A sceptic’s guide to crypto: bonus interview with a16z’s Chris Dixon

This is an audio transcript of the Tech Tonic podcast: A sceptic’s guide to crypto — bonus interview with a16z’s Chris Dixon

Jemima Kelly
This is Tech Tonic from the Financial Times. I’m Jemima Kelly, and it is a bonus episode in our sequence on the way forward for crypto. In the final episode, we heard the FT’s innovation editor, John Thornhill, talking to Chris Dixon, who leads crypto investing for Andreessen Horowitz, the Silicon Valley enterprise capital fund. They talked about why Andreessen Horowitz is investing billions of {dollars} in Web3 start-ups and Chris’s imaginative and prescient for an web constructed on the blockchain. So right here’s that interview in full, and a reminder, I’ll be again subsequent week with the third episode from this season of Tech Tonic. So right here’s John Thornhill and Chris Dixon from Andreessen Horowitz. The interview begins with a query from John.

John Thornhill
Right. I’d like to drill down a bit into what we’re speaking about after we focus on Web3. I imply, it’s a considerably nebulous time period that folks use in several methods. What’s your understanding of it?

Chris Dixon
Sure. So the way in which I view the historical past of the online or the web is in, in broadly three cycles. So the primary yr we name Web1 was the 90s and mainly the 90s. I imply, you had the web earlier than that in kind of academia and authorities, however form of the business web actually developed within the 90s. And the important thing factor within the 90s is that the form of governing techniques had been open protocols. So particularly the online is that this protocol known as HTTP, electronic mail, the protocol known as SMTP. And so should you had been, for instance, Larry and Sergei at Google, you realize, constructing your search engine, you had been constructing on this “platform that, that was the online.” And what that meant for Larry and Sergei and for all of the entrepreneurs of that period and traders of that period, is that should you construct one thing attention-grabbing, you actually personal that. And that meant that you just bought to seize the economics. You bought to management it. When you construct a web site, it’s your web site. In the period of Web2, which roughly I consider as 2005 to 2020, you had the rise of those large centralised companies, particularly Facebook, Google, Apple, Amazon, after which a complete set of form of different ones like Twitter which might be smaller, who basically turned the, basically took over the web for, for essentially the most half. If you, should you have a look at, should you have a look at the information and what folks do on the web, for essentially the most half, they’re utilizing centralised providers which might be run by corporations. Now, these, these had plenty of benefits. These are nice providers. They’re most, lots of them are free. They service billions of individuals. They present, I feel, plenty of utility, and, you realize, simply everybody who makes use of Google is aware of that it’s an incredible product. And on the draw back of it . . . 

John Thornhill
Andreessen Horowitz made an enormous amount of cash out of these Web2 corporations, didn’t it?

