Tech Brew Ride Home - (TWTR SPC) - a16z's Chris Dixon (@cdixon) On The State Of Crypto And Web3

Episode Date: May 21, 2022

Friend of the show, Chris Dixon (@cdixon) of a16z's crypto and web3 investing initiatives comes on to talk about the recent report: 2022 State of Crypto. We got into all the things, using our favorite lens of tech history. Learn more about your ad choices. Visit megaphone.fm/adchoices

On April 4th, 2023, around 2 in the morning, a man was found stabbed multiple times on a sidewalk in downtown San Francisco. Hey, who did this to you? What happened next turned the story into a political firestorm. Reports have identified the victim as Bob Lee, the founder of Cash App. From Bloomberg Podcasts, this is Foundering, the Killing of Bob Lee, beginning April 16. Welcome everybody to the TechMeme Ride Home Experience, a bonus episode of the TechMeme Ride Home podcast. I'm your host, Chris Messina, product lead at Republic, and my host is the regular voice of the daily TechMeme Ride Home podcast, Brian McCullough. Hello, hello, everybody.

And today our guest is someone very special. Chris Dixon, who leads crypto investing at Andrews-Norowitz, someone I've known for a long time. He may also be one of the biggest investors in the crypto space in the world. and certainly maybe the number one evangelist for Web 3.0, or rather Web3. Hello, Chris. Hey, thanks for having me. Brian, as you know, we did the podcast a couple years ago about your book, which I still send to new teammates when they join our team is one of the kind of canonical books.

Can I, it's always a pleasure. A bunch of people got in touch with me because you guys reposted that recently. And they pointed out that in that conversation, you and I say, you know, there's not, there's sort of, it's boring right now in tech. There's not a lot of innovation. that was 2018, so here we are. Here we are, that's one. It's always something new.

So, Chris Dixon, we're here to talk about that state of crypto report that you all put out, was it this week or last week? But let me start off with just a couple things that surprise me or that I wasn't expecting. A lot of times you kept bringing it back to the creator economy, which was, you know, the buzzword on every pitch deck before Web3 supplanted it. But I get the idea that you believe the best way to get to the promise of the creator economy is through Web 3. Why do you think that is? Yeah.

So, I mean, so we had a couple slides in there, specifically one, which showed the payouts of various kind of creator networks, including Web 2 networks like YouTube and Twitter and Facebook, and then kind of the new emerging categories in Web 3, like NFTs. And I think one of the striking things is that I forgot the exact numbers, but NFTs. It's smaller than the payouts to Web 2, but not by that much. And for this early in the movement, it's something on the order of like $5 billion versus $20 billion. And I think that's partly a – and what that means is that's money paid to creative people, creating things on the Internet, right? And that's money going directly to them. That's sort of the net number that goes to those folks' pockets.

I think it speaks to two things. Like one is – and I can talk more about this in a minute. I think that a lot of the innovations in Web 3 around things like NFTs, provide powerful new business models for creative people, number one. And number two, going back to Web 2, Web 2 did a lot of wonderful things. YouTube, Facebook, it sort of democratized publishing and, you know, gave Internet services that are mostly freed and billions of people. But one thing it did very poorly was share that, share that money with, with the people

who really kind of built the networks. I mean, if you look at networks like YouTube, people don't go to watch YouTube. They go to watch a specific YouTuber, right? people go to Facebook to hear from, you know, people they like, people go to Twitter to follow other people. Kind of remarkably, you know, networks like Facebook and Twitter, you know, their business model is advertising. They make literally hundreds of billions of dollars a year in advertising, and they share absolute like zero with their, with the people that do that actually create all the content. It's an amazing kind of trick they pulled off. But I think it's a very brittle system.

And what we're trying to do, you know, through our investment. investing and partnering with entrepreneurs is build out a new set of systems, which I think kind of encompass a lot of the great things about Web 2, but also build systems that share much more of that proceeds and kind of the economic upside with the people that really build those networks. So that's like one of the key innovations around Web 3. But so, you know, my pushback on that would be, well, what's to stop once? It's almost like these are low teaser rates to get people onboarded onto this new system. But that's, yes, I hear you. But I think it's a lot.

