The Startup Ideas Podcast - Elon's Twitter Takeover and The Future of Social Media with Sriram Krishnan

Episode Date: May 3, 2022

What does the future of Twitter look like as it transitions to a private company? Sriram Krishnan joined us on the pod to explore that question. Sriram is a general partner at Andreessen Horowitz and host of "The Good Time Show.” With a focus on investing in crypto and web3, he brings a unique perspective to help us understand the shifting social media landscape. In this episode, we also cover the crashing stock market, Aku World’s $33 million mistake, and receive valuable advice from our guest on raising capital.►► Want more community? Learn more here: http://trwih.comTHIS EPISODESriram Krishnan: https://twitter.com/sriramkSahil Bloom: https://twitter.com/SahilBloomGreg Isenberg: https://twitter.com/gregisenbergProduction & Marketing Team: https://penname.co/FIND US ON SOCIALTwitter: 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/id1593424985SPECIAL THANKS TO OUR SPONSORSThis episode is also brought to you by MarketerHire. MarketerHire provides on-demand access to pre-vetted, top-tier marketers who can freelance as much or as little as needed.They’ve made it easy to hire great marketers. With pre-vetted talent and expert hand-matching, you can add a proven marketer to your team in less than a week.Go to marketerhire.com to learn more.

Why am I drawn to Web 3? One of these is like, all this stuff is brand new. Right, it's a totally unexplored, like, design surface. It's like 2005 and people are figuring out what rest APIs are and user-generated content are for the very first time. So we figured a bunch of things. Even DAUs, for example, last year and a half, we learned so much about governance. And, you know, we learned tons more about token design. But I think the possibilities are just like, it blows your mind.

What's up, dude? What's going on? I like your outfit tonight. Thank you. I like the buttoned up all the way. button down. I think it's like a, it's a sharp look. The stock market is is tanking right now. So I've taken a second job as a bus boy. That's that's kind of where I'm at. Can we talk about the market? Actually, I'm not, I'm zero percent market analyst, but I do find it funny. I tweeted and

then aborted a tweet today because I didn't want to offend people. Like for the last 10 years, everyone has been tweeting out like Warren Buffett quotes about, you know, that quote, be fearful when others are greedy and greedy when others are fearful. You know, like everyone tweets that out. It's like this common wisdom that everyone throws out. And, you know, then when everyone actually is fearful, everyone just panics. And you start getting texts from all your friends being like the world's ending. You know, like Nikita and all these other people in our group chats sending us text telling us the world is ending.

Yeah, I mean, you and I are on the same page with this. We're just kind of like every week buying a little bit, just, you know, trying to keep it calm, looking for good businesses to buy and invest in. Today's episode is brought to you by Marketer Hire. With marketer hire, you can get expert marketers on demand. It's easy and fast. What's marketer hire? Simply put, Marketer Hire is a marketplace for marketing talent.

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If you're a growing business, you will too. Check them out today at marketerhire.com. Again, that's marketerhire.com. And tell them Sahel sent you. I mean, when I look at the market right now, so first off, I buy the S&P 500 every single Monday. Like without fit, I just, I always do that. That's just like my dollar cost average.

And that will always be like my biggest position long term. But I mean, when I look at the market today and I see some of the things that I'm like personally excited about the trends around, I think it's hard. Like, I'm just pulling random stuff up. Like, look at, like, random growth trends that are in the market that you know are going to be around and be big for the long term. And they're down, like, 40% off their highs or 50% off their highs. It's just hard to imagine if your time horizon's long enough that it's not a good time to buy these, like, tech forward names. And it's not financial advice. But, like, when I look at it, that's why I've,

personally on all of these massive collapses, I'm just like go by a little bit of basically everything in my portfolio. Yeah. I mean, same here, not financial advice, but I was just looking at Robin Hood. So Robin Hood just announced a few minutes ago that they're laying off 9% of their workforce. And the reason why is because of they're like, we have duplicate functions, which is obviously terrible that people are losing their jobs. And the stock is down.

At the same time, I look at it. I'm like, okay, the market cap for the business is $8.6 billion. They've got like almost $6 billion of cash on hand. So the enterprise value is like $3 billion, something like that. And it's Robin Hood. They've got like 20 million plus customers. You know, you got to think. that that's a decent bet. Yeah. And again, like, I know nothing about the fundamentals of these,

I don't actually buy single name stocks. You know this. Like, I only own one single name stock. It hasn't gone so hot since I did it because the only one that I bought. It was like right into the peak of the NASDAQ. But I don't really buy single name stock. So I'm just like, some of these industries are just going to be massive and continue to exist if we're going to have a future as a society, like semiconductors down SMH, which is like the name that I'm in there, is literally, down from like 300 plus to like 220 or something, 230. That is a massive drop. And yeah, like, is it going to get impacted by all this stuff?

Probably. But the reality is, like, semiconductors have to exist and continue to develop for us to have a technology-driven future. Do you know Rao Paul, the Real Vision guy? He sent me his latest piece. He calls it the exponential age, you know, his whole like thesis for the future here. and he basically is like tracking this basket of what he calls the kind of exponential age stocks and looking at where they are relative to their trend lines and whether their buys.

And for the first time this week, he started saying on the drop that he was going to start lagging into this stuff because they're so far down off of their trend lines that, you know, as these become a bigger and bigger part of our technology future, they're going to be like life-changing returns on the, you know, on the upside coming back from. this. So it'll be interesting to see. I mean, there's tons of macro involved, obviously, like, the Fed continuing to tighten and raise interest rates is a huge driver of the markets. I personally think that if we see my gut tells me that we're going to see like a pretty bad Q2 from an economy standpoint. Like, I wouldn't be shocked if we actually saw negative growth and people panic. I think the Fed

will just like reverse course very quickly because they've shown an unwillingness to allow pain. And I think if they do that, growth stocks will rip like we've never seen them rip in history. And anyone that was actually, you know, kind of had the guts to be buying, I think we'll be rewarded for those guts. But again, not financial advice. And time horizons matter. If you're planning to retire and you need this cash soon for some purchase or something, completely different story than you and I sitting here just basically like, you know, I feel like it's toy money. because I don't need it for a long time.

Switching gears from public markets to private markets. I don't know if you saw, you mentioned Nikita, but he tweeted the other day, if the startup you're working for is valued at more than $100 million, and the exercise window on your options is 90 days. You should pencil in that your equity will be worth nothing at this point. And I'd love you just to explain that for folks. What is he saying? And then how do you think that these, you know, big drawdowns of 50, 60, 70% on public markets are going to affect, you know, seed series A, series B, series C startups?

Yeah, I mean, I think broadly what he's getting at is the idea that, you know, equity to employees was issued at, you know, sort of the most recent valuation of the company. And in an environment like this, if you were joining like a series C or series B startup that had raised at a big price and you're, equity was being issued at that price, you're underwater, you know, on a true mark to market basis. Private markets do not have a mark to market function in the way that public markets do. I can go check the coin-based stock every single day and know that the value of my equity is lower. But in a private market, if my company just raised at a billion dollar valuation and I got equity granted at that valuation, now a few months later, the market has clearly adjusted. that billion dollars, which was based off of a lot of public comps in the market, it could be worth 40, 50% less just off of like pure public comps

because of how much some of the public names have dropped from a multiple standpoint. And so what I think Nakedo is getting at is just this idea that like, oh my God, a lot of startup equity and these employees that have that equity are wildly underwater. And there is like a massive return in the market that needs to be achieved prior to those people having any value in that equity. And it's a challenge. I mean, we saw Instacart. I think it was Instacart a few weeks ago, like repriced their, reprised their internal

valuation for this exact reason. So I think you're going to see more and more startups having to think really deliberately about doing this. Like Instacart, I just pulled this up, March 25th, Instacart basically cut its own value to $24 billion, which was a markdown of almost 40% off of where the last funding round had been done by Fidelity, D1, Sequoia, and Andrescent. So all those guys invested, you know, at like, yeah, $39 billion in March of 2021. And a year later, you know, the company was actually marking it down from $39 billion to $24 billion for the purposes of making sure.

that employees, you know, had real value in the equity that they were, that they were granting. Because, you know, it goes without saying if, if the whole market knows that you're worth less than 39 and you're trying to incentivize employees by saying, hey, I'm going to give you a grant based on the 39 billion valuation, if I'm looking at it, I'm saying like, well, that's worth half what, you know, that's worth half what you're telling me. It's worth, basically. So it's an interesting dynamic. I do think you're going to see more companies having to reprice and, and think about employee incentives in a more comprehensive way. Yeah.

