The Startup Ideas Podcast - Betting Big on Web3 with Li Jin

Episode Date: July 21, 2022

Crypto is still the future, are you in or out? Today we discuss why the crypto market needed a reset, explain how to hack back your creativity, and divulge the secret to picking investments in a down market. Hosts Greg Isenberg and Sahil Bloom are joined by guest Li Jin, the mastermind behind the “passion economy,” the co-founder of Variant, and a fundraising savant, who was able to raise her first fund during the onset of the pandemic. Li shares the lesson investors (hopefully) learned from the fall of 3 Arrows Capital, Sahil depicts why creators must have passion for the products they build, and Greg shares the pitch story that is every founder's worst nightmare.►► Want more community? Learn more here: http://trwih.comSPECIAL THANKS TO OUR SPONSORS►► Competition for great talent is more brutal than ever. To be able to hire better and faster, you need a trusted source of pre-vetted candidates.Lemon.io is a place like that. They have a network of engineers from Europe and Latin America, and every candidate has already been tested and interviewed by their team.So, how is it different from hiring on your own?• You can have an engineer start working on your project within a week instead of months• You don’t waste your time on candidates that are not qualified• You’ll have easy access to global talent without having to go through dozens of job boards• And finally, it’s more affordable than hiring local talent.Sign up at https://lemon.io/room and get your 15% off for the first 4 weeks of work with a developer.►► This episode is also brought to you by LMNT (http://DrinkLMNT.com/HAPPENS). LMNT is a delicious electrolyte drink mix with all of the things you need and none of the junk. It contains a science-backed electrolyte ratio: 1000 mg sodium, 200 mg potassium, 60 mg magnesium. LMNT can help prevent and eliminate headaches, muscle cramps, fatigue, sleeplessness, and other common symptoms of electrolyte deficiency. It tastes amazing and is great after a workout or one too many drinks :)Right now LMNT is offering our listeners a free sample pack with any order. That’s 8 single serving packets FREE with any LMNT order. Get yours at http://drinklmnt.com/HAPPENS. And it’s so good they have a no questions asked refund policy but you won’t need it.THIS EPISODELi Jin: https://twitter.com/ljin18Sahil Bloom: https://twitter.com/SahilBloomGreg Isenberg: https://twitter.com/gregisenbergProduction & Marketing Team: https://penname.co/FIND US ONLINETwitter: https://twitter.com/_trwihInstagram: https://www.instagram.com/_trwihTikTok: https://www.tiktok.com/@_trwihWeb: https://trwih.comSpotify: https://open.spotify.com/show/6aB0v6amo3a8hgTCjlTlvhApple: https://podcasts.apple.com/us/podcast/where-it-happens/id1593424985

I grew up very online. I was always on these consumer platforms, these UGC platforms, creating content on the internet. I was blogging throughout my preteen and teenage years and throughout college. I had multiple tumblers and live journals and all of that. Like, I had been primed to think about consumer software and the future of like content creation on the internet from such a young age. And I was just genuinely so passionate about it because I saw myself in it. Did you know that one of the top reasons startups fail is bad hiring decisions? People can be unpredictable, and developers can be unpredictable as well. Let lemon.io take care of hiring your software engineers. Why lemon.io?

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This deal is only available through my link. You must go to D-R-I-N-K-L-M-T-com slash happens to take advantage of this special offer. try element you won't regret it we're super excited to have you on this has been a long time coming i've been like a huge fanboy from afar of all of your writing for for a long time um and uh and most recently was was excited to read your ownership economy 2022 piece which was it feels like forever ago now i guess it was like late april i think when it came out um and the world has obviously changed a lot around a lot of these things, at least prices have. Maybe the world hasn't, which is one thing we're excited to dig into with you,

but excited to have you on. So thanks for taking the time amidst all your travel. Yeah, thanks so much for having me. Big fan of you guys as well. Greg, I feel like you're one of my few IRL friends in tech, since so many people I now know only virtually. But yeah, no, it's so nice to be here. Thank you.

It's kind of one of the nice features of this. like new post-COVID world. You know, there's like a lot of negatives, obviously, that came out of it. But the reach of our friendships, I feel like has dramatically expanded over the last couple of years. I mean, it truly feels like you have friends all over the world. And it's not weird. Like, it's no longer weird to say, oh, yeah, most of my close friends I met on Twitter or I met in discords or whatever it is. That's like a really normal thing that you run into in conversations with people now. Totally. I mean, I grew up that way. Most of my friends were online friends that I met through Neopets, but I realized that that was not a cool thing when I was a child.

Wait, we need to dig into that now. Hang on. So wait, first off, what is Neopets? I feel like I remember that from when I was a kid. Was that like Tomogachi and stuff like that? And Neopets? Was that in the same category? Neopets was this like online game phenomenon in, I want to say, like, late 90s, early 2000s, where you basically, had a virtual pet, you would play games, you would earn neopoints. There was this whole in-game economy. And in addition to that, there was a social element which took the form of forums on the neopet site. I would spend all day on the forums talking to people and, you know, then like going over to aim, adding friends. And that's like my ages nine to 11, I have no memories.

aside from being on neopets. That's essentially where I spent all of my waking hours. I was very neopets popular on the health forum. I knew I recognized you. Greg was definitely on there. This was all under a pseudonym, and I pretended to be like 18 years old. This is so cool. So I just pulled this up.

I mean, this is like, there's so many of these things. I feel like we've had this same conversation, Greg, with like Alexis O'Hanian, or even like with Gabby a few weeks ago. Gabby Goldbergly, who you probably know from the web three world, of like these, the like predecessors to all of these web three things that we now talk about and obsess over like play to earn games and Axi Infinity and all this stuff. Like I'm looking at Neopets and it literally looks like, you know, you can just trace back a lot of these things we're talking about today to Neopets or to some of these other games that people are playing at a young age. 100%. Neopets was the metaverse, but on a dial-up internet connection. It looks so cool. I like, I want to go back. I have. this, I guess a lot of people probably do, but I have this, like, obsession with kind of, like,

retro things that I did when I was a kid and going back and interacting with them and, like, experiencing it with the benefit now of new things that I've seen. I've been doing it recently with reading books that I loved as a kid. I don't know if you guys have ever done that, but, like, I just went back and read Hitchhiker's Guide to the Galaxy, which is amazing. Elon Musk says it's the most impactful book he's ever read. So I was like, I'm going to read it again because I loved it. It's incredible. But like I've gone back now and I'm on a kick. I'm like reading a wrinkle in time. I'm reading, you know, I read a Hitchhiker's Guide to Galaxy. I want to go back and read Lord of the Rings again and the Hobbit again. But there's something about the like nostalgia,

retro aspect of going back and engaging with these things from our childhood. That's so fun. Yeah, I really, really agree. This is random. But I've basically, I've taken about a like 10 year break from reading fiction and I just recently got back into it. Why did you take the break? Well, two reasons. One is I was a little bit burned out of reading fiction from taking so many English literature classes in college and having to read thousands of pages like per month. It was just so, it was so much.

