Jeff Schumacher on ESG and sustainability in Web3

0:00I'm Ashton Addison from Block West capital for investment pitch media and today on the Crypto Coin Show we have Jeff Schumacher founder and CEO of NAX group Jeff welcome to the show and it's a pleasure to see you again thanks Ashton good to see you too bud you're very welcome excited to dive into next group ESG and web3 and how can you know commercialize ESG profit

0:23from it and make it more than just sustainability which of course is important as well I would love to start off our conversation by just hearing a little bit on your background in finance and blockchain and how that led to you starting Max proof yeah I mean I've been in the space for about 25 years now mainly in the Innovation side and mostly in working within

0:46corporate environments and being able to extract value out of those environments which I think is pretty unique so you know the last platform I founded was digital Ventures that grew to be the largest corporate incubator and outsourced corporate Venture Capital firm in the world it's fully Acquired and owned by a Boston Consulting Group

1:06been back in 20 2018 we founded Max which stands for new asset exchange and we've been working on that now for a little over four years and it's grown quite big now so we're a global firm we're we're headquartered here in North America and California we have operations in Europe and operations in Asia and it's a unique platform it works

1:28on one side it has its corporate members that are Supply we work with corporate data sets and we take those data sets that are at scale and data sets could be like customers accounts Revenue what have you and we turn them into new digital products using our software and then we're able to extend a lot of those products and do exchange tradable products

1:52and then we have a hundred institutions on the other side that are very interested in those products as we develop them so that's kind of that the ecos this captive ecosystem we create and you can kind of think about our corporate members and we're onboarding about 40 of them right now there are Supply and then our institutional members are our buy and we put the two

2:12together very cool and from what I understand you're fitting in ESG into this as well and obviously sustainability is important maybe you can just touch on you know exactly what that focus is for people who aren't familiar with ESG and why it's important to incorporate that yeah I think you know you know most public companies have a sustainability initiative

2:36And what I would say it's you know a lot of them are focused on getting their their shop in order right and they're trying to figure out how to reduce their footprint get to Net Zero they've Incorporated a chief sustainability officer to help do that but when we have conversations with them very few have any idea how they're going to make money from it and if you

2:58don't make money from it you're not gonna do it long term so you know our platform and our software in there really helps enable the commercialization of e of the ESG and the S and then G is kind of an enabler that goes across and so when you look at the products that we have going into Market they index either into the E of the world or the S the world

3:25sometimes they're small e capital s sometimes there's you know capitalism small s but if you go across the board our platform has a unique capability of commercializing ESG and allowing our corporate members to make money from it which I think is a big thing when you know our planet's a bit on fire and you know there's there's a lot of things we

3:45can do socially as well definitely and you know I think sustainability is becoming ever more important with climate change and globalization and there's been this narrative from you know the people that aren't really in the blockchain world that are in traditional Finance or just in the news that blockchain was causing a huge carbon footprint and it

4:07seems like there's been a lot of steps towards solving that where do you see that at as sort of it how much impact it's actually having negatively towards the world and how much the blockchain industry is sort of working to fix that right now well yeah I think there's I mean it's just technology right so you have of I think the early forms of the

4:31blockchain technology was this idea of proof of work right you do something to get something and that's where you see the carbon footprint go up because you're expending a lot of energy to solve the puzzles or what they're doing in the proof of work side and then you see the enhancement to in essence what's proof of stake and that uses a fraction of the energy to

4:53accomplish the same thing and I think that's why you saw the ethereum merge into the proof of stake platform I think that's why you're going to see long-term things that if you know and I'm not a proponent of investing in crypto I don't I don't really I'm a proponent of investing into crypto projects that have fundamentals otherwise is trying to game it for a

5:15currency I don't think there's going to be a global cryptocurrency I don't think that's going to happen and you're not in the store of value I think is going to be predicated on the fundamentals of the project so you look at that I think you see long-term Bitcoin fairly challenged because most most of the monetary funds or the asset managers have ESG

5:39mandates and are going to have a hard time putting money into something like Bitcoin and second second of all it doesn't do anything so I would get more into what you've seen what Patel did in Ethan the ethereum guys there and creating proof at stake that project's got fundamentals I think we see some other ones like we're we're pretty heavily invested

6:03in algorand because of the decentralized finance capabilities that software brings and that's what we're pretty interested in as well and really just looking at you know our view is web3 is a technology you should look at the utility technology and be focused on that and I think that utility is about the trust function that it can be that it can enable