a very important idea, and this is kind of going back to sort of the history of the internet, which you know growing quite well, in the first year of the internet, which I kind of think is 1990 to 2005-ish, kind of the governing protocols were governing systems were protocols, right? It was HTTP, which is the protocol for the web, SMTP, the protocol for email, right? And so you built, as Larry and Sergey building a search engine, you were building on top of the web, right? You weren't sharing money with the web. There was no company doing that, right? and that was very important because there was a there is a network effect in email and there's a network effect in the web but that network effect was owned by the community there was no one company you could leave very important future of web one right is I could go and like host my email with a email hosting provider or host my website with you know a website provider like Rackspace or something and because the network effect did not accrue to Rackspace it accrued protocol I could switch I could switch for me if RaxPers raise the rates too much, I could leave and go to another web posting provider and take my

network with me. In the case of the web, all the inbound links and other kinds of things I'd accrued in the case of email, all of like my email, like newsletter lists and everything else, I can take that with me, right? And that fundamentally put constraints on the economics of the businesses. What happened in Web 2 is a network effect accrued to those companies. On Twitter, you know, I have whatever, 800,000 followers or something. If I leave Twitter, I'd lose that. The network effect accrues to the company. And that gives them disproportionate power. So a very, very important feature of Web3 is a network effect accrues to the community, to protocols, and not to companies. So people often, critics will often cite companies like OpenC, which we're investors

in and say, oh, look, it's the same thing. Again, OpenC charges two and a half percent. And they're, and they have some real competitors who are putting pressure on that two and a half percent because you can switch because the NFTs, they don't control, they don't hold the NFTs. People that go to OpenC and are used to kind of the Web2 model and they see these NFTs on there, they think it's, they think it's just like controlled by that website the way it is in a video game or the Web2 product is not. Those NFTs are held on the blockchain, on Ethereum blockchain in most cases. And therefore, the network effect doesn't accrue to them.

And so the switching, so people can switch. And because people can switch, that puts fundamental limits on the economics they can charge. This is the key concept when you're building internet networks is where do the, where do the network effects accrue? If they accrue to a protocol, then you have economics that favor the network participants, quote unquote, decentralized networks, decentralized power, decentralized economics. If the network affects accrue to a company, this is how you end the, up in the situation of Web 2 where you have five companies that control everything and have essentially monopolistic power.

And that was the mistake we made in Web 2, was allowing that network perfect accrued of those companies and giving them that much power. And it may be that it's too late. Some people, a lot of it's kind of cynics, and there are a lot of cynics out there around Web 3 would say that it's too late. I would argue it's not too late. We're still early in the kind of development of the internet. And it's a fight worth having.

It's worth going back and trying to build better systems that more, you're going to build better systems more that share the economics and the control of the networks in a in a much broader way. So, okay, Chris, this is exactly the point that I really wanted to talk to you about. Given, you know, my background and my experience, you know, 15 years ago this year, I started working on something called the Diesel Project, which was the distributed social networking effort to try to decentralize the social web. And as I've heard you talk about these protocols, you know, there's a lot of the concepts that we were working on back then that have kind of come back into the fore. And so what I'm wondering about,

you know, when you talk about the early days of the web and what, you know, Larry and Sergey were able to do with Google, they were building on a foundation that was funded by taxpayers that was built by, you know, the military and academics. And that was sort of part of an open marketplace, or I shouldn't say marketplace, an open resource that anybody could build upon. So my question to you is really about incentives and aligning incentives for the adoption of interoperable protocols that create a new type of maybe distributed or decentralized competition environment. Why do you think it'll work this time when it didn't work last time? You're saying it didn't work last time as in like the 2003 and I'm saying like Web 2.

Like essentially. Yeah. By the way, Chris, I mean, I remember meeting you there. I was just, you know, I was working on that stuff. And I was always inside of like RSS and the open stuff. So I remember. And I'll take that's why I want to have this conversation. It's like how did we go sideways?

I'm saying like in the sense of like I, you know, just for the record, I've been just, you know, as you have, working on this and blogging about it and everything else for 15 plus years as well, even before blockchings and everything else. And it's always been an issue I'm passionate about. Specifically with respect to Web 2, I think, you know, like RSS is a big, it's a big interesting question, right? RSS to me was kind of the foundational protocol that was most likely to challenge things like Facebook and Twitter, right? And so like, I think a really, really important question to ask is why did RSS, essentially lose. I mean, it still exists, but it's not used by three billion people the way that people like you and I wished it was 15 years ago. Why did that happen? I would argue it happened around, if you go back and I'd look at the data, it's around 2008, right? You know, you had a couple of things

happened. You had the Facebooks of the world kind of hit hundreds of millions of users. You had the iPhone come out, you know, which is sort of accelerated everything and then, you know, mobile apps and all that kind of stuff. And you go back 2008, you remember the experience. To set up an RSS feed, You had to have a domain name, first of all, right? And you look at domain name. I have a domain name. I'm sure you both do. I've had mine forever, right?

This is, that was the original decentralized social web. That was the concept of these out. But like I had a domain name and, and, you know, so hard to use. You have to buy it. You have to pay eight bucks a year. Yep. You have to have the semi-technical to go set it up. And then what happened is you remember Tumblr, Twitter, Facebook came along and

offered the same functionality, but you just type C Dixon into a box and voila, you've got a feed. And that user experience won, right? So then the question is why couldn't RSS offer a similar user experience? And like one thing you hear commonly is, oh, just open protocols, you know, it's harder. But that's that's not really the case. Like you, the way open protocols work is you, you have a kind of a partnership between private and public. Like SMTP is still a very popular protocol.

