Summit | Future of Ownership Economy

[Music] [Applause] [Music] and next up we have our last talk of the day and uh for this i want to introduce spencer and lee from variant and we're going to talk about the ownership in the passion economy so without further ado let's welcome lee and spencer on stage and i'll let you uh turn on your videos hi hey there nice to be here thanks carter for having us i'm excited to host to both of you and uh i kind of have a handful of things planned for this uh largely um it's just interesting because you are co-workers uh spencer and lee are general partners at varian fund and uh what i want to do is i want to see um when i first give you an opportunity just kind of talk about your background in terms of how you got to where you are now especially kind of from both of your ends you kind of have a different uh focus that each of you kind of are excited about and i'm curious to kind of hear what sort of made you spend all of your time in crypto and i've been maybe we can start with spencer here and uh and then we'll uh move on to to lee cool yeah happy too and thanks for having us um see i guess my crypto journey begins immediately just went down the rabbit hole right didn't have really anyone to talk to about it so i started tweeting um and it was in 2014 where i started a bitcoin on-ramp company um we were trying to make it easier for people to buy and sell bitcoin um like in physical locations and we had to shut that company down because of like just a really uncertain regulatory environment and i learned a lot during that time it's funny to see how much the space has changed right i think there's a lot more certainty as it relates to regulations today um but actually left the space during during the the bear market i guess officially um but then kind of came back in 2018 i started a crypto fund one of the early crypto funds called dtc capital and i was a solo gp there managing um a portfolio that invested in um you know tokens as well as like early stage companies and that's where i just fell in love with um working with entrepreneurs right building like these these new companies and protocols from the ground up uh and and just like the ability that some of them had to truly transform the world whether that's you know finance or consumer or social it really doesn't matter i think um you know just like i just got really invigorated by by doing that and and one of the insights that i had while at dtc capital was how much community really mattered to the overall success of these projects and having a really healthy community was something that i wrote a lot about just in terms of like tactically and someone else who was in the space and is and myself's third co-founder at variant is um jesse walden and jesse was writing about progressive decentralization when he was at anderson horowitz and this is this idea where you know you have a company and that you know you slowly exit to your community so you can kind of see the parallels between um those two like idea spaces and um yeah jesse and i just you know ended up investing a lot together i worked at his cryptic startup school initiative that he ran and highly encourage everyone to read watch those videos they're still on the internet today um and then yeah i joined him in january of last year as uh kind of the second general partner at variant and so yeah i would say one of the big things that that we do is you know we help our portfolio companies um build their own communities among other things and i manage my own community myself um it's called power network which i i you know shameless plug i hope everyone here subscribes to the newsletter it's powernetwork.substance.com and what it is it's an on-chain analytics community that you know each week we feature four or five projects in the crypto space that are doing innovative things and um contributors talk about them on like a like a fundamental basis and use kind of on-chain metrics to to tell a story about their health and i would say that it's everyone in in the ownership economy and this is the fun thesis and kind of get into it later with lee um is an investor right in crypto and so i think you know by subscribing to the newsletter you become a better more data-driven crypto investor which is something that i think everyone needs and it's just something that i'm really passionate about um so yeah happy to kick it over the way hey everyone uh really good to be here um i'm lee i'm one of the other general partners and co-founders at variant fund so my story and how i got into crypto um well it definitely was a little bit more belated than spencer's story but my background has been in consumer internet and consumer software for basically my entire career i started my journey as a product manager initially in silicon valley i was building a mobile app this was during the wave of like somolo social mobile local apps that everyone was working on post app store release did that for a few years that company got acquired and then i went over to the investing side at andreessen horowitz to work on the consumer investing team and what initially i intended to be a one or two year stint before i went back to the product side ended up being really something that i fell in love with and i'm still working on today which is investing so i have a long history and background as a consumer investor specifically in traditional marketplaces social networks professional networks any sort of network effects product and it's that story that then segways into my journey into crypto which is that the through line of all of the investments that i had been working on um for all of those years at my time at andreessen were really around using technology to improve access access to friends access to other social connections access to jobs and economic opportunity through being able to participate in a marketplace and then i started investing in future of work consumer platforms through my own fund called atelier ventures in 2020 after i left a16z and it was there that i began to explore crypto as a tool to help turbocharge that thesis of technology to improve access so i began to invest in crypto projects that helped to enable people to pursue their passions and to earn from that and found myself spending more and more time there becoming more interested in crypto as a means to distribute ownership of the under underlying platforms themselves and felt that that was really the strong form of my thesis of the passion economy of how people are able to earn a living through leveraging these new tools and so uh jesse and i who have been