And you know, you say it goes to that saying, but I actually think we should talk about this stuff because I think there's like, you'd be shocked how many employees like just don't know the fundamentals of all this stuff. Well, there's a business idea there, by the way. Like the lack of education and transparency around how options work, how exercise periods work, you know, the tax side of it, managing liquidity, managing your tax implications, all of that stuff is crazy. And that goes for like public companies. It goes for private companies, all of it. I mean, my sister-in-law works at Twilio and, you know, has had equity over a long period

of time. And it did extraordinarily well over the, you know, period in 2020. It rose to $400 a share. Now it's all the way down to $120. And she was having to pay taxes on things from, you know, gains that she had. And it's just like this massive headache of things that, candidly, very few people that are joining a tech company really want to or would have learned about that stuff. Right. And so I think there's a business somewhere in there of like, it's probably a B to B to C sale. Like you go plug in some sort of software or something easy. That's an education and kind of management tool for employees, plug it in with the companies. Carta has tried to do it, but their platform sucks, man. When you go look at it and try to like manage your options on there. It's really not intuitive and non-educational to me.

So either they should acquire someone and adapt it, they should improve it, or someone can come in and disrupt this market and provide something better. Yeah, I like it. I think there's there's definitely like a need for that just like people who understand tech, like who understand like, hey, like your CEO might say this company's worth 39 billion, but it's really worth 24 billion. And so I definitely think there's a business there. I want to pull up a text message that I got right before this call from a founder I invested in. Because I think if he's texting me this, a lot of people are probably thinking about this. And it's related to our conversation.

So he said, do you think that the fundraising environment is changing or is it just a lot of unwarranted fear? And then I said, what stage are you talking about? And he writes, I guess, any sage, seeds, or series A. And then he links to me a tweet by Harry Stebbings. Yeah, I saw that tweet. Founders, you need to hear the truth. The funding market has changed. That raise you wanted, you aren't going to get.

You are raising too much with too little. You will go out, burn lots of discussions raising too much, then come back with smaller requests. Don't do this. So he wanted to my... Plus FUD from Harry, man. Yeah, so he's, and then he writes LOL after that. Yeah.

And first off, I think VCs are a little self-serving when they tweet stuff like that. And I will tell Harry this. Harry's a friend. You know, like, look, I personally, if you're a series B, series C, you know, and later startup, has the funding market changed? Yeah, absolutely. Because, you know, like I had, I told you about this. I just had a conversation with one of the heads at one of the big crossover funds. And he was telling me, like, what we're looking at now, because we invest in both private and

public, is we're basically those late stage private companies. We have a direct comparison point now to look at a public company that has the same growth profile is of bigger scale and that is liquid. And so he's like, with what those have traded down to, why would I invest in a private, late stage software company that is illiquid when I could get the same growth and fundamentals in a liquid name in the public markets at a better price. He's like, it makes no sense. And so what he's seeing is he thinks there's going to be like kind of a rush out of that late stage growth market. So companies that went and raised big rounds in 2021 don't really maybe have to

worry about it because they've got runway and hopefully they're being prudent from a cash standpoint. But if you were planning to raise a big, you know, series C this year at a big price, it's really, really hard. You're just not going to find a lot of capacity in that market. On the earlier side of the market, I'm curious what you're seeing, Greg. I haven't seen a massive change in like seed and maybe like the high price series A is probably aren't going to happen quite as crazy as they were, which is probably a good thing, candidly. But the like pre-seed seed market, it's just so long term. and it's, you know, 10 plus year horizons that I don't see a massive change in the valuations. Yeah. Couldn't agree more. Pre-seed seed, you know, mostly business as usual.

You're backing great teams, basically. So I still think great teams and great products are going to be competitive. But yeah, I agreed. On the later stage, I think there'll be some correction. I just, what I don't love about that tweet, Harry Steving's tweet is I think a lot of his following are founders who are, you know, seed, series A or even pre-seed. And I want to encourage people to go, you know, to go and build and don't be afraid. Like a big part of raising money, like I've raised money a few times, like is the confidence. And so if you're listening to this, like, just because you're seeing some tweets that like prices are going down, it's going to be harder to raise, like, you know, keep your head up high. Yeah, I completely agree.

And look, like, builders build. You know, fundraising is fundraising, but if you're building something valuable and you're building real value, there's going to be a market for it. And there's so much capital that has been raised by all of these venture funds, it has to go to work somewhere. And the truth is, I don't know. The truth is, like, if you're going to see a tweet, a fud tweet and it's going to stop you from raising money, like, are you really an entrepreneur, right? Yeah, totally. Like, that's... Plus, who cares?

Like if it's at, if you raise your Series A at a, you know, 100 million versus 150 a few months ago, yeah, there's more dilution. But if your goal is to build a $10 billion business, yeah, you're going to own less, you know, percentage points. Is it slightly worse off? You're still going to be rich. Like, if you go build the big thing, you're still going to be rich. It's okay. So I don't know, man. I just think it's like separate the signal from the noise a bit here.

I know we've got Sri Ram in the waiting room. So let's go ahead and bring them in. Thank you so much for having me on. You know, the cliched thing of a long-time listener, first-time caller. I just love what you folks do. I watch all of it. I watch, you know, the one of Alexis. You know, I would say, okay, I'm going to say a bunch of good things and then like one really bad thing.

Okay. The bunch of good things is, you know, love the vibe of the show and, you know, love like the couch and the comfort and the conversation. It's all great. I just feel like, you know, you know, I was watching Alexis, the one there at Alexis, It would be just great episode. Alex was amazing. Talk of minimal,

minimal viable community. And in the middle, Alexi just kind of calls off camera and someone just brings him, I think, some vodka or tequila or something. And I just want to say, first of all I have to like kind of cook zero

over here. So I feel like I'm not getting the full-blown guest experience. I'm like, well, Alex is like, you know, the big shot. Like, let's get him,

you know, let's get him like the full-grown team. I'm like, oh, yeah, let's kind of get him on like a, you know, like a shitty, you know, like a internet connection

and let's kind of get this one out. So yeah, I feel like I'm kind of like, like, group you folks are on here. So I, okay, first off, very fair criticism. I blame, I blame COVID. I guess I blame Omicron because the last ones we were able to do in person. We're like Art Basel Week in Miami. And since then, we've been doing these on a remote, you know,

on a remote setting on Zoom or on Riverside, which is one of the Lexus's portfolio companies. I think they just raised their series. So we've been doing them remote, although super excited, post my baby, and once my like paternity leave is done to be able to come back and do the couch vibe. And we will have you back on and we will have someone walk into the shoot and give you a tequila. I think that was Boback, by the way, Greg, that did that. I will hold you to invite you. I just want to say also congratulations in advance.

You know, I was sort of expecting, you know, well, it might still happen any moment. You might just kind of disappear and it's going to be me and Greg. I hope not. I hope not, but I will take you up on some father advice at some point soon. So anyway, man, thank you so much for joining. We have been really excited to have you on. And so the feeling is really mutual and a bunch that we want to chat about with you. So I personally would suggest we just dive right into it.

