Chris Dixon Fireside: The Next Era of the Open Internet | Chris Dixon - a16z crypto

Chris welcome to eth Denver hello it's great to be here um I think he's on the ground for five hours flew in and out to be a part of the eth Denver Community um I want to get right into one question that I keep coming back to and that's whether VCS have been bad for crypto and what I mean by that is that you know we're coming out of a real low for VC funding of crypto projects but during the last bull cycle I feel like VC's contributed to a lot of froth now do you think that that froth was a good thing or this time around are you thinking differently about the strategy when it comes to investing in the space can you all hear me yeah I guess that's loud okay um so I mean like my my view of it is I mean like I'm obviously very biased I work in venture capital I used to be an entrepreneur and I raise venture capital and my view is that like there's yes there a lot of first of all a lot of people get lumped in as VCS who do different things um we you know we've been in the space for 10 years we've been very consistently investing we invested you know uh through every winter we've supported our companies through that so I I would argue like I'm biased I get that but I would argue that sort of VCS who have actual conviction in blockchain and crypto play can play an important role um that said there's like anything there's all sorts of different people there's people that trade more that um like our approach is our funds are 10 years long um and we invest generally pretty early and we have a very long holding period and we try to do a lot to help the projects that we're involved with um and I think there's a bunch of other VCS who do that and I think those are the good ones and they're helpful but there's also you know a whole wide range of of different types of behavior so Bitcoin and etherow our way up but do you even care like I I'm thinking about the last few days and every single conversation I've had on the ground here has been about uh Denon and like an imminent upgrade to the ethereum blockchain it's been about excitement in the Builder space nobody has talked about spot ether ETF so is that does that factor into the way that you think about Investments or your optimism around crypto I mean I think so first of all I think it's a this kind of like eth Denver and generally the ethereum community is an awesome community and especially because it's so focused on real software and building and um and I think that's that's to me the most important thing like having been in technology for a long time what really matters is that is building applications building infrastructure like this is how we you know I think what we all want to do is make this movement go mainstream like my not prices but my kind of Northstar is how do we get an application to 100 million users to a billion users I think that's how most people here think um that said like I go to DC a lot obviously there's all these like regulatory questions that we're all dealing with and I think the you know for us who've been in the space a long time we see this as like this is like probably the fourth cycle or something if you've been in Bitcoin and things like I have for 10 plus years a lot of people outside like in DC and Hollywood would to them like crypto started in 2021 like I I'll just tell you this because I talk to them like they heard of Bitcoin and things but like the real thing started in 2021 with like nfts and and uh and just all the kind of you know this talk in 21 and 22 and then you know FTX happened Luna happened and interest rates went up and the narrative became crypto's over like it was this thing that popped up and then it ended and that that has had an effect on the policy makers because a lot of them they literally will say this is this thing that happened during covid with low interest rates and now it's going to go away and we say to them no it's not going to go away like instead you have to like think about this and grapple with it and like come up with smart policy that maximizes the good and minimizes the bad so I do think in the sense that it kind of reminds people this is not going away and that it's a real thing and that there's I think what people underestimate is like there's you all of you and me and I think probably a few million people who are like true believers who believe in this movement who believe in you know building Digital Services that are owned by communities that that honor user ownership and Creator ownership and all these other things and I think a lot of people who aren't don't come here and don't see this by the way I think it's awesome that you're here because I think most media doesn't cover these things and they just talk about the prices but I think for those people that don't see this they don't understand that this is a real Tech movement right and and so it's important to remind people like it's a real Tech movement and it's not going away and we're not focused on prices but but that prices do have that effect and does does remind people of that so you just wrote a book it's called read write own building the next era of the internet and he's doing a book signing after this I'm giving him a plug right now if you want to go uh talk to him afterwards uh for those of you who haven't read it it's a very good introduction of a complex idea sort of a history of the internet and looking at how web 3 is a solid alternative to Big Tech before we dig into it why write a book like why not you know it seems like kind of buttoned up a corporate thing to do uh um are why that in ter of something more decentralized like my friends like were like why don't you first of all why don't you sell publish why don't you just do blog posts it's like oldfashioned to write a book um I I thought you know like we we've been doing podcasts and blog posts for years the reality is there's a lot of people including policy makers and just other folks who who want a book like a book is an API to a certain segment of the world is kind of how I think about it like and literally like I'd go to all these meetings and they'd say like what book should I read and I was like I mean there's some great books on like Bitcoin and coinbase history and stuff like this but I didn't think there was like a book that kind of frankly described the