And I remember like pulling multiple all-nighters to try and like finish a book that it just sacked a lot of the joy out of reading for me. And so I was kind of like feeling quite exhausted, honestly, from reading so much fiction. Because basically from my entire life, up to that point, up to college, and including college, I only read fiction. I never touched nonfiction. I just thought fiction was so much better. I thought it was amazing that you could basically experience the world as someone else, like really get into their brains, which no other media type allows you to do. But then after graduation, I was like, okay, now I'm a working person, I'm an adult, I should actually use my free time in a way that is productive and like teaches me something that I can apply to my work.

So I started reading exclusively nonfiction and I've been doing that for a long time. And and then I just recently, I recently picked up Jane Eyre again by Charlotte Bronte, which is one of my favorite novels that I've been doing that. read when I was a teenager. And the prose just, like, it was like opening a window after you've closed the room to a very musty room and the air is very stale. And you open the window and it's like, you know, it's just after the rain and it smells amazing. That's what reading the first page of Jane Eyre was like.

Like I forgot writing could be like this. It's a beautiful, it's a beautiful way of thinking about it. It's a beautiful imagery. So I can see that you've read a lot of fiction in your life because the way you said that was like a very novel-esque way of describing that. So it's interesting. The way that you characterize your arc of like you read so much fiction because that was what you were studying and you got sick of it and you needed to go towards like business and like productive type reading quote unquote. I feel like that's the opposite of most people. Like my experience was literally the inverse where I read so much, you know, economics and like,

nonfiction, you know, business, biographies, all of that. And I was the like hustle culture guy of, you know, like, listen on 2x speed so that I could get through 100 books a year and like flex on, you know, how many books I read to people. And like that was me. And then maybe two years ago, like right around when COVID started, I started just reading fiction for pleasure and like a lot of sci-fi. And I feel like it's made me much more intelligent because now all of a sudden, like, I engage with tons of business content from like newsletters I read, your stuff, you know, other people's things, like, that's what I read all day. So then at night, when I read things that are like novels or sci-fi or whatever it is,

I feel like the sort of amalgamation or like the maelstrom of all these types of information actually allows your brain to expand in new and unique ways. Yeah, you're going to be, if you read fiction, you're just going to be more creative, period. Like, you're not going to come up with the idea for Neopets after reading 0 to 1 by Peter Thiel. Like, you're not going to be like, oh my God, I just had this. amazing creativity, like insight. And I want to go and create, you know, I'm constantly reading fiction, trying to, you know, interact with creative mediums, video games, comics, like, you name it to like basically connect pieces in my brain to create creative insights. Because like,

my job is to like build things like neopets for ourselves and for clients. So like I kind of to need, like, that's my hack. My hack is like, how do I, how do I bring the most creative mediums to me? So those connections happen. I wonder if you agree or disagreely. Yeah. Well, I mean, I think that all sounds right. I don't have the counterfactual. I don't know what I would be like if I hadn't spent my entire childhood and adolescence reading nonfiction instead. But I think people often tell me like I write things. very differently than other people. I speak very differently than other people. I speak like a character in a novel. I mean, the way you said that about the room and the window opening and the fresh air

and the smell outside, like the way you described that situation, it was described in a way of, like, someone that I would imagine has read a lot of fiction in their life. Because you described it with a lot of imagery that, in my mind, I was like, oh, I can picture that. That entire scene I can picture that versus, you know, I think someone that had read a lot of nonfiction their entire life probably would have been a lot more like direct into the point of exactly that. And it wouldn't have presented that same imagery. So I would guess the counterfactual exists there. I think, yeah.

The first order effect is it's definitely influenced the way that I write and speak and communicating. The second order effect is probably a lot of what you had described, Greg, in terms of like more creativity, maybe more empathy for users and like it's just tons of. different types of users because that is the exercise of reading fiction is like deeply empathizing with various characters. Yeah, it's interesting to think about. Yeah, I also just, the last point to this before we dive into actual business related stuff is like I also have this perception that the entire like nonfiction book industry, you know, business books, self-help books, like all of that stuff, the vast majority of those things are like, two,

200 pages, but could have been said in a like two page or five page article or newsletter. And so that troubles me. I don't think you could condense a beautiful novel into two or three pages because the character development and like the whole scenery and the world that's being built cannot be condensed. But most of those books are like you read the first five pages and I get it. I understand your thesis. I understand like your key point of evidence that you just brought up to hook people in. And now I can probably leave. And so I actually think the newsletter industry and like, you know, people like you and people like Mario at the generalist. And, you know, he and Pachy writes super long pieces. And so I can't even read theirs because they're too long sometimes.

I need to like listen to. Right. There needs to be a newsletter to summarize the newsletter. Yeah, totally. And I think there's like a million dollar opportunity in doing that, actually just summarizing all the great business newsletters, which is a topic for another day. But I do think that like the newsletter industry and the blogging industry has disrupted fundamentally nonfiction book writing. Yes. I completely agree. I just,

yeah, tightens it. I think, well, I think it's a different motivation set on the part of the author. I think people write books

for lots of different reasons, not just to keep an information. Exactly. They want to. I mean, it's, it's very much a, like,

kind of life goals, like bucket list kind of thing to do. But, yeah, I agree with you. I mean, that's why nonfiction has spawned industries that summarize books,

like Blinkist or, like I feel like TLDRs were invented for nonfiction books. Yeah. So I do want to dive into a dive into some stuff outside of this book topic, which I thought was a fascinating opening that I wasn't anticipating. Lee, can you just give really quickly? And it's for my own benefit too, because I'm not quite as familiar with your background

