10. Regenerative Value - Lisbon 2022

[Applause] thanks than really great to be here in Lisbon and appreciate the opportunity to speak at the funding the commons talk I'm it's an honor because I actually really believe in what this movement is trying to awaken in this discussion which is it's Unique it is powerful it is disruptive in the crypto ecosystem and I'm going to do my part to contribute some thoughts today I I want to talk to you about this notion of regenerative value because it's been animating a lot of discussions with people within my team and we want to open up this discussion so that we can actually have a broader opportunity this week here in Lisbon to have people come and engage with us uh specifically on the crypto Eon day next week uh there's some tasks that we actually want to complete and we want to design some ideas around regenerative value so consider this really the the opening conversation that we hope invites you to come on in so let me begin I I'm certainly not the first person that's been on this stage today to talk about all the problems that we see with the internet today I don't think anyone would be here if we felt like things were going well there's no question at the moment that the internet has been overtaken by economic interest and corporate structures that are monopolies they are illegal monopolies and they are creating huge distortions in the current economic system uh they are the most valuable companies in the world on the basis of an extractive business model that now pretty much any consumer knows firsthand what those problems are the question is if we're going to replace this current system what might it look like so I I think the answer first begins with looking back in history and understanding exactly how we got to this point and I think you've heard little Peak of this over the last couple of hours in talking about let's say things like Bell labs and I want to begin there because I think it's a fascinating example on one hand B Labs was indeed this incredible idea Factory and it's extraordinary how many great inventions came out of one single place and there was a commitment by this massive Corporation AT&T to go and form a structure that could think about long-term Moon shot like Innovations and then as one's discussed actually move those things into production and deliver them into market so we can trace fundamental Innovations on one side and results on the other that are no question they've made massive contributions the question is if you look at this chart what was the actual accelerant to moving from the research to the market impact and I I'd argue that answer comes in 1956 that's when the US government stepped in through a series of very tortured negotiations that they had with AT&T to determine how they actually were going to break apart this Monopoly that AT&T had on Innovation and what they did which was really interesting was that there was essentially a compromise didn't solve everything but what the government understood was that they needed to find a way for 18 to loosen up some of the things that really could drive more competition and so they went to the heart of bell labs and they said all your patents every single thing that you guys have done here on the Innovation spectrum and they constituted a patent Corpus that was unlike anything that we had seen in history overnight they forced the company to flood the market with a cheap way of Licensing every single one of bell lab's patents think about that think about every single trillion doll company that we have right now that's the equivalent and you'd go in there and have the government force them to take all of their fundamental Innovation Google's search algorithm as an example right or the AdSense algorithm the recommendation algorithms on YouTube you know I can go on and on that's what we're talking about here in terms of the impact right and so you had all these patents these incredible patents that created things like that ultimately became things like the solar cell and the transistor the laser etc those now became affordable for people to license there was also another part which is that the government forced AT&T to also stay out of certain types of spaces which included critically AT&T couldn't get into computers so what did that do it basically leveled the playing field and allowed for these fundamental Innovations to be taken up not by a mega Corporation but actually by you know thousands of other corporations that could think about creating new things like hardware and so what you had and this is such a cool chart is that if you I'll just step to the side here okay so if you look here it starts right after 1956 and you can see that there's this dramatic amount of Market expansion and I and I'd argue it's because of the consent decree and that goes and it drives the hardware era right so this whole point in which you have now massive Market expansion and then consolidation and then commoditization this is that cycle that you're going to now see happen several times over the course of the 20th century because what happened was of course is that the hardware era gave way to the software era and so as things got let's say more powerful with things large companies like Microsoft the same thing started to happen massive monopolies were created there was consolidation and then there were interventions at each step interestingly there was government intervention at each step so IBM in the 7s was taken on by the FTC and through a series of basically chilling lawsuits they ended up uh forcing IBM to become a better corporate actor Microsoft of course famously was also handed down judgments that forced it uh to significantly Cil its monopolistic activity we forget this but if you were a startup at the height of the internet era in the late '90s if Microsoft decided to bet against you they would go to VCS on Sand Hill Road and explicitly tell them that they were not allowed to invest in you that's what that world was like so government action was required Google is now you know grew out of basically the leveling of that playing field and now we're