Tetragrammaton with Rick Rubin - Chris Dixon

Episode Date: April 3, 2024

Chris Dixon is an entrepreneur, investor, General Partner at Andreessen Horowitz, and the author of Read Write Own: Building the Next Era of the Internet. He started and manages a16z crypto, a branch dedicated to investing in new internet technologies, managing over $9 billion across four specialized funds. Prior to his venture capital career, Chris co-founded and led two successful startups, SiteAdvisor, an internet security firm acquired by McAfee in 2006, and Hunch, a recommendation technology company acquired by eBay in 2011. A prolific seed investor, he co-founded Founder Collective and made numerous personal angel investments in technology ventures.  ------ Thank you to the sponsors that fuel our podcast and our team: Squarespace https://squarespace.com/tetra ------ LMNT Electrolytes https://drinklmnt.com/tetra ------ House of Macadamias https://www.houseofmacadamias.com/tetra

Tetragrammaton. I was given a computer. The original one was called a TRS-80. It was a Radio Shack computer by my father who I didn't live with and he had a business and I think the business had gone defunct and he sent me the computer. And back then it was computers were kind of mysterious and there wasn't of course this was in like 1982 or something. There was no real internet. There were very little information about it.

Actually my older brother would go to school and he would come back and like learn a few programming commands and then he would tell me about them and then I would sort of start playing around with it. And to me it was this sort of mysterious thing. I became obsessed. I spent age 10 to 23 or something, probably programming computers seven hours a day or something, including professionally for a brief period of time. Pretty similar probably to a lot of people who are in the tech industry of just sort

of falling in love with the process of programming. I think it's, to me, it's sort of a misunderstood and that it's a very creative activity. So you kind of like, I was making games and other kinds of fun things, but but it's like you just you come up with an idea and then you think about how you're going to architect that and how you're going to build that and there was this little kind of additional mysterious aspect to it of like how does this machine work and the machines back then were much simpler obviously they've gotten much more complex but like a computer today has just massive amounts of memory and compute and there's probably no human being on earth, including the top experts who know everything about how this laptop I'm using works.

Back then, one person could kind of know the whole thing. And so, for example, the TRS-80 had, I think, 4K, 4,000 bytes, pieces of memory. I later got an Apple II that had 48-k. Think of bytes as like mailboxes or something, like slots. You can put stuff in. A lot of them did different things and you could learn what they do. Back then, sort of pre-internet,

I go to these things called user group meetings where I get my parents to drive me on Sundays to like a school and I didn't know this at the time, but I grew up right near an Air Force base called Wright-Patterson Air Force base, which turns out to be the kind of intelligence and computing Air Force base in Dayton, Ohio. Amazing. Which I didn't know at the time, but like in retrospect, that was a huge benefit to

me because I'd go there and there were all these kind of guys who were older who would teach me stuff, give me books, give me software. I didn't know what they did. I think they probably worked, you know, something in the Air Force base. How old were you then? Like early teens or something. So early teens and you go to a place, how many people would be there?

Probably like a hundred. And typical age of the people there? A lot of them were older. Like 20s or 50s? Yeah, like 30s, 40s. These were like, you know, this was the mid 80s in Ohio. And they did, I think a lot of these guys worked at the Air Force base on computers, and they were hobbyists on computers.

And you would go, and there were basically two things you would do at these meetings. You would pirate software, so you would copy games, because that's the only way you really, like I could buy games, I couldn't really afford them. And most people just did that back then, and there was actually a special hard drive you'd buy called the Happy Drive that let you copy the games.

And then you would show them what you programmed and you would trade those programs and then you would teach each other. And so it's kind of like a subreddit today or something like a forum where you go and hang out and do that. And that was really fun and exciting. And yeah, so I was just completely obsessed

and did that my whole childhood. And then- Purely passion, there was no idea that this is my job or no. In fact, I later, I'll fast forward. I actually kind of quit computers. I got into philosophy and actually went to school studying philosophy and then stayed for a master's degree in philosophy.

I mistakenly probably in the nineties, I felt like computing had gotten too corporate. Like, so like, if you go back in the eighties, the magazines about computers were like, you can still get them. It's like bite magazine and compute magazine. And they were all like, they actually would have code in them. You get the magazine, you type in the code. My poor mom would read me code and I would type in and so and that's how you got because didn't have you know, there was some internet early internet stuff like you

could do like BBS is there called where you could dial you could dial in, be able to use your phone line. So there's a little bit of that. But then what happened in the 90s is that if you look at it, all the magazines became like Productivity, Microsoft Office, and then the internet hit. At that time I was in college and thought I was counterculture or something, and like was like, they've sold out,

they've become corporate, I'm gonna do something else. So yeah, no, there was no intention to do it as a job or anything else, it was just like, I read about this a little bit in my book. Like I really view, I think software is really misunderstood. People think of it as an engineering field. And there is an aspect to which it's engineering, but like the design space, it's symbolic manipulation

in anything and it's sort of philosophers have shown this from like the 1930s, there was a lot of work where anything you can represent mathematically or scientifically, you can represent in code. There's a thing called Turing complete code, like Turing complete programming languages, which means anything you can really think of, you can write in code. So it's a very, very rich and expressive medium, which has all sorts of implications. First of all, it means just as an activity, it's fascinating because you can just sort

of invent things and invent new ideas and genres. I think the right way to think about software movements is analogous to creative activities and like there's really new genres. Like I think of when we talk about some of the stuff I work on, I think of it as a new genre. And I think similarly, like a very common mistake people make is they kind of write off genres, right? They sort of, they look at it and they say, this genre doesn't make sense to me.

But when you say that, what you're really saying is like, if you go back and look at the history of novels or something, like when science fiction started off, it was sort of considered a unsophisticated category of in this early mystery novels. And you know, and when you sort of write off a genre, you're really writing off human creativity, right? Because you're really saying, no one will come along who will write a great science fiction novel, right? So anyway, so I think I had a very, experience is very common to a lot of people

that kind of fall in love with software, which is like the same way you fall in love with, someone might fall in love with writing, or music, of course. It's a canvas. It's a place you can express yourself. It's a creative medium. How did you come back to it after college?

So I was in college. I got into philosophy kind of through computing. There was what people would now call artificial intelligence. I mean, they called them, but now, of course, it's much more prominent. But how does a mind work? How does language work? Logic.

That's kind of the philosophy I was interested in. I actually was in a graduate program. I was in New York, and just by necessity necessity had to program on the side to support myself. And as I was doing that, that was sort of late 90s. I discovered the internet startup world. And I guess I had grown up in an academic family. My parents are academics, English professors like my whole family is. And I had kind of a, I would say kind of cartoon understanding of business. And then for me, it was a real epiphany kind of late 90s would say, kind of cartoon understanding of business.

And then for me, it was a real epiphany, kind of late 90s with the internet boom. I had a few friends, I was sort of doing freelance work for them and they started companies and they was creative, they designed products, they had all of these interesting people working there and at that point, sort of, I don't know, around the year 2000 or something, fell in love with that and have spent my whole career

in one way or another in that industry since then, when I discovered that there's sort of, I don't know, around the year 2000 or something, fell in love with that and have spent my whole career in one way or another in that industry since then, when I discovered that there's sort of this other, what I would describe as like this other side of business, which is to me more interesting and creative, kind of the startup, the tech startup world. And I also, I really fell in love with, when I really dug into it, the internet and the way the internet had been designed.

We took an amazing path on the internet and the way the internet had been designed, we took an amazing path on the internet. In some ways, it was inevitable that we would network all the computers in the world. Once you have a bunch of computers, people had been starting connecting them in the 1960s, and why wouldn't you connect those computers? But there were at least two ways you could have connected those computers. One is a company in the middle of it. So like AOL tried to do this back in the 80s, they started, and then the 90s, where they would be the internet. Microsoft tried this, Disney tried this, Comcast tried this, right? They're sort of the internet, and you connect through them. The actual way the internet developed was very different than that. It was originally a set of academics and government.

It was called ARPANET and started in 69. And then it sort of evolved as this community-owned resource. And it's kind of amazing that in the 90s, it was truly the case that the internet, it was accessible to everybody and owned by nobody. And it was just an amazing idea. When I fully kind of dove into that and decided this is an amazing thing, and it feels

like it's got a lot more room for development, and I want to be part of that. What was the experience of the internet in the year 2000? What do you remember the first things that you did, the first things that you'd go to on a regular basis? The most popular home page was Yahoo. And you'd go to first things that you would go to on a regular basis? The most popular homepage was Yahoo and you go to Yahoo and they would have a thing at the top called site of the day. And site of the day, I mean, it sounds kind of funny now because the internet's so big or, you know, I don't know, also so concentrated, they're sort of, you know, social networks and all these other things.

But you'd go and you'd click on the site of the day and it would be like someone who's interested in some kind of flower or someone who's interested in some weird hobby, right? And it would be these kind of crazy web pages with like some of them had like, you know, like these crazy fonts and flashing letters, you can see them on like Internet archive and things. And it was just this sort of serendipity, right? Like that's why they had the term web surfing. You don't really hear that anymore. had the term web surfing, you don't really hear that anymore. But that that was the term back then, right? Because it was sort of like, you'd encounter one thing and then another. And it was sort of this constant process of serendipity. It's easy to forget, or his desktop, very importantly, there were no real mode. I mean, there were some like early mobile phones, but no one not at scale. It was slow. I mean, the 90s, you had to wait for pictures to load. Video was very poor. It was very text-based. My book is called Read Right On. The reason it's called that is it refers to three years of

the internet. The first year was a lot of people, internet veterans, called that the read era. They called it the read era because mostly what you were doing was consuming information. You were mostly clicking around and reading stuff and maybe going to a search engine and typing something and you could get an encyclopedia. A lot of websites looked like brochures. E-commerce was like catalogs. It was sort of taking these things that we knew that were familiar in the offline world

and bringing them into the internet. The bulk of it was consumption. I think Friends, the TV show, I believe it existed from 1996 to 2003, right? So that was well after the beginning of the internet. The internet does not occur in that show except for one episode, the entire show. Like, there's one episode and it's like one of the characters

does online dating and they all make fun of him because he's like, what kind of nerd would do that or something. Like that was 10 years into the internet and you can make a show about pop culture that lasted seven seasons or whatever it lasted. You know, there were these movies like you've got mail and things,

but like it almost didn't exist in movies till like 2010, like for the most part. Right now, of course, with mobile phones, many of the old plots wouldn't make sense because people are confused and don't talk to each other and now they just text each other or something. But it was just very different. And it was this concept of like you go online. You wouldn't say that today because today we're continuous.

Most people are continuously online. It's a continuous partial. Seven hours a day, the average person's on the internet. And it's on and off. And it's sort of like your phone's always with you, right? Back then it was like an event. You go online, sometimes you'd have that AOL, that beeping sound, and you've got mail,

and it was like a thing, and you'd go get your tickets, and then you'd surf and check out a few things. It was very, very different. Should we walk through the book? It's the first thing I've read that explained blockchain in a way that I understood it. That's great Yeah, and look that's why I wrote it I mean I wrote it very much for you know, the general reader Blockchains are my view is that there are two kind of cultures that are interested in blockchains

And I call them the casino and the computer the casino are people that you know speculate on token prices and create websites. It's essentially a kind of a gambling culture. And then there's another culture, which I see myself as part of, which is a big culture. I think certainly tens of thousands of people, if not more, who have a very different view of what blockchains are. And I wrote the book because I felt like that second view had not been properly explained. I think no one knows about that second view other than those tens of thousands of people. Yeah, I think that's my feeling. And so that's why I have a bottle of water in front of me.

And to me, I've been working on the internet for 25 years. The ideas in this book are it's just the way I see the world. It's as clear to me as this bottle on the table. And I feel this like frustration that I feel like so wildly misunderstood. And that I'm not expecting people to read the book and, you know, change their lives and, uh, and devoted to blockchains, But I wanted to just explain why people like me are excited about. So that's the idea behind the book. Why do people dislike the blockchain?

What's the negative? So kind of the thrust of the book and the reason it's called read, write, own, and the word own is there is that blockchains enable digital ownership. And so that means that today in the digital world, there are very few things that you really own, that essentially you're always using, most of the time you're on the internet, you're using a service and the things in that service, your username on Twitter, your friends on Facebook,

your data, your audience, how the money flows, how the control flows, these are all controlled by these centralized big company services. One of the main things that blockchains enable is that it can shift that control and that ownership back to the people that use the services, the creators, the users, the software developers. And so they enable ownership. And when you enable ownership, you enable trading and speculation.

Think about home ownership. I think we all think homeownership is a valuable concept for society, right? It's important psychologically to own a home. It aligns your incentives. People that own homes are more likely to take care of their home, take care of their community. Like, it's a...

I think most people agree homeownership's societally beneficial, but, you know, there are people that speculate on real estate. There are people that trade real estate. I think that, for a variety of reasons, some some of it self-inflicted by the industry I work in, that aspect, this trading and speculative aspect has gotten the lion's share of the attention. I think if you ask the average person, they'll say, oh, the blockchain is that's these tokens

like Bitcoin and these other things, and they don't have any real value, and they're just used for trading and speculation, there's an aspect of that which is true in the same sense of if you suddenly, if we lived in a world where you couldn't own homes and you suddenly could own homes, you would have speculation and things like this. So I think it's partly self-inflicted. There are people in the community who talk about these things.