SMTP is not the front end. Gmail is, you know, whatever. I mean, typically you accept some limitation of freedom for a better experience. Or you accept more complexity to have more choice. So, for example, when we were designing open ID, you could use whatever identity provider that you wanted. You could put in a URL. And eventually, we learned that that was too complex and that users would get confused and they didn't know what to do. So we had to give them a list of buttons.

And now you'll connect and it's the same thing. I think the fundamental missing thing in 2008 from the side of the open, the open side was missing. They were fighting with one arm tied behind their back. And specifically, I think the missing piece was there was no way to store state data in a community-owned way. it would have been very nice architecturally if you're building one of the systems to be able to offer feature parity. How would you have offered feature parity

if you're an RSS reader with Twitter? You would need somewhere to store that I'm C. Dixon without asking somebody to go set up a domain and pay $8 either, which is not a consumer experience, right? And there was nowhere to store it. That's exactly what Ethereum is. Ethereum is a community on database. Yeah, so it's the ledger.

The ledger is what makes it different this time. I think you were missing community-owned state. You go back, if you take a serious look at this, which I've done, and I would encourage others to do, and you imagine yourself as a product designer in 2008, trying to make RSS feature parity with Twitter and Facebook. The thing you are missing is shared community-owned state. I will defend that.

Can you unpack what that means because it's a little bit abstract? Because one of the things that we did work on with something called activity streams, and that was designed to actually take RSS to the next level and not just specify how blog posts could be rendered. Like RIS is stateless. It's stateless. I mean, you can keep state in the node, but the protocol itself is stable. Okay.

You're talking state specifically. Okay, got it. Yeah, storing stuff. Like how do you store my polygraph? How do you store my follow graph? Actually, I wrote a couple of blog posts about this. There was an interesting wired article in 2008 where they literally tried to do this. You know, like the thing we're missing is a place to store your holograph in your name and your username.

Like that's what you couldn't do back then. And asking regular users to go, remember a friend of a friend and open idea? I remember all these things. And I was, you know, supporters of them. But all of those things, they could never, I believe never get to feature parity. And so I believe like what Ethereum is, for example, or a blockchain, like, Ethereum, one of the very important things about it is it's a, it's a way for you to ship to store state in a way that can be shared computing database.

Yeah, that's totally what it is. I mean, for some reason, it's become like politicized and, you know, all these heated debates. Well, you bring money into the mix and it confuses things. Well, yes. There's money in there and there's other things and there's a whole, you know, it's somehow gotten mixed in with politics and everything else. But fundamentally, that's what Ethereum is a place to have community owned or user-owned, depending on how you architect it's state.

and a way to compute on that state. It's a community-owned computer. And that unlocks new capabilities, including, I think very important capabilities for the sides who want to make these systems open and not have them be controlled by companies. I mean, that's essentially where you think about the thing that these Web2 companies did.

They basically stepped in. They said, you can't source state. We'll do it for you. It seemed like a nice thing at first. Next thing you know, they're like taking all the money and all the control, right? I think it was very much of a bait-and-switch. And by the way, sometimes we're criticized,

Chris, weren't you part of that? Yeah, I was part of it. I didn't think it would end this way. You know, like, I don't think anyone, any of my friends who were involved in that expected it to end with like four big companies that control the whole internet. Like, this is not what we were signed up for, not what we want. It's not good for anybody except for those four companies. It's bad for creativity.

It's bad for innovation. It's bad for entrepreneurship. It's bad for society. Like, this is not what I signed up for. And I don't think it's too late to fix it. And I think Web3 is the best chance to fix it. I mean, we're still using the concept of a company to pursue these goals and outcomes. Right. So you've deployed an enormous amount of capital to that end.

Right. And so what is the incentive? What is the motivation for the companies that are actually building Web3 to not pursue the same outcomes and goals that the most successful companies that exist today are or have already succeeded at? So you're right that in many cases, the projects we invest in will start as companies. The goal is to have the company go away. So if you look at something like Ethereum, there is no Ethereum company. There's a foundation that supports it in the same way there's a Linux foundation. Exactly.

But there's no Ethereum company. Right. There are tokens. to fear of ether, the tokens, and those are owned by various people, including some of the people, you know, I presume I don't know the details, but I presume some of the people that originally like the Palick worked on it have tokens, you know, commensurate with their contribution. Many other people, you know, bought them early on, earn them early on, et cetera. So it's essentially just sort of the distribution of tokens is kind of the effective ownership

and there is no company, just a foundation. And I think that's the right way to do it. I mean, same with Bitcoin, right? There is no, you know, there are various foundations and things, but there's no Bitcoin company. I think that's the best, to me, that's the goal of all the things we base, most of the things we invest in, I should say. Some things like Coinbase, you know, that was an investment of ours, that likely will likely remain a company. But the kind of pure things that we're mostly investing in are things where they start off as a company and then hopefully over time, the company goes away and it just becomes this kind of decentralized protocol on. Is that an explicit or an implicit assumption

or agreement that you have with the founders? Well, I mean, I, I, it's certainly something I, we don't control the companies. Just so you know, I mean, we invest. We have some economic rights. I guess like what I'm certainly. I'm extremely explicit about it. And I think most people we invested agree with it. And we build terms in to,

you know, expecting that. So in our term sheets, there's a standard clause, which is at some point if you just all the company and, you know, you have tokens instead. We get some portion of tokens commensurate with our investment.