Chris Dixon
And yeah. Look, and yeah, I imply, look, and the agency did nicely, and, and I labored in Web2. My companions, you realize, clearly, you realize, Marc Andreessen and others at our agency labored in it. And typically, you realize, folks used it as a criticism towards us on the Web3 facet. I feel the, my view of it’s, you realize, sure, we had been concerned. Yes, you realize, our job is to spend money on form of the frontier applied sciences, and that was the frontier know-how on the time. I don’t assume any of us, although, together with my companions, anticipated that the result of at present, which, you realize, to me appears to be like so much like the way in which that, you realize, a really centralised web the place you’ve got 4 plus corporations that basically run it. You know, I feel it’s, it’s we’re at a degree the place it may turn out to be like radio and TV had been 30 years in the past, the place you had, you realize, tremendous focus, ABC, NBC, CBS. I don’t assume that’s good for anybody. I feel particularly, for instance, I feel it’s dangerous for artistic individuals who attempt to generate profits utilizing these providers. So, you realize, one of many outstanding issues about these providers is that they, they mainly share very, little or no of their income with, with their, with the folks that create all of the content material on these providers. So Facebook, Instagram, you realize, Instagram, let’s say, Instagram, they, a number of folks, you realize, photographers, writers, podcasters, construct audiences on providers like Instagram. Instagram makes their cash on promoting. Instagram shares zero of that cash again with the creators. Some of the providers are higher like YouTube that shares a share. Twitch shares a share. Facebook shares nothing. Twitter shares nothing. Instagram shares nothing. It’s very, it’s excellent for these corporations. And you may see this of their market caps and issues. They found out a method to produce other folks create their content material and take mainly all the cash, you realize? I feel so, so after we discuss Web3, simply to return to that, I consider Web3 as a brand new period of the web with new architectures and new methods to construct web providers which might be both constructed utilizing a few of these ideas from crypto like blockchains and tokens. The key function that, that I feel is related to your viewers is that you may now construct new social networks, methods for creators to monetise and all types of different video games . . . simply, you realize, any form of software that you just see at present on the web now you can construct in a brand new method utilizing Web3, the place the economics and the management of the providers are largely given to the customers and never merely to an organization. And so that is what you’ll hear folks discuss decentralisation. And what I consider decentralisation as basically is you’re pushing cash and energy out to the nodes of the community, the folks that truly construct these techniques, the folks that create the content material of those techniques, the folks that create the software program round these techniques, as an alternative of to a number of corporations. And so, you realize, you talked about that we’ve made some huge cash on Web2, you realize, I don’t assume that any of us anticipated this degree of focus. And frankly, I don’t assume it is a good end result, each societally and admittedly from a enterprise standpoint as a result of our enterprise is investing in entrepreneurs. And I feel that the concept of getting the web managed by 5 corporations may be very dangerous for entrepreneurs and dangerous for VCs. I feel that, you realize, should you return and have a look at it the primary yr, the online I feel was excellent for innovation as a result of it, you had to form of this degree taking part in discipline upon which individuals may construct, construct new providers. And that, and that’s form of spurred a wave of innovation and entrepreneurship. And I, my hope is thru Web3, we are able to return to an period like that the place we get the perfect of each worlds. We get the form of superior performance and, and all the good issues and bells and whistles of Web2 however, but additionally return to a way more decentralled, decentralised distribution of energy and management the way in which we’ve got in Web1.

John Thornhill
I imply, that is very compelling rhetoric, however I’d like to perceive in a bit extra element how in a Web3 world would somebody who’s creating content material for Instagram, because it had been, preserve more cash from the content material that they produce?

Chris Dixon
Well, there’s, there’s an idea known as take fee, proper? Take fee in enterprise is the proportion of, of, of the income that the centralised firm takes. And so on Instagram that take fee is a 100 per cent. They take all of it. On the online it’s 0 per cent, proper? I imply, should you undergo the online and also you go to Google, the online isn’t taking any of that cash, proper? The internet is, the online is an open protocol. And I’ll simply offer you an instance, a current start-up that we introduced funding for is named Farcaster, which is an basically it’s a it’s a service comparable to Twitter, besides as an alternative of being managed by an organization, a centralised firm, Twitter Corp, it’s, it’s an open protocol. And it’s, it’s, you realize, form of, consider kind of RSS, besides I feel RSS had plenty of function limitations that made it finally lose. I imply, the unhappy truth is RSS was a, you realize, only for the listeners who don’t know, it was an open protocol that, that was the closest factor we had to an open protocol that might compete with social networks. And it basically misplaced. If you have a look at the information, it’s, you realize, it’s has minimal utilization in contrast to the centralised providers and that’s as a result of, in my opinion, it was, it couldn’t compete on options. It couldn’t, you realize, if I am going to Twitter, I could be C Dixon on Twitter. If I am going to RSS, I’ve to arrange a web site and pay $10 a yr and all these different form of wonky issues. And so Farcaster is an instance — it’s very early, simply so you realize, these are, on this case, it’s a, it’s a uncooked start-up, it’s a seed stage start-up — nevertheless it’s an instance of one thing that I feel has this function parity with superior fashionable social networks. But it doesn’t have a take fee. It doesn’t, it doesn’t take any of the cash. So should you, should you create one thing on prime of it, you retain that cash. If you’re a developer who builds on prime of it, you retain that cash. They can have perhaps a low take fee. And you see this in Web3 like OpenSea, for instance, is form of the closest factor I feel you’ve got to a form of large centralised service in Web3, and the take fee’s 2.5 per cent in contrast to 100 per cent in Instagram. So they take solely 2.5 per cent, and that’s not as a result of they’re altruistic, it’s as a result of Web3 is architected otherwise the place the information is managed by customers, and so they can go away and so they can exit. And so the centralised providers have far much less energy. One of the explanations that Twitter has a lot energy, proper, is I’ve spent 15 years on Twitter. I constructed an enormous following. I can’t go away Twitter, proper? I can go away, if I’d go away, if my electronic mail internet hosting supplier, you realize, takes an excessive amount of cash, I can go away that electronic mail internet hosting supplier, that Web internet hosting supplier. With Web2, you’re, you’re caught in these silos. You construct an viewers, and also you’re caught there. And that’s why they’ve a lot energy. I imply, we are able to go into it, however, you realize, has to do with community results and Web2 have the community results accrue to these corporations.