The first thing that I want to talk about before we get into the obvious around Elon Musk and all of this Twitter stuff, the first thing I want to get into is this Accu world, the Akutars hack or exploit or a thing that happened. Greg, did you see this? I did. So I can give everyone, anyone that hasn't seen this, I can give a quick primer on. So Aku World, AKU World, the website is AKU. World, I believe. It's created by this guy, Micah Johnson, who incidentally is like a friend of

and someone who I think extremely highly of. He's from the baseball world, actually, which is where I know him from. He played baseball at Indiana, ended up going and playing professional baseball, and since has become an artist. And he's this incredible artist. And basically in the early days of the NFT rise, he created this project called Aku World. And it was all based around this pretty amazing story of his nephew, who is an African-American kid, who basically told someone that he wanted to be an astronaut and was told that black kids

couldn't be astronauts. And so Micah created this whole art and world and project around that idea. Basically, it's a young boy with an astronaut's helmet on is kind of the basis of this whole world. And it's really incredible art, incredible thing. They've had a ton of success with the early drops. But the latest is sort of an unfortunate thing that's happened in their most recent drop, which was a error in the code around the smart contract that was exploited and caused about $33 million to be locked forever in the smart contract. And so I'm curious, like you guys are my web three guys. I'm curious what you guys think of this situation in general, how we can prevent things like this from happening and how we can sort of come back from stuff like this. Good question. Okay, I probably going to have a disappointing answer because I don't think I follow the situation too closely. I saw Twitter, but I didn't follow the situation too closely.

So this one is very more general. I think it's like kind of a couple of things, right? You know, I think if you kind of look at any sort of technology shift over the last, you know, 20, 30 years, there's kind of been like a period of time when, you know, we've kind of hit, oh, here's this amazing new platform. They can do a bunch of amazing things. And then there's a bunch of like, you know,

I think there's two things which happen, right? I actually don't remember the details in this case. I think it was kind of an error of some sort. It wasn't like a malicious hacker, you know, And as, but, you know, in the last six, seven months, that have been, like, you know, multiple famous incidents, you know, the wormhole incident, there's a few other famous incidents that were actually, you know, people on the other side.

So I think they kind of have two broad sets of things which happen. Like, one is, you know, engineers and developers over time, you know, discover, like, what are the patterns and practices and make, like, painful errors? I have, like, a picture from the 90s that just get to. The other stories, other words up is that they're just bad guys, and, you know, the bad guys get smarter, and then the good guys get smarter,

and there's kind of, like, a warfare, which keeps going on. And I think you've seen this over time and time again. One of my favorite stories is from close friend of mine, Steven Sinovsky, who we all make fun off, because for all this history of Windows and Office, he's amazing. He's one of the most senior people at Microsoft,

and he was running office, probably in a very senior role in office in the late 90s. Do any of you room with the I Love You bug? Right? I do remember it vaguely, yes. I'm dating myself. No, I remember this. My dad, it was,

It was like an email that went out from AOL. It was like it was like an email that went out from AOL where like it sent out to your entire address book. I remember this hitting my dad. It was an email that went out to your entire email address book that just said, I love you. And so it was the subject line was I love you. And so like a bunch of your colleagues were getting an email from you saying, I love you. And people clicked it and opened it and it continued to spread. And it was like this malicious.

It was malware or something, right? Exactly. By the way, half your audience is going, I have no idea of what the I love you book. and the other half are just feeling triggered that he just said, well, I know this because my dad, you know, told me, well, back in my day. Well, no, I just remember when this happened to my dad, and it was a big deal, because it was like the first hack I had experienced to.

It was kind of like a big part. And what happened is basically sort of like, you know, misuse on scripting capabilities. And Stevensonson has a great story of how he got all these phone costs, you know, from all these reporters saying like, what is going on and, you know, my stuff is going on and, you know, even without knowing what is going on, he was like, well, we're going to beef up security.

I think was it Outlook Express or Outlook, and we're going to make it harder to run scripting code, yes, so I think there's kind of this constant, you know, the good guys put up more defenses, the good guys teach developers how to write better code, you know, audit more code. You know, they're kind of like open source repositories or practices and the bad guys do it.

Now, crypto obviously has an added sort of incentive because there is like real economics at stake, you know, which makes it a lot more lucrative. But, you know, I think, you know, one thing I've been seeing is that there's just so much community effort and just making things more secure. Like, here's a plug. You know, we kind of recording this near the end of April. And on the A6 and Z side, we put out a block post from the security team on, you know, who Rias, who kind of works on a bunch of security efforts and a couple of others talking about, like, a bunch of security practices, right? So it's going to be a constantly evolving thing.

We probably haven't seen the last of it, but I think the community is going to get stronger with each one. Yeah. Well, the interesting thing that you pointed out there, so it was a Dutch auction, which for people that aren't familiar, it starts at the top and sort of steps down until you find the buyers for the entire pool. And basically, they were going to issue refunds to anybody that bid above what the ultimate resting price was on the auction. And it ended up that all of those funds, because of a mishap in the code that got exploited, basically got locked and trapped. and to the credit of the team, you know, it was a coding mishap. They basically didn't audit the code sufficiently to make it function at the appropriate level. To the credit of the team, they came out of pocket from the treasury to refund the people that were supposed to get refunded. And Micah, who I will admit as a friend,

I thought handled it with a lot of grace in terms of just stepping up, owning it, and, you know, and basically saying we're going to build back brick by brick, and it doesn't change the quality of the world that we're trying to build. The point that you made, Serri Rom that I thought is also interesting is the way that Web3 works around, you know, like someone came and exploited this. Like somebody exploited this mishap in the code. Now in a market level, this became a big incident. A lot of people knew about it. It shines a huge light on making this type of mistake in a code. That should not happen again now because so much money was lost in some in a mishap like this. The next people that are going to build the next project,

should actually benefit from the fact that this has happened because now they've learned there's been a light shined on this someone's going to audit that specific piece of code very carefully. And so you have this like market mechanism now to hopefully continuously improve. So for everyone that shines a light on like, oh, there was this mishap in the code and look at all the money that was lost, web three's broken, et cetera, actually the flip side of that argument would say that now everyone gets to know that exact mistake that can be made and improve in future projects against it. So I think it's really interesting. I think so. I think with every one of these, the patterns and practices, you know, you probably wind up making different mistakes. Like,

we live in a world of technology and code, you know, and we can throw a lot of tools at it. And a lot of interesting new tools from like formal verification to auditing. But there's always going to be like threats like, you know, for example, you know, there are, you know, folks what APTs are like advanced persistent threats, which basically means, you know, governments, like, you know, folks like North Korea or other countries you can imagine. trying to go after you. So there'll always be these people. But, you know, I think, you know,

just kind of build on something you said. I didn't follow this incident pretty closely, but I always find it very remarkable when communities can survive and continue legitimacy. One of my favorite block posts in the last several years, not just in crypto in anything, is from Vitalik. It's called legitimacy is, you know, the best cash resource. If you haven't seen it,

we can probably drop a link in it and something. Go check it out. And it talks about how, you know, one of the, you know, One thing that I think crypto really deals with, or not just crypto about life, is how scarce legitimacy. I'll give you an example. All of you probably do know with a Dow hat, right? It's kind of the famous thing which costs this Ethereum fork.

And I think only recently to we actually figure out actually what might have happened, you know, because of the book this came out. But, you know, at one time, you know, there was a big question of, you know, will eat actually survive. And in a lot of ways, I think it was metallic and the community having the credibility which made them all, you know, switch. and, you know, actually survive. And obviously, you know, they've done really well since Zinn. So, you know, I sometimes think about there's a monetary aspect, but one of the most interesting things for me about Web3, you know, as kind of a cultural social force is sort of legitimacy, technology, and economics,

kind of all being much together, right? Because I used to work in social media and, you know, be there to social capital, like, you know, people having millions of followers. But there's not real economics tied to it. But Web3 kind of brings those together, which I think is really, really interesting. I'll give my point of view on this because I do a ton of drops via our agency late checkout. So we build drops. And if I ever have bags under my eyes, it's because we're doing a drop that day.