I think it's partly the media likes to focus on that aspect. It's easier to explain. I mean, I had to write a book to explain. Yeah. I think most people don't understand what it is. Well, and part of it too is like, so I spent a lot of time, like I've been, there's a lot of regulatory and policy topics related to blockchains. And so I go to DC, for example, and I talk to a lot of people who are not, you know, in the space. And what I discovered in talking to them is that it's very hard to describe blockchains

because they don't have the prerequisite knowledge about the internet. So in my book, the first third of the book is kind of a background on the internet. And that background, I'll say, like the first third of the book, I would say is pretty uncontroversial. The last part, it may maybe controversial, the blockchain part, or another way to put it is like I kind of diagnose how the internet went wrong in the first half of the book. And then I suggest a solution in the second half and the solution involves blockchains in the diagnosis. I think one, I don't think that's controversial within the internet veteran community, right?

Like that that part is sort of, you know, standard knowledge. But it's not common knowledge. And as a result, I found myself in lots of conversations, like hour long conversations, just realizing like, I just can't explain this in an hour. Like I've blogged for years, I've podcasted for years. I generally have the school of thought that if it can be shorter, it should be. I finally came to the conclusion this is just simply a topic that cannot be explained in under like 200 something pages because it just requires this background knowledge. Specifically, like how did the internet develop? And then how does power and money work on the internet? Like why? Why was the internet of the 90s an internet where power and money flowed to the edges? And why is the internet of today one where it flows to five to ten companies? Why did that change? How does that work? What are the mechanics behind it? Right and so that's kind of the first half of the book is just talking about that and like why that happened and you know And I think that's important because I think as I said earlier I got into the internet

I think a lot of people did and were inspired by this idea that it's this open democratically controlled system I think that we have mostly lost that and we're probably going to idea that it's this open, democratically controlled system. I think that we have mostly lost that and we're probably going to, if we don't do something, it's gonna get even worse. I think we're very close to having an internet of three to five companies that control almost everything. I think artificial intelligence,

the stuff going on there is amazing. That said, it will most likely, if not, if we don't put in checks and balances, it will most likely, if not, if we don't put in checks and balances, it will most likely further centralize that because it's a technology that rewards companies with large piles of capital and data. And I worry that sort of this was this miracle of history that the internet was this open decentralized system and not controlled by a company, but we may lose that. I think we're very close to losing that. If you just look at the data, and I cite some in the book, like the top 1% of social networks account for 99% of the traffic,

you know, the top five social networks made $150 billion in revenue last year. That was 99% of the revenue of social media. You basically have now, like if you go to a typical website now, it's like cluttered with banner ads and other things, is because everyone else is fighting over these tiny scraps that are left. I mean, why is the media industry in a state of peril because of that? Because that mostly, because all you basically have, we have re-architected the internet where all of the power and money is getting sucked into the center. And so why did that happen? And how does that power and money work? So that's the first kind of half of the book. Let's go through it. Why networks matter. Let's start really from the beginning. Okay. So the way I think of it is the internet

is a network of networks. And so you have the physical computers and those computers all have, you know, they all have a language for speaking to each other. And that's that language is called internet protocol. And it's a technical standard where they all speak to each other. And that's what the internet is. And then on top of that, what do you do? Like I used to be an entrepreneur, and now I'm an investor, and people who are internet entrepreneurs and investors, what they do is they build networks.

So the early networks were the World Wide Web. So some people sort of think of the World Wide Web as the internet, it's not. It's a network on top of the internet. The internet is a network that links computers. The World Wide Web is a network that links webpages. There's email, that email's a network. It computers. The World Wide Web is a network that links web pages. There's email. The email is a network.

It's a communication protocol that's open and built on top of the internet. Today there's Twitter and Facebook. Those are networks. There's Uber and eBay and just almost every internet service uses a network. Why do I say network and not, for example, service? It's important that they're networks because they have what are called network effects, which means that the more people that use them, the more powerful they become, right?

And this is very different than the business world pre-internet. In the pre-internet business world, the businesses would accrue power through economies of scale and scope and being able to having the biggest factories, having the most efficient factories, the most efficient distribution.

On the internet, the most efficient distribution. On the internet it's very different. You don't accrue power that way. You accrue power through network effects. Twitter is valuable because everyone else that you know uses Twitter. Facebook is valuable because the actual software they use and the servers are relatively easy to replace. It's the fact that the other people are there. And that is a very powerful force because once you get that, once one of these networks is built, it's very hard to leave. the other people are there. And that is a very powerful force because once you get that, once one of these networks is built, it's very hard to leave. Like if you're a creative person and you build an audience on one of these networks, they can change the algorithm.

Like, for example, recently Twitter has been punishing people if they have, a lot of the networks have, if you have a link to a substack because they see it as kind of economic leakage. And so they demote your post if you do that. And that crackdown has really hurt a lot of businesses. What can you do about it? You're just kind of stuck. You've built an audience there. You can leave.

Right, so network effects are a very powerful force. And until recently, there were kind of two main ways to build networks. And the first way are protocol networks. And the second way are corporate networks. And I have the first chapter of the book, I talk about protocol networks and the history and what they are and why they matter. In the second chapter, I talk about corporate networks.

Protocol networks, the most prominent of which are email and the web. I kind of analogize them to languages, like the English language. It's an agreement to speak in a certain way to each other, right? You can deviate from that, but then other people won't understand you But if you think about in language like English like you have dictionaries and things but ultimately it's a community resource Like nobody gets to decide, you know, maybe a novelist will it be influential or someone else will kind of influence things But in the end it's sort of a group of people all the English-speaking people in the world kind of in some complex bottom-up way Determining what that is.

And there's no central intermediary. And that's very much how the web and email work. So there are a set of standards that kind of go back to the 80s, where people said, hey, if you're gonna send an email, do the following things, use this code, use this code. And then what happened is this kind of bottoms-up group of software developers built email software,

web browsers, web servers. And so you now have sort of tens of thousands of developers, open source developers, some of them work at companies who kind of created this whole thing. And very importantly, there's no one, there's no company in the middle. So there's no one in the middle who can, no one's in charge. No one's in charge and no one can take, and that means no one can charge a toll. They can't take money. You know, you have a website, right?

And if people sign up on your website and use their email address, you can send them emails and nobody's in between. You may use like an email provider, but if they mess with you, you'll switch because you own the email addresses, right? And that's a very, very important part of protocol networks is you own that website, you own that email audience, you can send them what you want, you can decide you want to put ads there. You can charge them money. You cannot charge them money. There's no algorithm that's sitting in the middle

deciding your fate. And so protocol networks are a big reason why you had so much entrepreneurship in the 90s. Because everyone got a little plot of land. You bought google.com, and you could build an audience. And there was no someone in the middle today. Whereas you fast forward today, if you're on the app store or something, Google takes 30%. Google decides Apple takes 30%. They decide they don't want you and they just

kicked Epic game maker off of the app store because they didn't like a tweet of theirs. So like they're in full control. That wasn't the case with these protocol networks. So that was both I think, societally beneficial, I would argue, but also economically beneficial because you created a set of incentives for people to invent things. No gatekeepers. You know, you might think, well, isn't that gonna be chaos and crime? And the reality is, you know, look,

obviously there have been bad websites in history, but first of all, laws govern it. If you put up an illegal website, you get in trouble. And then secondly, this sort of decentralized group of the email clients, the registrars, the website hosters, they all in a kind of a collective manner take down the bad stuff. And the world hasn't ended.

Had you just proposed it in 1990 and sort of realized how important it was, a lot of people might have freaked out and said you need someone who's in center controlling it. Like the way that people are debating around AI today, people are saying, oh, you need someone to control it. What if it gets, you can't let the people have it, right? What, you need, you need a gatekeeper because otherwise it'll be abused. It turns out that it, I mean, you know, like there were bad things, but they were mostly

removed. And for the most part, I think people would say that the internet had a positive impact on society so so it worked remarkably well economically a societally and then This is kind of my core argument in the 2000s a couple of things happened a good thing in about them The good thing was that the internet got a lot more powerful, right? And so we were talking earlier about how limited the internet was it became more powerful First of all, we had, you know broadband mobile kind of the infrastructure got a lot more powerful, right? And so we were talking earlier about how limited the internet was. It became more powerful. First of all, we had broadband, mobile, kind of the infrastructure got much better.

But then also a wave of entrepreneurs said, hey, the internet so far is very kind of passive. You consume information. What if we designed a new set of internet services that were much more two-way? You could not only democratize information consumption, but also information publishing. This was known as the Web2 movement, also known as the Read-Write movement, which again goes to the title of the book. I was an entrepreneur then and part of that movement. It was very exciting because it was after the internet crash, broadband was starting,

and there were a whole bunch of entrepreneurs who said, you know, so far the internet we've just kind of taken brochures and cattle hogs and put them on the internet, but really this is a new medium. I have this distinction I talk about called skeuomorphic versus native. And so what this concept is, is that whenever, and this is sort of borrowing from like Marshall McLuhan and people like this, but the idea is that whenever a new medium comes around, people often start off kind of borrowing from a prior medium and then over time explore and understand kind of what is truly unique to that new medium. So early films were like if you watch them they're kind of

like plays and they hadn't discovered yet the close-up and the establishing shot right and then over time you sort of develop this grammar of film and it becomes its own unique medium. Early electricity was just a better way to make candles. You now have light bulbs. And then it took about 40 or 50 years before you said, hey, let's standardize the plug socket and let a bunch of entrepreneurs come up with new ideas of like toasters and washing machines.

And that became kind of native. And so in a similar way, in the 2000s, people said, look, this is this new software-based network. Like, why are we just going and passively reading brochures? Couldn't you do all this other stuff? And specifically, can't you kind of allow the user to participate as a first-class citizen and publish? And that was the beginning of blogging first.

It began with blogging. And then I think of blogging as kind of the primordial soup. Like if you look at early blogging, I was part of it There was kind of like there was what's called link blogging which was like one sentence Which is now like Twitter and then there was photo blogging which is like Instagram like you kind of like there's photo blogging There was long-form blogging. There was link blogging. There was called what was called tumble blogging which became tumblr There were like five different genres of blogs and each of them ended up leading to a service that became very big, right?

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What would be a typical link blog? I did this too. It was just like you'd surf the web and then you'd see something cool. And then it was almost like Twitter, except you'd be hosting it on a blog. And so you go to my website and I would just say like, look at this cool surfing website link. And the whole point was it was just short. It was just very short blogging.

And it was just a genre. It was just like a fun thing to do. And then you'd have an RSS reader and RSS reader would let you aggregate all of the blogs that you follow. And so you would just be scrolling through. And then you'd see like someone wrote a five pages, someone wrote a paragraph, someone else had six links they found that day. And it was just sort of the serendipitous thing you went through. And it was fun because it was just other people instead of only going to

professionally made websites, right? And again, there was no gatekeeper in that scenario. No gatekeeper. RSS is still around. It's a protocol network. In the 2000s, at one point, and I was part of this, I used to blog about this a lot, I was sort of a big supporter of RSS.

RSS, I think of it up until 2008, was actually a genuine rival to the corporate alternatives like Twitter and Facebook. It was sort of the open versus the closed and it was a real horse race. And if you look at the data, they were actually kind of close. And there was a moment in which social networking like fast, like in this alternative history, social networking developed as an open protocol with no gatekeepers, you say, but then it for a variety of reasons, which I outlined in the book, it ended up losing out.

It still exists in some podcasts and things, but it's very, very niche. If you walk down the street and ask somebody, how do you consume social media? Very few people say RSS anymore. Tell me why it lost out. It's interesting. It lost out and this is kind of leads into blockchains. I kind of summarize it as two things, features and funding. So when you went to features, what I mean by that is in 2007 or 8, if I wanted to create a blog, I had to do a couple things. I had to go register a domain name. That cost $8.

You have to go to whatever, GoDaddy. You have to go fiddle with some dials, so to speak, to set up a website. You had to then set up your RSS reader. And then you go to Twitter and Facebook and it's one click. You type, I'm C. Dixon, boom, one click, right? So look, the protocol, like email and the web they developed in the eighties, there was no, it was a bunch of academics and tinkerers and like there was no Twitter, you know, kind of corporate alternative. And so people were like willing to jump through some hoops. Protocol networks ask you to jump through some hoops. That was fine in the 80s and maybe the early 90s. By the 2000s, you had these alternatives and

they made it much, much easier. Number one. Number two is funding. So the example I use in the book is YouTube. And this is something I see in my daily life, which is essentially the way you build these services is through heavy subsidization. So in the case of YouTube, as an example, YouTube was started in 2005. At the time, it was sort of one of the genre of new video sites that was social video. There were a whole bunch of that there was explosion of video startups then because broadband internet hit a certain level of penetration. Entrepreneurs are smart. They figured that out. A bunch of people were going in like licensing, CBS content. YouTube took this sort of more kind of bottoms up, you know, sort of peer to peer approach if anyone can upload something. But their main feature was actually that they would subsidize the web hosting

costs because it was very expensive in 2005. So if I wanted to have a video on my website, it was very expensive and time consuming. And so what YouTube started off doing was that I could go upload a video to YouTube and then I could embed it on my website. That was actually the original feature of YouTube. It was not to go to youtube.com. It was to use it to embed and they would pay for the hosting costs. How did they pay for it? They raised venture capital.

The venture capitalists gave them money because they calculated that if they can kind of get a bunch of people to start using YouTube, that eventually instead of going to my website, they just go to youtube.com. And eventually, it would be this big place where you'd have this giant inventory of videos and this big audiences. And they were right, by the way. That was what they, you know, obviously Google bought them in 2006. Basically the calculation was let's subsidize this cool feature because the prize at the

end is this very big economic prize if we control kind of global video, which they kind of do today, right? So it was a smart economic calculation, right? And so that was very hard. There was a thing called Media RSS at the time that was an open protocol that was intending to compete with YouTube, but they didn't have any subsidization.