6:27If you look at web 2 it enables the function of time right it's it's easier to shop on your phone than it is to go into a store it's easier to Google something than go to a library so you're really solving time and I think in 2001 you saw a lot of companies that said hey we're valuable because we're something.com right and a lot of those companies

6:48went away I think now you've fast forward to web three and you've got the utility of trust you can see how trust I trust this side of the transaction like that something is there you can see in that area you know Finance is going to be one of the areas where it's going to play that's the only area that we see we're using it right now is in the finance place but we're

7:12just focused on the utility and the utility of trust when you look at that you probably get rid of 95 percent of the projects that are out there today but there's some there's some strong ones with fundamentals and we think algorand is one of them ethereum is another and there are a few others behind that as well it's a very interesting viewpoints and I

7:30agree with you that we're sort of seeing a rerun from from the 90s of 95 of the companies that don't provide value or fundamentals are will disappear and you know but there will be that five percent or less that become the next trillion dollar companies that we see you know 30 years from now and those could be around right now or they may not be yet here so that's why it's good

7:51to pay attention to this industry and you mentioned you mentioned there about defy I think it's very important and sort of at early early stages but we're seeing more financial products come in whether it's derivatives options sort of financial products that you'd see in traditional Finance but tokenized or more in a decentralized finance aspect where you don't have to

8:13trust a third party and it looks like more and more there's different kind of products that right now in the stock market you know derivatives are a quadrillion dollar industry when when you can just make so many different kinds of derivative Financial products that seems to be seeping into the decentralized world is that something that NAX is focused on or do

8:38you think that will continue in the way that we're seeing it right now yeah no that's one of the big things we're we have a you know there's two sides of our business one side we have a software and development side and the other side we have a structure and trading side right so on our exchange side it's very very focused on what kind of exchange tradable products you can

8:58create and so you know we have an art lending platform we just launched it's called watercolor and we're doing that with AXA and that's that's issuing our loans on a range of fifty thousand five hundred thousand dollars per piece of art so on the ESG side there what we're really doing is the S on this and we're democratizing art we're allowing more

9:23participation from artists and people to participate in art and if you lend to get art you buy more art just like the car loan did to the Auto industry back when you had to pay cash for cars and then they allowed they created the car financing and what it led to was now households should have two cars because you could Finance cars you didn't have to pay full cash well what

9:46did that mean well once you have two cars you enable you know two incomes to work the you know back in the 60s and 70s you now had women that were able to work leave the house because it wasn't just one car or two this the spouse was able to leave whether it's the woman or the husband be able to leave but you'd have a two income family just predicated on a car loan and so

10:08that's that democratization that we focus on the S on the art side you get you get people buy more art you have artists that are being able to sell more art you get more participation in art and generally that grows and if you flip on the flip side of that on the exchange tradable side you know we're appending an art loan and we're using the insurance data profile to do that so

10:32the insurance just to make it dumbed down the insurance captures about 25 attributes of art to ensure art subset of that 12 attributes are required to lend so that's that's how we create the lending then we append on that the appraisal data as well then you take that data set and you can package up the loans into what they call an ABS and it's in our back security and

10:57it looks and it trades like a mortgage-backed security wow just with shorter term and higher yield and what people that are going to trade that what Traders will tell you is they need data they need the more data that they have the more valuable that asset is to trade and then once you have a valuable asset then you can start to say well I can do different derivatives

11:19on that I can say I can create a future I can I can use this art loan as a proxy as art going to be more valuable in the future or less valuable in the future I can create indices off of it I can you know is Art counter cyclical to Market or where it is it gets even more powerful because unlike houses you can move the art so if you don't like the

11:42the North American Art Market you can sell your art and age right you can't move the house to Asia you know so this creates a lot of interest and this is just one of our platforms but the exchange tradable side can get very very interesting we have another platform we participate with in Europe called 360x that's what Deutsche berze that is the retail side of what

12:10I've just explained so what I was talking about in the trading the product there these are more institutions trading these products what we put out with 360x is the idea there is where we can get the retail side of the trade and that's where tokenization comes in some of the more you'll get the retail of the that or the C participation in

12:31these markets but again you gotta you know you can create all the derivatives you want but you've got to create it off a product that has fundamentals otherwise and I think that's you know one of the issues I have around the crypto space is they're like hey I'm creating a derivative off of you know whatever token that's out there and I'm like

12:52well what does that thing do well it doesn't do anything so you got you got garbage on top of garbage and I think that is just because you can do something you should which is great that the web 3 enables a lot of these things and can remove a lot of the intermediate steps that you otherwise would have to take but you still got to start with

