enterprise is that the way enterprises are structured, they're structured to, you know, pick the easy path.

What that means for an individual employee perspective is an employee's goals are not aligned to long-term innovation, right?

They're aligned to you know the the quarterly metrics that they have to achieve if they're in a sales capacity or or product capacity and they're certainly aligned to the yearly rewards cycles, right, that that you have to achieve.

And so what happens in a lot of large corporations is like people just get beaten down to the point that all they think about is, well, okay, well, it's gonna be the holiday season, so it's gonna be really quiet for a month and a half, right?

And then we're going to start up the second half of the calendar year.

And our reviews have been our fiscal end is July 1.

So all of our end of year reviews happen in the May to June time frame.

So people just fall into this cadence at a company, any large enterprise, but I'll be giving you a Microsoft example, where they focus more on having job safety and job success than like having a mission for why they do what they do.

And clearly in a context of a startup, you have a mission, and that's the first thing or else you can never get up every day and do what you do.

So you have to take a little bit of that with you inside large enterprise.

And to your point about excitement, I think that there's probably a timeline.

Like AI has been around for 10 plus years, right?

All of a sudden, and there have been cycles of excitement in AI as well, similarly, right?

And right now, we actually happen to be in a very interesting cycle because of what's been enabled in the last 6 to 12 months in terms of AI.

That same thing is happening in the Web3 space, right?

Or the blockchain space or the enterprise blockchain space or the crypto space, whatever you want to call, you know, the particular focus.

And, you know, I think the core thing to recognize is that in a large enterprise, everything's a journey and things just take time.

And if you don't have resilience, then you're gonna wind up getting exhausted just trying to keep yourself excited, to keep other people excited.

So, it's very similar in that regard to what you see in a startup.

Totally, I really appreciate that positioning too, because just running a tech company, you bring people in from larger companies and sometimes they want to take more of that pragmatic approach.

We're like, no, we can't do that because we have this mission.

And if we take that route, we're stuck there and we can't get to the mission.

So it's interesting that you frame it that way around the innovator.

And I think also too, you know, AI is a great example, but Ethereum, I think took about 5 years before we saw product market fit and applications building on Ethereum.

And a lot of that was due to like the tooling that came around Ethereum.

So yeah, it's a great point that innovation does take time.

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Obviously, You know, things have happened in the industry in 2022.

What would you say is the attitude inside of Microsoft now around crypto and blockchain, just given the bear market and also the FTX blow up?

I mean, you can see like, like people are people, right?

And, you know, this is, so the type of behavior you see on Twitter as a result of, you know, the massive fraud that FTX was, that, you know, use the crypto industry as its tool, you know, it is used as an excuse, right?

For people to say, ah, we don't wanna do that, right?

Like this actually is the thing I thought it was, right?

Which is the biggest unfortunate thing about, you know, people using the crypto industry as a tool for their own personal gain, and you know, at the detriment of consumers.

So, that absolutely, I sort of said it before, that type of behavior bleeds directly into the minds of employees to say, ah, Why should we try that?

And this is where negative market cycles and or massive frauds that are obvious frauds can harm an innovation cycle.

And those happen across different industries, obviously, but FTX is certainly the biggest, loudest example, and partly because of the hubris of the founder to just be so blatant about 1, in some ways, what he was doing, but actually, you know, being very public telling people he was doing the exact opposite.

And, you know, it's, you know, it's hard, right?

So you have to, I don't have a clear answer for you, but the distinction that we have to make is that this was a choice in a centralized organization to basically perform fraud, right, and embezzlement.

And crypto was the tool, right, because of the lack of required oversight and regulations.

So, it's not, it will certainly change the industry.

It's gonna cause, we're already starting to see this, cause a lot of desire for more types of regulation.

But the impact on that is, it's not positive, certainly, In any particular market.

But I think for people who understand that and believe that technical innovation is important, they continue working, right?

And where you have people who've sort of crossed the chasm, generally you're gonna have a decently sized number of believers who then understand that yeah this is different and that things like FTX were an aberration not by design right in terms of the industry.

Absolutely I think that's very well said.

It's unfortunate, but I do think it was getting a little bit out of hand with the bull market and the super cycle meme and the Wagony meme.