colleagues before at b16z uh decided that our two theses of the ownership economy and the passion economy were really two sides of the same coin and that we would be better as a team together collectively and so i joined the team full-time in october um and now am focused a lot on the consumer side of crypto and really interested in new applications that can help accelerate mainstream adoption thank you so much for that this is uh this is a awesome on a couple of friends one because you just made my life a lot easier by just shouting at all the tops we're going to cover anyway and uh it flows naturally and everything else so uh my kind of first question for for you is uh lee is um you already kind of said that bastion and ownership economy are kind of two sides of the same coin but are we talking about something brand new here or or do you think this is just sort of like is this something that's just uniquely only enabled by by web3 or crypto or was this kind of already happening in parts or pieces before and now it's just amplified like how do you kind of think about then versus now sort of uh comparison here yeah for sure so um just to sort of level set variance whole thesis is the ownership economy so we are investing in platforms that aim to distribute ownership to their users into their communities um and as to the question of is this new is this something that is only possible through crypto i think that the the answer is nuanced because i think the idea of user ownership and worker ownership has existed for hundreds of years cooperatives um like worker-owned co-ops or consumer cooperatives they've been around basically since the industrial revolution they came to being from this desire for people to have more leverage to gain economic power together um and to improve their options and so for about 200 years or so we've had worker-owned co-ops or consumer co-ops like some of the biggest companies that we encounter and purchase through are actually cooperatives like rei um but i think that the strong form of the ownership economy thesis is really made possible through crypto and that's because traditionally the way that you would enable worker ownership or user ownership is through traditional equity done through the traditional legal rails you would grant you know all of your workers equity in a worker-owned co-op and that obviously entails more inefficiency in actually distributing that ownership and is subject to all of the limitations of equity from a from a regulatory perspective um and and so as a result like crypto tokens i think represents the strong form of enabling the ownership economy because all of a sudden you're able to distribute value through tokens over the internet as easily as we're able to transmit information and so it's not entirely a new thing to to distribute ownership but i think it's it's very much strongly enabled by crypto yeah and i would just maybe add that um it's it's definitely accelerated um through crypto and like we've just i think there's just an immense amount of leverage with smart contracts and what developers can do um and yeah obviously like one of the the main like products from a smart contract is a token and and like yeah i would say if when you when you zoom out and think about how tokens are just superior to equity they have some downsides but let me just give you like a rosy picture right they're basically free to deploy right it costs you know just basically the the price to [Music] see they're infinitely programmable right you could you could literally do whatever you want with them they are accessible to anyone in the world it doesn't have to be just you know investors in the united states or somewhere else you know it's it's truly global and they're liquid if you want them to be from day one and and i think that like is a recipe for just like this this you know sounds you know a cambrian explosion if you will of new innovation in this space and it's honestly amazing that we get to invest in these projects at like the earliest most formative stages a lot of the times with entrepreneurs who are honestly just starting off and maybe only have an idea uh but i really think the the big unlock is smart contracts with tokens now that makes a lot of sense and uh no i absolutely agree i think and it's just one of those things where you have to kind of constantly switch between is this are we talking about the recipes or the outcomes and we have all the ingredients here for kind of coming with interesting items but we haven't seen all possible combination permutations of it just yet either one kind of question for both of you all going to start with spencer is that when we usually think about creator economy or kind of passion economy or ownership which i think is like a much better um collective sort of super set of this usually we're thinking about people who are artists or designers or like youtubers or people who just kind of have content creation as as the core um but of course um that's not so the definition of a creator or uh or shouldn't be rather spencer as you kind of look at things that are like not necessarily consumer apps or you kind of look at defy apps or anything else in the space as an investor can how do you think about what ownership economy means to those types of businesses and and have you seen any patterns or trends or any observations there yeah no i think it's a great like it's a super meaty question i think ownership it really gets the heart of like what what is ownership and and i think it can take like many different forms right um you could argue that like you taking unispot for example which is a decentralized exchange protocol um right now the uni token that governs the protocol it like has some you know ability to take fees right from that the protocol generates in terms of transaction volume but in addition to that liquidity providers people who provision their own tokens to like help the the liquidity of the like a given market they also um have ownership of individual liquidity pools in in the form of lp tokens and they also get a cut of fees um ownership can manifest in ways such as like revenue sharing and um um like the list kind of goes on it goes back to what i was saying about how tokens are programmable i think what i would love to see more of is we're in like the early days of this um jesse our our partner has written this kind of amazing piece called progressive decentralization which i encourage everyone to read and many of the companies that you know started with progressive decentralization they they exited to their community with a very simple governance