John Thornhill
You’ve described Web3 as a form of golden age for creatives. Could you give us another examples of perhaps corporations you’re investing in or fashions that you just’ve seen the place creators can generate profits out of this?

Chris Dixon
Yeah. So for instance, we’ve made a lot of investments in, in what we name Web3 gaming. And so these are video games, video video games, so consider one thing like Roblox or Minecraft. These are, and these are builders. One of I feel actually thrilling issues is that they’re popping out of prime corporations, you realize, sport design corporations like Riot and Blizzard and Epic and issues like this. And they’re, and so they’re popping out and so they’re saying, hey, we wish to construct new kinds of video games the place the enterprise mannequin is digital good. So simply to step again for many who don’t know, the form of essentially the most dominant and, and, and rising enterprise mannequin in video video games at present are promoting digital items. This is how Fortnite, Fortnite is a free sport. League of Legends is a free sport. Each of these video games makes billions of {dollars} a yr promoting digital items. So you’d purchase, for instance, in Fortnite, you realize, you purchase skins, that are outfits in your characters that are purely elective, however folks purchase them, and so they make billions of {dollars}. But proper now, all that cash goes to the corporate. It goes to Epic in that case, or Riot. So one of many thrilling issues in Web3 is you’ve got this way more of a peer-to-peer financial system. So you’ve got people, artistic folks can create these skins. The, the corporate behind it nonetheless makes some cash. They take a tax. But that’s, as an alternative of the tax being 100 per cent, the tax is like 5 per cent in some instances or one thing and 95 per cent goes to the artistic folks. And so as an alternative of getting an financial system, you mainly have, these fashionable video games — EVE, League of Legends, Fortnite — they’re, they’re, they’re economies. They’re fairly actually economies. They have, they’ve economists who handle them. They have, you realize, basically inside federal reserves and issues like this. And they give it some thought that method. These are, the concept with Web3 is you may have economies, however you may have economies which might be, which might be form of actually peer-to-peer, which means the customers can generate profits, too, as an alternative of simply the corporate behind it. And that’s a very thrilling concept and unlocks, I feel, one of many causes I feel we’ve seen so many individuals form of popping out of those prime sport corporations that need to create issues right here, is it’s one of many form of large new concepts in gaming, first large new concepts in gaming shortly. And it’s thrilling, and it permits a complete new form of wave of, of design and structure.

John Thornhill
One different method of taking a look at that is, I feel, to evaluate it perhaps to Wikipedia, and I’ve heard you speaking about that as form of miracle of a decentralised, crowdsourced, open useful resource, form of Web2.5, I feel you known as it. How would which have been completely different? How may folks benefited from the content material that they created in that form of Web3 world?