prior to variant. You know, you mentioned that you had studied English literature and, you know, we're very into into reading fiction. whole life. Like, what did you study? Where did you kind of end up in school? How did you get started in the venture industry? How did you break into that? And then I want to dive into like, you kind of founded the creator economy. You're like, you were kind of the first writer that I remember reading talking about it. And I think you coined the term probably. So I'd love to get there. But maybe we can just set the stage with a little bit on your background. For sure. So starting from

the very beginning, I'm from Beijing. I grew up there for the first six years of my life. And life. Then my family and I moved to Pittsburgh, Pennsylvania when I was six years old. Why Pittsburgh? My dad was doing his PhD in Pittsburgh. At Carnegie Mellon? At Pitt, at the University of Pittsburgh. That was my dad's first job, was at Carnegie Mellon. So that was why I was asking my parents lived in Pittsburgh for many years. Yeah. Well, the backstory was really that my mother was in love with America and American values and freedom and all of that. and really, really wanted us to move to America. And back then in the 90s,

really the only way to immigrate legally from China to America was through education. And so the PhD was like a stepping stone for us to come here. But anyways, so then we moved here, didn't speak a word of English, learned it in school, really, yeah, saw every layer of American society, because when we moved here,

we were living in, you know, the inner city of Pittsburgh. I went to public school, didn't know English, learning it through ESL, and then gradually we moved out of the city into the suburbs where I went to high school. And then I went to college at Harvard. I like to say that Harvard plucked me out of obscurity from southwestern Pennsylvania

and really brought me into this environment that was really life-changing and transformative for me. And initially, when I first got there, I thought I wanted to be a writer of some sort, either of books and novels or to be a journalist. So I threw myself into that. I spent 40 hours a week writing for the Harvard Crimson. I was an English literature major. And then gradually I was made aware that, well, actually, what happened was that my mother called me one day. And she was like, you know, it's very hard to make a living.

as a writer, you should study something else. She said this much more harshly, but that was the sentiment. She meant well. This is like the immigrant mother thing. My mom does the same thing. Like, she still thinks it's ridiculous that I didn't go to medical school and become a doctor, like my Indian immigrant mother, you know, Indian immigrant mother. It's like, it's definitely an immigrant parent thing. It definitely, she was like, if you look at the job postings on a newspaper, where do you see the listings for author? There is none. Like, there are no jobs for you. So, please study something else where you can support yourself. Like financial matters were very top of fine, given their backgrounds.

So anyways, long story short, I then decided to study statistics, and that is what I graduated with. So I pivoted 180 degrees. And then years later, I found myself in Silicon Valley working at a startup that built mobile apps that were tailored towards retailers and brands and rewarded, for walking into physical retail stores. And then that company got acquired, and then I went to go work at Andrews and Horowitz. So that was my entree into the venture world. And I really didn't know that much about venture when I joined.

I actually cold applied to Andrews and Horowitz on the website as a last-ditch attempt to not have to go to business school, which is a whole other story. I didn't want to go to business school, but I had applied, and I didn't, I felt like at that age, at that point of my life, you know, that I ought to basically move on from my previous job, but I wasn't sure what to do. And so I applied to business school, but I didn't really want to go. I didn't want to take myself out of the workforce. So I decided to buy. I think that's most people, by the way. I think like business school is like

the, it's like the uncertainty pick where like people aren't willing to tolerate the like uncertainty of what comes next at that first pivot point in their career and business school is like the easy the easy answer like there's some people obviously that really want to go to business school and there's a specific reason but it's a very like reputable thing that your parents will never get met no one will ever like ding you for going to business school it's like a socially acceptable way to wander around in the wilderness and figure yourself out that's a good way of putting it um yeah so that's that's how I felt at the time and then and then I just I cold applied to andrewson which by the way way is like not the not how you're supposed to go about getting a job in sector.

I didn't know you could do that. I didn't know that there was other ways of getting jobs. This was how naive and innocent I was in my early 20s. I thought that people just applied to jobs and that's how they got them. I didn't know about warm introductions and referrals and all of that. So anyways, to my surprise, someone actually writes me back. This is Frank Chen, who is one of, the people who works at A16C still.

And he writes me back and he's like, hey, you should, you should come in and like come chat with me. So I drive over to their office, which is very close to where I'm living at the time and have a conversation with him. And that kicks off a seven-month-long process in which I basically go over to their office every week, have a conversation, meet with other people. And finally, finally after seven months, I get the job. and I joined the consumer investment team.

And this is fall of 2016. I end up staying for four years, much longer than I had anticipated. I thought that I would stay for one or two years, go back to product. Well, after a seven month recruiting process, you got to stay for two years. There's got to be something there. Right, exactly. The ratio. Now I think they hire anyone that just says crypto in their Twitter bio.

Sorry if you're listening. Oh my God. It was a joke. Greg, didn't you pitch Andresen once and like someone fell asleep or something? Do I remember that story, Greg? Or is that not Andreessen? So that's, I don't know.

I don't think Lee have ever told you this story. Maybe I have. You pitched me. Yeah. I did not fall asleep. No, Lee definitely didn't fall asleep. I'll tell this story.

You got a name drop the person. Okay. I'll name drop the person. Sorry. Sorry, but not sorry. So, Lee, we met. in 2018, Andrew Chen introduced us. Right.

And, you know, I was doing islands, which was a sort of discord for communities and colleges were using it. And you told me, you liked what we were doing and you said, hey, like, it's gotten to the point where, you know, you can pitch Mark, Mark and Dresen and some of the other partners, which is if you're an entrepreneur, this is kind of like the final stage. This is the Super Bowl of pitching your startup right here. Exactly. And as someone who, you know, I grew up reading about Mark Andreessen,

like he's kind of a hero in terms of the tech landscape. He's created so much of the infrastructure for technology. I was like, wow, this is really, really cool. Like, I'm in it. I'm really in it. So I'm very excited. I show up to, it's on Sandhill Road, which is like where all these VC firms are. And I show up and Lee's there and Andrew Chen's there and Mark Andreessen is there and Benedict

Evans is there. And I'm going through, you know, I'm having this sort of pinch me moment, right? Because like this is incredible. I'm like pitching and I think we had like a 90 minute or two hour conversation. I'm getting direct product feedback. from Mark Andreessen, like, what a legend. And in the corner of my eye, I see someone sleeping in the middle. So I'm like, oh, I must be like, you know.