token which is like this is the protocol here are some parameters and you can vote on um those parameters or upgraded in in some way and i think that's the tip of the iceberg i think as we get kind of more robust as a community there are just going to be so many different dimensions of ownership that will be coded like into these smart contracts that are just a lot potentially more equitable and like get at the heart of what we're actually trying to do and maybe i guess yeah that makes sense and i think it's one of those things where kind of what we've seen in the last year and a half or so has just been deployments of these things but not active kind of um tweaking or iterations on them and you're basically yeah you're right it's we're seeing that and works a small scale and the question is will that scale up to a larger number of users and sort of my question for you lee is uh you're obviously spending more time on understanding consumer applications and projects here are there sort of any differences in how you evaluate consumer companies in crypto versus non-crypto or kind of what changes in that framework of deciding where opportunity is or or where there's potential for larger growth yeah great question um i think it's actually more similar than not uh where a lot of the same lessons and frameworks from traditional consumer investing do apply to crypto consumer investing as well and that's because fundamentally the humans are not different at the end of the day the people who are using these applications are still the same people and human needs have actually not changed that much even throughout the course of human history like at the very fundamental level people all share the same underlying drivers and motivations like the desire for connection the desire for community um the desire for financial stability and earnings wanting to seek love and meaning in their lives and so the best consumer products i think all tap into one of those core human needs but enables them in new and different ways so i think the way that these new crypto consumer platforms are enabling earnings or enabling connections to new people looks different than the prior generation of consumer apps but ultimately from my lens as an investor and as a user the question is still what fundamental need is this solving for on the part of people that's a really interesting way to look at annoying i yeah that's that's super cool what what uh so i guess maybe it does that differentiate when you look at marketplaces versus kind of social as gaps and sort of what does that look like and how does the ownership economy change those dynamics yeah i think um obviously marketplaces and social applications differ in terms of what is the user trying to accomplish when they get there and what does product market fit look like i typically say that in a marketplace product market fit is achieving liquidity meaning when you go to the marketplace you're able to get what you want that is product market fit for a marketplace versus in a social network that's obviously quite different you're there for entertainment connection utility of being able to communicate with your friends etc um and so there's there's different core drivers there but there's still metrics that you can leverage in order to kind of quantitatively assess our users our users getting their needs met through this product in a much more powerful way than prior generations or prior products did as to how the ownership economy applies to this model i think like the the theory which um is still very much like in its early days and still being refined is that giving users ownership helps to bootstrap networks much more effectively and grow them into much more engaged networks than otherwise would have been possible so historically building a new network is is essentially like an impossible hercule herculean feat it required you know uber to raise billions and billions of dollars facebook just makes it yeah yeah exactly and giving users ownership over charles charges all of that and also can be used as a way to enhance retention not to mention ultimately there's a there's a financial value proposition that gets layered on top of the core value proposition of the product itself as well so i think all of those lenses taken together um it's really still about like how much value is being driven to users lives by these new product products and ownership um offers something new and different that is additive and incremental to the core product but the core product still very much needs to work that's extremely well put in and that makes absolute sense this is great um i'll kind of pose the next question uh for for both of you which is um do you kind of see this space evolving as you know a parallel universe where like the existing giants just get dethroned or do you kind of like how do you feel like the role of existing big companies whether it's marketplaces or consumer companies um sort of come to think about web3 3 and what kind of happens in a few years from now anyone can go i don't have a yeah sure um i i can take a stab at this um so i've spent a lot of time like talking to executives and people who work at these web 2 giants and these network incumbents i think they are smarter than we give them credit for for sure and i think they're going to be forced to respond in in various ways i think the um the key thing is that i think everyone is exploring or actively looking to integrate web3 elements into their products they're looking to add crypto as a feature into their existing products because they realize this is where consumers are going they want to own nfts they want to showcase them they want to be able to have like co-ownership of a community etc and so all of these web 2 networks are going to add crypto as a feature to their products sort of akin to how twitter added the hexagonal profile pictures um but at the same time i think what they do in terms of fully leaning into the ownership economy is limited because they're not going to be able to offer the full spectrum of what ownership entails which is you know ownership isn't just about owning a digital good and and having it and being able to view it as an investment it's also about responsibility and governance and these incumbents are structured in such a way where they're limited in terms of the amount of governance rights they can actually confer to their users and so i think if if users value the whole spectrum of everything that is encompassed in ownership i think the web two giants are going to be challenged um in being able to fully meet that any anything to