So we expect it. If we plan on it, you know, people can, entrepreneurs control the company and they can fit it. I think that the hard thing, though, is like,

one, aligning incentives and aligning context. because you have someone like Jack Dorsey, right, who is previously CEO of Twitter and spun up blue sky. And he's now saying that Twitter should be a protocol. And yet there are too many vested interests quite literally, especially in this moment, who want to persist, you know, the company. Yeah, I mean, look at Twitter's cap table.

It's fidelity and like a bunch of these, like, giant money management firms at this point. I don't think they're going to switch tokens anytime soon. So it just may be too late, frankly. I mean, that'd be awesome. Well, I mean, like, so will Web3 companies somehow avoid that fate and having the same hooks in them? I hope so. You know,

I mean, I mean, look, Jack Dorsey says, you know, A6CZ owns Web 3. I mean, if you actually look at it,

and I think we're going to put out, we're going to try to put out a report. We have to do it in a way that, you know, that honors all our confidentiality agreements with our companies and things. But essentially our average ownership of tokens at this point is, is certainly, in the new things we invest in certainly sub 5%,

which is very, very, you know, historically mentioned capital was back in the, well, back 30 years ago. and, you know, have the majority of control of companies in some cases, you know, maybe 10 years ago, 20% in crypto. I think the norm is like 3% or something. And in fact, if you look at generally the token distribution of most companies, at least the norm is 50% at least goes to community and is for free based on their contributions to the network.

So, for example, imagine a, you know, Web 3 version of, and this is something we've actually actively investing in, Twitter, discourse, et cetera. and imagine where users earn tokens for building software that makes the, for building client software, other kinds of software that makes network better, for doing various content contributions. And the basic assumption, I would say actually is probably 60% these days, 50 to 60% somewhere between 50 to 60% of the tokens. And this is explicit in our investments will go to the community free of charge, air drops based on earning things.

Now, you know, I think what's useful about that is two things. It's like one is the hardest thing if you're used to building networks is getting over what's called the chicken egg problem, right? Well, the cold start problem, which the cold start problem. I don't think has been totally solved. But yeah, continue. It's not totally solved. It's not so for sure. But financial, but, you know, tokens and financials can be a very useful tool to getting over that chicken egg problem.

Now, you know, critics will say, oh, isn't that like a Ponzi scheme? No, it's not a Ponzi scheme. If there's not an end state, it's an actual useful network. And the things we invest in in every case, we believe there's an end state where it's a useful network. in the end you have a decentralized Twitter and people are sharing content and earning money and doing all sorts of interesting things. You use financial incentives to try to get over that cold star problem. But the financial incentives over time go away and there's all of these things to have a diminishing kind of issuance curve for the financial incentives. And that's the norm.

I mean, these are like in our terms sheets. These are all norms in the industry. Like there will always be cases where people deviate off of it and things like that. But this is just sort of generally the norm. And I think, you know, I think as long as we kind of keep it these kinds of these kinds of, of structures baked in. I think there's a lot of safeguards around having it kind of deteriorate the way the Web 2 did. Yeah. Brian? Yeah, yeah. I wanted to wedge in a couple more things that surprised me from the report. The biggest one was that 49% of crypto wallet activity is related to gaming, and 20% of NFT sales last

year were gaming-related assets. So given that A16Z just raised a big fund focusing on gaming investments, Clearly, you see these areas overlapping. Yeah, for sure. And so, for example, we, yes. And so we've probably done in our crypto activities, and many of these are not, these games haven't launched yet, probably 15 investments related to gaming. And in some cases, we, you know, have done those partnering with our games fund. For sure. I think games, like, games are not the ultimate goal here, at least from me.

I mean, for me, we want to kind of restructure the Internet and social networks and everything else. But I think games can be a very important kind of tip of the sphere. I think it's very likely that, you know, like a hit game, we have one in our portfolio called Axi Infinity, you know, which is one, I think it's one of four discords that hit the discord limit of whatever it is, 800,000 users. And they did that without even being in the app, they're not app store. And just, you know, it became really, really popular kind of just organically.