It's probably a sign, Greg. Yeah, no, it can't be. It can't be. So I'm like, I'm looking, Mark was sitting right across from me. So I'm just like, I'm going to focus on Mark and talk to Mark. A minute later, I look in the corner of my eye and that same person is still asleep. To clarify, this person was not me. No, it was not Lee.

This person was Benedict Evans. Benedict Evans fell asleep. Oh, no. During my pitch. I feel like you should have that on your Twitter bio, Greg. Yeah. That's an amazing story because, I don't know. He kind of looks like I guess he looks like he might fall asleep in a pitch.

he's an amazing writer. I mean, I subscribe, I think I pay and subscribe to his weekly newsletter, which is amazing. And it's like probably one of the best things that I read every week. He kind of like, it's a, it's a, for people that don't have it, it's like a combination of sort of insights plus curation once a week. And it like, basically if you only read one thing a week on the tech landscape, it sort of gives you like everything you need in one swoop. But that's hysterical, Greg. Everything you need in one sleep. To me, I don't have any recollection of someone falling asleep.

That is hilarious. Maybe it was Greg's like subconscious. No. Greg was like nervous about someone falling asleep until his subconscious showed him Benedict Evans asleep. So I even, I actually glanced, I think, at Andrew Chen and I think he might have seen it. Because I was like, we should bring.

We should bring Benedict Evans on the show, Greg. And, and ask him about this. Because like he actually, he strikes me as a. very honest and like direct person and he might just say like yeah it was super boring bro uh he would definitely tell it like it is i i am going to just take the i'm going to apologize on behalf of ben evans he's he's a really nice person and i'm going to chalk it up maybe to jet lag he was probably coming back from england and jet lagged or something like that very tired but as the entrepreneur i was kind of thinking like okay do i say

say something? Do I like tap him on the shoulder and be like, dude, like, you okay? I also was worried about his health. I was like, is this guy like, I don't even know. It's like, should we, should we help him? And I was like, there was too much stimulation for me between Mark and this whole long table between our company being like out of cash in three months or something. Like, there was too much going on. You know, it's probably just. like take away from this for me is like if you're a startup founder and you're pitching the partners of a firm and one of them's asleep it's probably not going to work out you might want to go ahead and walk out of there and I know Greg you ended up you ended up just fine and your business got

acquired shortly thereafter so things worked out for you and here we are today but man that is a great that is a great graveyard story from the BC trail that was such a quintessentially like pre-COVID Silicon Valley VC kind of story. So, yeah, to continue the story, like, that was my life. Sand Hill Road every single day from 2016 through 2020, basically until COVID happened. And then in early 2020, I decided to leave and to start my own fund at that time to invest in the future of online work. And that included the creator economy or whatever. I called the passion economy, basically platforms that enabled consumers to monetize their passions

and their individuality. So in early 2020, I left. I started that fund called the Tellier Ventures, which I then subsequently ended up deploying a large portion of into crypto and web three companies. And was that, sorry to interrupt you, was that before COVID hit? Like, did you leave and raise that in Q1 of 2020 or was that post- It was basically in the midst of COVID? So I think I started raising in April of 2020 when the whole world was falling apart. Yeah, that was that was a whole journey. Like I learned so much through that process. It's an amazing example of seeing into the future though, right?

Like the clearly you started to think about, you know, the second order effects of some of the things that were happening. And I think it was at a time, you know, when a lot of people were just like, oh, this guy's falling, the world's going to end. And you were kind of looking out and seeing like, oh, wow, this unlocks an entire new economy and a ton of people to go and. monetized in a way that didn't exist prior. Totally. Everyone, everyone that I spoke to, I remember this clearly in April 2020, told me not to fundraise that I'm there. They told me, don't, don't raise a fund right now. Like, just chill out, wait, six months, maybe nine months, 12 months. Who knows how long this can last, but like this is the worst time possible to try to raise a new fund.

Like, emerging managers told me this. Angels told me this. LPs told me this. Everyone told me this. And I just did it anyway. And it was definitely really hard. I think it's one of those things like where being, I mean, similar to being a founder, you need a degree of kind of exuberance and like irrational confidence and almost naivete to go ahead with it. Because in retrospect, knowing how hard it was, it actually does seem kind of crazy to me now that I actually did that. But going into it, I was like, yeah, well, no, it's going to be a piece of cake. I can raise a fund.

Like I'm coming from Andreessen. Ultimately, that was not the case. Like, it was so hard. And I got told no like 900 times. But anyways, the fund like got raised eventually. And then I deployed it into a bunch of, yeah, like new consumer platforms that enabled people to pursue entirely new, like internet-based forms of work. So I invested in companies like Patreon and Substack, a bunch of early stage companies like

Stir and Perpop. And then I invested a lot into Web3 as well. So that included projects like Syndicate, Foundation, Field Guild Games, Mirror, and many others. Really because I saw, like, crypto was this new way for people to earn an income online. And not only could they earn an income, they were actually earning ownership in the projects that they were participating in, which I thought was so interesting and something that had never been possible before before crypto. And so I began spending more and more of my time in the Web 3 world and ultimately looked up one day and felt like this was the most dynamic and interesting part of the consumer software universe. And I wanted to spend 100% of my time there. So long story short, I decided to join forces with my friend and former colleague Jesse Walden over at Variant.

we ended up merging, raised fund two together last fall, and are now, yeah, a partnership of three, myself, Jesse, and then one other partner named Spencer, and we built out this whole team, and we're entirely focused on Web3 investing across the full stack. It's a really amazing story. And, you know, I think it has a lot of parallels to today as well, like what you said about the timing of when you went out and raised it and, you know, the environment at the time. and, you know, the naysayers, etc. I think it's probably pretty similar to what Web3 founders

and potential emerging managers are experiencing now. You know, we have this like the pendulum swings, right? Like you go from way like overreaching optimism and like unbounded optimism to it swings the other way and suddenly we're in this environment where personally I feel like we're at like really unbounded pessimism and everyone's like, oh, everything's dead, nothing's going to ever work again. and the VC's private markets are dead, all of that pessimism. And the reality is it's going to swing back and it'll be somewhere in the middle.