Chris Dixon
Well, so yeah. So Wikipedia, I feel Wikipedia is without doubt one of the form of miracles of the fashionable period. It’s an exquisite service. You know, I feel lots of people who began, I imagine, in 2001 on the time you had these, you realize, encyclopedias, digital encyclopedias like Microsoft had a product known as Encarta. And, you realize, when Wikipedia got here out 2001, it was, it had, it had only a few, few contributors, and the content material was, was fairly dangerous. Meanwhile, Encarta, you realize, that they had stunning footage and content material written by consultants. But what occurred over time is that Wikipedia, you realize, attracted extra contributors. And in fact, and finally had this type of flywheel the place the contributors created higher content material, extra customers got here. That then led to extra creators. And should you recall, for these, for these sufficiently old to bear in mind, Wikipedia was very controversial. It was banned on school campuses. There had been a number of information articles speaking about this degree of inaccuracy and, you realize, and the form of dangers that it could undermine consultants and all types of different issues. And as I recall, it was roughly 2007, there was, I feel it was Nature or some scientific journal that did a research and really discovered Wikipedia to be, to get, to getting kind of comparable accuracy to, to encyclopedias created by consultants. And in fact, at present, I feel most individuals would agree it’s an unbelievable useful resource. You know, I feel one of many challenges Wikipedia is, and by the way in which, I feel Wikipedia is superb and I, I, plenty of what we’re doing is, is in different areas the place you haven’t seen that degree of decentralisation so, so I’m not being important of Wikipedia, however, however there are points. So for instance, I simply noticed a stat lately, there’s, you realize, there’s one thing like, you realize, a thousand instances as a lot content material round Star Wars on Wikipedia than there may be round like a bunch of different, you realize, scientific matters. It’s, it’s, you realize, it’s, it’s a bunch of fanatics and fanatics have varied motives and pursuits and issues like that. But look, I’m not criticising Wikipedia. I feel it’s truly an exquisite service. I’m way more important of kind of the issues that haven’t been decentralised the way in which Wikipedia has, and particularly social networking providers for, you realize . . . You take into consideration like . . . let’s take music for example. So music, and I’m not criticising any particular firm right here, however, however should you simply have a look at most musicians at present, they’ll let you know they make little or no cash on the web. Most of them make most of their cash, undecided, you realize, Taylor Swift or one thing, should you’re, should you’re kind of an odd, not prime 50 musician, you mainly make your cash offline by means of merchandising and touring and issues like this as a result of the digital economics are so dangerous. Does this have to be this fashion? Like, why? Why? Why do they make, why do musicians make a lot more cash offline? It’s as a result of offline there aren’t these large, I imply, there are Ticketmaster and issues, however for essentially the most half, they will go promote T-shirts instantly to their followers. So one of many, one of many issues I’m actually enthusiastic about, for instance, in Web3 and crypto or NFTs the place we’ve invested in a lot of providers Sound.xyz, Royal and some others the place basically musicians can promote instantly to their followers with out being intermediated by an organization like Facebook or Twitter. Digital collectibles and different kinds of digital gadgets utilizing, utilizing NFTs that, that permit them, I feel, do a few issues. They allow them to give their fan base a brand new, new sorts of attention-grabbing experiences. But extra importantly, they, they, they will generate profits instantly from their followers in a method that with out 99 per cent of the cash going to Spotify and different centralised intermediaries. I feel you possibly can see the same form of dynamic in different, I feel we’ll see the same dynamic in different areas of, of on-line creation, podcasting, writing . . . I imply, look what Substack is on writing. Substack isn’t a crypto form of Web3 firm. I feel should you’d requested lots of people 5 plus years in the past, can a author with a e-newsletter make $1mn a yr promoting that e-newsletter to their viewers? People would have thought you had been loopy. You know, there are various writers making that form of cash now in Substack. I feel what Substack demonstrates is the ability of if you take away the intermediaries, how, how significantly better creator economics could be. So lots of people, I feel there’s a typical fable on the market that the web is dangerous for artistic folks economically. I feel it’s not the web that’s dangerous. I feel it’s these large centralised intermediaries. And when you take away them as Substack reveals, you may, you may, you realize, you may remodel the creator economics and particularly that is idea for many who have an interest. Kevin Kelly, who’s this nice author, thinker, entrepreneur, has this, I feel, form of, superb form of canonical article known as 1,000 True Fans from 15 years in the past. And the concept was the web would allow a artistic particular person, as an alternative of getting to to form of get to scale and have hundreds of thousands of followers and make pennies off of them, may as an alternative go and discover kind of their thousand hardcore fanatics who’re prepared to drive and see their present or purchase their cookbook or no matter it may be. And should you do the maths, that should you, when you have a thousand folks and so they’re every paying, let’s name it 20 bucks a month or one thing like that, you may make a very attention-grabbing dwelling. And so the essential concept is when you take away all these large intermediaries who take all the cash, you may unlock all types of latest, attention-grabbing financial potentialities for excellent folks.