repeat of history Google is now of course being taken on by the government again for its monopolistic practices so and enter the crypto era what is this future going to hold for us are we going to continue the same cycle over and over again and basically rely on government to step in and provide this massive Innovation uh leveling playing field that we need or could we think about the fundamentals of how cryptographic networks work as a path to Breaking this cycle so I I'd like to think about why this might be possible because we might be able to appreciate the fundamental transformative things that happened with the creation of the internet and maybe if we can treasure those incredible positions that brave innovators took back then we might appreciate actually how there is been some consistency about a view of a better world and what's really missing is just us actually treasuring that and not being so naive to think that it is impossible because when I look at this image here I get a vision actually of what how difficult it was to conceive of something like the internet consider this this is the quotequote personal computer of the day in the early 60s and when you had innovators like Douglas angelart looking at machines like this they had to think about a world in which that type of machine would be something that was easy to use it could sit in anyone's home and critically it needed to be connected to other computers this was the augment intelligence framework that angelar put forward in 62 which was really what what I think of as like the initial architecture document of what we know of today as the the positive possibility here of the internet and what it was was a document that put forward two really clear ideas one was that Computing should be something that's personal not industrial not commercial but something that's accessible to anybody and secondly that it was one that required a decentralized network of knowledge that connected essentially all those different computers think about that in ' 62 they had to bet on this idea that that type of computing network was possible nothing about the hardware of the era nothing about the software of the era even made it remotely feasible for that type of thing to happen they had to work doggedly over the next six years to think about taking that framework and then starting to actually create the machines that would realize it so from that you get incredible inventions like the mouse the screen and if you go to the mother of all demos in' 68 and in fact went and put all these things together and a whole list of other inventions and took the Computing era through a giant leap forward to really posit this notion that we needed an online system of knowledge that's what what Angel carded so that those are the table Stakes all the ideas that that we're talking about right now they are not new they've been actually from the very beginning of the creation of personal Computing the notion of decentralization the notion of personal Liberty the notion of a connected Network those are all founding principles but angelart although he architected them and put them forward and created the first products he was not the one that actually brought them to Market what happened was through a series of very selective hires Angel Bart's lab was dismantled and ultimately the best and brightest went over to Xerox Park and that's the story that most of us know at least that's when I got into Computing you know the story was jobs goes over to Xerox Park sees the mouse sees you know the personal computer and then basically steals it none of that is true actually jobs had by the time he stepped foot in Xerox Park he had actually purchased all of xerox's patents and he was the one that then went and brought it forth to Market but the difference was is that he was not committed towards the idea of creating this notion of a public good he was there going and trying to create a corporation and so when you look at all the incredible innovations that came out of xerox's park it's kind of a miracle actually that these many of these things remained open source and they ultimately became public goods um but I'd say to you that one of the things that's actually miraculous about is that even though jobs had sat there and basically held the keys to the future of the Computing Kingdom In fact when you think about it like so many of these ideas were so Transcendent that even he couldn't even control them in spite of his attempt to so what emerged is really that we had a very clear vision of code what I mean by that is software code which is one that helped us create this form of computing and moral code which is actually very clearly thought through about why you would want to decentralize and that's how I like to think about the internet code it basically if you if you break it down it's this idea that there are actually critical components of the internet we need to follow these four principles and again they were there from the very beginning the notion of decentralization the neutrality of the network interoperability personal Liberty these are things that I know we talk about here as these totems of how we're trying to fight to create a better internet but remember this is actually how the internet was originally designed so how how did that really manifest it well it it went through this idea that decentralization was one in which you could create a certain form of intelligence not one that was centralized where you needed let's say a centralized node like AT&T to basically do all the switching and the connecting but instead it posited that if you put power at the edge of the network and you allowed the data and the routing inst structures to actually sit within the same block potentially be autonomous you could have incredible things happen with that Network it would ultimately be more resilient and there was a way for it to survive all sorts of different attacks and to grow so that's the notion and it's pretty familiar when you actually go back to Tim burner Lee's first node on the web it's it took me actually a while on this one it's was like I was