But for founders today, there's a lesson in there of like, you know, your kind of message of, you know, slight irrationality and like, you know, throwing caution to the wind a little bit as you, you know, if you do have that level of belief in what you're building and doing. Well, I think, so one thing that Lee isn't saying because she's quite humble is that she, she was known as you know really the passion economy leader or one of the leaders here in the space and I remember

when you started fundraising Lee for Atelier and lay checkout put a mini, you know, a small check in and the reason why we put it in was because even though the world was falling apart like if anyone's going to figure it out in this space it's going to be Lee and if you believe in that space.

So those are the two things. And you have capital, I guess. Those are the three things. The same was true. You know, I invested in Variant Fund One with Jesse, you know, I think it was April 2020 or something like that. Because Jesse, you know, he was, I believe, one of the best crypto managers. And he wrote the first thesis on ownership economy and published that,

popular blog post. And I think the lesson is, and, you know, Sahel, you speak about this all the time, but like the lesson is really like, how do you become the community guy or the frameworks, you know, girl or the passion economy person or whatever it is and build that audience so that when you do need an ask, when you need that ask, like, you only need a few people to say yes to your fund or a few people to. You know, you only need Andresen to fund your company, right? You only need a couple yeses to create momentum. Yeah, I'm looking, I mean, the way you said that, Greg, I thought was perfect.

Like, you know, Lee, I'm on your website, you know, Lee-Gin.com. And I'm at the bottom and I'm looking at your top posts. And all I see is like I'm looking at the dates of these posts and when you were putting out this writing. And, you know, you say that it kind of came together. The reality is like you were putting out these. amazing posts on this stuff on the topic of, you know, 100 true fans came out in February 2020 before all this. You wrote about ways to measure network effects. You wrote about startups on consumer platforms like TikTok, et cetera, all of that stuff. It was like, you know, the 10 years

to become an overnight success with these things. And so to Greg's point, you know, I think Naval calls this like type 4 luck, which is you become an expert at something and you build an audience around this expertise and then luck comes to you you know luck comes to you quote unquote in the sense that like people seek you out for that and suddenly you know you've been putting out amazing content around this you're sharing in public which is a great way to get lucky because you sort of cast these like idea magnets out into the world around all this stuff and now suddenly you know you are the passion economy person and you've built a reputation for that and you've shared unique you know individual ideas around it you're not just kind of like tailing on the back

of other people, and a lot is possible on the back of that when you do that. Today's episode is brought to you by Element, a tasty electrolyte drink mix with everything you need and nothing you don't. That means lots of salt with no sugar. It contains a science-backed electrolyte ratio, a thousand milligram sodium, 200 milligrams potassium, and 60 milligrams of magnesium, but none of the junk. No sugar, no coloring, no artificial ingredients, no gluten, no fillers, no BS. I absolutely love it and how it's fit into my lifestyle. Whether your keto, low carb, paleo, or just want to feel better and more active, element is the drink for you. I drink it after an intense workout to replenish my electrolytes. I also drink it after a few too many whiskeys late at

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Check out lemon.io today. Yeah, absolutely. I completely agree. And I think there's a step before that type of type for luck, which is just genuine passion for the topic. Like you have to have a genuine like intellectual Um curiosity and passion for whatever it is that you're studying in order to have those like novel ideas that you then translate into a blog post.

But you know like even starting from when my childhood like I grew up very online. I was always on these consumer platforms, these UGC platforms creating content on the internet. I was blogging throughout my preteen and teenage years and throughout college I had multiple tumblers and live journals and call of that like I had been primed to think about consumer software and the future of like content creation on the internet from such a young age and I was just genuinely so passionate about it because I saw myself in it and I really really wanted to find a way for people to monetize that passion so I think yeah just like it sounds cheesy but like I just advise people to follow their passions and to

have this like intuitive sense of of always thinking about what gives them energy because if they're working on something that gives them energy and that they're truly in love with that they feel like is their life's work they are going to excel at that and they're going to have insights beyond what other people can have you know the way I always think about this is so the whole like you know follow your passion follow your energy I always personally found it as like it felt abstract to me I didn't really know what that meant. And the thing when clicked for me was the idea of what feels easy to you. Like when you're doing it, what just feels so easy and like you're in flow.

And for you, that was engaging in these digital communities. It was playing games like Neopats. It was writing. It was, you know, all of those things you were doing, they felt very easy. And so you did them. You built a passion around them. And you did the sort of like janky early version of your later things that you were exceptional at throughout your whole life. And like, I found that to be a common thread, by the way, among extremely successful people.

They, like, built the, you know, version 1.0 of their thing accidentally prior to doing the real one. Like Tim Urban I had on the podcast, you know, a couple months ago. He writes, wait, but why, which is, like, arguably the most popular blog in the world. And before he launched that, he had this, like, weird email thing that he would send to, like, a hundred friends that basically said what he did during the course of the day. And he did it for years. Like he would just say, oh, yeah, here's what I did today. And it was like a few bullets. And it just struck me that like everyone that goes and does something exceptional had the like kind of yucky skeleton type version of that just because it felt easy to them and natural.

So I do think it's like a call to arms for a lot of people out there. If you just, if you're trying to figure out what your thing is, think about what feels fluid. Like what just feels effortless to you when you're doing it. maybe that's playing video games, by the way. Like, and for you, like Neopets, maybe that felt effortless. And there is in this new world that we live in a path within any of those worlds for you to go and monetize and make money and do things. Yeah, plus one. I agree with all of that.

And consistency. Like, yeah. Like, how many threads have you written since 2020 consistently? Too many. It's one a week. One a week. Yeah. One a week.

Yeah. One a week for two years. We have a friend. And newsletter pieces, like two newsletters a week for two years. I mean, a year and a half now. We have a friend Justin Welsh, and he had a tweet that went viral the other day, which I thought was really good. And he wrote, my social media strategy. Tweets, two times per day.

Threads, one time per week. LinkedIn post two times per day. Weekly newsletter, one time per week. Then each day I spend about 45 minutes interacting with my audience. Do this for six months and watch what happens. Wow. Yeah, this is like, so I think there's. There's two sides to this, by the way. I love Justin. I think it's amazing. I think there's

like the tactician, which is that. I think Justin's a tactician. I think he's amazing and he's like doing a great job of building a life and a career and businesses for himself around the internet by doing this, by like having that consistency. And just like he basically has a blueprint and he follows it. He knows it works and he'll replicate it. Then you have the like, I don't know, the artist, which is like the person like a Tim Urban, frankly, who just like writes, you know, he might write one blog post every three months, but you know when it comes out, it's going to be like, it's going to change your world because he just sits around thinking and writing all the time. And like his business model is very different. I don't, I wouldn't say one is

better or worse. But it's interesting to see like these different kind of ends of the spectrum of doing this. Especially, I mean, it's all, it all ties to the passion economy, right? It all ties to the stuff that that you've been writing and talking about. But it is fascinating. Like the intensity model versus the consistency model and then kind of where they blend in the middle of the hybrid. Yeah, I'm definitely more on the Tim Urban side of the spectrum. Like, I'm not consistent at all. I call my newsletter an aspirationally weekly newsletter or maybe it's aspirational monthly.