You had to pay for your own hosting. You had to get a domain name. You had to fiddle with dials. It just wasn't a competitive product. Sadly, I was part of that RSS movement. I blogged for years, I was a supporter of these things. And then when mobile phones came along, it really kind of accelerated the different, because the corporate ones were very, they had these slick mobile apps and then just adoption.

If you just look at the number of people with computers, like it went from 500 million to five billion over that, from know, sort of the next 10 years. So RSS was actually widely supported until about 2012. And 2012 is when Twitter removed it, Facebook removed it, Google shut down their RSS reader, and it just kind of became this hardcore nerd thing. And then since then, more and more consolidation around these, these five to 10 companies. hardcore nerd thing. the percentage of time people spend online is more and more within TikTok and Twitter and these things. And actually the services have gotten more aggressive about not letting

you link out and like they see it as kind of leakage in their system and they want to kind of keep you there. And so for a bunch of reasons, I worry that, you know, we're fairly soon going to just, they're still going to exist, but that they're, that sort of the relevance is going to be steadily declining. It was something I just learned recently that Instagram in some parts of the world, it's mainly used as a communication device. I for me, yeah, I don't know the exact data on it, but email has definitely been in, it's still used in corporate context,

but young people it's texting WhatsApp, Instagram DM, like it's in severe decline. So after the corporate version next comes blockchain. Yeah. So, so yeah, so sort of the summary in the 2000s, right, is I think we made this kind of Faustian bargain. On the one hand, like, let me just say the good side, so I don't sound too negative, which is the good side is we now have 5 billion people using smartphones. They have a lot access to a lot of free services, you know, thanks to open source software and free services, you can buy a $10 Android phone and get on the internet and participate.

And so I think generally the internet has been a very positive thing. I think that along the way in that process, kind of shifted over to using networks that do have gatekeepers, that are controlled by, in a very centralized way by these companies. And that has had, I believe has increasingly

kind of negative effects. You know, if you think of a social network as a two-sided network, meaning there's sort of consumers and creators, the main effect is on the creators, right? So, and I also think of the software developers because in my world I work with them, is sort of they're on the kind of creator side, right? So the sort of so-called supply side

has been mostly negatively affected. So if you go to, why does someone go to TikTok? They don't go to TikTok to see TikTok's content, they go to see the people on TikTok. Yet those people on TikTok are not making any money. TikTok is making many billions of dollars through advertising and other things. Those people are not getting paid. Sometimes they have these de minimis creator programs, but they're literally sub 1% of revenue. They're not material. And so what you have, and you may have friends like this, I have friends like this, you have to go and basically do all of these gymnastics to make money, to go and, you know,

a sponsorship or sell body spray or do like, this is what these people do. YouTube, by the way, is the exception. They do a revenue share. Every other social network doesn't. They take all the money. In both cases, you don't own your audience. You don't own your audience.

They can remove you, and that's the most prominent thing, which is called deplatforming, right? Which we've seen happen, especially in the pre Elon Musk Twitter era, where activists, political figures were removed from the platform. That's very politically charged, obviously. There's also something that's much subtler

called shadow banning, which we know happened. It does happen all these networks, which is you're still on there, you're still using it, but your tweets don't show up or they don't show up as much. I think a much more, you know, the nuanced version of that is there's dials essentially inside of these companies, and they can just turn the dial and they can say I want less of that person and more of that person, right? Why would the gatekeepers care about this?

Yeah, like when the book mostly I talk about economics. So there's a political dimension potentially, like I think with Twitter, pre Elon Musk, there was maybe a political motivation. And some of these tech, a lot of these tech companies have political motivation. So there's that. But I think it's primarily economic.

And so let me explain. So like TikTok started off, kind of blew up four or five years ago, it was relatively recently that it got, it has been around for 10 years, but of blew up four or five years ago. It was relatively recently that it got, it was been around for 10 years, but it got really popular a few years ago. And it got popular with a few creators who had like hundreds of millions of followers, social networks don't like that.

They don't want to be dependent on five people. They want to have thousands of people with a million followers, not five people with a hundred million followers. Right. And so they, you hear this again and again, from the people that build audiences on YouTube and TikTok, they turn the dials, they turn the dials so that, you know, they have a more diversity of people that they depend on because they depend, you know, if they get too big, Mr. Beast gets too big, Joe

Rogan gets too big, he cuts the deal with Spotify, right? He leaves YouTube, right? Number one, number two, how do these networks make money? When you go to a feed, there's two types of posts in the feed. There's what's called organic and promoted. Organic is just not paid for and promoted is paid for. When you go to search, by the way, same thing. You search and there's ads, those are promoted, sponsored, and then there's the free links. All of these tech companies are basically predicated on the idea that they have to go

read the Wall Street reports. They have to grow revenue year over year. You can't be a tech company and not grow revenue. But the problem is, you say a company like Google or Facebook is they've kind of saturated the world. I mean, they can still grow somewhat, but they've got many billions of users. So how do they grow revenue? They grow revenue by shifting the mix of promoted and organic.

And so if you notice this, like Google, for example, on your mobile phone, most of the times you search, you'll get almost all ads or Google products on the first page. Amazon, you'll see more and more of the page is taken up with sponsored links. Right? Same thing in all of these services. And so this is not, by the way, this is all kind of a pure capitalist. They're just maximizing profits. They're doing what smart businesses do.

And by the way, a lot of them use AI and other things. So this is probably happening by machines doing it and things, but the machine saying, how do we optimize profit? Okay, this person got to a million followers. Now let's turn down the dial. And if they want to keep growing, they're going to have to pay for it. They're going to have to pay for sponsored links. Right.

If we go to something to get clear information and what we're getting back is promoted information, and sometimes we don't know which is which it's really confusing. I agree. I mean, like, I think, I think particularly like Google has become a mess. There's not really any choice. There's Bing. There's not actually any other real there's duck.go, but that's actually Bing. There's not really choices.

It's a lot of their own properties. So like Yelp used to be the top link. We've searched for a restaurant. It used to be the top link and they demoted them, they put the Google restaurants, this got so bad that the CEO of Yelp was in front of Congress saying, hey, this is not fair, unfair competition. And then you search for travel right now, I don't, on a mobile phone, I don't think you'll get a single actual organic link, it'll be all paid for. Look, I, when I use these things, I'm always like immediately scroll down to the organic stuff. But most people, I don't know if they know that. And they probably

get bad results. And by the way, even the organic, I mean, this is, you know, the organic things too are highly skewed these days too. And I think it's severely diminished the utility of these services. I mean, Google started off, I remember like very famously with no ads on the page, they eventually added one link at the top and it was very clear, it was this big blue border, don't be evil, that was their motto. And they were referring to other internet services that had too many ads and were deceptive and that was kind of their whole thing, was like, we're going to keep it clean and simple and not do that.

And I think it severely degraded the quality of the internet. Even the organic is messed up because of this huge industry that's about around gaming, it's severely degraded the quality of the internet. Even the organic, right, is messed up because of this huge industry that's about around gaming, it's called SEO, right? And it's like, how can you optimize to get up there? And then there's other consequences, like there, I mean, this is also getting to AI, it's like, well, how do, if you're a content site, how do you make money?

Well, you make money, Google doesn't pay you, they take snippets. When you have like a new site, you make money Google doesn't pay you they take snippets when you have like a news site you say Google it's okay if you index me and you Use my content just send me some traffic back But then they'll do stuff like they'll do this thing called one boxing where they'll actually like if they just Wikipedia they take the content And just show it and don't even put like maybe they'll put a link down here but it doesn't get clicked on and so then you have this whole other problem, which is people are giving their content and

they're not getting clicks back. And so what that's doing is it's just kind of anyone who's not one of those five companies who's just trying to run a website is in freefall from a business point of view, which is why outside of maybe the top five newspapers, the rest of the media industry is kind of going bankrupt essentially as an example. We haven't talked to AI. I think if you're an illustrator, before generative AI, you could put your illustrations online and maybe show up in a search engine and then get some clicks and then maybe put some ads or have a subscription.

In this new world, people are just going to get the image. They're not going to click through. So there's a whole other kind of wave of this coming. So I think it's created all of these downstream negative incentives that not only is it degrading the search results, the social network experience, but also all the things downstream that depend on those things. L-M-N-T. Element Electrolytes. Have you ever felt dehydrated after an intense workout or a long day in the sun? Do you want to maximize your endurance and feel your best? Add Element Electrolytes to your daily routine.

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And since then, it's become a term people use to describe a computer system in this design. Bitcoin was designed to be a payment system that had no gatekeeper, right? A payment system sort of going back to what we're talking about protocol networks that are democratically owned and controlled. Bitcoin was designed to be a financial system where there was no gatekeeper, no boss, no one in charge, just the community, right? That was the idea and that's what the paper talks about.

Bitcoin is its own interesting thing and it's evolved and it's got its community and it's kind of its own thing. But what happened in 2015 is that a group of people said, what if we took that same architecture and instead of just focusing on a financial system, we made it a general purpose computer? So think about like, kind of analogize it to like a Blackberry, pre-iPhone, you had a Blackberry, it was a computer that did like kind of one thing basically

It was like email But then Apple came along and had an app store and said anyone can write an app for it And so you can kind of think of aetherium is saying let's have it's not literally an app store But it's like that like anyone can write software for this blockchain And then since then people have aetherium has evolved and people have created kind of variants on aetherium and other what I would call programmable blockchains. And then people build applications on top. And that's when I kind of post Ethereum got really excited about it and said, this is

really interesting because it's, to me, it looked a lot like a computing movement. And so, you know, we have a history of computing movements. So computers, you know, sort of invented in the 30s and 40s. And then you had mainframe computers and, you know, mini computers and PCs and the internet and mobile phones and AI. And in each of these cases, you had these programmable devices or systems. And in each case, you had sort of the early computers that came out like the early PC. And then you had a bunch of enthusiasts come along and make stuff for it. And then at some point, some of the stuff they made got really popular. And it sort of grew as like a hockey stick. And then at some point, some of the stuff they made got really popular and it

sort of grew as like a hockey stick. And so when I saw Ethereum, you know, to me, I was Bitcoin was interesting and I was into it, but then I saw Ethereum and I'm like, wow, this is really interesting because it's, it's an open canvas. You can design it's it's software. You can, you can build anything on it. I refer to blockchains as computers in the sense that, that you write software for it, they store information, they operate on that information.

That's what a computer is, defined by its functional properties. But it's not a physical computer. Ethereum is not a physical, it's not a device. It's a virtual computer that exists on a network of other computers. So Ethereum today has, there's something like 20,000, 30,000 kind of what are called validators that are kind of computers that run. And when you submit code to it, it's actually submitted to those 30,000 and those 30,000 every so often, like every minute come together and say, this is the state of this computer. And then they run code and then they functionally, it behaves like a computer, but it's kind

of this computer in the sky that's owned by nobody and accessible to anyone. How similar is that to Bitcoin? That architecture is very similar. That's what a block, a blockchain is a computer that kind of runs on top of these networks of devices. And the difference is that blockchain has one application that it runs, which is the Bitcoin application, which is this application that says you can have a Bitcoin, there's only going to be 21 million Bitcoins. You can't double spend.

It's like a set of rules, financial rules that underlie the Bitcoin system, but that's the only kind of application. It's like a computer. We have one app. Okay. Ethereum is a computer where you can upload any app, right? You can write anything you want. My understanding of the benefit of Bitcoin is because of that 21 number, yeah, it creates a limit. You can't print money. My understanding of the benefit of Bitcoin is because of that 21 number, it creates a limit. You can't print money.

Yeah. Bitcoin is the fans of Bitcoin tend to be people who are concerned about inflation. They tend to be fans of Austrian economics, Milton Friedman, Hayek, that kind of thing. They see the main benefit is you can't tamper with the supply. And I think that's interesting and we could talk about that. Ethereum has a different idea, which is it's sort of like Bitcoin is interested in money. Bitcoin is for people that have views on money. Ethereum is more tech. So it has less of an opinion on money. And there is a token that's called ether that it uses, but it uses it more as a kind of fuel for the computer. So whenever you want to run software on the Ethereum computer, you have to pay for it with ether. It's like a timeshare system, because it has limited resources, and so you pay for it, and you pay for it with a token. And so it's

a sort of, and then it then it uses that payment you made to pay the hosting providers who run the code. And so it has this little micro economy. And that's sort, and then it uses that payment you made to pay the hosting providers who run the code. And so it has this little micro economy and that's what, and so when you buy ether, you're not making some sort of statement about inflation or economics. It's more, you're saying, I think this computer might get more popular and more people will want to enter this economy. So it's very different in that sense, right? So I think, I think it gets lumped into it.

And that's partly because, you know, if you don't dig into the details, you just sort of see this, hey, this is thing, it has a price. And like, it must be like this, but it's actually quite different. Like Bitcoin is this sort of monetary thing. It's the people involved in it are much more political. As an example, the people in Ethereum tend to be more sort of they're interested in the tech. The people in Ethereum are more like probably like me, like concerned about the internet and big tech. The people in Bitcoin are concerned about big government. Okay, like maybe that's a way to put it. So there's different reasons one might, you know,

blockchain world is very broad and there's also, you name it, there's some weird community that has a blockchain as into, okay. So like it's a much more complex, it's sort of like the internet or something, right? There's websites that do this and this, and there's just different genres and movements and the same thing is true here. And so, you know, a natural question you'd ask is why go through all this trouble?