John Thornhill
I’m actually intrigued by this concept of form of eradicating the intermediaries and decentralising the ability and so forth, and this Web3. And how is that squared with how Andreessen Horowitz is gonna generate profits out of this world? How, how are you going to return the fund to your traders?

Chris Dixon
Yeah. So I’ll offer you an instance. So, you realize, so, so the brief reply is it’s a unique, it’s a, it’s a totally completely different form of financial mannequin in Web3 and crypto during which our investments are largely in tokens as an alternative of, as an alternative of corporations. And so to offer you, and so what does that imply? So to offer you an instance, let’s take Ethereum. So Ethereum is, you may mainly consider Ethereum as a large pc within the cloud that’s owned by no person. It’s kind of run by 20,000 folks. You know, anybody can form of go on and, and, and be a part of the Ethereum pc. Other folks can write code for the Ethereum pc, that are known as good contracts. And then a 3rd set of individuals can go use these, that code. A lot of the crypto and Web3 stuff you hear about is constructed on Ethereum. It’s kind of the preferred platform. Ethereum doesn’t take, it doesn’t have a take fee, doesn’t take any cash from folks. It does cost what are known as gasoline charges, which basically you may consider as the same to the charges that outdated mainframe computer systems would cost, kind of you pay for the quantity of compute you utilize. And the way in which it really works is then basically you may consider that, these funds, in order a system will get extra common, persons are required to, to, to pay to use it. And that cash that’s, that’s, you realize, that’s kind of its “income” is, is given again to the, to the holders of that token known as ether. And so it’s, you realize, so there’s kind of a complete financial mannequin constructed round it that’s primarily based on that, that essentially is pushed by the demand for utilizing the Ethereum pc. So that token shall be useful to the extent that, that, that the Ethereum supercomputer turns into increasingly common. And so the way in which we generate profits is we purchase the tokens, very merely. And so we’re basically having a bet that, that, that, that pc will get extra common. Now, very importantly, these, these are tokens on the market, and there are folks that work on Ethereum, however there is no such thing as a, there is no such thing as a Ethereum firm, proper? There isn’t any, like, that is finally managed by, there are folks that first created the system like Vitalik and different folks, however at this level, you realize, Vitalik is form of the, the pinnacle of variety, of the, has a bully pulpit, however no precise management. And it’s, it’s managed by the neighborhood in the identical method that one thing like Wikipedia is.

John Thornhill
So simply so I perceive, that is very completely different from the standard VC mannequin the place you’ll take an fairness stake in an organization after which promote it on and also you’re earning profits out of the tokens that of the businesses . . .

Chris Dixon
That’s proper, and that was, and look, that was an enormous, that was an enormous change. That’s an enormous a part of why we created a separate crypto fund. It required a unique, a complete completely different set of issues, together with, I imply, I went out and raised cash individually for this crypto fund from a, from a kind of subset of our traders who’re, who had been form of into this new concept. And it requires a complete kind of completely different authorized construction, a unique custody construction. And it’s a fairly large shift. You know, clearly, I see it as a possibility for us to, to lean in and be on the frontier. But, however, you realize, it has all of the dangers of form of a brand new class.

John Thornhill
Other folks have completely different visions of the form of way forward for the web. And Tim Berners-Lee, the inventor of the world vast internet, talks about re-decentralising the online. I imply, he acknowledges, I feel such as you, that there are various flaws within the Web2, and, 2.0, and desires to form of hand energy again to the customers and has come up with a brand new system known as Solid, which he’s working with folks at MIT to give folks extra management over their very own information. Would you contemplate that to be Web3? Do you assume that form of concept will work?

