We’re familiar with the concept of ‘too big to fail’ and saw it particularly around the collapse of Lehman Brothers, eleven years ago. As the subprime mortgage scandal gathered speed, the US government had already rescued the lenders Fannie May and Freddie Mac, and it looked set to do the same for Goldman Sachs, Lehman, and many others, because collectively they were all too big to fail. Except the support that was expected from the government did not arrive, and Lehman went down, taking 600 billion dollars of assets in its fall.
When a giant is taken down, it rarely gets up again. I mention this because I want to look at an exception to this rule, or at least a proof that giants can sometimes get back on their feet, sort of.
If you were a huge industrial conglomerate making steam trains, or digging coal, launching an ICO might seem a risky business. Why would you even think of this when your products and services belong to a previous century? Once upon a time Kodak was the hugely dominant giant in the photographic industry. Founded in 1888, it had a century of growth and success, making film for cameras, photo printing paper, and the cameras themselves. ‘Brownie’ cameras became the first photographic experience for millions upon millions of people around the world, and the idea of a ‘Kodak moment’ entered the English language (a Kodak moment being something worth taking a shot of, a bit like a selfie).
And then came the digital revolution, and although Kodak tried to adapt, and indeed even introduced cheap digital cameras to its range, the company was a slow-moving giant, out of step with the times. By the mid-1990s the company was in serious trouble, and by 2012 had filed for bankruptcy protection. It was all over for Kodak. Or so it seemed.
However by early 2018 the remains of Kodak were about to launch what a BBC reporter at the time headlined as, ‘The Worst Idea Ever’, with the announcement of an ICO-based enterprise called KodakOne, with a new cryptocurrency, KODAKCoin. The giant was apparently back on its feet, and getting to grips with this new world of the cryptoverse. But surely it was still like a steamship maker or a coal digger, and no longer relevant to the modern world? No longer appropriate. Surely this was just a smart move to grab the money and run, taking advantage of all those dumb so-called investors who were excited about all the get-rich-quick ICOs of early 2018?
It seems not. Kodak were already involved in digital imaging – printers, scanners, specialist medical equipment – so the company had dragged itself through Chapter 11 and was still alive, but was now returning to its core business, with a twist. What KodakOne offered was a digital rights management system for photographers, worldwide. With massive internet growth, and the ease we have of downloading images of all sorts, the possibility of stealing image rights from the originators – in this case the photographers who take pictures – is viewed as normal by many people. Of course we can steal and re-use videos, music and images! KodakOne addresses this theft in the area of photography, using the blockchain and smart contracts to track usage, reward the originators, and pursue payment. The extra bit is the cryptocoin which provides an ecosystem allowing for a universal payment and exchange system, and to date a million dollars-worth of licensing fees have been recovered. OK, that’s not yet big money, but it shows a strong use case, and that’s a million bucks put back in the hands of photographers, who would otherwise have had their work ripped off.
So, ‘The worst idea of 2018’? It seems not. KodakOne isn’t even out of the beta-testing phase yet, but it seems to be working, and investors in the ICO may yet have smiles as big as those who invested in the original company way back in the 1880s. They’ve backed a giant that fell to the ground, and which got up again. And yes, of course I’m aware of some of the criticism which has brewed around the KodakOne and KodakCoin ICO, and my comments refer to the principle of turning a failure into something of a success, rather than the specifics of this particular example.
All this is food for thought for the book I am currently planning, about why tokenized offerings fail (and what they must do to succeed). 2018 saw nearly 1,300 ICOs launched along with some 300-plus STOs. Many are still in process, but based on last year’s figures, about 50% didn’t make it to market. Why? Well the reasons are many and varied, but let me suggest a few:
Inappropriate offering
The founders are putting up an idea which simply isn’t of its time, or isn’t needed right now - perhaps like steamships or coalmining (but there again, both of these examples could have a unique angle!). A reporter claimed the KodakOne concept as the worst ever, and yet it seems to be working, so appropriateness is sometimes merely a point of view. Nevertheless, as investors we should always be examining offerings with the view to whether the idea is of its time. Another way of putting it is the question: Is this credible?
Credibility
Now we’re into the roadmap and whitepaper, and whether the facts stack up. Or not. We can absolutely love the idea of the offering, but if the enterprise hasn’t done its homework, or is making claims which aren’t supported by the figures, then credibility is low. I like the fact that KodakOne didn’t jump into the market promising unrealistic returns, and to date has performed modestly. It looks like being a slow-grower, but that’s OK because they never promised otherwise. It’s when the figures look incredible that they probably are not credible. The company is telling investors what they think we want to hear, rather than the likely reality.
The Front Runners
People are always important to the success or failure of any business, and yet in the cryptoverse this is largely ignored. Yes, the Front Runners will get a paragraph or two on the website, stressing their ‘cutting edge’ credentials, but we don’t really get the chance of learning about who they are or what motivates them in coming up with their enterprise. As regular readers will know, this is something which has been interesting me a lot lately, as I introduce a new service called ‘The Human Factor’, to help bridge the gap between Investors and Front Runners. Great Front Runners will power a business forward. Weak Front Runners will probably never pilot their project to success. A 50% failure rate in tokenized offerings suggests that there are a lot of Front Runners out there who really need to get their act together and get up to speed with their duty to lead the enterprise they are head of.
Scam!
Lastly, there’s the word which is almost always screamed when a tokenized offering fails to deliver on its promises: scam! Personally I don’t believe that the cryptoverse is populated by criminal masterminds working to defraud investors. Yes, there are a few criminals out there, but not so many to explain a 50% failure rate. And for ever scammer that is at work, there have to be scam-ees who are willing to take the bait and fall into the trap. That means people who don’t read the whitepaper properly, who don’t do their due diligence, and who fail to consider the appropriateness of the offering. There are two sides to a scam, and it’s really down to the investment community to ensure that we don’t fall for the obvious criminally-intended traps. And if it’s not criminal, don’t fall for the enterprises which seem inappropriate, not credible, or have Front Runners who should – in truth – only be ‘Backroom staff’, rather than the leaders.
Failure and success – clearly two sides of the same (crypto)coin, are sometimes separated by the thinnest of margins. I have a timeline of six months to completion of my next book on this subject, and I’m still collecting stories and examples, so if you want to contribute, I’d really like to hear from you.
In the meantime I hope you noticed the image I used this week, of an old Kodak ‘Brownie’ camera. I didn’t get it through KodakOne, but used instead another excellent image sourcing agency called Pexels, and can tell you that the credit goes to a company called ‘Little Visuals’. Thanks guys.
More about KodakOne at: https://kodakone.com/
Tokenized Offering success/ failure rates: https://www.coinstaker.com/initial-coin-offerings-fail/
https://medium.freecodecamp.org/the-single-biggest-problem-with-token-models-part-i-8f9bcb3bab50