Well, you know, why not just use a regular computer? I like to say blockchains are computers that can make commitments. So Bitcoin, it commits there will only ever be 21 million bitcoins and it commits that in the core code of the system. You can't change that. Like you would need all of the people that run the core code of the system. You can't change that. You would need all of the people that run the software, that probably I think there's at least 100,000 of these miners, to all kind of collude.

Actually, technically, 51%. You need more than half to collude to change that number. And actually, with Bitcoin, you'd need not just the 100,000, you'd need all the different what are called wallet providers, you'd need Coinbase,'d need like this vast array of people to collude. So it's just not gonna happen and it's never happened. And in the 15 years it's been around, nothing like that has happened. And so it's probably about as strong assurance

as you're gonna get in the world that like there's this 21 million limit, right? And so it makes a set of commitments and those happen to be financial commitments. With Ethereum, you can make other kinds of commitments. You can make a commitment that like,'s this 21 million limit, right? And so it makes a set of commitments and those happen to be financial commitments. With Ethereum, you can make other kinds of commitments. You can make a commitment that like, for example, you can build a social network on Ethereum and you can say, I commit to the following rules.

If you're a creator, I chart, you know, and you make money, you get to keep the money. If you build an audience, you get to keep the money. You can do whatever you want, it's software, right? As I would argue, the internet today is one you can't really trust these companies that they change the rules They change their privacy policies. They change how they handle data. They change how they handle We were just talking about how Google's changed over the years, right block change. You can make a search engine

You can make a social network. You can make a game You can make a financial service where the rules are baked into the code The code is open source anyone can go look at them and they can't change So they're that's why I call them computers that can make commitments and I and Yeah, you can build all these different kinds of applications and what we're seeing now since the advent of aetherium is sort of More and more people building things including things like social networks and games and that's that's what I do in my day job is Invest in those things. How do we know that they can't get corrupted? Let's use Wikipedia for an example, which is an open, it's an open platform,

but a lot of the information on Wikipedia is not correct. Yeah. Wikipedia is, I mean, look, Wikipedia is an interesting case. I think that it's probably more political organization than most people realize. If you just go look at their, you know, budget and how they spend it and all

the different donations they make and things like that. Anything can get in the end can get corrupted. How does it get corrupted, I guess I would say. For example, the most popular operating system and one thing we haven't talked about yet is open source software. Open source software began as this radical movement in the 90s. Today 99% of software in the world is open source software. People may not realize this, but like Linux is probably

99% of the operating systems in the world. So every Android phone runs on Linux, every server in the world. This is a operating system made by a community of software developers, right? Could it get corrupted? Yeah, it could. I mean, but like it's thousands of people,

it's all open. You can go on GitHub and you can go read it. If it changes, you know, anyone can audit it. You'd have to go and get all those thousands of people to agree to corrupt it. What would be the incentive? And there's no incentive. I mean, maybe your company could hire people

and try to bribe them or something, but it's decentralized enough that it has stayed, you know, pretty good for that whole time, right? The assurances of blockchains are similar. Everything is open. All of Ethereum's code, anything you write for it is open. It's all auditable. There's nothing that's closed, meaning you can just literally go and look at the code. And if you're not technical, you can hire somebody or you can have third-party monitors, right? So it's all open. So you don't have to trust somebody. And then it just is designed in such a way that it requires a whole bunch of people with

different sets of incentives to collude to corrupt it. Anything in human affairs can be corrupted, but it's designed to be highly resilient to it. But it's funny that there's prior work to Satoshi, the Bitcoin paper, including a dissertation in the 80s by a guy named David Chom, who was a computer scientist that was sort of the inspiration in some ways for Bitcoin. The paper was essentially the title was something like, how do you get a bunch of adversarial actors together to act in concert?

That's a lot of what Ethereum and Bitcoin are, is there these sort of game theoretic designs that create these incentives that make it very hard to corrupt the system. Right. And so you can actually like calculate, for example, on Ethereum and Bitcoin, the cost it would take to bribe everybody, you know, and I think on Ethereum, it's, you know, it's like $50 billion or something. It's something that there was a paper that just came out recently on it.

But that that's sort of how they're designed. They're designed in such a way that they sort of assume the worst. Would there been a way to design Wikipedia that assumed the worst and where it was actually honest? That's a good question. I mean, it doesn't have any incentives, right? It's all based on sort of reputation. So like the, one of the reasons that in blockchains, there is this

financial element, right? Is you need the financial element to be able to design the incentives to make what you talk about in blockchains, when you talk about the security is the cost to attack it. So I have to think about that. But you kind of need a Wikipedia with incentives in such a way that you have sort of a cost to attack it, right? It's a very relevant question, by the way, because it's about to happen with AI, the big debate now around AI should it be open source?

In most cases in history, when there are gatekeepers involved, usually the gatekeepers turn out to be the bad guys. I tend to agree. I think it's sort of the, you know, it's the Winston Churchill, the only thing worse than democracy is every other form of government, right? It's like, it's just sort of the, I think the same is true of computing systems. I like that. I I'm generally a fan of sort ofcontrolled, that they're chaotic, they're messy, but

it's probably better than every other. Essentially what you have with these corporate networks is monarchies. Linux is a democracy, and the web is a democracy, and Facebook's a mon and like which is better and maybe maybe those work for a while. Maybe they have a benign monarch, but at some point you probably don't. And is that what we want for the internet? Do we want to have it be set up in a way that we have five people to control it? And you see it with Twitter, you know, like maybe you liked the people before Elon, maybe you like Elon, but like then there's a secondary question of should that matter so much?

Should it matter who happens to own this thing that the global town square can trade hands like that? Shouldn't it be owned by a community? I think that that's the fundamental problem, is that you even allow that to happen. The communities are messy, and like you said, maybe Wikipedia has gone off the rails, I don't know. Like I think in theory, by the way, going back to your Wikipedia question, like one answer is what's called forking in code, right, which forking is you copy it and create your own version of it.

And you can do that with Wikipedia. It's all open and you can copy it. The challenge with copying it is then how do you, you know, the Wikipedia is valuable because you've got some person out there who's like taking care of like the page on like Jupiter and someone else's like Abraham Lincoln and like if you copy it, how do you get that community and also how do you make sure it shows up in search engine results and how do you make sure it so there's all this stuff that like makes it kind of sticky the current Wikipedia but in theory that's's its voice and exit, right? Are the two sort of famously the ways to have political influence and the exit is forking

in computing world. You copy the code and you leave. There are other interesting things like prediction markets are interesting. So if you like, there's a whole history of this, which is letting people kind of make basically make bets on what's going to happen in the future and what facts are true. And there's a whole kind of interesting area of research there. There's been famously like the CIA actually launched a prediction market. I think it was the early 2000s as a way to predict like disasters.

The idea was you could let people bet on is there going to be a terrorist attack? And even though that sounds awful and they shut down like within like three days because it was so it was so controversial. But the idea was that you like wouldn't it be better to surface that information and then try to prevent that attack? And the one way to do it is market like markets are basically like the stock market is like you know when Tesla stock goes up that's a bunch of smart people making a bet that like Tesla is going to sell more cars in the future.

And so there's been a lot of work around trying to create better information systems. Do you know what that CIA operation was called? I had to look it up. I could send it to you after. Yeah, it was like it was sort of because I used to follow prediction markets and I was like, I remember seeing that and then I literally I think it was like a New York Times article the next day and then it's like, I can't believe they actually did that. I get the academic motivation, but the pragmatic reality of it didn't play well.

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So you can build, so for example, there's a, you know, we're investors in a relatively small but emerging social network called Farcaster. And what's interesting about Farcaster is it's like Twitter or something like this, except you own your name and your audience. And just like with web browsers, you can switch software. So if you think that one piece of software, you don't like how they change the rules or the ranking, or the way they look or the ads or whatever, you can change it and you control that, right. And if you build an audience, you own that audience. And if that service is messing with you

and trying to take your money and do things, you can change that, right? So like one interesting question in the future is people spend more and more time playing video games and soon they'll use virtual reality headsets and there'll be these giant virtual worlds. And will these worlds be kind of similar to what we've been discussing kind of controlled by five companies or will they be more like the World Wide Web will they be open

systems where anyone can add up another part to that world and can open a store and create goods that they sell or create music or create art or whatever they might want to do and so using using a blockchain like Ethereum, there's a sort of a wave of entrepreneurs who are building new internet services, financial systems like, you know, we mentioned Bitcoin and there's other kinds of things around payments and lending and whatever you might think. Social networks, media, I think is very interesting so you would know much more than I do but I don't think that Spotify and things have been particularly good for musicians in many ways.

By their own stats, I think Spotify's stats is something like, of the 8 million artists, less than 20,000 make $50,000 a year or more to sort of the average American salary. So obviously, if you're a major artist, you're fine. You have many ways to make money, but if you're a smaller one, you aren't. There's a famous blog post, a guy named Kevin Kelly, who's a co-founder of Wired, he's a brilliant author, wrote a famous blog post called A Thousand True Fans. And the idea was that the internet, this was sort of in the early 2000s he wrote this, the internet was going to change the economics of creativity because prior to the internet,

you had to get mass media, you had to get on the radio, you had to play in stadiums, and that was because you had all these intermediaries taking tolls along the way, and you would only get a small percentage of it. And the idea, and this was the hope in the 90s and early 2000s, right, is that the internet would change that because you'd have a direct relationship. And he called it A Thousand True Fans,

because if you do the math, if somebody's, let's say somebody loves you, I'm a chef, and I have great recipes and they love me. Can I get a thousand people to pay me 20 bucks a month? 10 bucks a month. That's $10,000 a month. That's $120,000 a year. That's a living. Right. And so the dream was. We would have an internet of millions of people pursuing niche interests, not having to kind of sell out to mass audiences, building direct relationships.

And this is kind of what should have happened and didn't happen. Now we go, we fast forward and you look at the economics of Spotify or YouTube or TikTok and we're back to the mass market audience, right? The mass market logic. And so what you can do on blockchains like Ethereum is you can build internet services that I like to say that kind of combine the best aspects of corporate networks with advanced functionality. You can use things like I discussed earlier, subsidization,

because blockchains have economic models and they can subsidize things with tokens and other things. Today you can build, like the one I mentioned, like Farcaster, it feels just like a modern social network in terms of onboarding and all the other kinds of things. You can build things that really compete with these corporate networks, but which, because of the commitments

that blockchains can make, have the societal benefits of protocol network, and let, shift power to users. Let's use Substack as an example, because that's sort of a new model, but it's not built on a blockchain, is that correct? That's right. How would Substack be different if it was on the blockchain?

Well, so Substack, look, I are, my firm's an investor in substack. I am a fan of substack. So substack is built on email. And so you go to substack and you get people to sign up and they give you your email address and it kind of helps you manage that and it charges 10%. And I think the substack founders are great and well intentioned. But the reality is you have no assurance as a user that they won't change that later. That's the difference with the blockchain is that like that 10% there's no assurance

that that will change that their data privacy policies won't change that you know and look I've been doing internet long enough I remember when Twitter had all these policies it was open you could download your stuff you could do this the reality is over time like what happened with Twitter is that they raised a bunch of venture capital, they didn't have a business model, they finally decided, you know, with their venture capitalists that the only possible business model was advertising. At the time, for five years or so into Twitter's existence, they didn't have an app. You couldn't go to the app store and download Twitter. You download Tweety, Twitlator, Tweetdeck. There were like 50, it was like the internet, like you just go download a browser.

They didn't have an app, right? Then what happened is they raised money. They needed to do ads. They realized to do ads. They had to have a controlled sanitized environment. They had to own an app. They bought an app. They shut down the ability for other people to make apps and they, you know,

fast forward, it's a Twitter of today. So like, if you follow the history of these internet services, they often start off very friendly, very low rent because in the beginning they're a startup, they have to, right? And actually in my book, I have a whole section on this. I call it the attract-extract cycle and I argue that every corporate network goes through this cycle. And so when it starts off, it's of course, it's a startup, it has to attract people and it's doing everything, it's being as solicitous as possible. It's trying to get people to come in over time.

So every technology falls kind of an S curve. This is just, this is not my idea. This is just standard knowledge, right? There's an S curve. It starts off kind of slow. If it works, then it kind of moves up really quickly. And then at some point you run out of people. If you're successful enough to get to the top of the S curve, at some point, if you've

been really friendly, Hey, I'm friendly, I'm open, you can build stuff, it's low, low take rate, you know, at some point, you know, you raise money, probably the founders are gone, right? Most of these companies, the founders are gone. It's run by professional CEO and they're going to be like, why are we charging 10%? Like let's charge what we should. Let's why are we letting these other application developers on here? And this has happened over and over and over in the last 20 years on the internet right like the only large tech company still run by the founder is

Facebook right at some point the corporate logic takes over look I mean as they should they're fiduciaries to their shareholders and they are gonna maximize profits and the logic of maximizing profits when you own a big network is to start to extract from it at some point. So what I like to say is blockchains are instead of don't be evil, it can't be evil. You bake it into the logic of the code. You can dislike me. You can dislike everybody I work with. You can not trust us.

But it's just like Linux. Like you don't need to like me or trust me. It's in the code. It's open. And you can go look for yourself. And that's the assurance, right? The assurance is a community, it's a game-theoretic design that makes it very hard to corrupt, and the rules are in the code, right? That's the difference.

That's what a blockchain gives you, that an existing internet service does. And I would say, even if you trust all these folks, like I do trust a lot of these entrepreneurs, I work with them, but eventually the logic of these, the kind of corporate profit logic just has to take over like it's just the nature of these things and people leave and Management changes and if you don't do that you get fired right because if someone else is going to come in and double the profits like it just you can only sustain that so long and so Having computers and and internet services that make these strong commitments is valuable.