I think what I would love is I would love Web 2 infrastructure in a Web 3 world. And what I mean by that is in Web 3. Sounds like a big song title, by the way. Exactly. A great, a great song title. What I mean by that is like a lot of the time what we're doing in Web3 is we're writing custom contracts, custom software, or we're grabbing multiple things and sort of putting it together. And because of that and also because there's a shortage of talent and because people just haven't been doing this that long, a lot of the time there's mistakes. And there's a lot of processes that you can do to mitigate the mistakes.

and like we have a ton of those processes in place. Like for example, like when you do your first mint, you know, make sure that you can withdraw the Ethereum from that first mint to somewhere else. Make sure it's not locked. And there's like a hundred things like that that you can do. But my only advice to people listening who potentially want to do a job is it's important to to basically have those processes in place. and, you know, work with people who, you know, aren't doing their first drop, you know,

work with people who've done multiple drops, I think is really, really important. I do want to switch gears a little bit and talk about Twitter because that's, that's, that's on my mind right now. Did something happen with Twitter? Did it happen? Ah, wait, oh, you just stole my line. You just stole my line. So, you know, we're sitting here.

It's been about 24 hours since. Elon Musk has been, you know, it's approved that he's buying Twitter, so it's very exciting. Do we think that Elon is going to make Twitter a more Web 3 version of Twitter? And if so, what would that look like? Good question. By the way, I have to say, you know, if you follow this story for the last couple of weeks from, you know, him, you know, revealing that he has a stake, going on the board and all of that. It's only been two weeks.

So I don't know when you folks plan on getting this podcast out, but this could be like hopelessly out of date by the time. You know, you might as to be talking about something in the 90s, given how fast the story is moat. No, so first of all, I just want to say, you know, Twitter is a company and a product,

which is just very special to be on multiple levels. One is, you know, just my personal story. I think so much of my professional connections, personal connections, you know, have come to Twitter. You know, I'm pretty sure like Siler and I started DMing on Twitter at one point in time. I made a lot of relationships through Twitter. I also, you know, over the years, you know, built up a little bit of a following and people

who are just going to be so good to me on Twitter. That's just on the personal side. I also worked there for a few years and, you know, I had ran a variety of products over there. So I got to see the company on the inside. I work closely with Jack and the team over there. So I feel like I'm very connected and, you know, very grateful for the product in multiple ways. Now, okay, there's feelings. There's things which I think Elon has said that he would do,

and there's things which I would, you know, I would love for somebody to do and, you know, that somebody might be Elon or something, I think might be fun if we do it. So I think what Elon has talked about in public so far has been, you know, he wants to, you know, he has a whole point of view about content moderation and censorship and free speech, which we can probably get into,

if you want to get into that. He's talking about bots, and he's talked about, you know, just kind of just improving the product, right? And I think a lot of people have very, very strong views to put it mildly on Elon and some of these, but which you can also get into. But for me, you know, I think in some ways we even Jack has talked about is I would love to see Twitter get decentralized. And it might be just to kind of talk about what that actually means.

And I have no idea about that Elon. I don't think Elon's really talked about it. Jack has a little bit, but I don't think Elon has talked about. so we'll have to see. So I think the best way talk about is through analytics. So we all grew up using email. And I remember April 1st, I think there was 2004, when

there was a rumor of Google launching this new email product which had one gigabyte of free space. And you know, you could, you know, the invites were really really hard to get. But fun fact, I tried to impress my now wife, Artie, back when I was wooing her by getting her one of these really hard to get invites. And we got married. So kids, that's a story for you there. But the truth is, email it existed for, I think, a couple of decades, you know, before Gmail came along.

And even to this day, right, you all just using DCP IP and SMTP and IMAP and POP, I can send you an email, no Google, nobody else in the middle, right? So there is a protocol, you know, which is built on SMTP, IMAP, P, etc, and there's a bunch of, like, infrastructure goes along with it. Then there are a bunch of clients. Like I grew up in a age when, like, Yahoo and Hotmail emails were really popular. then Gmail became popular and all of us I'm sure I have a variety of like work email or this and so on. So but at no one time did when you forced to use one company's product. It's not as if like Google says, hey, you know what, folks, you're off Gmail today and then you're banned from the world of email, right? So I think that that is one lens of decentralization, which I think of it as like, you know, you can pick the client that you want to use.

And by the way, the Gmail client, very different from, you know, your client. I have one of these nerds who likes to sometimes check email with Emacs. Gunoz fans represent. I'm sure you have no idea what I'm talking about. But that Jeff Bufant knows, you don't need Google in the middle. And I think there's something really powerful about that concept of, hey, there is a right to exit. Even if I don't, even if I can't use Google or Google makes me not use them for some reason, I have an alternative. That's one very important factor.

The other important factor is you can build your own client experience, right? So, for example, Gmail has a spam algorithm. They have a recommendation algorithm, right? All those different things. But that's not what Gmail is doing on the client. There's nothing about the nature of email itself. Like, in fact, you know, I'm sure if they have like a non-Gmail client, they're not sometimes good as spam.

They don't do the recommendation or whatever. So you have a client which is doing AI and ML, which is trying to take a spam or not, trying to sort into operas or social for all the things that Gmail does. So what you're having is you have a protocol which basically kind of transmitting, you know, electrons really, But then you have a client leader, which is doing AI recommendation, Gmail. I should guess at what you might be interested in viewing.

It tries to, you know, send out all the, you know, Viagra ads often to spam. Like, it does all those things for you. Now, you know, when you think about, say, Twitter, I don't mean to pick on Twitter, because Twitter, I think, is a very special company or Facebook, any one of these companies. I've been very grateful for all things they've done to make amazing companies. But you don't have a choice, right? Like, if Twitter says you're off, you're up. It's not like you can quote up something on Emacs and be like, oh,

I'm going to use Twitter in my own way. So there is no right to exit, which I think is like one key bit on decentralization. So this is one key factor. Now the second key factor is, now this whole debate on speech, content moderation. By the way, I was there on the inside. We can spend hours talking about this, right?

And I think, you know, beginning, and, you know, we probably wouldn't make most people happy. But let me kind of like oversimplify, right? There is one set of people who think certain sets of things should be allowed to be said on Twitter. There's another set of people who think certain people, things should not be a lot of set on Twitter, right? Incredibly broad oversimplification here, folks.

That's the name of the game. Now, the challenge is if any one of these people say, you know, win or, you know, are right on Twitter, the other side has no alternative. You basically banned from Twitter. Like, you have nowhere else to go. The same doesn't exist for email, right? On email, like, even Gmail bans you. That's fine.

You know, I can still find a way to get email to you. Now, of course, you may not use the email client that actually lean it or whatever. So I think that's also important in terms of like Twitter needs to be decentralized one into a protocol. So people can use a different client. The second is they can use their algorithms of choice, right? So you could get banned of, say, you know, the Twitter that, let's pick an example. Okay, name your favorite Twitter personality. Today's episode is brought to you by Marketer Hire.

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Elon Musk. Well, let's pick somebody from Marvel. My favorite VC Twitter personality. Um, shoot, this is a tough one. All you're thinking about it, I'll give you Nikita beer. Yeah, Nikita's a good one. No, I don't want to give Nikita that much credit. Okay, fine, Nikita.

Hopefully Nikita doesn't hear this. Oh, yeah, well, Nikita, Nikita deserves all of this, right? He deserves it. So, let's speak Nikita, right? Let's say, Nikita, you know, you know, what, you know, Nikita obviously is a brutal dictator. I mean, look, I know the guy, right? He's going to be a brutal dictator. and Nikita says, look, on my Twitter, all of you are gone, right?

It's going to be me and Logan and, you know, a bunch of people I like and a bunch of people I can troll. Everybody else is just gone from my Twitter. If you know that, right, that's fine. Because you can still go use, you know, I don't know, like see Twitter or Twitter or direct Twitter, and you can be perfectly fine. Now, of course, we're kind of joking around here because the stakes are much higher. Like today, if you get remote of Twitter, right, you lose a massive audience on what is a world which can really shape the discourse.

And I think that's kind of the other part of decentralization, which is you can say, hey, you know what? I can pick, I wasn't expecting to talk about Nikita Twitter today on this podcast, right? But so you can be like, hey, I pick Nikita Twitter, which has a certain set of algorithms. Maybe Nikita Twitter says, look, when you open on Twitter, Nikita tweets are going to be pinned like 500 pixels at the very top, and then you get everything else. Because that's the rules, right, for Nikita Twitter.