And it was, you know, kind of an early case. I think there'll be many more. One of the things we're seeing now is the founders, who are working on kind of Web 3 gaming are coming from traditional gaming world. So they're coming out of companies like Riot and Blizzard and kind of these top-end game companies. They have like proper, they built or worked on some way

like hit games before. And they're excited by the idea where you can now build economies in these games where instead of all the money going to Epic who makes Fortnite, so Fortnite has a $3 billion, something on that order, virtual goods economy, but all the money ends up going. going to Epic. What the Web 3 model is is you now use NFTs, which are basically virtual goods

owned by users instead of owned by the company. You create new kinds of economies. The kind of sponsoring entity, Axi Infinity, et cetera, takes a tax rate. I think Axis tax rate is 5%, but they don't take 100%. And there's just very cool kind of peer-to-peer economy that can develop. So I don't if you're familiar with games like Eve Online, there's a long tradition of kind of virtual worlds where there's economies, but outside of a few exceptions like CounterStrike, generally the kind of goods are locked in the system, and people can build up things, but they ultimately can't kind of take their goods out with them. And so the difference here is you would sort of remove that constraint and let people actually kind of make real money. Now, it's got to be a very delicate balance to not make it just kind of a mercenary community that's only trying to make money. You need to make sure it's a fun game, too.

And you balance those two things. You know, Roblox is actually an example where it's not an NFT-based thing. but I do a pretty good job of that. So anyone can create a Roblox kind of mini-game and earn money from it. And so that's kind of a neat model. Before we let you go, I have to ask you about some of the current turmoil in crypto spaces. It's sort of axiomatic that in the past when there have been crypto winters, that's when a lot of the development energy for the...

The next big thing was beginning to happen during those winters. I'm curious if you're seeing now, I've seen people anecdotally say that developer activity in crypto has never been higher. What are you seeing in terms of project starting and people interested in the space? We have a slide in the deck that shows the data that we collect from GitHub, which shows are going up higher. I will tell you this, which is I have a bunch of friends in Silicon Valley, sort of tech people who are professional investors who have no interest in Web3. They're just sort of generalist tech people. and I'll tell you also anecdotally from our firm, you know, we have a lot of big venture practices that don't do crypto.

I think I would say it's more than 50% of all tech, early stage tech startups today throughout the industry are doing Web3. And I hear this again and again from the best. And so what that means is not just developers, but like really, really strong product people. I mean, we just funded in the last six months, I would say some of the best teams out of some of the best Web2 companies. They're coming out in droves. Look, I mean, do you want to, you're like a, a sort of.

smart AI person, you're a smart product manager. Do you know what, you know, what do you actually do with Google today? Like, there's probably like a hundred people doing actual R&D. And as far as I can tell, none of that's shit. I mean, what's Google has a chip with a single novel project in over a decade? And the rest of the people you're working on like, you know, whatever, like some blue bar on the corner of some advertising dashboard. And it's just not fun. We hear it again and again. They come out and they're like these really smart engineers, product managers. Like, this is boring. I'm like, you know, I'm doing, I'm fixing some little piece of the death, death star over year. I want to go join like this, this exciting new, you know, kind of swashbuckling movement.

And so there's just a massive drove of people coming out. And, you know, we're, our job is to kind of partner with them and fund them. And yeah, no, for sure. It's, the kind of, the number of, it's just night and day, the kind of level of entrepreneurs, product managers, engineers, as technologists today versus any other time in crypto. I've been in crypto for 10 years. So, you know, this stuff's going to take some time. Products need to be built and launched and marketed. But I'm very excited.

And I think a lot of that, you know, we tried in that report to be balanced. That data was very carefully scrubbed. You know, we have a data science team. But I think there's a lot of really positive signs. You know, like it's not there yet. There's a lot of work to do. But, you know, I'm very excited. I think one of the things that we're, you know, Brian and I,

being both, you know, historians and also participants in some of the history. Yeah. Yeah. Is, again, to try to think towards the future about what do we miss, what do we get wrong, what was not included in the way that we approach things, you know, back in, you know, sort of the early days of Web 2 that we want to try to, you know, you know, fix or address or just now. One of the big things that I guess I want to ask you about, you've got all these, all these amazing talented people coming into Web 3 projects and startups. And I see it too. You know, A lot of my friends are working in the space. But it seems like we're still going to be possibly repeating a lot of the negative, I don't know, patterns that have led us, you know, in some ways to where we are now.

And in some ways, my question is about participation, governance. And we have this pattern of DAWS. But I don't, I haven't seen as many of them actually kind of working functionally at scale over a long period of time. So we're trying to do many, many things at the same time, which creates a, complex nest of stuff. And I guess what I'm wondering is like, what does the startup environment look like in, I know this is going to be very hard to, you know, think about, but in 10 to 15 years. If we're only changing technology, if the only change is the ledger,

without also changing governance and participation and how we think about, you know, the way in which we were quite exclusive in designing a lot of the web two platforms. Yeah, I think it's a great question. So like the governance is a very important question. And, and by the way, like I talked more about economic. so far, but I mean, one of the key ideas with these kind of web-free networks is that they're both, you know, you change, you sort of decentralized both the economics and also the governance. Yeah. I think the most sophisticated DAOs right now are probably things like D-Fi, sorry, in D-Fi like Maker-Dow.