And I think that a lot of founders were being pulled in 900 directions And now it feels a little bit more quiet.

You can continue building, focus on your mission.

And I think we'll come out stronger on the other side.

And as you mentioned, it's a failure of centralized finance.

It's not a failure of decentralized finance.

And if anything, it points to the success of decentralized finance, something like a Uniswap where they don't take client funds and the power of that.

So hopefully, hopefully we all come out stronger on the other end.

And I know you started kind of famously within the Ethereum Enterprise Alliance.

Yeah, so we recognized pretty early, basically in 2016, along with some collaborators in the space who helped to go found the Enterprise Ethereum Alliance.

We recognized that this could go down a road very similar to the Unix road, where you just had complete incompatibility, right?

And application stacks being used in an enterprise context.

And so the goal, the real goal initially was to drive towards very compatible and aligned with Ethereum stacks that we're not just reinventing the wheel over and over again, right?

And so the first thing we did was we basically looked at what was the most mature enterprise blockchain stack at the time, Quorum, and chose that as a essentially a default template for what it would look like to have an enterprise class stack, and then continue to iterate around that in terms of guiding others along the appropriate path and journey around requirements.

And today, the Enterprise Theorem Alliance is alive and well and has been embracing over the past year plus more and more crypto native companies like Coinbase and others, Polygon example, to just participate in the work that we're doing.

We've always had the Ethereum Foundation as a board member on the Enterprise Ethereum Alliance and so tight connection into folks at the Ethereum Foundation.

I think what we'll see going forward as this recognition of the capabilities of privacy, privacy enablement through 0 knowledge proofs and layer twos in the public blockchain space, we'll see more and more of that in the enterprise space and therefore the necessity of the Enterprise Ethereum Alliance to really take a point of view on that and sort of you know take this moment in time very similar to what we did when we founded it in 2016 and say okay we need to now be focusing on what's very relevant today, you know, as as things go forward.

And I know there's been an evolution when it comes to the thinking of how blockchains kind of fit into a more enterprise type system.

I remember they used to say a lot of people used to think like, oh we'll just create a private blockchain internally and I always thought that was confusing because we've always had federated databases, they don't work very well and I was always impressed that Microsoft didn't go that route and went more towards the tooling side of things.

So can you talk a little bit about that evolution from your perspective?

Yeah, I think that a lot of people, technology is a tool that can be used and misused.

And I think in the context of a lot of the misunderstanding of what a transactional system with sidecar storage actually is designed for in a distributed system outside of an enterprise, how that would translate into products and tools.

I think the enterprise blockchain space, you could say in some ways, depending on your perspective, that you gave an example of like, do I use this thing inside my company?

When you can actually use more efficient tools, right?

When you have a hundred percent control over the environment and the outcomes and things like that, right?

And I think that was a derailment that a lot of people in the enterprise blockchain space took just because they didn't recognize this context around, you cannot have censorship resistance and uncorruptibility when there's single party control, right?

And so, you know, that core concept was lost on some folks, I think.

And, you know, then you can have like the, you know, the quote unquote consortium space, right?

Which was like, okay, well, we recognize that we need to do something outside of the context of an enterprise.

How do we do that in the context of governance outside of the enterprise?

And that led to this very nebulous and sometimes problematic terminology around consortiums and what is that right and what makes sense there.

And by the way, just going back to the point I made about the supply chain work earlier, the core recognition about control outside of the center and also an end tier problem is also, you know, part of that recognition around, well, this is not something you could easily do with an existing technology.

And so don't try to make blockchain look like a database, which is kind of the hyperledger fabric example.

And the problem with giving people that perception is you have a lot of systems integrators who will respond to customer requests and demand no matter what those requests and demands are and whether they make any sense, because what makes sense to a systems integrator is services revenue.

And so if a customer wants to go build something, your services revenue trumps essentially your advice to not do that.

And so we certainly saw that happen in the industry.

The other thing is, if you were introduced to blockchain technology in the context of something like Hyperledger Fabric or Corda, which are purely enterprise, non-public distributed systems approaches, you had a very warped introduction, right?

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Yorke Rhodes Explains How Microsoft Is Leveraging Ethereum