And if you want, and nuclear is the best product, you use it. If you don't want it, you can pick a different algorithm. By the way, on Twitter, we've tried to do this also over there. So we've tried to say, hey, you know, maybe we should. have ranking algorithms. Maybe we should do only latest. There's always in this controversy of only latest of ranking, which by the way, took up three years of my life,

which we can also talk about if you're interested. But I think the point here is you don't have a choice. And so decently, I think there's one is a right of exit when you can pick any client. And the second part of this is really interesting is when you pick the client, you know how a choice of the algorithm. So for example, just like Gmail picks a spam algorithm for you, Niki Twitter, which is going to be no trending on Twitter

after this, can pick the algorithm. them for you, right? And of course, we're kind of goofing around here, but you kind of see, you know, how, you know, choice can be really important. So this is one level of decentralization. Now, let's get, now, where it gets really interesting is, uh, Sal, how many followers do you have on Twitter? Uh, 575,000. Okay, so that's quite a bit, right? I know, Sal is like a popular guy, right? Now, you know, so I could argue, and I'm very good at you add value to Twitter, right? I mean, you, there are

500,000 people who follow you and get back. So you're adding some value to the company, right? I hope so. When was the last time Twitter sent you a check for your 500,000 followers and the work you do on Twitter? I haven't seen one yet, unfortunately. Okay. When was the last time they asked you for input into a decision that they're making in their offices

in San Francisco? Very rarely. Well, you know, so by the way, again, I was a Twitter, I mean, pick on them, but, you know, like, seven to eight years ago, when social media, maybe 10 years ago, when social media came out, the concept of social, there was kind of an agreement on social media, right? The agreement was we will give you an audience

and you in turn will give us content, right? And that's the deal, right? And you grow your audience and by the way, we would show ads against it and, you know, it'll be great business. So that is kind of the deal. But over the years, I think that concept is slowly shifted. Like I think the rise of the creator economy,

the rights of companies like cameo has been like kind of a shift where, you know, you've seen these creators sort of like solid theater, right? Like, Searle could be like, hey, you know what? You know, I, you know, I deserve to be compensated for my service to Twitter because we can obviously see he's adding some value on Twitter. Now, I think Web 3.

So just to pause you there. So the flip side argument to this is something that our friend at sweaty startup, Nick Huber tweeted out, which is a flip of this entire model, which is that large creators should actually have to pay more for use of the platform. as their audience scale. So rather than me getting paid or me being able to harvest value, the whole idea is like, look,

I have not been paid by Twitter. No, I have not gotten a check from them, but I have made a whole lot of money off of having a large following broadly from a lot of different things. And that fact probably holds for a lot of people that have large audiences who are active on the platform, maybe not like famous people

that just have a large audience for the sake of it, but people who have built audience on the platform have monetized pretty effectively, And Nick was saying and got a lot of flack for it that basically it should be a fee that you pay per follower. So per 1,000 followers, you pay a dollar per month or something. So I'd be paying $500 a month, you know, plus in order to use Twitter. And it would kind of scale up. And it was an interesting thought experiment.

He got massively dragged for it as he does on a lot of things that he tweets. But it was kind of an interesting flip of the model that you're talking about. Well, I didn't see the tweet, but, you know, I kind of reject, I think I disagree with the premise. And the reason is, you know, let us say, for example, you were forced Twitter, right? And an alternate social platform came to you and they said, you know what, you're being those folks. Like, why don't you come over to us and we will pay you instead? Now, we see this happen all the time. Like, you know, streaming companies like a Netflix and a HBO compete for moviemakers or podcast companies, you know, sign up, you know, compete to who gets an exclusive to some famous for the next podcast.

So basically the market will decide. And I think what Web3 is doing or could do for Twitter is give the people who give value Twitter two things. One is economics and the second is governance. So what economics means is imagine, and I'm just making stuff up and I have no idea how this could actually work. But imagine there is a token and the token basically incentivizes behavior. This is a very naive version. It basically says, you know what, Sal should tweet X. number of times and the speech should be positive and it should spark the right kind of

conversation you should do it over a long beat of time so it's not like you know you can take a check and then run away and you know and but it's somewhat commiserate with the value to adding to Twitter all of a sudden you know having two things happen one you're getting rewarded for the work that you're putting in second that token could be tied to governance and you know we can get a rid of it kind of obvious if you kind of follow like you know a lot of like stuff and staff you know you could be like hey but twitter decides you know to make you know to ship something new or a shift and algorithm change, you could have a stake in it. So it's kind of the very bad bones, basic version of what could happen.

But let's get more interesting, right? Imagine you could say, hey, you know what? You know, when I'm, you know, when somebody new comes into Twitter, because you know on Twitter token, you want the token to grow in value. I want to bring in new people. So Sao could be like, hey, there's an, you know, Joe unknown over here. And I'm going to stake my token in him because I really believe in this guy or them, right?

And I believe they're going to be good for Twitter, right? Because you know have kind of like a value which accrues when they do really really well. We do this today, by the way, in Twitter in a subtle way. We do this using social capital. Now, I was a whole theory, by the way, if I go on a tangent about how Twitter is all about social capital, which is not converted financial capital. Like right now, if I quote tweet Sahel and say, follow this guard, right? Like I am sort of imbueing or giving Sal some social capital. And they say, hey, I endorse this person.

I'm going to trust that, you know, you trust me that I'm not a jerk. And if Saal does not be like somebody terrible to follow, my followers will be like, oh my God's next year. is just a total market, right? So you're putting something on the line, which is why, like, quote, tweeting kind of means something, unless you're talking, of course. But in a token world, all these mechanics can be brought in and formalized in some really, really interesting way.

So imagine, for example, somebody is like, you know, can be an investor in the next big Twitter user, where they can be, like, I'm going to go and find maybe the next Charlie Demelio of Twitter, or, you know, the next, you know, Dwayne Johnson, or pick somebody who's kind of like social media native celebrity. So a lot of things you'll start opening up. And then users could have a direct voice. Instead of this model now where you have a bunch of people making decisions,

you could be like, hey, I don't agree with your latest algorithm change, or I don't agree with changing to dark mode, or just go ship edit. I don't care what you say. I just want you to ship edit and let's take it to a word. So those things will be really a transformation. I'll just get on this one thought. I'm going to steal a lot of lines from, you know, Chris Dixon, who heads up our crypto fund, who's kind of literally, you know,

all the credit for A6C and Cryptos should really. go to him. He basically tweaks Bezos's line of your margins by opportunity and he says you see this lot in Web3 where there's kind of some value which is not being given to the right set of stakeholders and Web3 kind of fills in that spot. We see this as artists, right? Artists,

there's so many middlemen between the music and their fans. But I think you might see this in social media and we actually start seeing some very interesting companies. Hopefully I can talk about them soon which are taking the same model to social media or just kind of community-based products too and saying like, hey, you're not rewarding your stakeholders

appropriately, we can empower and reward appropriate. Anyway, I'll kind of stop that. Okay, so there's a ton to unpack here. And I have a handful of pushbacks, I suppose, to a bunch of this. So social tokens is like a general concept that I think you kind of talked about or around that I find conceptually quite interesting. You know, the cynic in me says that this stuff just like sort of asymptotes to being like a Ponzi scheme and you're like where's the real value and how is it you know has it being created or managed is any of this stuff um in your guys's opinion viable for them to actually like progressively decentralize or layer any of this into existing twitter or does it have to be built into a completely different platform where you're trying to like spin up scale

it's a great question I'll try to attack it in a few ways I think there is kind of there's a technical answer there is an economic answer then that's going to be kind of a social cultural answer you know on the technical

and economic answer that's why there's this great paper by one of my teammates Miles Jennings he's general counsel for ICS in the crypto but it's just kind of a real genius when it comes to all things decentralization it's probably the pin tweet that's like a 25 page paper

it talks about how companies in Web 3 can progressively decentralize and there actually some social media style examples in there. And it talks with different kinds of decentralization. It's kind of a technical architecture, that's kind of a legal architecture, and I think there's a special one for Twitter given to the existing company. So the technical

architecture, I think, is kind of a sequence of steps, right? Like the first step would be kind of my Gmail SMTP example. Imagine the world where Twitter says, hey, instead of just using the one blue app or Twitter.com, you can use any app and it's perfectly fine, and you can use the algorithm of And all we're going to do is provide you the API of choice.