vision here I think ethereum is the most aligned Vision to my book um and so I really felt like no one had written the book like that that kind of contextualized all of this in the history of the internet and really I it took me forever to write the book I don't know if it's worth it to write a book but I did it so but the the work I did a lot of the work I did was to make it really just accessible um and and so for example like you know instead of saying like I don't use the word decentralized very much because that's kind of a technical word slightly technical word instead I really try to explain through examples that non-technical people can understand like why that matters so like decentralization really means decentralization of software production which is like composability it's a decentralization of Economics which is take rates and so anyway so like each chapter kind of goes through like why does this matter to you so what I'm hoping is and I feel like it's happening is that hopefully all of you folks like it obviously you'll know parts of the book already maybe some of section I I wrote it with chunks so you can jump around probably everyone here knows the blockchain section I hope the history might be interesting to you I hope some of the later sections might be but really I wrote it so that you would have a book to give to your family and friends when they say isn't crypto that thing that's like you know scammers and whatever and like no it's actually this whole other side of it here's this book that's what I'm hoping it becomes is like a book that you can hand to somebody and they and explain to them and they don't have to come away like oh my God I'm going to quit my job and do this and devote my life to it but at least they can understand that there's another side to the story right cuz like that I didn't feel like that was getting told like yeah and you make this analogy of crypto as the casino and how that kind of obscures some of the larger use cases but isn't that part of what has helped the industry scale a little bit this like get rich quick scheme this this this idea that you could be a part of something big you could make it um I I don't know yeah I think it's a good question I think it's a question of emphasis so like the way I think of it is like like ownership is a key aspect to to you know that's what tokens enable ownership and whether an nft enables ownership of a digital object a fungible token enables ownership of something more money like um I would sort of analogize it to like the housing market where in the housing market you know you have people that flip houses and you have um Mark you know people that trade and things like this but the but why do we want home ownership as a society we want home ownership Society not for that reason we want it because it it's important psychologically you can raise a family in your home it's important to align incentives like it's it's well documented the people that own homes contribute more to their home and their community so like my my argu and then as a side effect of that right we have trading and speculation and that does play a role right it it's the reason you can go get a zestimate on Zillow is because there's a liquid market like I'm not anti- liquid markets like the United States is generally like the regulatory framework United States has generally supported regulated markets and speculation and other thing like it's it does serve a purpose in providing liquidity and price Discovery but I my argument is just that the that's been all of the emphasis from kind of a media point of view and that shouldn't be that should be the side effect right the core thing should be about ownership enabling empowering users empowering developers empowering creators through a new architecture of Digital Services right that that that shifts ownership to the edges of the network you know web 3 folks have been accused of being super handwavy and and not very specific in terms of what uh web 3 is actually accomplishing right now Jack dorsy Elon Musk two big critics of of web 3 and I know that that was one of the things you were looking to combat in your book and I and you have these like actionable takeaways you know real world examples of of things that are really working right now and you have so many developers and builders in the audience I think they'd be Keen to kind of hear what you think is is Tech that's working but also needs to be scaled yeah so sorry um so uh I mean look these my my view like I've been on the working on the internet for almost 25 years now I started really started my career in Earnest during the internet downturn which you know it's easy now to sort of dismiss that as like oh was obvious the internet was going to be a big thing it was not obvious it was more much of a downturn um the these things just take in my experience these things take a long time so AI you know the first neural network paper was 1943 um I actually personally started an AI company in 2008 I thought that machine learning was going to happen then I was 15 years too early um smartphones go back to the you know 80s and 90s uh internet goes back you know go look up compus serve and Prodigy these were big internet sort of internet services in the 80s internet goes back to the60s um so take time um I think we were really set back by some of the stuff that like the FTX stuff and everything else I think that on the positive side like the folks here know like I think there's a lot of really good stuff going on on the infrastructure side which just frankly wasn't quite there yet you know you need low gas fees and great ux and you know embedded wallets 4 4844 you know like all these kinds of things are important um and then you need applications and there's a whole bunch of people I'm sure many here who are building a whole wave of new exciting applications and look I I think also some of these things have been like like the death of nfts has been exaggerated there were I think 8.6 billion in sales last year of nfts after the downturn stable coins have become I think I think are kind of sneaking up on people I think it was 600 billion last month in stable coin transactions um and then there's a whole wave of emerging applications you know people here some of you might be on foraster I I was talking to some of you earlier probably it's a new