I don't even know what cadence I said I wanted to do, but it basically comes out whenever I have some insight or something to share that crosses a bar. It is very hard. Yeah, I mean, Greg, you do the same. same thing. And like I think it's very hard. Julian Shapiro, our friend Greg, who Lee, you may have read some of his stuff before, also an awesome internet writer and thinker. He's talked about this in the past. Like, it's really hard to send an insight-rich newsletter once a week. And the people that do it, like, Ben Thompson, I like bowed down to. The fact that that guy can every single day churn out

an insight-rich piece of writing is insane to me. Like, Packy once a week. Yeah. You know, Mario, same thing. Like, it's pretty remarkable, I think, and those are like unicorns in my mind. I think most of us can't really do that. It's just very, very difficult. So it's interesting to, like, see those different models of what works within this economy and world. Before we lose you, because we've got about 20 minutes left, I want to talk about your piece. I want to talk about Web 3 because a lot has changed since that piece came out,

although I think the principles and the body of it still really holds. But we've had, you know, over, really over like May and June, a broad kind of reset or destruction of, you know, crypto asset prices. I'll separate that from like the fundamentals of the crypto world, which I'm curious to get your guys' perspectives on. But we'd love to just like start out by kind of just getting your thoughts on what has transpired and, you know, like general perspective on the space and what you're seeing, you know, in terms of as an individual. investor founders going and doing and building. And just a general vibe check. Vibe check. You know, quick vibe check.

Lee, how are you doing? And are you feeling more bullish, you know, as bullish, you know, less, you know, more bearish. Thank you for asking. Yeah, like, how are you doing, you know? That's very kind. Well, I just got better from COVID, so I'm already doing better than before. Was that an NFT week, COVID?

It was. Yeah, it was. Yeah, man. I think I might have gotten it before, but I was basically out for like NFT. I didn't see anyone. I didn't make it to our own parties. Hope everyone had fun at our parties, but I wasn't there because I had COVID. But yeah, anyways, so I'm doing pretty well.

I think to answer your question, I think I'm a really strange creature in Webbreed. I'm kind of like an aberration. in the landscape because I got into Web 3 for really ideological reasons. So when I was talking about my backstory and how I was investing out of this fund that was scoped to the future of online work and consumer tech, like I think one thing that I didn't mention was I had always felt this tension between the platforms that I was investing in and like the professed vision of enabling anyone to achieve financial stability and economic freedom, they're working on these platforms versus what was happening in reality,

which is that a lot of the value came from the equity value of these companies, and that accrued to a very, very small group of people, investors, founders, early employees, executives, etc. And notably, who's missing from that is the participants on the platforms themselves. So I was really drawn to Web3 as a way to alleviate that tension and imbalance that I perceived in the platform world, wherein I felt like there were huge swaths of people who were actually contributing the value to these platforms, but left out of the ownership of them. And so I got into Web 3 from a mission perspective of how do we make that situation much more equitable? How do we make the Internet more fair and architect new platforms that actually share ownership much more?

broadly. And I say that I'm kind of like an aberration in crypto because I feel like for the last year or so, for maybe the last two years of the bull market, I felt like that message was oftentimes drowned out by a lot of the price action that was happening or a lot of like, you know, projects that would launch to huge fanfare and then like kind of dissipated into nothingness. There were just a lot of distractions happening over the last two years that I felt like the mission element of crypto sort of got lost in all of that noise. And I actually find it refreshing now where we are at this moment because I think a lot of the noise is finally settling down. And we can actually focus on what the long term mission of crypto is, like why we're all here in the first place. Like what are we actually trying to build?

our mission as investors is nothing short of building a more equitable internet. That is why we are in crypto as variant funds. We think crypto can be the basis of a more equitable fair internet that actually enables people to own wealth-building assets for the first time ever. And so we're still really deeply committed to that vision and that mission. And I think finally, we're finally in a market environment in which we can cut through the noise and there's less of like a wild speculation that's happening that I think detracts from that long-term mission.

Do you, do you know like Cape Cod? You were in the Boston area for a while. You know Cape Cod? Yeah. I keep thinking of this as like Cape Cod. I've talked to our friend Sean Puri about this in the past as well. It's like Cape Cod, you know, in the summer. It's like everyone goes to Cape Cod.

Those places are packed. It's like the hot place. you know, all these like vacationers come in and rent all the houses, all the prices go through the roof, everything's insane. You know, and then come Labor Day weekend, it's crazy. And like starting in September, it starts getting real quiet in Cape Cod. And like all of those people leave and they go back to wherever they live. And the people that stay in Cape Cod and that live there are the locals.

And, you know, they're like the true Cape Cod lovers and believers and the prices come down. And it's like, it's the place where they love to live. And I keep thinking about that. with asset markets in general, but like crypto, there were a lot of tourists that were in it, not because they understood, you know, underlying fundamentals or they understood the vision of, you know, a kind of a truly equitable internet as you laid it out. But because, you know, they thought they could make a quick buck or like it was the get rich, quick scheme of the day. And a lot of those people have left.

You know, and I know a lot of those people and there's nothing wrong with it, actually. it's sort of a tale as old as time for humans to chase after those things. But the real builders of the space, if it does end up being and fulfilling the promise of what a lot of people think or hope, are the ones that are more excited now than they were. Because now, you know, like for you guys, first off, like prices are hopefully going to reset to some extent in the private markets too. And you're going to be able to invest in things at a, you know, a more reasonable price point and generate better returns for your investors, which creates a feedback loop of more money flowing into the space and allows more projects to be built. So actually, in the aggregate, that should be good for founders

as well. But there's a lot, I mean, it is a lot to unpack just because of all of the speculative fever that had to get drained out in a short period of time. I mean, all of like the unwinding of Three Arrow's Capital and, you know, the impact that's had on BlockFi and some of these other things that you've seen that are more publicized. I think it had to happen. And, and I think it had to happen. It had to happen in tech broadly. Like the whole tech bubble has sort of pulled back to get just some of this like crazy speculation out of the markets. I agree. Did you guys see this like I mentioned it just in passing there, but did you guys see and follow like the whole BlockFi FTX?