13:14something as fundamental and if you don't have that then you're just you know you're just hot air so I completely agree and it's it's clear that this technology you know through the tokenization or through nfts with art if you can get art that actually has value and you know there's a lot of art that really isn't in the web three space yet once that technology merges into

13:39that you know we started seeing it last year with the rise of nfts and digital art but for the most part it seemed like it got overtaken by profile pictures and monkeys and apes but I did see you know through some of these platforms on what the kind of thing that you're talking about about tokenizing art and bringing utility to whether it was you know the most

14:03common use cases I've seen in through the new profile picture art was with crypto punks or board Apes that actually had some sort of floor whether it has fundamental value or not it's another discussion but something that was worth over a hundred thousand dollars they're able to get collateral of 20 30 50 and tokenized that and get a loan to

14:26buy more art or use it in defy and I've also seen this fractionalization where say you had a Monet painting or something you could divide that by one million pieces through blockchain technology and sort of sell it on a retail space to you know have everyday investors invest into something that they would normally not be able to afford is that something that you think

14:51will be a continuing Trend as more artwork comes into the web through space well yeah I think I might separate you into two buckets I think that the board AIDS conversation and the nft it's things centered around that I think that's more of a membership than it is Art you're paying for a membership you're paying to be a part of this little Club you know it's no different in my mind

15:17than the Soho house or you know any one of those Elite memberships that you can have and they just have added benefits you know a dynamic benefit to that thing that you bought that ticket that card that nft whatever it be that's a membership thing and I think that's not ours and people that try to pretend it's art are probably gonna

15:41find themselves in a pretty bad spot in a year or two or three but if they if it's a membership and a loyalty kind of play and you got to pay to play and all that kind of stuff there's probably some real opportunity there but there's there's only so many of those you probably will see the other side the tokenization and fractionalization of Art

16:07I don't you don't necessarily need a web 3 platform to do that you can you can go fractionalize piece of art you wanted to and say hey Ashton I'll sell you one tenth or 1 100th of this Monet and the question is does it have liquidity is there a market to make that trade and this is where I would say you know art kind of mimics a little bit of the

16:33carbon market and the carbon offsets you know our exchange Partners trade hundreds of millions of contracts in carbon offsets and they make no money like a few million dollars and the reason for that is there's it doesn't trade more than once it's just attached you're probably you're buying an offset but you're not buying an offset and then trading it to somebody else right

16:56there's there's no other there's no other counterparty on that trade and when you don't have that you don't have liquidity when you don't have liquidity you're not going to make any money and so you know what we're focused on the on the E part of the ESG we're looking at one platform we're trying to create a platform around carbon removal versus carbon offset and we're

17:20looking at a function of stopping deforestation so we lose about 80 000 Acres a day right now wow globally that deforestation that we're losing globally is worth about 15 percent of the carbon emit on the planet put that in perspective that's about seven times a little over seven times what the United States emits so this is big the problem you have is there the

17:47forest fires or the poor station is happening because it's more valuable in the farmer's mind to you know burn down this rainforest for palm oil or for grazing than it is to leave it alone and now when you can come in here and we're working with the ability to one ensure undeveloped Land once you can ensure it I can securitize it once I can securitize it I can create instruments

18:15that allow those those those landowners to receive compensation to not develop the land and then what we do you know remember we do two things at next we create digital products which in many cases are are marketplaces and then out of those marketplaces we create exchange tradable products that actually can come in and make that Marketplace more efficient so in this in this world of

18:38where we're trying to create a eco-friendly solution to stop deforestation we're trying to create a Marketplace and if you think about like the mountain gorilla in Congo you know these ngos spent billions of dollars trying to stop the poaching of those of those gorillas and they were arming you know the Park Rangers and all these things and it

19:03still wasn't stopping then you get eco-tourism coming in now and now all of a sudden you have restaurants that are full hotels that are full car services tour Services now you have Community pressure or Marketplace pressure to stop the poaching and it's largely working more so than than just trying to you know pay people off so the same thing in

19:26deforestation if you're going to go in and stop deforestation you can't just give the landowner money you got to actually create a market around this so on one side we're working on that and then the other side we can create the Securities that can actually fund the market and you buy a carbon carbon removal credit well once I have a removal and

19:47that's based on you know we have other partners that can give us the data sets that tell us what the canopy is removing of carbon every day so on one side we can insure it we can then securitize it we know how much carbon comes out we'll insure it for 30 years you can buy that removal credit for 30 years in carbon removal is carbon removal it doesn't matter where it is so now I have