By the way, you see this in Web 3 today, right? Like there are companies, like for example, you could uniswap website, you know, they can go up and it's perfectly fine because it's kind of a protocol which runs by itself and you don't need an actual website. There are multiple clients which can do the work of the website. So Twitter could basically say, hey, the Twitter. Dotcom URL and the website or the app is just one lens, but doesn't it matter you can pick any lengths, right?

We intuitively know that about Gmail, you know that you can use super human, you know that you can use Outlook and you can know you can use a Gmail app and you know it's all the same view on your email and it's kind of fine. But imagine the same for Twitter. So that is like I would say step one, where you're like one of many and then everyone is kind of equal. Step two would be some form of like token that I describe. And I'll be the first is admitted that a lot of this have to be figured out. We have some ideas, you know, there's some amazing founders working on the space. But it has to be figured out in terms of how do you incentivize creators?

How do you incentivize various clients? And it's like, for example, you need different people to build, you know, the versions of Gmail flying or Thunderbird or superhuman or one of the equivalence of Twitter. So I think it's all like to be interesting. So that's on one side. And I think it's kind of like a, the sort of a legal sort of variation of this of how do you do this in a way, you know, where, you know, where you kind of like pass the hinky test. Now, I think the harder problem to be super honest with you is cultural. And I don't have a great answer for that. I think so far a lot of what we have seen in Web3 is Web3 native companies from the ground up.

And I don't have like a really good existence proof of somebody who used to be Web 2, but now moved into Web 3. So it's going to be hard lip, right? Because you have to tone over power and economics to your community. And I think it's a hard culture. But I'll say, having said that, if somebody can pull it off, Elon would be the person to pull it off. Can you can you, so Ben Thompson wrote an amazing piece maybe like a week ago. like back to Twitter's future, I think it was called, where he, he sort of sketched out a world where in a private market, you could separate Twitter into effectively two companies, where it's like

current business model with the social graph and the ad monetization existed as one company. And then there was sort of like a Twitter services company that licensed access to the social graph plugged in via APIs. And then that kind of becomes like an open protocol layer where people can build on top of it, gain access to the social graph. and the great high value part of Twitter, but build in their own ecosystems on top of it in an open world. That kind of strikes me as like an interesting middle ground that you could start to see a sort of transition. Like if it becomes a more open ecosystem, it's been traditionally this closed ecosystem. And personally, I think that that has made it so that Twitter was not able to innovate.

They were trying to do everything like exclusively in house with their own engineers rather than, I mean, I'm a free market guy. right so like i i believe that harnessing the value of amazing innovators everywhere is the way for these platforms to you know exist and thrive by that so i should you know just in twitter's defense right there's a good reason why they did what they did though it was unpopular the reason was ads right so for the last 10 years well the early part of last decade actually the dominant internet model that people knew how to make work was advertising so twitter had basically two choices right the early part of last ticket by the way this is i wasn't there i wasn't there I'm kind of speaking like from what I've heard from other people.

One was you could build an API business and you know where you know you basically charge people for access to tweets and then people you know build clients or do things where they paid money for that. And other people actually try to build companies. If you remember Dalton Caldwell who's in our way combinator, build a company called app.net which was purely like API Twitter. And the other model was ads. It turned out and you know who knows at the time like you know we don't know that the

ads model was much more lucrative, easier to kind of like figure out that API Twitter was. Now, you could play hindsight and you can be like, you know, maybe they didn't execute well, they didn't have a right people in place. We don't know. But they say, okay, we're going to do ads. Now, the challenge is when you want to do ads is you to actually show ads to people because you're going and telling advertisers, hey, we have all these human beings and they're like, great, but half your users are using a client which does not show ads. Right. And they are like, so you don't have a real problem. And I think that actually pushed Twitter over the year. say, look, if you're in the media business and you're showing ads, you need to actually show

the ads to people. So I think that's why it led them down this road. And look, I'm not totally defending them because I think, you know, a lot of startups, you know, were destroyed. Like Chris Dixon, you know, it's kind of close to a lot of those companies and they very rightly feel agree. But I think that's kind of what the sequence of events we want to happen. Yeah. I think, but I think what we're talking about now is now we're a private company, a lot of options don't open up, right? Maybe you don't need to do ads anymore. Maybe you can do a subscription business, subscription went really a thing like eight, ten years ago. Like, for example, like, break inside, how much would you pay for access to career every year?

How much will I pay? You would? I mean, we used Twitter. I make a lot of money out of it. Yeah, I mean, we use Twitter. I mean, it's like, in a lot of ways, it's like, how much would we spend on, like, business events and networking events and travel, right? It's like the same sort of thing.

Yeah, I mean, I'd pay, I'd pay. $1,000 a month. Yeah, me too. Probably even more, given the value it gives me, right, professionally. So, you know, maybe there's a word, and this by this model didn't do they exist 11 years ago. So maybe that's the world, they do subscriptions. But I think now that the private company, that some of the pressure is off of them,

but Elon can die. So, sorry. I need to stop you there. So I, so public company, like totally agree. Ad model. They've had to do it. Public market. It was their golden goose.

It was the only way they were generating revenue. Their ad stack sucks. they serve up really bad ads. There's no signal, really bad conversion. Like, it's just a bad ad stack. And so when advertisers are comparing it to like Snapchat, Instagram, you know, TikTok, all the other places they can advertise, it's never really performed really well, especially not on direct response advertising, which is the most lucrative.

So they now go into the private market. Everyone is like, oh, now they can experiment and do things. Sort of agree, sort of disagree. There's $25 billion of debt sitting on the business now. and that debt has interest rates on it that aren't super low. And in an environment where so far, the baseline rate is rising right now, it's actually going to be a shitload of interest payments that they're going to have to be paying. So you can't just like a lot of people have been asserting that he can just like go rogue on the model and shut off ad monetization.

But someone has to pay the interest. And like, so I like Jack tweeted today this whole tweet about, oh, it's a great step to take back Twitter from Wall Street. And I was kind of like, yes, sort of, but $25 billion of debt doesn't really feel to me like it's taking back, you know, Twitter from Wall Street. It's just different hands on Wall Street that now own a whole bunch of Twitter. And if things go wrong, it's not very good. The other thing I would point out, and this is all just from my like private equity days that I come back to it in my head is Elon took out a 12. I think it's like $12.5 billion of the purchase price is a margin loan against his Twitter stock or against his Tesla stock.

What that means is he doesn't have to sell his Tesla stock, and bankers are loaning him $12.5 billion that has recourse to his Tesla stock. So if the value or if he's unable to pay the interest on it or if something happens, they can go grab his Tesla stock as the collateral against that. The challenge of that, which I would not be happy about if I were a Tesla shareholder, by the way, is if Tesla drops, for whatever reason, they miss a couple of quarterly earnings, if the stock starts to come down, those bankers are going to get a little nervous about the value of that Tesla stock and the coverage they have against it. They can ask him to put up more collateral

against that $12.5 billion margin loan. How does he do that? He has to sell assets that he has in order to put up cash collateral. What assets does he have? It's all Tesla stock that's liquid. So suddenly you get into this like bad spiral of he's having to put up more cash as collateral against that loan. And the only way to put up more cash against that is by selling Tesla stock. So Tesla stock's dropping. You get called for more collateral. You have to sell more Tesla stock, which further pushes down the price of it. It's like this is literally how people have gone bank. I'm not saying that's going to happen to them. But this spiral of like taking out a loan against your stock, having the stock drop and having to sell the stock to put up more cash against that loan is the spiral that leads to people

going bankrupt sometimes. So it's not like a fun thing actually, by the way, for Tesla. shareholders here. And I don't think that's something that anyone's talking about. Well, look, I have absolutely no insight into sort of the financial engineering here. I just want to say, I want to kind of defend the Twitter ads team.