Yeah. For those who don't know it, like that's a very interesting. I mean, you know, you can, there's sort of two sides to Maker-Dow. There's the financial, it's a stable coin and financial sort of thing. But then there's the other side, which is sort of the governance of it. And it's truly kind of, I think it's truly decentralized. It's got this very interesting governance model. I think it's worked, you know, it's worked pretty well.

uniswap compound Ave also are some pretty interesting DAWS. I mean, sort of I think DFI kind of pioneered a lot of the stuff. I think there's a lot of you're right. There's a lot of people experimenting. There's a lot of missing tooling. There's missing concepts.

You know, that's sort of two ways. This is the whole, it's just, I agree with you. It's generally kind of the Dow space is early. I think most people in tech probably only really started thinking about

Dow's in the last 12 months. It was sort of this really kind of niche, you know, kind of crypto thing before that. So it's still early. I think, look, I mean, you can look at that two ways. It can be, it's early, you know, there's a lot to do. You know, don't have product market fit yet. That's sort of the negative way to look at it.

The positive way to look at it is come join us. This is an amazing time to help build these things, to help shape it. And look, you're right. Like, this stuff can go off the rails, too. I think one thing I would love to see, like right now, it's sort of this, we have these critics, but they're really outside of the crypto community. And frankly, like, it's just, they just don't know basic stuff. like the sort of these kind of loud web 3.

I mean, it's just frustrating to me because they don't even do kind of basic research. It's funny to see a lot of the same conversations kind of happening over again that happened 10 years ago. Yeah. So I would love better critics. I would love some of those folks. Maybe it's not then. Maybe it's a new set of people. But I would love to have people in the space who are kind of more critical, more product

focused. Sounds like the kind of questions you're asking. They're great questions. You know, how do we make sure that Dow's don't fall down some kind of trap the way that the Web 2 companies did? How do we make sure it doesn't turn into some. chaotic awful thing, you know, how do we think through like what is decentralized content moderation, what a decentralized governance look like? These are great questions and it would be

great to have more people coming in and discussing it instead of just sort of, you know, writing alcohol. Are you investing in companies that are working on those problems? Because clearly both content moderation, you know, pro-social engagement is super important. We've done a whole bunch. A bunch of it doesn't announce yet. We've done a bunch of should be soon. So it's not my place to announce it, but a bunch of social stuff where, yeah, for sure. And there's been a lot of really interesting kind of deep thinking around content moderation and what that looks like in a way that, you know, like, you nobody, you know, everyone wants a system where, I think, you know, where there's, where there's, you know, rules that keep people

safe and follow laws and all the other kind of things you want to do in a good system, but also do it in a transparent way, right? I don't think the current way, my biggest issue with the current way it's done is it's opaque. and just and that and that you know that what that does I think is it is it really hurts I mean you see what's going on on Twitter these days and just the anger on all sides it's a pick but it's also very hard right and I think this is one of the the core things that I've been wondering out right like let's say Alon you know does complete the acquisition and then in theory somehow open sources the algorithm it seems to me that there's not enough education that's occurring to allow people to actually inspect and understand the information that that would be given to them I feel like you The algorithm would be out there and get home. I mean, like, spam's not perfect, I would say, but I think it's decent. And that was solved in a centralized manner. You know, I think the, I mean, we have systems like the web and email that exist that are not controlled by, you know, a company, a single company doing content moderation.

And I think things are, I would argue under reasonably good control. It's not perfect. You know, there's stuff goes in your spam filter. You get bad stuff. I'm sure there's. Yeah, I was going to say that's the adversarial problem, right? Like when you're in an attention economy, everybody wants to be able to exploit attention. at a lower marginal cost.

But look, what you had in the case of email, right, is you had a marketplace where a whole bunch of companies went out, bright mail, postini, for those who remember these old days. There was a whole kind of wave of, yeah, there was a whole wave of anti-spam companies who went out.

And you had, like, instead of having one team at Twitter to try to solve it, you had 50 really smart teams try to solve it, and you had a market for it and people could choose among it, and it worked. And that's how you do it in the Web 3 way. So I feel like, you know,

when people say that you can't do it this way, like they're just ignoring the history. at this. We have examples where this is done. I'm not saying it's trivial. And like as tech has become more and more important, you know, these networks have become more and more important. They start shaping global politics, everything else. The stakes are higher. You know, so we've got to take this thing seriously. But the idea that you, the only way to do it is with a group of, you know, product managers at a company, it just seems to me ignoring history. Okay. So we're at time for you and I want to make sure that if you would like to leave, you can. If you want to stick around,