The next section of the book is community created software. Tell me about that. Okay, so maybe just a little bit in the history. So up until the 1970s, the way you made money in computing is you sold hardware. Like companies like IBM would sell big machines. And then Bill Gates came along and he had a contrarian idea, which is I'm going to sell software. And at the time, software was this stuff you gave away with the hardware that was a contrarian idea, which is I'm going to sell software. And at the time software was this stuff you gave away with the hardware. That was a contrarian idea. And he was right. So it turned out that the value was in the operating system and the

hardware became interchangeable, right? Whether you had a Dell or a compact didn't matter. What you needed was to have windows and to have office. I mean, that was a brilliant idea. But then what happened is this sort of rag tag group of left-wing activists, which is how open-source software started, Richard Stallman and MIT, who didn't believe in property rights, like software should be open and free. They started creating all these really interesting software products,

including all these variations of what's called Unix, which is a really powerful operating system. And in the 90s, Linus Torvalds, who was the creator of Linux, took these ideas and kind of, I would describe it as, made it a more pragmatic technology movement, as opposed to being kind of politically motivated. And he built Linux, which is a, fast forward today, the most popular operating system in the world. People started building kind of every level of software,

so web servers, databases. And at some point, the software industry realized, people started building kind of every level of software so web servers databases and At some point the software industry realized wait a second. We're not going to be able to Keep selling software because people are making it for free so if a group of people on the internet who don't know each other are coming together as a community and Writing software and it turns out that software is open It's great and actually this kind of surprisingly happened companies prefer to use that software because they can see the code. They want to be able to see the code. They don't want to trust Windows.

It's free but really the more important thing to them is they can see the code and they can change the code. Right? And so like people like that. And so open source became more and more popular. And then what happened is the tech industry moved into, if you follow the tech industry, you'll hear this buzzword of software as a service. Okay, we can't make money on software anymore, so we'll move up to doing services.

So services means, you know, think anything you need internet service for is a service, right? Like Netflix is a service. Microsoft calls themselves a services company now, like Office, like Adobe is now a service. And their idea was, well, we can't really sell software anymore. Like selling shrink-wrapped $59 software, downloadable software is not going to work in a world of open source, we can't really sell software anymore like selling shrink-wrapped $59 software downloadable software Is not going to work in a world of open source. We're going to sell services, right? So I think a very interesting thing to happen right along the way is that people realize that a community could come together and actually build better

technical software Than companies there's a famous essay from the 90s called the Cathedral in the Bazaar by by a guy named Eric Raymond And he was in the Linux movement and talking about this and he calls it the Cathedral in the Bazaar by a guy named Eric Raymond. And he was in the Linux movement and talking about this. And he calls it the Cathedral in the Bazaar because the idea is sort of Microsoft is the cathedral and you have these priests, right? They're kind of secret and they're in this tower and they're creating this magical thing called Windows. And then you have the Bazaar, which is this cacophonous, chaotic mess of people, but they're, you know, sort of like markets or something like a bizarre, right?

Like someone will create something, something, something will be good. You'll take two steps forward. Someone makes something bad, but then other people will come along and fix it. And maybe someone, you know, will suggest something and together in this sort of chaotic way, they end up creating better software. He had a famous phrase with enough enough eyeballs all bugs are shallow meaning, you know, no matter what bugs, you know, like a security flaw, a mistake in the software, just by making it open you see them, right, and they're more secure and you end up actually having much better software. And so a very surprising thing, I think, if

you kind of were sitting in the 90s, just to fast forward today, is that literally 99% of the software in the world is open source. It's just amazing how much it won. And I think that's by senses that's underappreciated outside of the technology industry that most of this, by the way, even your Apple computer is probably 70% open source, you know, and then Android is basically fully and all the backend stuff you connect to from your computer on the other side, that's all open source, all the new devices, VR, self-driving cars, they're all Linux open source. So just completely dominated. Would blockchain be considered open source? Oh yeah, for sure. If you're not open source, you'll be immediately kind of rejected and

banished from the community. It's deeply embedded in ethos. The limits though of software, right, is software, you know, Linux is a piece of static software. When you actually want to run the software, you got to pay money to, you know, to post it, to pay for electricity, to pay for bandwidth. And that's why the tech industry was able to sort of move up the stack and charge for services, right, is that you couldn't, there's no open way to run services. And these communities can't come together and fund that. They don't have financial, they're a bunch of hobbyists, right? So how are they going to create a community owned

Facebook? You know, how are they going to create a community owned Netflix or something, right? Like you just can't, like it just has these operating expenses that can't be created that way. And so in that section, one of my arguments is that one of the interesting things about blockchains is they let you make essentially community-created services. They do that partly through this economic model. So earlier I described the Ethereum token, and so the way it works with Ethereum is you pay money to kind of access the system. And this, when I say you pay money, it can be the software provider can pay the money

in the same way they pay hosting costs, so it's sort of not something the user necessarily sees. And that then money sort of cascades back out to pay for the electricity and the hosting costs and everything else. And what that means is, you know, for example, you can have a social network where one person creates the client software and somebody else creates the algorithm for the feed and somebody else creates, like, basically all these different people come together and create these services. And software, we talk about the concept of composability. Composability is software as Lego bricks.

It's the idea that you can take these small pieces and put them together and build interesting things. That's one of the main reasons why Linux has been so successful in open source software is one person comes along and builds one little Lego brick and someone else builds another Lego brick and then someone else combines those two Lego bricks. You have all of humanity coming together and you get this kind of compounding growth of knowledge and Blockchains have a similar kind of way of doing that with services so you can have one person can come along and add a little bit to this to this new game or social network or financial

Service and someone else can come along and do it and then collectively they kind of build through Lego bricks these services That end up sort of going back to Cathedral in the Bazaar. How do these collectives communicate? I mean so like with open source code most of it happens on these websites like GitHub there are communication in the code there's things called pull requests where you make some change to the code and then you ask for it to be included and then they have these forums where they discuss it and they have, you know, it's like forums.

But there's a whole community where people who know how to do this stuff, know where to go to be able to be involved. Oh yeah, for sure. For sure. Yeah. And there's these, these are various large communities and they exist around open source code. They exist around blockchains and there are, you know, millions of people who participate in these communities. Take rates. So a take rate in any network or internet service, there's money flowing through the service.

And so for example, when you use Uber, you pay some amount of money and the driver receives some amount of money. The take rate is the business term of art for what percentage of that money that the operator, like Uber or the company, takes. Okay? And so the take rate of internet services varies widely. Social networks like Twitter and Facebook take 100%.

And what that means is they run ads and sell products and do other things to make money. The aggregate revenue of the top five social networks last year was $150 billion, so they make a lot of money. And then they basically don't, with some minor exceptions, don't share that with the people who actually create the content on those networks. Apple has a 30% take rate. And what that means is if you create an app and you, this is actually a big active area of discussion

going on now. Like Spotify is suing Apple and a bunch of other people are epic, the maker of Fortnite is very unhappy with Apple because of this take rate. So anything you do in the app store, if you sell products, if you're Spotify and you sell subscription, if you're Netflix, you sell subscription, if you're a game

and you sell premium service, 30% of that money goes to Apple, right? Which is a very, very high take rate for providing payments. Like typical payments, like credit cards are like two and a half percent. So they charge, you know, 10 times that Android does the same. And by the way, if you notice, like you ever tried to buy an audio book in the Amazon app and you can't, and they'll say you can't do that and you have to go to the web browser why is that because Apple charges 30% in the app and Amazon doesn't want to pay that and so you have to go to the web

which is this the last area of freedom on your mobile phone as a legacy of the open internet where they can't do that. Like the web, the browser on your phone, for cultural and other reasons, like it's the one place Apple won't touch. Because it's been around for 40 years, and it's always been free, and people will get really upset. So take rates is the economics of networks.

It's how much of the money, so just sort of one way to picture it is, you've got a network, and it's sort of a bunch of nodes, people are sending information and money and other things back and forth to each other, and how much money does a gatekeeper take? Right? And in protocol networks, which I talked about earlier, there is no gatekeeper, therefore there is no take rate.

It's all free. That means that if you make a website and people pay you $100, you get $100 like period. But on, you know, on the app store, they take 30% on Facebook, they take 100% on, you know, eBay, they take, I think it's 10%. You know, so it's all over the map. And I kind of go through it in the book, like the take rate, basically, none of it is, you know, it's not like eBay charges less because they're nicer. They charge less because it's easier for you to switch. You know, if you're selling shoes, you can go to StockX, right? And Facebook, it's very hard for you to switch.

So it has to do, basically the take rate is higher when it's harder for you to go to alternatives because you get kind of, the more you're stuck, the more they charge is how it works. And so, yeah, there's the kind of main point of that is that there's a lot of money at stake. There's many trillions in dollars in value, if you look at the value of these companies, many hundreds of billions of dollars in revenue, and how that money flows,

does it flow to the center of the network, sort of the owners, or does it flow to the edges of the network, has to do with how these systems are designed. Had the world evolved differently, and had RSS and an open protocol Been the dominant way in which we build social networks I believe that that hundred and fifty billion in revenue those social networks make would go to the edges instead

right, which is you know, two million jobs at the The average American salary like these are massive I think like I have a section in the book on the fall of RSS Which sounds like an arcane weird technical thing. My view is it's the most impactful event of the History of the economics of the internet the fact that social net Well, the fact that social networking is owned by five companies and not why isn't it like the web? Why is information delivered in this open way? Why is email delivered in this open way?

But once we add friends into it and audiences, you know, it's now closed, right? And all that money gets rerouted. When people think about things like having these gatekeepers, they tend to think of the political aspects, like they can deplatform because it's very visible and it gets a lot of attention. But I would argue, and that matters, but I would argue that the economic impact is really what matters, is the most important thing, and that has to do with these takeaways, like how much money, where does the money flow? What may fall within the sphere of tetragrammaton? Counterculture? Tetragrammaton.

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I'm personally concerned with censorship because living through the explosion of hip hop in the 1980s, all of the gatekeepers were trying to ban hip hop. So I've seen beautiful movements from the ground up be stifled and it's really a miracle that we know about hip hop. Yeah, I mean, I come at it more from the tech angle, obviously, you from the creative. I think of it like my partner, Mark Andreessen,

he created the first popular web browser. I don't think the web, which then led, catalyzed the growth of the internet, I don't think the web, which then catalyzed the growth of the internet, I don't think the web browser would be allowed in the App Store today, in the Apple App Store. One of the first things his boss at the University of Illinois said was, can you remove the porn?

No, you can't remove the porn from the web. We are not pro porn, but it's an open system, right? And that would be something Apple would say, hey, you have the new system where you can anyone can do anything like including you know make a bomb tell you how to make a bomb or do what the it's an open it's just an open it's a web browser like so and I think you're right like from the I don't know the creative side as well but I think that anything that's sort of outside of some overton window is probably not going to be allowed

maybe there's some exceptions like the new Twitter or something. But like I come from the view that most interesting innovation comes from the edges. Absolutely. It always has. And that's so it's worrisome, right? That you'd have, yeah, that you'd have these systems that blows that off and do so from a deep platform. Like there's also, like I said, there's these subtler things, there's shadow banning.

It's like they wouldn't just have to ban hip hop, they could also just demote it, or they could censor certain words, or they could, you know, YouTube does a lot of things where they demonetize. So they allow you to stay, but they don't let you make money off of it. So there's all sorts of, you know,

it's a very, there's a whole range of ways in which that are kind of get less attention, but are still very impactful. When you're demonetized, does that mean they don't put advertisements in your? And you can't make money. You'll see this. If you go on there, you search for that. You'll see all these people like, because they did something that they didn't, that the sensors didn't like.

They can't make money and they'll be complaining about how they're demonetized and they won't put ads and they won't share, and obviously they don't get revenue then. And like their business goes away overnight. how they're demonetized. Yeah. And they won't put ads and they won't share. And obviously they don't get revenue then. And like their business goes away overnight. Like they're completely dependent. They have no, you can't switch, right? Cause your audience is there and all the things you built are there.

Building networks with token incentives. Yeah. So this is where blockchains are kind of inspired by the video game industry. So maybe I'll talk a little about the video game industry, which I think is very interesting. Great. I think, you know, William Gibson famously said the future is here. It's just not evenly distributed.

And I feel like that about video games with respect to media business models. They have been very pioneering with new ways to think about business models and sort of rewind to 1990. The video game industry was similar to the music industry in that you sold the video game. It was like 50 bucks or 30 bucks and you'd buy a video game, right? And that's how music was sold. You'd buy an album.

The internet came along and fast forward, most video games today actually don't charge for the game. They give away the game for free. Like Fortnite is a good example, League of Legends. And instead they charge for the game. They give away the game for free. Like Fortnite is a good example, league of legends. And instead they charge for virtual goods. So in Fortnite, you buy skins and dance moves. And why do they do that? Because they realize that the internet is a giant copy machine.

The internet likes to copy things. And when you create media, there's a trade-off between giving something away for free and charging for something because when you give it away for free you can let the internet do its thing and spread it around people can stream it they can remix it they can chop it up and the video game industry said you know what let them do that you can take fortnight you can stream it you can remix it you can play with it you can play it for free just and and like you go to it, you can play with it, you can play it for free. And you go to social media, you go to YouTube, and video games dominate because of that.