You know, I think, you know, there's some really amazing people there. They try really hard. You know, we can sort of get into, you know, they try really hard. But I think there's, you know, there's some really good tech there. And I think they actually deliver some great

to those from brand advertisers. You know, I have a bunch of friends. I'd probably them if I didn't, like, pointed out. Look, I have no incentive in the financial engineering, but I would say one of the things, I think this, one of the ways, and we obviously what happens, nobody knows. You know, by the time this podcast comes up, the situation could have shifted. One of the way this could help is, you know, you now are off the earnings treadmill, and you now have maybe a longer leash on time to go build something, right? Totally.

And I've seen this with, like, other companies in the past where you're sometimes with a treadmill where you can't really go take like a deep, long-term. that's kind of one dynamic the other dynamic is I mean Elon's like a strong opinioned guy right he has opinion so and he's going to go try them out and I think having somebody who has like a very clear sense of what he wants

and by a lot of people on Twitter may not agree what he wants but that's you know but he definitely has a strong opinion and the second part is having sort of the bandwidth or the runway to go for it instead of being like well you know if we you know this we can't actually get out of this dynamic because you know our employees are

I see you drop and it's going to cause a lot of people leave and going to be this whole thing. So I'm very excited because I think for the first time, look, we're not talking about Twitter. There's a bunch of energy in the air. It feels like they could try out a bunch of stuff. They could ship edit. They could try out a bunch of stuff. And it's a service where I think is very valuable to humanity. I'm very excited.

I do hope and believe long term it's going to be decentralized. I do think it's a, I think Twitter's ethos has always been about the community. It's always been about the community and we are in service with the community. So it feels natural. It's for me some way that the community in some day should own Twitter in some shape or form. By the Jack has actually talked about this. If you look at Blue Sky, you know, I'm not telling me how well Blue Sky has progressed, but the idea of it was that Twitter should be decentralized in some shape or form.

So I think it was always the art. Hope it gets there someday, but it is not boring right now. So I want to clarify the point around like the governance token and what that means, the social token piece. And what true I'm saying around, like what does it look like if Twitter users, like have a piece of this pie in forms of tokens? So did you see when Elon Musk tweeted different polls

about like basically where he should take Twitter? Like should we ship an edit button? And, you know, should we open source the algorithm and people were voting on it? Did you see that? So we voted, you know, millions of people voted. and Elon could basically, you know, if 99% said we need an edit button and 1% said no, Elon, if he's the new owner, could basically say like, you know what, I don't feel like

shipping an edit button. But if we actually had tokens that represented some amount of governance, what's where I'm saying is he would, if it was on chain, he would actually have to go and do it. And that's a really, really powerful concept. Yeah, I, I, I, that makes sense to me. What I would say is like my pushback to you guys on that is I think that all sounds great when everything's going well. And when it's sort of peacetime quote unquote, but when you are in wartime and having to make dramatic, you know, bold decisions quickly, the idea of going and asking, you know, a hundred million users to vote on something and trusting that it's going to be the right. long-term decision when they're operating with imperfect information relative to you as the general is a little scary to me. And so like that's my general pushback or maybe not pushback even. That's my general question for DAWS as a prospective future. I love the idea of community governance. I love the

idea of communities owning more of the equity of a startup if they've created a ton of value. But I do have serious questions about the ability of a community at scale to make rapid, bold decisions. during war time. Wait, I just want to, my pushback to that, the first thing that comes to mind is, isn't that the democratic society that we live in? No, no, it's not. Actually, because we live in a representative of democracy, right? Okay.

Let me, let me, first of all, this is, let me explain, let me explain myself. And by the way, this is coming from someone who doesn't vote in the American elections, because I'm not allowed to, because I'm an immigrant, and who doesn't follow politics at all. So take it with a grain of salt. But from the way I understand how politics work is or democratic countries work is you vote. And depending on what country you live in, like let's say in the U.S., I think there's a Senate and there's a Congress and these people are voted in or sworn in. And then you sort of trust that these people who represent you are going to make decisions. Is that correct?

Yes. So that's the exact same as like a shareholder of a public company. voting for board members at the, you know, proxy, whatever, and you vote the board members and you vote the CEO in or out, and then you trust that they're making the decisions. And I, like, I actually think that works reasonably well. Yeah, I think I think social tokens in a lot of ways are, is very much like owning a share in a company and getting a vote. The only, it's just the only difference in it is instead of, like, if I want to vote in a Twitter

shareholder meeting, I have to go. and buy Twitter stock. And I'm not sure that I can vote on like product decisions. However, with, if, you know, what true I'm saying is basically if, you know, you brought a lot of value to the network and you were able, you were rewarded with tokens for giving that value, it doesn't make a difference if you didn't have the money to buy those tokens. But because you created that value, you would have the ability to influence the product.

Yeah. I think that, I mean, like, I think the. ethos of that makes a ton of sense, right? Like if I, I have contributed more value to Twitter and like probably more innovation to Twitter than some random billionaire that owns $100 million of Twitter stock, like just full stop. I understand the product probably better. I understand the puts and takes. I understand the ecosystem better. And if I were to have received like governance tokens accordingly with the value that I've created and could have a say in the decision making and the changes and the product and the development, I definitely would be more

valuable to them than some random person. And so right now in the system, it's just driven off of dollars. And so a really rich person has more influence than a poor person, even if the poor person has done so much more for the community, totally agree with the ethos and what you're saying there. I'm just curious to see how it actually plays out in a more challenging, you know, environment and context. Yeah. Just to close on this, you know, if I could do more, I think the internet has kind of always had some version of what a Tao is. I grew up in the open source world, right? And you always had this kind of, you know, BDFLs, these benevolent dictators for life,

like Guido for Python and Linux for Linux. And the idea was, you know, they were there, just like Vitalik for Ethereum, like they had legitimacy, right? They were there for the trust of the community. Now, they were totally rogue or they've been crazy. The company could just fork and go somewhere else, right? But there was a sense that they were your representative and, you know, you didn't like look at every pull request.

Dennis was opining on, but you trusted him, you know, because of the legitimacy pulled over time, to be like, okay, I'm going to trust him to make positions and this is going to be the official kernel for. And I think in some ways, tokens, you know, do two things. One, they formalize that. They formalize the relationship between, you know, for example, so many people contribute value to Linux, you know, but how many of them actually got the same value back? And now you could have a token mechanism which actually orchestrates. And the second point is what you said, which is Sahel. I don't want to make this about Twitter. Same is true, for instance. Instagram, same store TikTok.

It's not just for social media. Think of any marketplace company, right? A lot of marketplaces have on the supply side, you've often had these small set of suppliers who basically generate a lot of the transaction volume or generate a lot of the economics, but they probably don't have any presence on the cap table, right? Like any sort of like marketplace ecosystem.

Now, you know, we have three words on that could say, hey, we are going to take over and give them economics. We're in a marketplace, it's as you know, eBay 20 years ago, came and said, I'm going to take our top 10 sellers. They actually tried some version of this, but it's kind of like, I think, a symbolic move.

But if we're going to take our top 10 sellers and make them like some meaningful stockholders in like on the eBay captive and going to give them governance. And by the way, it's going to constantly shift based on their, you know, if they leave eBay, they lose that. I know if they stop selling somebody, whatever it is. So, and I think we actually, by the way, we actually just, you know, partnering with the company which is doing for some version of this. So I think all of this kind of like very interesting.

I'll be the first to point out that this is very early. It's a, by the way, I think there was a question I think we're talking about is like, why am I drawn to Web 3? One of these is like, all this stuff is brand new. This is a totally unexplored like design surface. It's like 2005 and people are figuring out what the rest APIs are and user-generated content are for the very first time. So we figured a bunch of things. Even DAUs, for example, last year and half, we learned so much about governance and, you know, we learned tons more about token design. But I think the possibilities are just like, it blows your mind.