Chris Dixon
Yeah, I imply, so, you realize, he’s clearly a legend and, and, you realize, created the web and, and, or the online and, and I’ve big respect for him. I feel that, I feel that there’s a pair, I feel that there’s, that there’s, you want to do a few issues to, I imply, the, the incumbents we talked about Google, Apple, Facebook, and so forth are very highly effective. They’re very talked-about with customers. I feel that an important a part of taking them on is creating a brand new set of incentives and economics for, so, in order that, for instance, artistic folks, like the way in which that we’ll finally, we, Web3, will finally, I feel, win over providers like Instagram or TikTok, and so forth is by providing the folks that create the content material on these networks considerably higher economics. And so I imagine form of incentives and economics are a core a part of how, of any form of credible plan to change the large Web2 incumbents. I don’t see the way you get there with out, with out considerably higher incentives and economics. It simply appears to me a core a part of the way you, you realize, can tackle some, some set of incumbents which might be so highly effective. And I don’t know the main points of his new system, however the final time I regarded, it was way more very attention-grabbing architectural concepts. But I didn’t see the financial element there. Maybe, perhaps that’s been up to date. And so I don’t need to communicate on that, however, however I do assume that’s a core half. Like I feel, I feel it’s additionally what creates an issue round Web3 and crypto as a result of, you realize, you upon getting economics, you’ve got hypothesis and you’ve got folks taking dangers and all types of different issues. And that creates the controversy. I imagine that it’s a kind of a double-edged sword that you just want that, that, you realize, I’m not a fan of, I feel that of all of the hypothesis and different kinds of, you realize, there’s clearly plenty of dangerous issues which have occurred within the area. And by the way in which, one of many issues we’ve been calling for is we actually assume that, that, that we’d like good regulation within the area and that there’s been under-regulated. And we’ve talked so much about that. But, however on the similar time, I imagine you really want these economics and that worth the kind of new incentives for artistic folks, for customers to have an opportunity to actually tackle.

John Thornhill
Let’s discuss a bit in regards to the regulation that you just’re speaking about there. I imply, on the one hand, you’ve form of tried to draw a distinction between the people who find themselves constructing Web3 and the people who find themselves form of operating a on line casino and playing on Web3. How are regulators gonna divide one from the opposite?

Chris Dixon
Yeah, and so it’s sophisticated, and there’s many nuances. Maybe I’ll give one instance as a result of it’s been within the information, which (inaudible) and coverage options are being mentioned proper now, that are stablecoins. So stablecoins are, are tokens, you realize, cryptocurrency that, that’s pegged to one thing just like the US greenback. In the case of stablecoins, you’ve got many alternative sorts of them, and so you’ve got one known as USDC, which is co-sponsored by Coinbase and Circle, which for each token you’ve got that, that’s, is a greenback. There’s a, there’s a literal greenback sitting in a checking account that you may go redeem and that’s audited and clear and every thing else. So that’s one excessive, which I feel is the nice excessive. Like that’s the precise method to do a stablecoin. And then you’ve got different instances, a few of which have been within the headlines like Terra Luna, which collapsed, the place they had been, the one factor backing it was, it was this type of round system the place the one factor backing Luna was, was different tokens from that very same system. So it was all form of this round form of factor. And then you definitely had mainly a financial institution run situation the place everybody, you realize, left the system and it collapsed. So, in order that’s, that, these are simply two examples of fine and dangerous. And I feel one of many issues I discovered kind of irritating is that each by way of how regulators have handled it thus far and, and simply usually the form of press protection as these items have all been lumped collectively when actually they’re, I feel, one thing like USDC has very sturdy collateral, a you realize, excellent form of auditing processes, and so forth . . . And then you’ve got these different examples the place, you realize, the dangers had been a lot greater and never kind of correctly disclosed. So I feel that, it’s, what I hope is that we find yourself with coverage options that make the precise distinctions between the nice methods to construct these techniques and the dangerous methods.

John Thornhill
Yeah, I imply, there are plenty of different people who find themselves very sceptical of this world who’re additionally form of calling for form of extra interventionist regulation. And I feel in June, there have been 1500 pc scientists and technologists who wrote to Congress are calling for a extra accountable regulation of crypto property, and so they like, to quote the letter that they wrote, they mentioned, “The catastrophes and externalities associated to blockchain applied sciences and crypto asset investments are neither remoted nor are they rising pains of a nascent know-how. They are the inevitable outcomes of a know-how that’s not constructed for function and can stay ceaselessly unsuitable as a basis for giant scale financial capabilities (Chris Dixon speaking over).