20:09the first standardized Global carbon removal Credit One should standardized now it trades because right now in the carbon offset the US does its own way Europe does its own way California does its own way China does its own thing there's no standardization and so that's one of the big things we're doing around the E and the standardization and once you have standardization you have

20:31liquidity once you have liquidity you got to Market incredible and yeah I would love to have you know I feel like that would be something that we really need and if that could be a part of the narrative for web 3 and showcasing hey you know when we when we do tokenize this stuff we can actually help save the planet people that understand the benefits

20:54of creating these marketplaces how far along it is that you know are when are we going to be saving the forest through web3 well that product is in development with us right now we'll probably be prepared to announce it in January we're targeting we're an acts as a full member at the world economic Forum so we were targeting around that to announce the product

21:21it's in design right now in development and then hopefully we can bring it out around that time and so you'd hear that we have another product around methane reduction where there's you know the pipes and the pumps that oil companies have and how much methane they leak and a lot of the companies don't have the means to go fix it so

21:45we can come in again a different type of securitization and actually fund the fixing of those those those those pipes and pumps and we can create a Marketplace different participants that participate in that and then come in and securitize the fun that fix and that's a that's a five-year credit because it doesn't take you 30

22:08years to fix something you can fix it in a shorter period of time that's another one that's under development that we have too and I'm more just giving you those as examples that you can see that you can use web 3 in a utility and actually really affect the E of ESG not not to mention you know obviously the democratization capabilities that it brings and gives you the S as we talked

22:31about the arc incredible and your team is working on you know so many different initiatives and I'm curious on your insights and what you think will be some of the main drivers for the next narratives of the next upcycle of web3 you know we saw D5 and nfts do you think it will be you know 2.0 versions of those or introduction of these other industries

22:59that weren't previously involved in web3 sort of getting on top of this technology like these kind of industries that you're talking about or what other narratives do you think will drive sort of the next cycle I think you know the big narrative will probably be pushing is the utility of web3 and getting away from someone that says oh I'm going to create this new

23:19currency that everybody's gonna you know I would dry my dry that out and fertilize my lawn with that statement and then you get into the store value well I think store of value is going to be attached to fundamentals so just like the you see the crypto Market really tracking at a discount to the tech Market out there and the tech companies have

23:47to have fundamentals or they go away pretty quickly right and you're seeing that as well here so I think really rather than the web 5.0 or whatever some person will come up with some other analogy I think it's going to be looking at what we already have looking at the projects that really have fundamentals and then those projects can be quote a store of value value

24:11but we're going to be looking at projects that have the fundamentals and then in our view have utility that we can use and so I think you'll see a lot of them center around decentralized Finance because I think there is there's there's there's significant opportunity there and from our side we're looking to bring on the corporate participation in those and

24:32that's what you need I think to create the staying power and so we're really only looking at things that have quote unquote institutional grade or Enterprise grade so we're very focused on that and platforms that have been very hardened or projects that have been very hardened around that and I think that's why you see us gravitate toward East and you see

24:54us gravitate toward algorand because out of there that we see that those have utilities some others do Solana is another one that has some pretty strong utility and things and then you know we look at exchanges like FDX we see what Sam's doing over there we think that's got you know great promise and how he's kind of thinking about the market and expanding it in the

25:17FTX Universe we kind of see the same thing we're just really focused on the institutional or Enterprise side definitely incredible insights Jeff and for the viewers that want to follow along with some of these initiatives that knack's working is working on and your work as well what's the best way for them to learn more I think you know we obviously have our

25:38website and we put some of the projects out there we're very confidential in what we do so even the projects that I'm announcing there's there's a host of other ones that we're doing that we just don't talk about yet but we have you know we use the form at the West so you'll see us announce a few of our projects and show what we're doing there we do things at the

25:58salt conference again you'll see us announced there and milk and you'll see us announced there and then you know our Communications team uses LinkedIn and some of the other forums to put some of our product out and then at the same time we're hiring we're probably we're hiring I think close to two to three people a week right now so even in this market we're kind of

26:18counter cyclical to it and we're growing in that way so we're we're growing and we're you know we're here in California in Los Angeles Manhattan Beach we've got teams in Palo Alto teams in New York Tampa Florida is scaling significantly for us then over in Europe we have our lab job in Geneva and then we're in Zurich we're in Paris from

26:39Frankfurt or Munich or in London and we've got teams now in Vietnam and Ho Chi Minh City and we're we're we're we're about ready to open up Sydney as well so lots of places to interact with us and lots of things to come very exciting well thank you so much for the insights Jeff I will leave those links in the description box below

27:06and I appreciate you taking the time and let's follow up in the near future good to see you again my friend nation and talk soon