So I know we're running up against the end of time. I have to ask you this because I think a lot of our listeners are builders, ambitious people that are trying to go create these different futures. You're a general partner at Andreessen Horowitz, one of the most famous venture funds in the world. If you were to give advice to prospective builders who are looking to raise money for their startups and for their projects, what are the couple of things you would say to somebody?

Like what stands out to you when you meet a founder for the first time? Good question. So it's interesting because, you know, my wife is a multi-time founder. And, you know, I saw her go through the whole like fundraising process, you know, in Silicon Valley, you know, some good meetings of VCs, lots of bad meetings with VCs. And now it's kind of weird that I'm on the other side. And, you know, like people ask me how I spend my day and most of my day is spent talking to founders. And often it is for the very first time. I'm meeting them for the very first time, and they're coming in, these years over Zoom,

and they're telling me about something amazing that they're building and their vision for the future. It's honestly one of the best jobs on the planet. Okay, so I'm going to do a – I was thinking about this question because you had asked me about this before. I think there's one bit which often missed when people – BCs give advice, which is my job, right, or any VC's job, is to go invest in founders. Like, if I spent a year or two years without investing any company, like, then Mark would or should fire me because the job is to actually go invest in companies, right? So if you're a good we see, you know, you are going into every meeting, you know,

hoping, like, this, you know, is going to be someone amazing. This person is going to build the next Google or the next Facebook or the next Coinbase or, you know, take your pick, you know, because that's the job. Like your job is to hopefully the next person who gets on the Zoom meeting or walks into the door is going to be a founder. So first of all, I think, you know, I'm talking about my wife, other funders, you know, like, I feel like you don't understand, like, the venture capitalists need you, you know, maybe a lot more than sometimes you need them. Because at the end of the day, you know, we're kind of giving away one of the most commodity of products, which is money. Now, like, kind of putting that aside, I think every, every VC firm and every individual are very, very different in their own ways. And, of course, you can kind of go into, like, what it means when you're a seed-stage company, when it's a very first investment, it's two people in the first investment, it's two people in the business.

pro-biel garage and you know they just have an idea all the way to somebody who's been there for five six years and they're raising an all at several billion dollars because they grew up front but i spent most of my time on the earliest of stages where it's either the very first round of capital or it's close enough to the first round of capital right i think there's a few things i'm looking for and by way none of these are original i've kind of stolen them from a lot of people have worked with often a six and z especially christicson and mark himself and alex example, the first one is that is a phrase called the idea maze. And I think it comes from either Chris or Balaji, which is has this person spent a bunch of

time figuring out, you know, going through all the, you know, the various versions of before they've kind of settled on this thing, right? Like, for example, you know, you know, I've spent like close to 10 years working in social media companies, right? Like, so I've spent a lot, let's pause that I've spent a lot of time thinking about social media, right? So if I say, you know, when a mobile and new social media company, you could probably say I've spent lot I'm thinking about this. As opposed to, if I suddenly start like a database company,

right, I know nothing about databases. Like, you know, and unless you could, you know, I could prove to you that I spend a year talking to every single database developer, every single customer or spend all time with the inside, I don't think I could kind of credibly say I have gone through the idea maze. And I think that is one big difference. And as probably one of the first things I'm looking for, which is has this person gone through IDMS? By the way, that doesn't mean they need to have worked in that space before. And Web3 is often new. But I'm looking for, you know, have, have, has this person some. how explored every version of this idea.

Maybe they've spoken to customers. Maybe they've built some prototype. Maybe they spent a lot of time thinking about it. Maybe they've worked there for many years. It could be in one of many kinds of categories, but in that step one. Because if you don't have that, right? There's going to be somebody else who's probably gone

to the idea that's probably going to build a much better version. So I think that's step one. Step two is, I think, you know, I'm going to steal this from Alex Rampell. You know, he looks for, can this person, you know, manifest things? Can they manifest talent? Can they manifest fundraising? Can they manifest sales? Very simply, the best founders, when you meet them, right,

they already put together something. They already maybe hired one or two people, or they already build something very quickly, or they already have like a, you know, a bunch of customers in some hacky prototype somewhere, right? But they're very good at just having high output in short periods of time. And it's very, you know, and often when you see that kind of trajectory, you can sort of plot the dots and be like, okay, this person, you know, probably has a good probability of continuing doing that.

So, and I think the other part of it, like so much of startup life is very hard. I think one of the best things about Ben and Mark is they are founders themselves, and they drill into every single person at the firm, which is kind of respect for founders and respect for startup process, because it is very hard. You know, you should, I highly think we'll go read Ben's books for that. And so, you know, what that means is, you know, Can you actually demonstrate that you're able to actually go sell people on the thing that you're doing? Because it's going to be hard, right?

Can you maybe close a hire, close a stayer, you know, maybe erase capital. Whatever it is. So that manifestation thing, I think, is super key. I think the third part is it's a dual-sided relationship, right? I invest in a few companies every single year. And let me answer a slightly different question. People ask me, what's the difference between being an operator? I hit the word operator by being a VC, right?

And one of the biggest differences as a VC, at least, you know, our firm, when we invest in someone, that's a relationship for life. Like 10 years from now, every company I've invested in our 20 years from now, will be like somebody I work with, hopefully I'm calling in the middle of the night, and we back them and support them and go to the ends of the earth for them. So that means that you better be very, very careful about, you know, the decision because, you know, you have to, it's going to be a very, very long term. relationship, right?

And when I joined the firm, it is amazing because my very first week got this off-site with all the general partner in 16-Z. And I saw everybody kind of talked about all their companies that have worked with. And so much connection about companies who are like been down for seven, eight years because the firm is like, you know, over 10 years old. I was like, wow, this are really deep, long relationships, right? So on the other hand, so when I'm talking to a founder, you know, I'm trying to think of like, okay, will I want to work with this person for the next 10, 15 years?

Like, will I want this, you know, will I want to, you know, talk to this person in the middle of the night, you know, attend their wedding or, you know, whatever it is. I think that's kind of like a interpersonal thing. So I think, so on the founder's side, I think there's kind of a chemistry aspect to it. There's also an aspect of like, like, how big can this be? Because, you know, we are very much like a power law driven business. So I think one of the things for our founders is being able to articulate a vision of, hey, how big can this be? How can this be world changing? And then having all these proof.

points you go get there. So I'm massively oversimplifying what is a really complex process. I'm still learning. But I will say it's probably one of the best jobs in the world. And the reason for that is you just, you know, every single day, some really passionate smart person comes to you, talks to you about hopes and dreams. And, you know, and if you're lucky, you know, you're going to work with them. And it's just one of the best feelings ever. You said so many things that resonated with me there. I mean, I just in general, I every day kind of pinch myself at the novelty of like getting paid to give money to really smart people that are building big ambitious things. And that's just such a cool thing. Greg and I, you know, constantly text about this, like how

need of a job it is to be able to invest in companies. And so what you said there, I mean, it really resonated. I appreciate all of the advice. I know a lot of people will find it really valuable as they continue on their builder journey. So I feel like we got through, you know, four hours worth of content in, uh, in an hour and a bit. Because you, my friend, talk as fast as anybody. I, you're, you're, you're like a podcast on two and a half X speed. We're going to, we're going to have to, uh, you know, normally I think people have to put us on one and a half X because Greg talks kind of slow. I talk like pretty fast. And so we're like balancing out. But we're going to have to suggest everybody listens to this on a one X speed. Um, you know, um,

You're amazing, man. It was awesome. Got through so much in a short period of time. And we promise to do an in-person episode in the near future. And we'll bring you that tequila. We'll bring you that tequila. Thank you so much for joining, man. Thanks for taking the time with us.

I just want to say I'm a big fan. And I love what you folks do. And I love working together with you on multiple, multiple ways. And thank you for having me. And thanks for everything. Thank you. 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 high at t rwiH.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.