Oh how the mighty have fallen…
Seven months after he angrily quit the Trump Administration in protest over President Trump’s tariff plans, former Goldman Sachs President Gary Cohn has broken his silence to announce his first big career move since leaving the West Wing. As the Financial Times reports, Cohn has joined the advisory board of a…blockchain startup?
Somebody should tell Cohn that he’s about a year late: In 2017, joining a blockchain startup was the trend du jour for bankers looking for an entry point into the burgeoning fintech space who – despite the reality that many of them didn’t understand the underlying technology beyond the notion that it would someday “revolutionize” banking/commerce/logistics/supply chains). To be sure, Cohn is merely a member of the advisory board of Spring Labs. And we concede that the company has a tantalizing pitch: Its founder, Adam Jiwan, plans to leverage blockchain technology to build a secure “peer to peer” system that would allow banks to share customers’ credit data in a way that could render credit reporting agencies like Equifax and Experian obsolete. If last year’s Equifax data breach taught us anything, it was that the credit reporting bureaus have grossly represented their ability to protect our most sensitive personal data.
Under the current credit system, banks hand over customer data to credit reporting agencies such as Equifax and Experian, before buying back aggregated reports from those companies. Last year, Equifax disclosed that it had suffered a massive data hack in the US, affecting 143 million clients and raising concerns about the safety of customer information.
Adam Jiwan, Spring Labs’ chairman and chief executive, said his company was building blockchain-based applications that would allow such data to be shared directly between parties in a “highly secure” and “anonymous” way that complies with data privacy regulations.
He added this could “ultimately . . . replace the credit bureaus you see today”.
That sounds like a viable business strategy, but the one obstacle is the technology itself. Nobody – including Spring Labs’ engineers – has figured out how to scale blockchain technology to accomplish these tasks on the scale necessary to make this model viable. Even Cohn – who is also an investor – admits that “building the technology” is the company’s biggest obstacle.
“When you look at the two challenges Spring Labs has, one is building the technology. Once you’ve built the technology you’ve got to get it accepted and adopted,” Mr Cohn said, adding that he would use his experience in financial services to help the company tackle the latter.
Blockchain technology allows for information storage and transmission without a central control body. While it is best known for its role in underpinning the exchange of cryptocurrencies such as bitcoin, its decentralised functionality has made it popular with companies seeking to manage large flows of data. However, critics have questioned whether its usefulness has been overstated, and the technology has also been tainted by its association with the cryptocurrency world, which many have warned is vulnerable to fraud.
Still, we wish Cohn best of luck with this new venture. If it doesn’t work out, we hear there might be a few job openings in the West Wing early next year (though the former Goldman banker may have burned those bridges)…