Social Network built on ethereum um there's a whole bunch of games and other kind of exciting things so look I'm in my idea world it would have been faster but I also think that like just because something's taking longer doesn't mean it won't happen yeah I I think that stable coins are especially interesting in emerging certain Emerging Markets where the bank rate is so off of the black market it it's just uh helping to fuel a shadow economy that's absolutely vital to survival yeah it's a it's it's it's harder to see in the us because we have a very you know we have obviously we have easy access to the dollar and good payment systems but I think around the world it's much more it solves much more of a problem yeah yeah uh you know one critique of a16z that I've seen lately are uh relate to some comments that you made to the New York Times that your projects aren't allowed to sell tokens publicly you know some say that well you've got axi Infinity that's an exception with a token that they issue any response to that or that narrative well I think the comment I made was that they were talking about icos I believe I did a lot of podcasts I don't remember everything I said but um the icos which were you know in the 2017 18 era when people were kind of launching and selling tokens directly to the market and the SEC came out with guidance that guided against that and that basically ended and so like we haven't been involved like the the norm now for projects I mean you can debate whether this is good or bad from a societal point of view but like the norm is to raise money from from Exempted or institutions like VCS and then and then later on to airdrop tokens to um Regular users but not to sell them directly um and that's been like that that's how every I I think I I should I I maybe qu no I think every project we've been involved with has done that so um anyway so so I think I think it's just a misunderstanding like that did happen with projects in 2017 and 18 but the SEC guided against it and people since then have raised money from Institutions and then then airdrop so people can still get tokens but they get them for free for doing work for contributing to the network as opposed to buying them which I think is just also a much better way to have a happy Community too uh you told Cara Swisher that 94% of your portfolio is locked up meaning you haven't sold the tokens associated with your portfolio companies it's not locked up but we haven't sold it yeah haven't sold it okay uh I I mean how must have been a rough couple years but I but what's you're thinking though about like the because I I know it's a part of the term sheets you have certain lockup windows and that's not required by um any sort of larger regulator so what's what's your philosophy behind that I mean this is just based on like so this this is just this is not new to crypto just I think people may not realize this about venture capital in general which is like this is if you go look at all of our funds like I have the data for all of a6z funds like all the way it works is you have this J curve right so you invest and then the F value of the fund drops almost invariably this and I've seen a lot of data from a lot of venture firms it's that's why it's called A J curve because it drops and then it goes up and just basically universally you the biggest mistake a VC can make is to when things start to work sell them too early right all of the value in Venture Capital that's ever been created in the history of venture capital has been basically years 6 through 12 in the portfolio right and so you can you can just and every LP will tell you this all the data analysis every you know so it's just kind of widely understood in the Venture world and and you do yes you do it does go down and and if it's a little harrowing at times because you know like you can tell yourself hey it's a J curve but like stuff goes down but like so it's not this is not some like altruistic Theory this is just kind of standard Venture Capital which is like these projects take a long time to build and you know when they work sometimes you know many won't won't work but occasionally they'll work and when they work really well they just kind of start compounding you wouldn't want to sell then yeah I do feel like it's in contrast to like this other narrative that's out there like that some people just think that you know you got VCS that'll invest in projects and they get uh they kind of exit the token when it's at Peak value and then retails kind of plowed in money and you know it's it's it's a troubling Dynamic that some people people point to um just generally of the VC world uh which seems to be in contrast I mean the thing there's a lot of different stuff that goes on out there I mean I think that there need to be I don't know if this will be controversial here or not I don't know but like our our view is there needs to be Pol regulatory kind of Frameworks around this including things like lockups and disclosures and other things there needs to be a path and we've said this for year for many years five six years long before like kind of the scandals and things very importantly we believe there needs to be a path for you to create a project and for you know every project by definition starts off centralized so did Bitcoin was you know go read the Satoshi emails that was one person building a project over time these projects if they're built properly become decentralized and that changes the regulatory classification there needs to be we we believe a path to get there a very clear path because everyone wants to be comp everyone here I'm sure wants to be compliant right but that path can include things and should I think should include things like lockups disclosures you know required secur security audits like there there should you know there should be things in there um and and that would have the other benefit I think for The Regulators is that then they would have very clear black and white rules and if someone's over the line you can go after them and if they're but every entrepreneur we work with is dying for this because they just they want to all do the right thing they just need to know what it is right and right now it's it's the strategy of the policy makers to of some of them to deliberately make the line gray so that people don't know right so you know