And they said, you know what, we're going to figure out a different way to make money. We're not going to charge for the game. We're going to make people so into these games, and it becomes their social life, that they're going to want to buy an outfit so that they look cool around their friends. And Fortnite is $3 billion billion revenue last year selling virtual outfits That's how they make money And so what they did is I call it the attention monetization kind of dilemma like there's a trade-off between giving something away and charging for something Right. Whereas the music industry

Evolved somewhat during the course of the internet it moved from selling albums to streaming services, but still sort of has the same basic economic model, which is you charge for music. Maybe now you do it through a bundle. By the way, as a result, if you look at the music industry, it's mostly stayed flat in terms of its revenue over the course of the life of the internet. In the same time, video game industry has gone

from 25 billion or something similar to the music industry to $180 billion during that period. Part of it is video games have gotten better and things like this, but I think a lot of it is they've been really aggressively experimenting with new business models. They basically have created these small mini economies in these games. There's a game called Eve Online that's a very famous

game that is a spaceship battle game where millions of people play it and there's an entire economy inside of the game and you can buy spaceship pieces and there's all these other kind of crazy, they actually hired famously an economist, there's like a big New Yorker article about the economist and they have interest rates and there's a lot of video games like this where they have these economies and they have these sort of micro economies.

And so blockchains like Ethereum and blockchain systems were inspired a lot by video games, including this idea of creating these economies with virtual goods. And the idea is with something like Ethereum where you allow people to pay and then you create this little micro economy and the more people that come into the economy, the more they want the token and they can go up. In addition, we asked about token incentives specifically. Okay, so one of the interesting ways in which these little mini economies

can be effective is the following, which is one of the hardest things about building a network is what's called the cold start problem, which is think about a dating website, okay? Like if you're the first person on a dating website, it's utterly useless to you. If you're the hundredth person, it's probably a dating website, okay? Like, if you're the first person on a dating website, it's utterly useless to you. If you're the hundredth person, it's probably pretty bad too, right?

Once you have a million people, maybe it's good, and then once you have a hundred million, it's unstoppable, like no one can compete anymore, right? And so when you're creating a network, you have, at the beginning, it's really, really, really hard. Like, how do you get over that hump? And then later on, it becomes much easier. But that early hump is a problem. So what, you know, as I described earlier, YouTube

helped try to get over that hump by subsidizing by saying, Hey, you can have free hosting. Right. And this has been a long history, my entire career. This is not blockchain. This is just the internet business. Okay. It's like, how do you build networks and how do you incentivize people early on? This is kind of like, there's books and theory and it, because it's like this, if we're in the network business and the hardest part of a network is the cold start, is the beginning, like how do you get over that?

Like Airbnb famously like gave out cereal boxes and did free photography and this and that. You know, Facebook famously like started at Harvard and then went to other schools. It was a whole series of tactics with blockchains. One of the interesting things you have these economic models. And so what if you use those economics to help get over the cold start problem? And so the idea is provide incentives for early users, like financial, like

early users, if you join, you get rewarded with a token and that token gives you some upside in the future development of the network. So imagine an early Uber, right? So early Uber, you're trying to get cars on the network. You give each of those drivers, every time you drive somebody on a ride, you get a token and that token eventually is, is connected in some way to the value of Uber as a service, right? And that value will decay over time. Like the first person who does it gets five tokens

and the hundreds gets three tokens, right? Because at some point, you don't need to give them out anymore because at some point, like, they can just get paid for the driving and they don't need extra incentives, right? And so the whole idea is you sort of taper them. And so there's been some really cool experiments, like... So there's this long this longtime dream among technologists to kind of create a grassroots telecom company

to compete with Verizon. So this goes back 30 years. So there was like, for example, MIT had a thing called RoofNet. And the idea was everyone would put a telecom, like a 5G receiver on the roof. And then it was mesh networks. They would all talk.

This is pre-blockchain. So they would all talk to each other. And so I put one on my roof and it would be like a 5G telecom thing, but it would also talk to you on your roof. And they got everyone at MIT to do on the roof. Actually, New York City has a pretty cool one called NYC Mesh and it's this mesh network of a bunch of wifi things, right?

And so it's been this, like I've been involved in these things for like a long time, like it's really cool. Cause like, what if you could get everybody to sign up for one of these things? And then you could have this sort of telecom system that's not dependent on these big gatekeepers like Verizon. Right. So this is like old dream.

I've talked about this idea for 20 years, right? There was a company called helium that is a blockchain based company. And what they do is the same idea, except what they do is they give out token incentives early on. And so they say if you put up one of these systems early on, the first person gets X tokens. The next person gets a little bit less. And they did this five years ago and they got basically the entire United States covered

with these helium stations. So it was a really cool thing. Now they originally had, they were using this instead of doing 5G, it was like this kind of esoteric IoT internet thing standard. So sort of they kind of picked the wrong thing and then have switched it and actually are now you could they actually have a service you can sign up for it like with your cell phone and it's growing and it's interesting. You know so they basically kind of bootstrap the network using these incentives in a network design that had a giant cold start problem and entrepreneurs had tried to solve for 20 years.

So the really cool idea is what if you could do that with other kinds of networks? For example, there are people doing it with electric charging stations, like anything where you need telecom, electric charging stations, like anything where you need, you know, telecom, electric charging stations, financial systems, like social networks, like anything where you need a large group of people to do it. What if you use various kind of financial incentives early on to get over that early cold start problem? So that's kind of what that section's about. The other interesting thing, like I'll give you another example of an idea I'm excited about, which is it's called collaborative storytelling. And so the idea there is what if the next kind of Harry Potter or Star Wars was created by a fan community like in the same way that you have Wikipedia but you have a creative

fan community who gets together and creates those worlds like you think about how excited people get talking on reddit or something about Star Wars like people get really into this stuff it's like a stuff. It's like a fantasy football league. Exactly, it's like fantasy football, like they all get together, but it's like fantasy storytelling, right? They come together, they create a narrative world, they get rewarded for their contribution through tokens.

And you have to have a system for doing that. Like, if you contribute more, you get more tokens, and there's a whole bunch of mechanisms for doing that. And then, if that narrative universe gets made into a movie or something else, they get some portion of the proceeds. And then what's really cool about this idea is it's cool for the community because they now, instead of,

they used to mention fantasy football, instead of just being passive participants, observers are actually participants and can come up with these stories. But it also is cool because it solves a problem for Hollywood because why is Hollywood making sequels all the time? Because it's so hard to market a new narrative universe. So what if instead you had this sort of million people come together and create it and then

they become the evangelist for this new world? You already have the fan base built in. So this is another example where sort of token incentives are used. By the way, that idea too, like, you know, we're about to have a world of AI where generative AI will let you create a movie cheaply and let you create art cheaply. In that world, I think you're going to have sort of a deluge of media. And I think the valuable thing will be having communities of people around that media who care about it Right and and the way they have skin in the game and get rewarded is by having some piece of that system

And that's what tokens are for so block chains enable users to own parts of the digital services They use tokens are the mechanism by which that ownership happens right a token is a unit of ownership and it can represent a Bitcoin. It can represent an ether, which is like gas or what you need to run software there, it can represent a piece of a narrative universe. It can represent an identity on a social network. It's a very broad and expansive concept. It's a unit of ownership on the internet.

Next is network governance. So network governance is a little bit of what we're talking about with like de-platforming, which is if the internet's a network of networks, how are those networks governed and controlled? The web is sort of this mishmash community of software developers and nonprofit organizations and internet service providers and all these other people who kind of come together and like, you know, if somebody does something really bad and you're a web hosting provider, you might take them down and someone else will take them down

and sort of the community in this sort of messy democratic way effectively is governs the worldwide web and email, right? If you look at modern internet services, they're effectively, you know, they're controlled by a single person or single company But the companies are ultimately controlled by one person You know, sometimes they I assume the content filters on YouTube aren't actually happening by the CEO They're probably a some group of people that are anointed by the CEO But essentially, you know

YouTube is owned by Google and all Google services are ultimately controlled by Google and whatever policies they want. And they have various opaque committees. Who knows what their rules are? I don't know what they are. I would sort of liken it to, we let AT&T decide who can make phone calls. AT&T made really good phones and they made really good phone lines, but does that give them some special ability to decide who can use those things? Like, it's very strange to me that we've allowed these opaque groups of product managers the ability to decide what is correct pandemic information, how the economics of the internet work, who's allowed to say what.

It doesn't seem like a good idea to me. I think the way that the web did it was much better. And I think that as we've now seen how important, I think 10 years ago a lot of these systems were, social media for example, was dismissed by many people as somewhat frivolous and unimportant. I think it's now very clear that it's extremely important and I think it's now time to think harder about how these networks are governed. One of the things that a blockchain allows you to do is it allows you to encode the governance of a network in software and So you could write software that says I'm going to give the power to you could write so you could in one case You could write software that says it's a dictatorship and Chris Dixon controls everything I don't think that would be a good design but that you could do that software

You could also design a system that says anyone who has a, you know, has a voting token is allowed to vote on it. And that's actually a very popular way to do it. People do today, other systems, annoying power to a group of like a foundations. The point is that you now, for the first time ever with blockchains, because remember they're computers that can make commitments, you can write code that says, here's how the network is governed and essentially, it's like it's a little bit like the move I like in the book from the move from

To move towards sort of constitutional government governance. You can now write down the governance There's very interesting experiments going on in the blockchain world where people are trying different kinds of governance systems Some so for example, aetherium is what is much much more, Ethereum itself and Bitcoin are much more governed like the way the World Wide Web is by like the software developers effectively vote on what system they want based on which software they choose to adopt. There are other systems, a whole bunch of things like these in this area called DeFi decentralized finance, where they have tokens like this system like Uniswap and Compound where they have tokens and the token holders actually vote. And these are very active discussions and votes where they actually tokens like this system like Uniswap and Compound where they have tokens and the token holders actually vote and these are very active

discussions and votes where they actually go and they vote regularly on someone could submit a proposal and they vote on it and the vote affects how the code works like if you vote one way the code changes and that's interesting there's other ones that have bicameral systems I mean two houses so like the token holders will vote on something and then there's also like a set of kind of appointed X like kind of foundations and things. And it's very interesting. And so there's now for the first time, there's sort of this, I think this really interesting

experimentation going on in like in the future when we have these important systems, when we have games, virtual world, social networks, financial systems that end up being very important in our lives, how are those systems controlled? And so, for example, we have a guy named Andy Hall as Professor of Stanford in the Political Science Department and he's now working with us and writing all these papers and studying it

because for him it's like this really exciting new test bed for governance systems. And until now, you just had, on the internet, you just had these old systems like email and the web and then you have everything else kind of designed as a dictatorship. And now you for the first time have a way to really, in a nuanced way, design new governance systems. So that's another kind of interesting thing that blockchains enable.

Is it fair to make comparisons between the physical world and the digital world in the way rules are created, or is it just so different that you can't compare it to the physical world? A lot of the things I think about have analogs there. So, as I just mentioned with governance, I mean, we've had thousands of years of governance in the physical world and experiments, and obviously some have gone well and some not well.

And I think most people think that we, I would say, haven't really fully figured it out, but have some sense of what works. I think on the economic side, I think about this a lot. Like I think, like I have a bunch in the throughout the book, I have these analogies to cities. I think cities are very interesting and have a lot of analogies to the digital world. And I'll explain that because cities in many ways are networks. New York City gets more valuable to me because of the other people that are there, because of the businesses there, because of the parks that are there, because of the streets that are there. I think a very important aspect of cities is a balance between

public and private space. The street is owned by the public, the sidewalk is owned by the public, the entrepreneur who starts a pizza shop knows that it's owned by the public and therefore knows that nobody's going to, you know, if it were a private road, someone could come along and charge rent to walk down that street. If it was a toll road, it's not a toll road. They know they'll get foot traffic. They can depend on that. They know there's a park nearby, right?

In a city, you want both, right? You want the open streets, you want the people to walk around, you want the parks, and that's very important to give the assurances to the residents and the businesses that certain things won't change, certain things will be the way they are, but you also want incentives for entrepreneurs because I don't think the city probably should be inventing new restaurant sites, right? Like the creative entrepreneurs do, and so I think I've lived a lot of my life in New York. I think parts of New York have this feeling of working really well and balancing very well between the public and the private, right?

Cities are also bottoms up. I mean, they have mayors and things, but most of the energy in a city, right, comes from the people, right? And by the way, every sort of attempt at planning a city generally hasn't worked well, right? The best cities have been organic and bottom up. I think it's very much true in the digital world. So I'd like, to me, the worldwide web

is like New York City. It's a balance. The web itself is like those streets. It's open, like the actual, you know, the transport. Like, I go to a website and that relationship in between, I'm walking down an open street. The website might be a non-profit, it might be a for-profit. They vary. The for-profits know they can build a business there because they know the streets are free. And so you

have this sort of really healthy dynamic where you sort of have this public and private space. This is the 90s, early 2000s internet. That's why when we were talking in the beginning, the internet had that serendipitous feel. I think it had that feel of New York City. You turn a corner and there's this antique bookshop, the chess store in the- Washington Square Park. Washington Square Park. Yeah, yeah, exactly. That kind of stuff. I love those chess stores. Yeah, it's like these stores that like just,

where else but New York City would there be like a store where the guys are all like in the back smoking and playing chess, right? It's like, and so, but that's what makes New York great. And that's what made the early internet great. And I think it really had to do with this, to me it was about the bottoms up and the balance between the public and the private, right?

And what now what we have, what I worry about with these five companies that control the Internet is TikTok, Facebook, Google, Amazon, Apple, is it's all private space. Where do you get that bottoms up energy? Do you trust Facebook? Well, in what sense? Like I think they're I trust them all to act like profit maximizing companies, which they will ask for each of them. Do you trust Facebook? Do you trust Microsoft? Do you trust Google? Do you trust that? I think you need to look like Charlie Munger, show me the incentive, show me the outcome. Right? So in some ways,

Microsoft is the best because they sell it. Microsoft is an enterprise software company. Don't forget. They sell, they sell software to businesses. Like enterprise software is in some ways, the most honest part of the tech industry because you just have a customer and they pay you. There's no data sharing, there's no advertising, there's no privacy policy. They just want you to buy Word, like in Excel, and you pay your whatever it is, 200 bucks a year. Whereas I think the ad-based companies, I think it's become very adversarial. They have this incentive to track you and follow you around.