would love to have you. I do have one more quick question for you. Yes, that's good. Okay. Last question is, I guess if you could go back in time, you know, to the early, I don't know how far back you want to go. But I'm thinking 2006 to 2008 was sort of a moment in time. You know, we had Facebook in the room when we were talking about decentralizing

the social web. You know, there was a lot of energy there. If you could go back and wave a wand, what would you change and do differently? Yeah. I think that, I mean, look, there were two. I mentioned one challenge, which is, I think. there were architectural limits to what the open side could do. I think there were also incentive limits. You mentioned how protocols, you know, academia and government funded the early end of

protocols, which is amazing. And I, you know, I mean, it's, it's a awesome thing that that happened. But there's been, I mean, name of protocol that's been developed in the last 30 years in a serious way. I mean, when that heart bleed bug happened, open SSL, you know, which is a, which is a, it's not a protocol, but it's a library that runs like most of the encryption on the internet. they had this major bug, it turned out there was a half of developer working on it. Why? Because there's no way to fund these things, right? Yeah. And so I think, look, I think there were, I don't know specifically, like, as I mentioned, like I would, I think keeping a way to feature parity to Twitter by having a way to store state,

things like that. But I also think on the incentive side, how, you know, like you look at the times when look at the employee count of Facebook from 2008 and 2015, it went from whatever it was relatively small to, you know, I don't know, 50,000 people, right? How would RSS have funded? What percentage of these people working on advertising, though? Yeah, no, that's right. But even if they had, let's say, 2,000 really good developers or 1,000 or whatever it might be, it's still a lot more. You know, it's hard.

So you've got to marshal the forces on the other side. And the best ways we know how to do that is one kind of Linux way, right, which is, you know, by the way, you know, I mean, people sometimes ignore this. Linux is actually corporate funded for the most part. Yeah. It's, you know, the biggest funder of Linux is Intel and what Intel do it. The biggest funder of Mozilla is Google. Yeah, and they do it because it for like,

a bunch of kind of business strategic reasons. Yeah. Right. I mean, so like for Intel, it's good to have a strong open source operating system that kind of balances windows. So there's one way, which is really corporate funded open source. And I believe that we've discovered through kind of Web3 and tokens, another way to do and to do kind of development of open systems.

I think EMS is a really interesting example, of theory of namespace, where they have a token and they use it as the Treasury and the Dow and it funds the development of the ecosystem. And I think that's a really interesting new way to do kind of public goods funding. So that's, so going back to 2008, I don't know, maybe it was a great question. I think there was the kind of technical architectural feature parity question I mentioned. And I think the other thing is the incentive thing. I don't know.

Maybe it was just a fade of complete. We were kind of screwed back then. And the white walkers were coming and we didn't do anything about it. But now, like, maybe we can. And I'm not ready to give up. I think we should keep trying. I don't know. I think we should, you know, this seems like a, it seems like a, it's a question of whether

we should keep trying or not. I think a question is, do we invest in the right things? And are we actually sort of solving for the right set of problems, given what we've learned? Yeah, like, I'm a fan, by the way, of things like Mastodon. I was going to say, yeah, Mastodon is a great example. Yeah, but it's how many users? It's not it hasn't broken out. Why?

I think it's because they have no global namespace. I'm not Cedix. I have to give some weird name. I'm like Cedix on some social server. It's this very 1990s architecture. I mean, we solved this problem actually in 2009. I mean, the email address, granted, it's PII now, but that was the best. It was a username at a domain.

And actually, that is what Macedon does. It's a global name fix. You know, I think the key, when I used it, I have an account. I'm C. Dixon at some social server, whatever it is, at some URL and some person. That's at least my name. I won't mention I names. But, I mean, there have been a lot of attempts to solve the identity problem. You have a question of like, why is Massadon at whatever single digit million users is at?

And why is Facebook? You can say the same thing about. social or getter? Yeah, but I think there's one question is on the product side. How do you get it to be a product? How do you make it a product that feels like a Facebook product? I mean, that would be step one for me. And I think there's a lot of technical architectural things missing,

including a clean way to do shared state. But, yeah. I do think like the shared state piece, the blockchain piece, those are definitely enablers that will lead to new types of interaction. One thing that I'm wondering about is like, again, interoperability. When it comes to the companies that you're investing in, how important is interoperability? Because you mentioned ENS, but there's also a number of, lens protocol just launched the other day. So there are several different identity providers that are coming out that are

ostensibly using, you know, Ethereum or whatever namespace they're using to create the new kind of like, you know, this is my login, this is my identity on the web. But now there's going to be dozens of them and they're not going to be interoperable. And so we're going to end up having this plurality of solutions once again. Well, well, but yeah, I mean, like I haven't, so I haven't look dug into the details of lens, but if you build, for example, if you build something with using smart contracts and Ethereum, it's interoperable by default, right? I mean, every smart contract on Ethereum is open source and callable by any person. Yeah, yeah. And there's no sort of owner. It's just literally a community resource. Right.