Chris Dixon
There’s a set of those form of the identical critics that come over the studio deal, and there’s a bunch of those that they’re like ten folks that preserve orchestrating these form of, I might name them astroturfing, form of faux campaigns to criticise this area. Like, I don’t I imply, like . . . 

John Thornhill
Tell me, why are they flawed?

Chris Dixon
Because they cherry-pick dangerous issues. They don’t, they, they ignore all the nice issues. They, you realize, I’ve but to meet certainly one of these, I’ve spoken to plenty of critics have been within the area for ten years. I’ve but to meet one who truly was very deep within the area and frolicked on the form of constructive facet. We have 90 portfolio corporations within the crypto Web3 area. I spend all day every single day with them. These are the neatest, you realize, most earnest and inventive entrepreneurs I work with. I by no means see any of these, these people mentioned by these critics. I feel you may take any, look, you possibly can take, you noticed this throughout the, you realize, the post-dotcom period, Pets.com. You can if you would like to concentrate on solely Webvan and Pets.com and ignore Amazon and Google, you realize, you are able to do this with any yr of know-how. You can cherry-pick the dangerous issues and ignore all the nice issues. And I feel there’s an actual threat with that as a rustic that we find yourself, you realize, we’ve finished an excellent job, the US has finished excellent job being on the centre of the final two years of the web. And I feel it’s necessary to get into the nuance and the element. And sure, there are dangerous issues, and we should always we should always come up with good regulation to scale back or eradicate that. But I feel it’s throwing the infant out with the bathwater to begin to attempt to ban new forms of computing architectures. I feel that’s, and I feel an clever dialogue of it, would undergo the strengths and the weaknesses and check out to work out how we lean into the strengths and the way we scale back the detrimental issues. And there are detrimental externalities. I don’t deny that. I feel it’s simply, you realize, I feel it’s cherry-picking, exaggerating the dangerous issues and ignoring good issues.

John Thornhill
I’d actually like to form of return to this problem of how persons are gonna generate profits on this world. And I feel Peter Thiel famously mentioned that each one start-ups ought to goal to turn out to be a monopoly and dominate a market so as to extract cash from it. And I imply, most frequently that’s not attainable to obtain, however that ought to be the intent of any start-up. How does that philosophy sq. with the concept of decentralising energy, giving possession and management and reward for the content material that’s produced again to the individuals who create this content material? And in different phrases, I imply, Peter Thiel appears to counsel that you may solely generate profits out of the gatekeepers from, from the web.

Chris Dixon
Yeah, nicely, I feel, I imply, I feel, I feel companies have their very own logic. And I feel I agree with Thiel that finally companies will attempt to maximise their worth, their shareholder worth. That’s what they do. That if, should you have a look at all of those corporations, so take Google, famously, the founders mentioned, don’t be evil. We’re not going to put too many advertisements on the web page. Eventually, you realize, they, they’re now, I feel, so mainly retired. And you’ve got skilled administration there. And I don’t know, no less than my expertise on Google, is the entire thing’s advertisements now. And so, so we like to say, and so I simply assume it is best to anticipate, I might anticipate any firm to attempt to maximise shareholder worth. That’s what they do, and I feel that’s what Thiel was getting at. And you realize, within the excessive case on the web, you’ve got community results, which lead to monopolies, which is what you’ve got, I feel, with, with corporations like Google and Amazon and Apple, you realize, or one thing shut to monopolies. And so my, my view and what blockchains do is we don’t, we don’t fake that human nature will change. We construct new techniques as we like to say they will’t be evil as an alternative of don’t be evil. So we assume people will attempt to construct monopolies and check out to do all types of egocentric issues. But what a blockchain does is it builds into the structure, the foundations of the system. And so even when the founders who’re well-intentioned go away {and professional} administration takes over and all types of different kinds of issues occur that people will do, the structure of the system ensures issues that I mentioned earlier than, just like the take fee or who controls the system or how the economics work. That’s the important thing factor in one thing like a system like Ethereum is every thing is all the form of the guarantees the system makes are baked into, the baked into the structure and might’t be modified. That’s a really, crucial idea in Web3 can’t be evil as an alternative of don’t be evil. So I agree with Thiel. That’s what people, that’s what enterprise folks will attempt to do. Of course they’ll. They’ll go attempt to create monopolies and massive companies and maximise shareholder worth. What we are able to do to create a greater web, I imagine, is create new techniques the place the community results accrue to the neighborhood as an alternative of to corporations. And subsequently it makes it a lot, a lot more durable for, for these folks to go construct these form of community results like monopolies.