And by the way, Apple and Amazon have large and growing ad businesses. I trust Apple when they sell me a phone. I trust that Apple because they just want to sell me a nice phone. When they start layering and advertising and so, you know, if you follow read Wall Street reports about Apple, I love that. Like I've used Apple devices my whole life. Like I think they generally are good company, but I do worry that their focus is on services. If you read the Wall Street reports, all their growth, they're not growing by phones. That's basically

tapped out. They're growing by services, which means the app store fees, the payments, Apple Pay, all these other things. And advertising, they have a $40 billion advertising business. And they famously kind of cut off, they did this change to the iPhone where they, it really hurt Facebook and Google, the tracking, then sort of seemed like a privacy move, but then they layer on their own advertising. So I think the incentives matter, like, what's the business model?

The advertising business model just is by nature adversarial, I think, because you just want to, like, you just wanna collect more and more data, and it just becomes this kind of cat and mouse game. So I think that the best tech business is just sell you a product, and that's generally business software like Microsoft. No, I don't particularly trust them. I just think that they're gonna do what they do

to maximize profits, and that has generally not been aligned with the user and the internet's interest in my opinion. Why do you think people are so concerned about digital currency in general? You mean the negative side, the pushback? Yeah. I think there's different threads to it. I think there's sort of, there's one school of thought. There's this thing called a central bank digital currency, and I've heard of this.

Okay, so there's a move to basically create like a US issued, US government issued dollar and to move all of the banking infrastructure to that system. And so essentially you would have, the government would have the ability to issue money, to send money and to decide who can send money and monitor all the money and all these other full control, right? And that's going to be a big political issue in the next couple of years. Yeah, and if you followed like the Canadian trucker thing, this was a big flashpoint where there was a protest in Canada with truckers and basically they had their banking account

shut down. It happens in my industry with blockchains. A lot of companies have trouble getting bank accounts. This is not like they don't even have tokens and cryptocurrency. They just literally have the word blockchain on their website and it's hard to get a bank account. There's a famous thing called Operation Choke Point 10 years ago where like gun companies, I think marijuana companies, like a lot of other kind of outside the Overton window.

You talked about the Overton window earlier. Like in some ways, one way to look at the world is the last battle was who gets to talk on social networks. The next battle is going to be who gets access to the financial system. That's become more and more of a political issue. Having money controlled by the government will heighten the stakes. Does it concern you at all? Yeah, I'm concerned about it.

We deal with it in our business where we have a lot of companies that just simply can't get bank accounts and they're perfectly within the law. I'm a big believer in rule of law. I think there should be laws and our companies obviously should follow them, but that should be, if you follow the law, you should be able to get a bank account, I believe. Yes. And that's not necessarily the case. So there's become this extra paralegal, outside the legal system.

So why are people concerned about digital currency? I think the people that are proponents of these central bank digital currencies see things like Bitcoin as a threat to that because it's not in that world. And this is a very live political issue. There's a thing called the stablecoin bill that's may in the next year or two become law that has to do with how so stablecoins are crypto currency, you know, blockchain based tokens that represent US dollars. There's one called USDC that's very popular.

So it's a token that exists on the Ethereum blockchain and I can send you a USD token and that represents a dollar and you can redeem it for a dollar. And it's become very popular. Last month there were $600 billion of USDC sent around. It's very popular in the developing world. Yeah, it's very popular in developing world like in South America.

That's something like 18% of Argentinians own, have some, you know, own some stablecoin. The last stat I saw. Is that owned by someone? There's a company called Circle that's one of the issuers. It's just they have a bank and then they are audited. Well, this is what the stablecoin bill, this is bill that's being proposed and is working its way hopefully through Congress that would put rules around it and say there's sort of different issuers and probably like every bank might have their own stablecoin

in the same way, you know, banks issue credit cards or something, but then like credit cards, it would all be kind of interoperable and transparent to you and you just know it's like a digital dollar. But there's going to be regulations around it. Money is very regulated, like the Bank Secrecy Act, KYC, sanctioned controls, right? That's not a debate. That's going to happen. The question is, do you go farther than that and actually let the government decide

who can have this extra layer of control and say you get access to digital dollars or you don't? And so I think there's basically kind of a showdown coming, whereas like, is it going to be digital dollars to built on open networks like Ethereum, or are they going to be built by the government? And I would predict that's going to be a major political discussion area in the next five years. There's many ways in which blockchains intersect with politics.

That's one of them. You say currently, there's difficulty for people working in the blockchain to get bank accounts. Is that based on fear? What do you think the root of that is? I don't know how deep down the rabbit hole you want to go here, but there's a, if you Google something called operation show point, I'll just talk about this. There's thing called operation show point that happened. I think it was 10 years ago.

There was accusations that the Obama administration had cut off bank accounts for people, for example, in the gun, and they're political opponents. There was a series of lawsuits and then in the discovery process of the lawsuits, it seemed as if what was happening is that various banking regulators were putting pressures on the banks. And there's a whole kind of system that works behind the scenes where that, you know, where it's not public and like the Federal Reserve, the FDIC. Look, I mean, it's the banking system is very consolidated. So 2008, you had the financial crisis,

then you had this thing called the Dodd-Frank bill, which was meant to kind of reign in the banking industry. If you look, go to Yahoo Finance, you don't have to trust me and look at the market caps of the top five banks, they've all gone up dramatically and the banking industry has become much more consolidated than the top banks have a special guarantee from the government that they, I think GSIBs is the word they use, it means that they can't, they're guaranteed to have their deposits insured, which is why you had this regional banking crisis with Silicon Valley Bank and First Republic and others, because they don't have that guarantee. And so this is big kind of advantage that big banks have, which is their guarantee. So the banking, depending on who you talk to, the banking industry is just sort of like

everyone is, there's all sorts of ways in which the FDIC and the Federal Reserve can punish those banks. And they have these kind of risk scores for like who your customers are. And what ends up happening is an effect is like a company will get like a 500 page, Hey, you're high risk. You've been flagged as high risk. You're not told why sometimes you're just fully debanked. We won't be your banking customer.

Sometimes you're sent like a 500 page questionnaire that's impossible to answer that's like a risk profile or something, but you don't get any feedback. You don't get this and that. And so it's very opaque. I'm not commenting on who's right or wrong here. I mean, it's frustrating these companies can't get bank accounts, but there's a whole separate kind of thread of political debate around should the executive branch have this much power?

Should these regulators be able to decide these things or should this be happen more through like a legislative democratic process? Is another question, but. You mentioned Sam Bankman Fried earlier. I wanted to ask, what is effective altruism and why does anyone who do it go to jail? I don't, so my, like I'm not an effective altruist

and I just probably just learned about it from the internet But um, I kind of think of it as as sort of I guess utilitarianism, you know So meaning that you it's like capitalist utilitarianism or something So you can make as much money as you want as long as you then Give it away and do it in a very rational way that sort of you know I don't know like these philosophers like Peter Singer and these other people who like you give it away in a way that maximizes aggregate human utility or something like this.

Why would that be frowned upon? I mean, I don't think helping people, I don't think it's that. I think it's, I think the, and again, I'm not taking this idea, but the accusation is used as a front. It's not that helping people is a bad thing, it's that there's a group of people who say

that that's their goal, but then end up creating casino-like websites like FTX or lobbying to get rid of open source software. So a lot of effective altruists have funded these think tanks that have pushed very hard to regulate AI systems. So I think everyone's for maximizing human happiness and helping people. The question is like, is it sort of a fig leaf covering up another agenda or is that the... It's also called like accelerationist, you know, effective accelerationism. So that's like, it's kind of a movement that's a response to effective altruism,

because the perception is the effective altruism people are trying to slow down the adoption of technology and are kind of anti open source AI And then there's a group that called them effective accelerationists who are kind of co-opting the name But they're actually their opponents who are saying the only way out of our Troubles in society is to actually accelerate the adoption of technology and open source. And so there's a whole it's like on Twitter You'll see EACC is effective acceleration. It's just like a thing. They'll put in their Twitter handle back to the book the computer versus the casino. So as I mentioned before I think that the basically two cultures have formed around blockchains

there's a culture that is more interested in trading and speculating on the value of tokens and in some cases taking that and creating like FTX did and creating a website based in the Bahamas that lets you kind of gamble essentially. And then there's another culture that's the one I'm describing here, which is they're excited by using blockchains for I think kind of productive use cases for creating a new generation of internet services that are owned and operated by communities instead of by companies.

And tokens are an important part of the design of those systems, but they have an intended use as a productive asset in those systems as opposed to existing purely for speculative reasons. And so I think of it as there are two cultures and they're battling it out in some ways to shape the narrative of this movement. I see myself as part of the computer movement.

I think our side has failed in the narrative side. Most people you walk down the street, you ask them about crypto, blockchains, tokens, all these different concepts and they'll think, oh, it's that either it's that silly thing like Dogecoin, you know, it's sort of for gambling or Bitcoin or, you know, maybe they'll have views on Bitcoin or they'll just say it's a bunch of scams, right? I think the fact that people say that is a failure of partly is a failure of our communicating It's a failure. We need to build better products that where they can experience this viscerally They need to you know understand what were the motivations and the and the reasons we're doing this

And so I think of it as I don't, probably true of other kind of movements in the world, but you have people who adopt the same kind of core things, but for different reasons. And it ends up being that, like, I've come to the conclusion that in some ways, these casino folks are in some ways the biggest threat to the movement. Like, FTX was a big, like,

I've worked on this for a long time That was a catastrophic incident. We're one of the few vcs who were not investors in ftx We were not involved in any of those kind of scandals But it was catastrophic and for the customers who lost money and it was very very bad for the image of this technology You know when that happened, I was kind of depressed about it and I said It's really a shame like what I saw is that there's this massive gap between how I saw blockchains and how the world did. And at first I was kind of depressed about that.

And then afterwards I said, you know, I should like chin up here and see it as an opportunity, which is why then I'd sat down for the next 15 months and wrote this book. Cause I was like, I want to see this as an opportunity to explain this and sort of the glass half full kind of perspective, right? No, it works. Like how often do you get that opportunity in life to explain something that's so misunderstood? So that's what I'm trying to do.

That's what I hope to do. I don't know if it'll work. I think ultimately technology is experienced, not read about. And that's what I spend most of my time doing is sort of helping entrepreneurs build products. And I hope that in a year or two, there'll be a bunch of products that, you know, I can build things that I can show you, like look at this musician doing this, look at this social network.

And those exist by the way, and they're growing, but they're early still, they're not mainstream. Yeah. Most of my understanding up until reading your book was the idea of it being like a replacement for gold, an alternative currency that protects value. The book is so powerful because it presents a whole other use case that I don't think anyone knows about.

It was very hard book to write because it's, I mean, it's a book about network design really. And so I was like, how do I make this tangible? Right. And so I spent a ton of time. I mean, yeah, just try it like as you hopefully saw, like telling stories, giving examples. I did a rewrite at one point where a friend of mine told me to remove every adjective from the book, every adverb and adjective from the book, because I would when you're when you're writing about abstract things, you it's easy to use. Like I would say, like genuine ownership.

Like like what that what does that mean? Like, and so instead remove it and then add five sentences, like the give examples. So I just kept doing that over and over and over. And it's really nice to hear just because, you know, you sit in a room and do that and you're like, I think it's more accessible, but I have no idea until someone actually reads it.

So I was excited to see that you found it understandable. No, it spoke to me right away, and I'm not, as I said, not a technical person. That's great to hear, thank you. The next section of the book is called The iPhone Moment, From Incubation to Growth. Yeah, so I spent a lot of time thinking about and reading about technology history,

and specifically computing history and I think computing history, I think it was like part of my job and just my interest is to try to predict the future and the best I think the best guide for predicting the future is in many ways the past because you know the world is incredibly complex and multiple many different things intersecting and you know the past reveals patterns that sometimes recur. And specifically with computing, I think you have these kind of repeatable patterns. First of all, you have two kind of major phases for computing movements. Sort of the early phase is kind of

the incubation phase. And that's Steve Jobs and Wozniak that went to the Homebrew Computer Club and flip-flops and they hand-assembled PCs. That was, I think, 1979. And it wasn't until probably six or seven years later that PCs started to grow and get popular. And then mobile phones. Mobile phone, there's a great documentary called, it's on the company called General Magic. I think they were 1994 or five. and they were trying to create an iPhone essentially So that was 12 years before the iPhone And in fact, it's funny because there were a lot of the same people like Tony Fidel and others who did create the iPhone

But they were 12 years too early. And then for those remember like I had a sidekick. I love the sidekick It was this mobile phone that had this like flip thing, you know It's like the early 2000s. And then the iPhone came out. But if you look at the stats, and there was Blackbird before that too, if you look at the stats, essentially there was some usage, a couple million people, but then it just boom, hockey stick with the iPhone.

Same with the PC. PC, there was some usage, this and that. Maybe a million people had computers in the early 80s or something. But then it just hit and boom like this, right. AI has been around for 80 years. The first paper on neural networks was in 1943. Long history in AI, there was actually an AI bubble financial bubble in 1980s, believe it or not. Wow. Yeah, it was this thing called expert systems.