And that's certainly the way that we view the world and we want every, you know, we certainly encourage that. So I haven't dug in this lens, the social kind of stuff that we have invested in, all of them embrace interoperability. And look, it's not, in Web 3, the mentality is not like I'm doing it. And Web 2, the mentality is, I'll just. interoperability begrudgingly because people demand it, but ultimately I don't want to do it. And that's why, by the way, remember the whole kind of mashup movement, 2008-ish and all the widget-ish and all that stuff. It basically all went away.

All these people put restrictions on their API because it wasn't in their business interest. And Web 3 is opposite, which is you want more people to use. You want people, we call it composability. You want people to build on top of you. And you don't need to like have these things where you build these gated communities because you want more and more people. Like look at it. They love it when people build layer two and side chains and other kinds of things on

top of it, it just makes the whole thing more popular. It makes more people, it increases on the business model side, it increases demand for the token. And so there's an incentive to interoperate as well in Web3, and that's very important. It kind of flips the incentives around. Yeah. Okay. Brian? Yeah, absolutely. Last one, Chris. Sorry. You alluded to this, oh, Chris Dixon, I should specify. You alluded to this a little bit earlier talking about sort of the anger and the haterade going on

against Web 3 and Crypto and we were there in Web 2 that wasn't there. In fact, quite the opposite. The broader world seemed to think the internet fad had ended and so people could create without that headwind. When you're, especially we talked about gaming, there seems to be this

gamer backlash to it. So when you're dealing when you're talking with developers and you're dealing with projects, how do you think of that and how do you tell the developers to think of this headwind where potentially the users that you're trying to convert have this animus to what you're doing from the go? Well, I think there's a great question.

I think a couple layers to it. I think one, the tech is just in the focus. So back in the 2000s, right, everything was dismissed. All the Webto stuff was dismissed as kind of a sideshow, right? You know, New York Times would put the word tweet and quotes until like 2013, and it was like this thing where nerds went to have lunches. And if you all remember it in some point that flipped, and people realize, you know, I think it had to do with politics and a bunch of other things, people realize how important these things are. And so just I think all of tech now is under the microscope and it's just people now don't dismiss anything as a joke anymore because they know that it's not a very, you know, it's not smart to underestimate how important these kind of Internet technologies can be.

Right. So I just think the giant, the overall climate has shifted. I think you have this kind of level of scrutiny now in a lot of areas of tech, including Web3. I look, I think it's also like with a lot of people that are critics right now, they were web two darlings. And it's not fun to not be the, you know, the cool person anymore. And so they, you know, I just think there's a set of incentives. We have incumbents now in a way that we didn't back then, you know, who have vested interests. And I, you know, I think they're going to end up doing a whole bunch of things, including funding, various stuff, et cetera. And so that, that's a big kind of difference from then. Sorry, what's the second part of your question?

Just when you're talking to people on these projects, what is your advice to them for facing this headwind? And you mentioned the game thing. Look, my impression on the game thing, like I talked to a lot of gaming text, including a big game companies. They're all charging for it with their blockchain stuff. Their data, their focus groups say that like almost no normal people actually, you know, dislike Web3. It's coming from like a very vocal like 2% of the community and a few like, you know, blogs and things. I don't think it's serious. I think it'll go away. the games world also like hated you know hated mobile gaming hated

hated free to play you know I think once we have a few hit games and they see how cool it can be and they see see the games are great and that will change very quickly so I don't I don't take that you know that kind of just and I read some of those criticisms and they're just literally talking about something else like it's just a complete straw man argument so it's really hard for me to take that seriously I think it's just you know but like I think it's we also live in a very

politically charged time. I think in some people's minds, Web3 crypto has taken on a political valence of libertarianism or something, which I think might be somewhat true of kind of early Bitcoin users. I think it's very not true of modern Web 3, which I think of is politically agnostic and could be, you know, in many ways actually a very kind of communitarian bent to the technology. So I don't think for some reason there's that kind of change to the discussions. I think that will go away as people, again, as we build popular products and people see kind of the true nature of the tech and the fact that you know it can have all these kind of democratizing um effects on the internet so i think it's all just sort of a matter

of kind of um just stuff that will go away over time and and you know and i think most of the founders work will think that too well you know a very famous investor once wrote that the next big thing is often dismissed as a toy or or a joke or something i can't remember what you said so um maybe you trained all of us to not be so dismissive of the new, you know. Yeah, I mean, I think, yeah. Yeah, listen, Chris, thank you so much for your time. Anyone listening to this on the podcast, the link to the report from A16Z is on the show notes. Good to talk to you again, Chris.

All right, thanks, fine. Thanks, Chris. Thanks, Chris. Thanks, Chris. So thank you, Chris Dixon. Thank you, Chris Messina for a great interview with Chris Dixon. Thank you, everybody. This will be on the TechMeme Right Home podcast feed tomorrow after. afternoon. I love everybody.