staring at this Photograph and I was like what is remarkable about this well it's because it's a personal computer this isn't a Mainframe it's not a dedicated server that was made just simply for the creation of an Internet node this is a next computer that was sitting on Tim berners ley's desk and in fact it had a sticker there that that said hey don't turn this thing off it's a it's actually a server right think about that that's the first note on the internet that's how audacious of of a thought that would be that this is how you would actually want to create this decentralized network of knowledge okay so what happened basically we had this this the principle of decentralization translated into an architecture of the network in which we said look push all of the intelligence to the edge and make the network neutral or make it dumb that's what it's often called and this idea is that basically that all the intelligence therefore if it's at the edge would there be therefore be held by all the users so when we fought for things like soapa a pipa as an example it was this kind of existential idea of oh my gosh if the internet was somehow challenged and then there was power that was centralized into these Gatekeepers like the networks that would destroy the end to-end principle and so when that battle for net neutrality was one you might think well that's it we're done internet saved let's all go home but the truth was is that there was something much more pernicious going on the very actors that were fighting to save net neutrality well they actually had a different plan because they had a different business model what they were seeking to do was to co-opt the original Vision the original Spirit the original philosophy of the internet in order not to preserve the internet but instead to preserve their Supremacy as platforms so how did that happen well I think the answer is You' got to go back to xerox's park because one of the interesting things that spun out of there was not just a protocol like let's say something like ethernet but a vision of how certain entrepreneurs were going to take these protocols and put them into practice this is instructive how many people know what meta's law is one person but actually you all know what it is it's this concept of network effects and this is if you were running as an entrepreneur in the last 20 years and you walked into a VC's office you'd have to pitch them on this idea that any technology that you created would essentially leverage Network effects and the notion is that basically as the number of users of your application or your network grow over time it can grow to with such an amount tremendous degree of velocity that ultimately it could entrench users in the network you would get basically this adoption or it would be addictive you know take all these different types of kind of pretty terrible terms to describe success and essentially what it would do is it would make the network so valuable that you would not be able to leave so this has been applied r large I mean I I you know with great deference this is you know a chart that I often would show entrepreneurs when I was guiding them in uh you know the mid 2000s it was something that um Reed Hoffman had put together and you basically you'd say okay listen my technology would basically follow this business model of creating Network effects even Bitcoin for instance was originally positive saying well it's going to grow because of the value essentially of the network and therefore it's going to be entrenched and we basically have never questioned the success of this because it created these multi- trillion dollar companies but if you go back to the origin of it I find it actually pretty curious because because first of all it's wrong and I'm going to show you how it's wrong but also even Bob medcap you know he if you think about it um he was wrong on many levels most of all he was actually um fighting against the possibility of an Internet he said it would never work and he said and if it did he would actually eat his words which he actually ended up doing he took that article and he put it into a blender and then he drank it so at least he was you know honest about that but but let's unpack this what was really wrong with mech's law it basically posited that every single node within the network had the same value right which economists immediately blew up because growth alone is not necessarily intrinsically right doesn't actually create value and second of all when you actually look at it really what it was is that ethernet where mecast came from it was um it was really just a sales tactic to be able to sell printers and these accessories basically like from a computer and Bob didn't even think that much about it it was an interim sales technique that he used but it was anointed as this law by George Gilder and when you read gilder's book where he talks about meda's law or then you read his successor books something else emerges that I think is actually quite disturbing Gilder has a political project not an economic project he and Peter teal one of his famous Pro J they believe that monopolies are a good thing straight up this is the future that they want they have absolutely no problem with this type of distortion in the market and the only challenge to a monopoly is basically another company that can become a monopoly is that really the world that we want to live in and when you think about you know this idea of trying to empower users with technology with a network you think about the problems of platforms you have to ask yourself is well is there an alternative well when you go back to the original principles of how the innovators were thinking about this people like steuart brand is an example who's often cited in this world and he's a very special person you he painted a vision around this idea of a Commons and I think that ethos is something that very much animates people that are in this room and I want to share with you a quote that I really like is that he talks about the the idea of cyberspace and posits of this notion of autonomy and self-reliance allows for