so so my my like we can't we're one firm in the Market we can't impose rules on the market like if we do that people won't work with us like we can only ask for certain things um it some of this needs to come from the referee so to speak right like in terms of like kind of Shifting focus in in terms of your Investments I feel like all the VC dollars have dried up for crypto in the last few years and generative AI is like the new um popular kid in the room but I bring that up in the context of I believe something like 25% of your Investments are in the Creator economy space and you know kind of is more important than ever to come up with new business models for Creative so I think that's an interesting strategy Choice can you walk me through how how your thinking is evolved in lock step with the surgeon popularity in AI yeah I talk about this some in my book in some of the in the last third of the books so the first third is like history the the kind of history of the internet next third is kind of about blockchains and the benefits of blockchain Based Services and the last third are seven different application areas a coup two two or three of which are kind of social media and Creator economy that kind of thing and so I you know I think it's a really important area look I mean what's what's about to happen right is the cost to create video images text is about to if not already drop to zero with generative AI um and that will that will create the need for new business models if you're a creative person and so like one example I talk about in the book it's a really exciting idea I think is what I what some people call collaborative storytelling and so this is idea of a bunch of people getting together and collaboratively creating the next Harry Potter or Star Wars universe getting rewarded for their contribution with tokens and then having an incentive to go out and evangelize and contribute and build out and fork and so you know we have a few portfolio companies doing that that's just one example there's many great ideas I'm sure people here are working on them some of them um of of like what do you do you know have musicians can sell digital Collectibles to Their audience in a you know so in a world where content goes to zero what you need are sort of complimentary business model other things that you can sell right other ways to engage your audience and have a have a financial relationship with your audience which I think is incredibly important because like do we want an like right now if we don't have new business models like if you look at the way things are headed right now we've got five companies that control the internet essentially by all the data I have stats in the book and AI is probably going to increase that centralization because it rewards companies with lot with large stock piles of data and capital and compute um and you know and so what you know look it takes stack Overflow so the I used to be on the board of stack Overflow the the stack Overflow has this great programmer content the AI systems went and and used it in their training and then they have co-pilot and now stack overflows traffic is down 50% like that's the canary in the coal mine that's going to happen throughout the internet right every all of these sites that were used for training data are now going to become irrelevant because you can just go to one of these five big internet services and get a photo get a get an image get a movie and you don't need to click through and go to those sites anymore so my argument is we need new incentive systems right like do we want a world where there's five services or do we want a world where there's a diverse ecosystem of creators and people building audiences and and that question comes down to incentives right it comes to and crypto is very good at creating new incentives so like what like I think it should be this should be a golden period where people are like okay we need to now go and rethink how the incentives on the internet work and make sure that we keep the internet open and diverse and kind of aligned with the original ideals of the internet that's why I got involved in this in the internet the reason I I used I didn't I probably wouldn't be in technology I don't think if it weren't for the '90s internet and the idea this dream of an open decentralized network that anyone could build on was an inspiring vision and I would love to see it return to that and I and I think if we don't have new systems like blockchain based systems we're at risk of having sort of an Internet of like you know what's that movie Wall-E you know he like the five companies and you plug your brain into it and it's just like dystopian and not not you know not not the internet that I want to see very very last question because we're over time I there are a lot of builders in this audience two things for you what do you want to see them build and how do they reach you directly to pit you I you know I'm actually Chris at a16z it's super easy so um and I I generally I'll respond in some way if not directly I'll I'll introduce you to somebody but um uh uh I look I think there's I think this is the this is the my favorite the reason I came here is I think there's so much great developer energy here and a lot of friends and a lot of projects were involved with and so I'm very excited about all the things that the ethereum community is doing and um look I would just love to see more you know more interesting products Games social networks things that aren't speculative I think there's all these interesting other features of blockchain networks like composability the fact that you can make you can have developers all kind of coming you're seeing some of that with like frames on foraster but like there's a whole interesting product space that I don't think has been fully explored there's the tokens and meme coins people have explored that like let's go explore all the other things like I would love to see and I'm not saying again the tokens are part of this and I have chapters in the book on it but there's a whole another world out there of non-speculative use cases that I think a lot of people here are working on and I would love to see more more development there thank you Chris thank you to everyone who joined us and to the eth Denver festival for having us [Applause] thanks thank you great