John Thornhill
And what provides you the arrogance to imagine that the incumbents aren’t going to simply muscle in on this new world, and it actually goes to be the insurgents that win?

Chris Dixon
Yeah, they might. I imply, you realize, that is kind of, I consider Clay Christensen’s frameworks the place you’ve got sustaining and disruptive applied sciences. I consider, so I feel, for instance, there’s one other actually thrilling know-how folks discuss so much about at present is AI. I feel AI may be very thrilling. I feel AI is a sustaining know-how. There are, should you have a look at the investments that Facebook and Google and corporations like which might be making, they’re making huge investments in AI. And it’s very possible the advantages of AI will accrue to these corporations as a result of they management all the information and all of the, you realize, the large computing techniques and every thing else that allow you to run these, these, you realize, form of benefit from this new know-how. So far, they’ve virtually, virtually, I say, exterior of Facebook or Meta, they’ve all basically ignored Web3 and have, I feel, are stuffed with you realize, workers who’re sceptical of it. And plenty of them are kind of energetic on Twitter as sceptics and simply kind of are culturally averse to it, which, you realize, in the identical method that software program corporations pre-internet, you realize, had been culturally averse to, to the web and desktop corporations had been culturally averse to cellular. I feel this occurs again and again, and I feel it’s the mark of a real disruptive know-how in a Christensen sense. And so, thus far, I’ve seen no proof that these corporations will muscle in. Maybe they’ll sooner or later. I see that as a possibility. And so we’ve got, I feel, a, you realize, a a lot wider berth for our start-ups to function and as in contrast to areas like AI and digital actuality the place the incumbents are making important investments. But I suppose time will inform.

John Thornhill
And you assume that this crash that we’re seeing within the crypto world in the mean time is a chance for you? I imply, there’s that nice funding phrase in there that you need to be grasping when everybody else is fearful. Is that very a lot your philosophy?

Chris Dixon
I imply, I might say I wrote a Twitter thread about this lately. My expertise having been, I suppose, within the, within the web for about 20 years now, is that innovation is usually unbiased of monetary markets. So plenty of nice corporations are created, and a few, some are created, not markets, so much are created in down markets. You simply have a look at the, have a look at it traditionally when these corporations had been began. And so yeah, I do, I do assume it’s a possibility for us as a result of there’s plenty of nice entrepreneurs getting into the area. There’s plenty of nice concepts, and, and costs are decrease. And so, you realize, as in enterprise capital, you’re, you realize, that, that you just’re shopping for, hopefully, shopping for low, promoting excessive sooner or later and having issues that, you realize, investing in issues that admire. And, and so, so my expertise has been downturns, you realize, have been alternatives in enterprise capital. But we, you realize, we don’t, we don’t attempt to, we’re not monetary analysts, macro economists. We don’t attempt to form of time the market, largely simply see ourselves as being within the expertise enterprise and discovering nice entrepreneurs whatever the monetary cycle.

John Thornhill
But we should finish it there. But thanks very a lot, Chris.

Chris Dixon
OK. Thanks so much. Appreciate it.

[MUSIC PLAYING]

Jemima Kelly
That was Chris Dixon from Andreessen Horowitz, talking to John Thornhill. Thanks for listening. We’ll be again with an everyday episode of Tech Tonic subsequent week.

[MUSIC PLAYING]

This transcript has been robotically generated. If by any probability there may be an error please ship the main points for a correction to: [email protected]. We will do our greatest to make the modification as quickly as attainable.