And there are all these companies going public and talk to AI veterans, it was this thing called expert systems, and there were all these companies going public and talk to AI veterans. They'll talk about all these different, they call them summers and winters or like summers when there was funding and people were excited and then they'd get depressed and there would be like a 10-year bleak period, 80 years, right? And then you have chat GPT and now probably AI is off to the races and going to grow in the same way the smart, the iPhone did in 2007. And so I think every kind of computing movement follows this pattern and you have this moment where the right product is built, right?

That right moment, in computing it's different than maybe in music or some other creative thing. You can't just, you're dependent on other things. Like why did AI happen now? It wasn't, you know, OpenAI is a brilliant company, brilliant people, but fundamentally it's because the neural networks can be much bigger than they were in the past

because the processors they use, the GPUs made by companies like Nvidia have just gotten much, much better, which has followed this kind of thing, you know, Moore's law, which is this kind of long-term process that's happened in the computing industry where you can pack more transistors on a computer. So there's like a million. So computing, the big difference is it's not like one person doing it. There's all of these different forces where you can kind of look at these trend

lines. And by the way, why did GPUs get better? Video games, very strange. Like if we ever have, you know, AGI, like ultra sophisticated AI, it was sort of bootstrapped by video game people playing fortnight is what funded GPUs GPU suddenly got so good that you could then run LMS on them and so all computing kind of follows this pattern So you look I work on blockchains and blockchains are computers and they but they have all sorts of weaknesses kind of like early smartphone So for example, I talked a lot about aetherium But the problem with aetherium is if you go and you do some action it can cost you like a dollar it's too expensive and it can cost you like a dollar. It's too expensive.

And it can be slow sometimes. And sometimes if you go to some of these applications, like the user experience, there's like a pop-up and it's like this and it's just like confusing. And it's very much like old mobile phones before the iPhone. It just wasn't, the experience wasn't quite there. And so I think a lot about, as I have throughout my career, kind of like, where are we in this cycle? And like, when will it happen?

And what investments and other things can I do to accelerate that process, right? So that's what the iPhone, the iPhone moment is sort of my shorthand way of saying, all computing movements sort of follow some kind of predictable process. And then in all cases, if they're successful, there's a moment where it all kind of all comes together and the world says aha

I get it based on what you've seen so far. What would you say the best? What's the best use case you've seen thus far? for a blockchain computer Yeah I well I think the thing we talked about earlier like digital dollars throughout the around the world is a pretty I mean That's that's actually the most popular use case, and that's many hundreds of billions a month.

It's really actually popular. And I think we take it for granted in the US that you have access to dollars. You can't take it for granted around the world. And that's valuable. And I think it should be – I go to DC a lot, and we argue it should be in the US's interest. It makes the dollar more popular. Like the dollar in some ways is the most – it's really the most popular product in the US is interest. It makes the dollar more popular. Like the dollar in some ways is the most it's really the most popular product in the world. And it's one of the reasons

the US is so successful and blockchains make it easier and you know, to use them and to and to access them. Let's use another one besides that. That gives it the casino feel. Yeah, yeah. So we haven't talked about NFTs. So NFTs are tokens that are one of one token So instead of being so like something like Bitcoin is what's called fungible So like if you have one Bitcoin, it's like money It's like they're interchangeable if I have a Bitcoin you have a Bitcoin doesn't matter which one NFTs It's just a concept of a unique token that represents something people think of NFTs is representing like an avatar like a photo on

That doesn't have to be it can represent your social media name that doesn't have to be. It can represent your social media name, it can represent your audience, it can represent your healthcare data, it can represent, it's just a thing you own on the internet, right? Like I just think, for me, things like social networks and games, if you look at the seven hours a day people spend on the internet, three to four hours

is social networking and games and messaging. So they just have to be important things. If you're gonna try to work on something that fights the consolidation and concentration of the internet, you have to take those categories seriously. So we, you know, a lot of things around that. I think things around, before I talked about video games and virtual goods and buying skins and things, I think that there's a lot of really interesting ways in which you can think about similar models for other forms of media. We see like musicians selling digital merchandise and backstage passes as blockchain items,

right? And so they are able to, when they do that, they can bypass the labels and Spotify and build direct relationship with their audiences. So that you buy an NFT as a musician and you show that you're an early fan and you get to go to see the special behind the scenes show and there's people are doing things where there's offline online interactions where the NFT becomes a ticket. And the interesting thing there again is removing the gatekeepers and they can invent whatever kind of creative thing they want.

And then there's like I mentioned before the collaborative storytelling, like new business models for creative people I think are going to become very important. And by the way, all these things I'm discussing, like the collaboration, we have two investments that are doing that and they have products and like these are real things. They're early, they're not, you know, they're not, they're tens of thousands, sometimes hundreds of thousands of users. Remember, the internet is now five billion people. So we have many companies that are blockchain based with millions of users, but they aren't

at billions of users, which is what people kind of expect now for mainstream. So these are all things that exist, just so you know, and people are using. Yeah, so I think anywhere where you currently have these kinds of big gatekeepers in games, social media, media businesses, those are all interesting. I have, by the way, in the book, at the end, I have seven sections where there's specific application areas. Finance is interesting, and this is not the speculative side of finance, things like payments. So payments, you know, today, every payment you do in the world, there's a two and a half

percent fee that's associated with it, right? One of the interesting things with blockchain based payments is you can have a direct payment without having to have all those intermediaries and charge fees. That also allows you to do things like people have talked about for years, like machine to machine payments. So like one investment we have is if you want to train an AI model, today the only people that can train big AI models are giant companies. So like Facebook just bought, I think it was 100,000 GPUs for $10 billion.

How does a startup compete with that? So we have an investment, uh, it's called Jensen and Jensen, think of it almost like Airbnb for GPUs. So there's all these gamers in the world who have GPUs. I now as a startup can submit a job. I want to train this AI model. I submit it to this system and the system then says to all the people with GPUs, Hey, if you'll run a little bit of code you can get paid money right and then this allows the startup to compete on a level playing field. Yeah in the same way that like sort of

Airbnb and the way Airbnb uses underutilized like I'm away for two weeks why not sell it I have a graphics card for gaming but I'm not playing it right now why not sell that GPU time so that graphics card for gaming, but I'm not playing it right now. Why not sell that GPU time. So that's a machine to machine payment. So there's all these ways in which you can use blockchain based payments to create networks that allow startups to compete on a level playing field with big companies. Another interesting one is like deepfakes, right? So deepfakes are AI generated video that fakes like a politician said something they didn't they didn't say there's people building interesting blockchain based systems

Where one of these blockchains are very good at is proving provenance It's proving where something came from right and by the way, you're also going to need systems to prove people are real There's a whole bunch of people working on a thing called proof of personhood So I can prove cryptographically that I'm a real person and I get a code and like There's a whole kind of way to do that. And then I have a code that says I'm Chris Dixon, I'm a real person. When I send you an email, you can know that email came from a person and not AI because yeah, I can now like think about it up until now, you've just sort of detected it based on the text. That's not going to work anymore in an AI world.

And then moreover, I can say I'm Chris Dixon and I created I attest that I created that I created this video, or I'm the New York Times, and I attest this is a real video, or I'm Joe Biden, and I say this is a real video. And so you have a, you have a provenance trail and I think this is going to be just absolutely necessary, it's probably necessary today, but certainly in five years to have an internet that where you trust that these things are real. That system will get created, it will have to get created. That system that says, I'm a real person, that this is a real video. Someone will create that. We're not going to live in a world of awash with fake video. The question becomes, in all cases, I believe, is that created by Facebook or is it created by a

community-owned system, i.e. a blockchain? Shouldn't that information, your proof of personhood, exist on a community-owned database, not on a corporate-owned database? So I kind of view it as AI is coming, metaverses are coming, there's a whole new way. The internet is 30 years into its development. It sounds maybe hyperbolic, but I think it's credible to think the internet is as important as the printing press and a bunch of other kind of massive technologies. We are very, very early. There's going to be many, many more systems built on the internet is as important as the printing press and a bunch of other kind of massive technologies, we are very, very early. There's going to be many, many more systems built

on the internet. And the choice we have is how are those, there's basically, are they going to be systems that are owned by those five companies? Because there's going to be a proof of person though, there's going to be a proof that the video is real, like, or is it going to be built in this open community owned way, which is what a blockchain and one other way to think about a blockchain is a community on database that it can also run code and do other things like a computer. But the point is it's owned by a community. You can store that on the Ethereum blockchain that you're a real person. There's actually like a project called WorldCoin that actually we're investors in and Sam

Altman from Over The Eye is the co-founder of, which is a company doing exactly what I described, the proof of personhood thing. And it stores a record on the Ethereum blockchain and I keep a private key where I can say, Hey, I'm that person. And I prove I'm that person. And I suppose venture capital fits in to help the individual compete with the big corporation with all the funding that they need. Yes. I think the only reason that startups have, I mean, I mean, I'm pro people,

people will tell you different things about venture capital. I work in venture capital, I'm pro venture capital. I mean, there's obviously good and bad examples of it, like any industry, but I think at its best, it's a resource that lets startups compete with big companies, right? And on a somewhat level playing field. It's not fully level, but somewhat.

I mean, the biggest demand, even if we give somebody 10 or a hundred million dollars, they still have far less than Google. But they also just have the energy and bigger of a startup. But yeah, I think it does play an important role to help them compete. We like to say we're like when we go to D.C., we represent little tech, not big tech, because people say, aren't you just saying this to further your interest? We're like, yeah, we are. But our interests are startups, dynamic economy, dynamic internet. So that is in our interest. It is self-interested.

But I would also argue that that's generally in the world's interest as well, to have a dynamic open internet. Like we're pro open source software. We're pro open source AI. We're pro blockchains. We want to see a big dynamic open internet. And that does benefit us.

But it also, I would argue, benefits the world. It just so happens We're aligned with the world in this way Tell me what was the cause for optimism? It's the conclusion of the book Well, you know the book was written as a general audience explainer Like one question you write a book is like if you actually look at book sales figures like compared to internet Product like blogs and things there they're relatively like not many people read. You can write a blog post that gets read by a lot more people than a book.

And so when you write a book, you have to ask, you wrote a book, you probably asked yourself this, but like, you know, why am I writing a book as opposed to a blog post or podcast or something like this? And I've had a number of books in my life that have really had a profound impact. And so I, when I wrote the book, I was a lot of it, I was thinking about people early in their career and what are they thinking about doing? And so that last section, Calls for Optimism, is a little bit more of a manifesto

and it's hoping to inspire some of the readers, especially people maybe that are building stuff. There's sort of various powerful forces in the technology industry that I think are kind of put wind at the back of this movement. One of them is just sort of the fact that the infrastructure and all the kind of core technology has been on a steady improvement course over the last decade and continues to improve. And as that improve, talking about the iPhone moment, like you get to a point where it's just kind of good enough to build great products. Another is that there's a natural network effect. The more people that use blockchains, the more valuable they get because they're sort of fundamentally social technology. And I sort of ended with this thinking about, I always as a fan of history like to think

about the early days of people tinkering on computer systems and there's sort of two ways to look at that. When you look at those, the early Google founders, the early Wozniak and Jobs, one is, wow, they got a lot of work to do. That's a really nascent industry. And the other is like those are the good old days. Like that's like the the fun tinkering times. And so that's kind of how I end the book is I'm sort of saying these are the you know these are the good old days of blockchains and hopefully someday 30 years from

now people will be talking about this important technology that is used by billions of people and the people now who are misunderstood and maybe mischaracterized are actually going to be the tinkerers that led to that movement. So I think it's hopefully an exciting time for them. I think the good news is that for the typical user, it'll be the same experience. They won't necessarily know that the thing that they're working on is blockchain related. So if something great comes along and it happens to be on the blockchain, that would really open the doors.

Yeah. I think the one thing that they may notice different is like what I was saying before, like the ability to switch, right? In the same way you kind of, you may not know the details, but you understand the web is different, like I can download Chrome or I can download Safari, right? It's just sort of the, the, the service is independent of the software that that will be the difference. But I think you're right. Otherwise it should be, it should be identical and feel just as modern and advanced.

If you were going to start today building anything, is there any reason not to build on the blockchain? Yeah. So there's always a cost to building on a blockchain because there's this game theoretic mechanism I described before that kind of keeps keeps a bunch of different like computers that may not trust each other Collectively honest and that's what's called a consensus mechanism and that has some overhead So if you're doing some very high performance thing like a you know, Grand Theft Auto like you don't want to run Grand Theft Auto on blockchain It's gonna be impossible or something that's highly performant like that.

Generally what you want to store in a blockchain are the things that shift power to the users, you know, if it's finance, it's like the user controls their money, right? If it's social network, the user controls their name and their data and their audience. So that's how I think about it. It's like, there's a cost to it. You want to put just enough to shift the power to the users, but outside of that, you just

let computers do the regular thing. It sounds like the cost to it has a benefit that's really worth the cost. I think so. The benefit is that the user controls that aspect. The end user, the little person, not the company, controls that aspect of the service. It's a way to shift power and money back to the edges of the network. So it's also possible that in the way that Linux took over, there could be this open version of the web going forward based on blockchain.

I think so. I hope so. In the chapter on community-created software, I kind of, what I say is the cathedral in the bizarre, which was referring to the 90s battle over operating systems. Like I see blockchains versus centralized services like Facebook as today's cathedral in the bizarre, you know, blockchains are the bizarre and these centralized gatekeepers are the cathedral. And I think ultimately, communities and markets and sort of bottoms up processes, they're chaotic and they take more time and they create this casino culture and these other kind of all the controversy and everything else. But in the end, I think bottom-up communities are a very powerful force and can ultimately be better and win out over these kind of cathedral centralized services. Music