A little bit. Yeah. Yeah. I just thought it was so interesting. I mean, the whole like story of it is actually not super complicated because basically, you know, they were taking in money from, from clients and, you know, they were loaning it out into what is a super attractive loaning market for crypto assets. And so they were generating a great return on that. And they were basically passing through a high return to their, to their customers. And most of it was

like over collateralized loans, meaning there was a lot of collateral in the form of Bitcoin or other crypto assets for every dollar of a loan. And that's great, actually. The challenge is these are super volatile assets. So over collateralized is good until something dropped 60 percent. And all of a sudden the over collateralization is not super helpful. And so, you know, generally speaking, what happened was there was, you know, a couple of these hedge funds that got liquidated and collapsed like Three Arrows Capital. And these places like Blockfire, like Voyager has been another big one, got smoked by losses and had to, you know, take pretty dramatic actions to avoid, you know, being completely bankrupt and losing client funds. But, you know, the thing that I found so

interesting was like so that business was valued at what like four billion dollars or something last year. FTX is now you know under a definitive agreement to acquire block five for like I don't really care how you know the CEO positioned it you know with the with the revolving line of credit that's not really enterprise value it's not like buying the equity but like basically for up to 240 million or something like that it had been reported that it was for 25 million which I imagine is like the low end of what it could possibly be if everything goes to hell. But it's pretty remarkable that you can have a business, you know, raise money at a $4 billion valuation and all the, you know, frankly, like the employees who came on and got equity at that valuation and have it literally be worth,

you know, basically nothing, right? Like pennies on the dollar from that deal. It's just like, it's a little bit shocking just on the surface of it. Yeah, I totally agree. And I think, I mean, there's there's just like so many lessons and implications from all of this um like one thing that i'll call out is like i think i think it all gets conflated together in the news media and in the minds of like broader like retail investor market but i would distinguish between these like centralized companies like block buy um that are um built on top of crypto assets but really like kind of building a proprietary business around that, where it's, you know, lending money to actors and institutions that aren't super transparent to the end users and so on and so forth and exposing

themselves to a lot of risk. I would distinguish between that versus like the world of decentralized finance or defy, wherein things are very much transparent. It's all on chain. All of the smart contracts are auditable users know how the methods work. That's a very, that's a very, that's a very important point that you made because I think someone I saw it on Twitter somewhere you guys might have seen it but like so you know block five is like centralized finance uh voyager is the same way um there's like a single point of failure in those systems right and like the equity that you know the value that was lost from 4.6 billion or whatever it was to the you know the deal pennies on the dollar that's like you know tiger global and bane capital like it's not you know people um and client

funds are actually going to be protected in this deal with ftx which is fantastic but The point you made about DFI, like I think the biggest protocols like compound or MakerDAO, they actually didn't experience any of these massive issues in this rundown. They actually operated and function quite effectively with this massive drawdown, which is an important point for people that question DFI and the merits of it. I think there's plenty of reasons to question it, but this probably isn't one, actually, because it seemed to function well in what was a massive drawdown. Exactly, exactly.

All of the DFI protocols are still working. they've been incredibly resilient during this period of broader turmoil. And I think it's really important to note that because in those instances in the defy world, users know exactly what is happening with their funds, how it's being pulled, what's going to happen once they deposit their funds into a lending pool, et cetera, versus for something like BlockFi, when users deposited their funds, I think they were just messaged the interest rate and they probably had no idea that it was, you know, ultimately being, you know, sent to 3AC or whomever else.

Like there is a very clear distinction between those two worlds of centralized. I think it's called C, D-D-Fi, like centralized D-Fi versus actual D-Fi. So I would be very clear in drawing that distinction. Defi is still working as expected and continues to like come along. I think unfortunately, like it does get conflated together in the minds of general consumers. And I think in the short term, this is going to represent a headwind to broader consumer adoption, unfortunately, because I think broadly speaking, like most normal Americans are going to look at what's happening right now and just think, oh my God, like crypto is imploding. Like all of crypto under this umbrella of crypto is like not doing well and things are, you know, getting marked down significantly and people are losing money. I think that that is definitely going to be an impact of it.

And I think what this also exposes is the need for more consumer protections and disclosure of who is representing certain projects in a certain way when people have exposure financially to a certain project success, having to disclose that just like they do in the securities world or just as they do for advertising purposes on social media. Like, I think there were a lot of instances over the last year where people promoted, you know, not just Blockby, but a whole range of different projects didn't disclose that they were actually being compensated for that or that they were investors. And ultimately, like, you know, obviously have an incentive to talk about it in a certain way. That's really positive. And, yeah, retail investors ultimately were harmed in those situations. And I think that's really sad. Let me ask you on that, because I think that's a really important point. It's one that's not often talked about.

You know, one of the things that I've seen people criticize about the crypto industry and Web3 in general is like this idea that VCs are like dumping their bags, quote unquote, on retail. And that, you know, they're basically like buying into a token in the pre-sale, marking it up with a follow-on investment. And then as soon as it starts being liquid and tradable, they're, again. it at a huge markup to retail who, you know, is then kind of caught holding the bag, quote unquote, for, you know, for any drops in price. My experience personally, you know, I haven't done a ton of like out of my fund or personally, I haven't done a lot of like pre-sale investing, but I've always seen there be like lockups investing periods for at least like the most reputable projects, like the ones that I see big VCs getting into. I've always seen them having like

12 to 24 month lockups, basically to prevent from this happening, like the same way. your startup equity gets vests over a certain period of years. Is that a real problem? Do you see people that are actually able to do that? Or do most of these projects have those type of lockups? So usually, I would say in the deals that I've been a part of, lockups are very, very common, if not just universally present. And furthermore, those lockups are really long, like multi-year lockups.