that spencer yes it's super meaty topic and i think it it's like it's always helpful to look through like the lens of different industries and i think i have like a different hypothesis for maybe like you know social media versus um d5 for example which i think like something like d5 we're going to see you know crypto uh we'll see like the larger banks and the legacy financial system kind of um implemented like integrated on the back end and it'll probably just like exist and and users won't really know the difference of what they're using for their financial things so do you think that's more likely versus a alternative offering that just dethrones those institutions i think it's probably a a bit of both right and it kind of sort of depends on the product um and and so but i think the important part is like crypto is pushing the boundaries of what these like legacy institutions do and that kind of um that's like universal to the entire space um at its core though i think like the ownership economy represents like like a new chapter frankly and like how how we think about um like operating internet companies and and i would argue that at least our hypothesis as a fund is that the largest winners from here are going to be user-owned networks as opposed to like you know rent extracting companies um and we'll have to see if that gets proved out but i think like some of the early signs are really encouraging i absolutely agree um i want to kind of uh wrap this up and just to ask one last question and we can go in deep if we want to but if you want to just list things that works as well it can be independent of the the ownership economy too but what are some kind of anywhere from ideas to projects you're excited about that you would either like to see or you would like to see people explore more and i'll kind of put that in context which is about 1200 developers um going to be building interesting things over the next four days and uh anywhere from inspirations for a quick hack to quick improvements to potential businesses what does that look like is there a wish list or things that you want to see more experimentation on spencer do you want to take that yes i can fire up everybody um so so i would say like perhaps that that may be what you say maybe kind of looking at what's happening in d5 right now and sort of what do you think things could yeah so so like historically in hackathons there's been a lot of remixing right like taking this and using it with that and like coming up with something i think that's pretty cool um but i would love to see kind of more maybe experimentation in areas that we haven't had yet um an idea is like on token levels so one thing that i've been looking at is like curves ve token mechanics and there's some really cool things that they do to incentivize liquidity through you know different gauges and voting like imagine taking that and like changing it altering it in order to get like produce a different outcome um that would affect the system i think also like this idea of cross-chain applications that really excites me so um imagine an nft marketplace the order book is is on one blockchain that's super fast and maybe like some other part is on ethereum which is like more secure um i think crosschain is something that we we should like we're definitely thinking about at variant and i know a lot of entrepreneurs are too um and then maybe if i have one more um i i'm i'm always a fan of like innovation around like like nfts in general and like they're just fun and like doing fun things with like the programmability of nfts noun is like a really interesting project that has this cool distribution mechanism but i think there's like a bigger idea is maybe to work through there yeah i'll just tag some more ideas onto that list um we've been very interested in the category of web3 infrastructure um so kind of the core building blocks that are going to enable the next generation of applications is very interesting to us i think there's some really key um missing puzzle pieces to enable like the next generation of consumer applications including decentralized social graphs being able to do account to account messaging on chain that's also missing um beyond that i think i'll put in a plug for fashion nfts i think this space is like all of the attention is on music nfts which we're also very bullish on but i think there is something to be built around fashion and expression self-expression digitally through nfts and i think the exciting thing about fashion nfts is that you're not limited to the human form factor that we have in meat space um fashion nfts can look different than than human fashion i guess i'm not even entirely sure what it could look like you know referring to like the physical goodness piece of nft's when you say fashion is that correct um well definitely it can be not linked to the physical fashion but it can also transcend like the way that we actually look physically like i i refer to um twitter profile pictures as the first instance of digital fashion or fashion nfts actually because they're essentially like adornment for this online profile that we all have um we don't change our outfits that often but it's like one of the primary instances in which we can actually dress up our social profiles i think there's going to be other places that we want to express ourselves and change our appearances in order to broadcast things about our identities or our communities and then lastly i'll say i think the wallet space is super interesting and there are probably going to be multiple winning wallets um perhaps designed for different demographics or different use cases so excited to see more innovation there that is an impressive uh comprehensive list that i think uh gives definitely a couple hundred people good ideas to can explore and uh well this is amazing well i think that's a perfect to end on unless spencer you want to add something oh yeah i was just going to say both lee and i are like we're on twitter all the time uh we love connecting with entrepreneurs if you're a hackathon participant and you want some feedback on your idea no promises that we can get back to everyone but like hit us up happy to give you feedback and uh yeah and anybody who wants to chat with them you can also send me a note on discord and i'll be able to forward that request to them as well so uh lee spencer thank you so much for giving your time and for this amazing chat and uh we'll keep you posted on what comes out of the hackathon awesome thanks so much thanks so much good luck everyone see you right bye [Music] [Applause] [Music] you