resilience I think we all understand that but he says something else he says where generosity leads Prosperity follows H maybe just maybe we need to go beyond Network effects if we're going to be able to achieve that Vision so let me talk to you about how that might work the traditional Network effects as a rehearsal again we have this bootstrapping problem trying to get people to adopt the technology so what we need to do is provide massive amount of incentives mostly in the form of venture capital to heavily subsidize the product and then boom people start adap adopting the product it's utility goes up because the network becomes more and more valuable and then you become Monopoly cryptographic tokens are supposed to present an alternative so with Chris Dixon who's put out this this very decent analysis and thinking about open network design he says look instead of actually having VCS fund everything why don't we go and have cryptographic tokens be issued and they can become the basis of the subsidy that's required to drive adoption to drive Network effects and you're off interesting because obviously they're decentralizing some of the wealth creation some of the accumulation of value to the users that's a cool idea but is that is that really all that we need I'd argue no I want to go over a couple of ideas one is that I still think that inherent in all of this what really is driving the success of blockchain as a fundamental Revolution is this notion of transparency and I talk to people within the Falin ecosystem especially about this because this is very important SPS are in a position to make a lot of money with their cryptographic tokens and the idea that somehow we can just subsidize storage and just say come come come store all of your data for free everything will be fine after that well we we've already heard that story before I mean how is that actually fundamentally different from let's say Facebook saying oh just do all this stuff for free don't worry it'll be fine it'll be fine right so we need to be transparent actually about the wealth creation and the effects of the work secondly is that we need to think about collaboration there has if we're going to stop this cycle of consolidation we need to think about how vertical integration can be avoided and that we continue to have long-term cooperation and regeneration this is I think the most powerful idea which is that as you accumulate value within the organization I like to think about Dows because they're very efficient structures but even protocols same thing the idea is that you need to always keep higher minded values so participation as the fulcrum for adoption that means voice product quality as a driver of retention and that diversification inclusion right that is really what's going to get you to have a resilient system powerful ideas right and what I think this is going to do is that if we can focus on those types of Notions we can actually do a fundamental reordering what I think is incomplete about Dixon's thesis about crypto um economics is that it still has this notion of value as basically being profit and it has also this notion that growth is something that is actually the most important priority I think that we're already starting to see that both of those things are probably not going to actually work for Humanity if we continue with those priorities we're likely not going to be able to survive as a species so GDP is one of those very interesting cases where now communities countries are starting to understand that actually if GDP is the only metric for your success essentially the growth of GDP we're not going to be able to sustain our way of living so people already starting to move off of that there are incredible innovations that are going on in urban planning to think about how we can move away from growth and you know ditching even this notion of GDP altogether to think about more holistic principles that are transparent that are collaborative that are regenerative uh this is this idea of donut economics which I really like not for this talk today but I urge you to all take a look at it these are the types of templates that people are starting to use to drive things like Urban Development and also Green Technology but what i' invite you all to join me on Tuesday is to think about the next thing which is that I don't like the notion that all these types of higher-minded ideals are simply the domain of things like impact or some something else that oh philanthropist will deal with or you know other people no let's actually go to the heart of the corporate system right now and reimagine this notion of value where we go beyond Revenue we go beyond strict utility and we get into this multiplier around valuation and we think about how we can use as an example block rewards which are important part of this ecosystem to drive things like utility sure but things like long-term sustain stainability Innovation and what we need is to come out of this with actually brand new business models that look Beyond growth and actually think holistically like literally on your balance sheet you would have a way of crediting a company for its Notions of value that go well beyond profit these would be Assets in the company that would actually drive not intangible assets but actually like core clear recognized accounting to say this company actually can survive this company has an innovative business model that can drive inclusion that can drive participation and there's many ways to do that and that actually is I think going to be the most important thing that comes out of this revolution with blockchain is that you're going to get a brand new corporate form so I'd love to continue the conversation on Tuesday I think in depth but I'm happy to take some questions here this to me is the greatest surface area for our opportunity here is not just the commons that is outside of the corporate world but actually bringing the commons into the corporate structure itself and to think about how the next generation of corporations are going to have new priorities new ways of sustaining themselves and I can't wait to