And for venture firms, I mean, venture firms, are structured as usually 10-year funds, where we have a 10-year time horizon to achieve our fund returns. And so people are not investing for a quick flip or to invest on a short time horizon. I think obviously there's lots of different capital allocators out there. There's not just the venture firms, there's trading firms, there's hedge funds investing in crypto. So I'm not entirely sure if, you know, all of them are. stipulating that there's going to be a lockup perhaps people are negotiating differently but i think lockups are really really important to create that long-term alignment yeah i completely agree

i got to ask you before selfishly before we leave um what does a web three version of neo-pets look like and can you describe it um yeah that's a that's a really really good question I haven't thought about this. I think NeoPet's was essentially a play-to-earn game before the term Play-to-Earn actually existed. So there was an in-game currency called Neo-Points that you would earn by taking various actions. You could earn it through investing in their virtual stock market. You can earn it by selling items in your shop or by playing games. But that in-game currency was just that.

It was an in-game currency that had no connectivity to like US dollars. dollars. There was no way to actually take that neopoint and like convert it to any any fiat currency. And furthermore, like, neopoints were subject to whatever like, you know, economy they designed. Like it could be inflated. They could create some of more neopoints, et cetera. There was no transparency into that. So I think the Web 3 version of neopoints, there's probably lots of lessons to be learned around designing play-to-earn economies. I think someone's going to crack this actually. far the play-to-earn games that we've seen take off haven't had exactly sustainable tokenomics.

But I think in this next cycle, someone is going to crack that and design a game economy that is actually sustainable and functions. And Neopets was really, really amazing because there were both ample ways to earn, earn neopoints, but there were also a ton of different ways to spend your neopo points. So you could spend them on items. You can spend it, like, upping the attractiveness of your pet, painting it into different colors, et cetera, buying furniture for your virtual home. Like, it was really this very expansive virtual world and economy.

And I think that holds a lot of lessons for game designers to both, like, create the mechanisms for earning, but also to make sure that people have ways to continue to spend and therefore demand the token on a long-term basis. Yeah. I have two cut through the noise. I know nothing about play to earn outside of my like general reading and whatnot. Like I've never built anything in the space. But I have two like simple rules that I think need to exist for someone to build a thriving play to earn game.

Number one, people have to get utility from playing, not just from making money. Like there has to be people who play because they love it. Like you have neopets. And number two, I think there needs to be outside dollars coming into the system, not from gamers. And the way that I think that happens is like neopets, oh, maybe my guy can wear Nike shoes in Neopets. And so Nike is excited to, like, put their brand in this. And there's, like, all of a sudden, brand dollars or outside dollars and ecosystem

dollars coming into this environment. And I think the combination of those two creates a much more sustainable environment. Because now I don't just rely on, you know, effectively Ponzi economics of, like, you know, new dollars coming in to fund returns to old money. I have, like, a truly, like, self-replicating system that exists. So that's my, like, thing. if I'm looking at them, that's what I'm looking for. I would do a slight edit on the second,

the second characteristic that you mentioned. So I do agree, the first one needs to be in place, which is that the game actually needs to be fun. It actually needs to be played and users want to be there for like intrinsic reasons, not just to earn. And that ties in well to the second characteristic

that it needs to have, which is that there needs to be players who are net, like putting in money into the game versus extracting out from the game. There needs to be people who have like net inflows versus net outflows. Like all of the net outflows are the people who are earning. But there needs to be another contingent of players,

which does exist in most games, it's the whales, who are spending more money than they earn out. And that is the only way that the economy of the game can be in balance without necessarily relying on the pononomics of new players depositing money in, therefore like earlier players can cash out. And so it needs to perpetually grow, otherwise it collapses. So it needs to get those plays.

players, like that segment of whale users in the game, paying to enhance their experience and being happy to pay on a net basis, depositing money into the game's economy for it to work. Lee, do you think the winner of this play-to-earn ecosystem is going to look primitive, like a neopets? Like when you went to neopets, it, like, fell pretty primitive, web-based. or do you think it's going to be from a AAA game studio? Like, is it going to look more like Fortnite or is it going to look more like neopets? There's a good closing question, Greg.

I have an answer, but I'm curious Lee's perspective. I think you can do a lot with a really primitive game. I don't think a game needs to be so visually fancy to compel the two characters. that we just mentioned. I think you can get there with pretty simple game dynamics, like what Neopets had. Neopets was literally playable on a dial-up mode. And so I think those are the games that are going to figure it out first in advance of the AAA games that probably will take five years to come out.

I like it. Greg? I think the, I'm with you, Lee. I think the vibe I'm hearing from a lot of game developers right now. and game designers is it needs to be this AAA crazy metaverse 3D, let's go take three years and raise $100 million and build this crazy ecosystem, I think it's going to look way more like NeoPets than it is Fortnite initially. All right.

I'll take the other side of this bet, just because I don't want to have three people agree with it. I think it's going to come from a AAA game developer. But do you believe in that? Yeah, I do. I just think that the game experience and like absolutely having an immersive, of insane game experience is going to be really important. But we can argue it more.

When you say AAA game developer, what do you mean? Do you mean like coming like from the makers of like epic or? Yeah, I think they're going to have to create like a, you know, like a separate entity that kind of allows it to be more free ownership. And it'll come from one of those big studios. I actually don't think it'll be a new studio that raises money. Here's why I think you're wrong. So if you live. look at what

happened with Ubisoft. Ubisoft created was going to do some NFT dynamics in

one of their games. They used the most green blockchain Tezos, which basically

is super green. And they had such a big backlash that it sent a ripple effect

to all major game studios that if you are going to do play to earn,

if you're going to do NFTs, you can't really do it from your there's just so much of a backlash you can't really do it from the mothership uh it has to be like an independent game studio it has to be like i take that point yeah i think that's true like the there's a big uh there's a big uh hold up like around the terminology and the gaming community doesn't love it um so i i i hear you i'm happy

to debate this further i think it'll be interesting to see maybe they'll set up a separate entity that's like, you know, a shell company or something like that. People are creative. That's what's going to happen. Lee, thank you so much. This was awesome. Super, super excited to release this. You're amazing.

And people can find you on Twitter and you're writing. And they should check out Variant Fund as well because you guys are up to some amazing things. So we look forward to having you back on in the future. Thank you so much for joining us. Thank you, so much for having me. This is great. Thanks so much for listening to today's episode. If you have any questions that you want featured in a future episode, email us at

hi at t rw iH dot com leave us a review at apple or spotify to help us grow the reach of this podcast. Until next time, we will see you soon.