start on that so thank you for joining me and happy to take some questions he uh thank you for that lovely talk um yeah really appreciated the history on uh doging gobart and just make me think of all the great stuff around there um I guess one of the things that is coming to mind is um value and the notion of value and the difficulties around uh plural forms of value um yeah and basing them on some kind of non-c contentious uh factual element um yeah I'm just wondering what thoughts you have around there um well I think that let's look at kind of the building blocks of how that might work the bcorporation created a way for us to just start to eliminate um certain liabilities for officers if they started to think more holistically about value right and impact and stuff like that so I think we're seeing you know trends that are heading in the right direction um but I actually think that the our best friends in this discussion are accountants because until we actually go and we change the balance sheet there is no way to actually get people to understand what EV valuation might look like unless we can see that there are certain assets that are considered holistically and what type of value that they're contributing this can be done this is not impossible and I think this is one of if I was to start with one thing it would be that because um audacious crazy things can actually happen with corporate fors even you know within most the people's lifetimes here you know the notion of the LLC for instance that took off it was a fanciful idea in the late 70s it took time in the mid 80s for people to finally understand and then it took off and its the dominant corporate form in the United States why is because the IRS in the mid 80s finally decided how they were going to tax this thing right so Notions of essentially the accounting the principles around Taxation and then what ultimately your balance sheet will look like those those to me are like actually where a lot of this Innovation is going to be driven and the good news is that crypto can do a lot of things in creating alternative marketplaces that can start to recognize that value and then you be able to Syndicate it Trade It Etc so uh so I think there's there's great opportunity there very cool um we'll have to follow up on it so hi uh just to to comment on that that actually connected to that so there's a there's a lot of work on the high level how do we get this uh this going U side of things like there's a book called Prosperity by Colin Mayer that touches on a bunch of these points including the need to to lean on accounting principles and uh and make sure that they reflect actual value generated not just uh whatever the um whatever the the p&l currently says because that's a losing proposition uh but then that there's of course the does the market recognize the value side of it right and uh connected to that uh myself and a bunch of other folks that are here that that are working on natural regeneration there's a there's a lot of that a lot of work that's happening on various forms of payments for E ecosystem Services which which is just one uh one of many ways to to kind of uh create uh more more material and and uh easy to account for forms of of seeing these Capital flows right and the point is really that these are um self-fulfilling prophecies right they they don't currently exist because there's no there's no Market that actually believes that that companies will be built on top of this in in the future right and uh it Bo really boils down to where is this carcity com going to come from is it going to come from Regulators saying you can't you can't over fish you can't over Harvest you can't over pollute uh or is it going to come from the the the market side or mix mixture of both yeah I mean I hear what you're saying I the the only thing is there's it's it's important to recognize I think how Corporate incentives have already started to change pretty massively I mean at this point being a good corporate citizen is not an option you actually have to have some sort of of commitment to higher-minded ideals in order for you to connect with your consumers and and that I don't think there's a single you member of The Fortune 500 who would say oh yeah yeah yeah we don't care about that that's someone else's problem the problem is that if they do that really well they might get brand lift from the whole thing but where is that recognized on their balance sheet exactly right and if I wanted to inorganically let's say acquire that type of company I actually would be paying a premium on those types of things but I have to build that into a valuation model that there's really no standards around and more importantly there's no visibility and there's no accountability around that type of thing there's no upside right you it's all today it's all about brand risk management right well I mean I'd argue there's significant upside like a company could be extremely valuable if it does these things well the point is is that we're letting investment bankers drive that conversation or Bankers when they're extending loans for the viability of the company um I'm saying first of all let's let the consumers vote and prosper through that process of basically becoming stakeholders in that company and then secondly let's create the marketplaces that could establish the type of Standards to think holistically about value the transfer of value the syndication Etc yeah just want to end that is that there's a problem with time Horizon mismatch as well which is uh quarterly balance sheets versus uh multi-year multi-decade uh impact and these two are kind of hard to reconcile so it that's yet another reason why the self-fulfilling prophecy cycle is kind of hard to to to to change sure uh agreed agreed um I my my offer to you which I think is a very realistic proposition is that if you give consumers as an example more power and more economic reward through their ownership of the companies that they use and they care about amazing things are going to start to happen on that front thanks all right then I'll see you all on Tuesday [Applause] thanks