A New Paradigm for Trust with entrepreneur Yat Siu

0:06Web3, NFTs, blockchain, the mere utterance of these words makes one glaze over and want to change the channel. I am exactly the same. I am not that interested in these things, but I know I have to be interested in these things. But every time someone tries to explain them to me, I understand them even less. Which is why I was really excited to talk to Yat-Su. He talked to me like I was the idiot that I am and helped me understand them in terms that actually made sense. Born and raised in Vienna, a Hong Kong-based entrepreneur and angel investor these days, He is the co-founder of Anamoco Brands, which is valued at over$6 billion, so he knows what he's talking about.

0:52And I have to say, talking to him, I'm actually really interested in these things a little more than I thought. This is a bit of optimism.

1:05Your trajectory is one of those magical trajectories of which there's only a few stories of somebody who, at a very young age, figured something out that ended up having commercial success and you sort of abandoned your formal education to go be one of these tech pioneers. And the company now is a gaming company. So gaming is a big part of what we do, but Animoca Brands is a web three company that is focused on delivering true digital property rights basically to the world. And we're known to be doing this in gaming first because we feel that gamers themselves are ones who already believe and more intrinsically understand that they have sort of digital property.

1:43So I want to get your, like, I'm curious on how you explain to your parents what you do. How do they understand the space in which you work? Yes. So maybe I'll start kind of right from the beginning. I can think it's helpful to basically describe how we define Web3 and what Web3 really means. To do that, we need to understand a little bit about the evolution of the web because the original internet started as utility and has actually become our life, right? So in web one, we were able to access information. There was a way in which data was freely available. And that was a way in which we could get, you know, all the information in the world, beginning of the early internet, you know, the days of Yahoo and so on.

2:22And then came web two. And in web two, we were able to actually write to the web. But that means things like, you know, not just Wikipedia, but, you know, Facebook, Instagram, all these social networks, the beginning of the social web, because there we were able to contribute to the web. until we were able to write to it and create a value. Web 1 is taking content from the web exclusively. It's unidirectional. Web 2 is now bidirectional. I can take and I can give to the internet. Correct. And what happens when it goes bidirectional is that the quantum of data that comes through is much larger than just one directional because now you're contributing and it feeds off each other because I have a comment, you have a comment, you add to it, there's knowledge that comes from there.

3:01But then the differences about Web 2 versus Web 3 is where is that data written to? And in Web2, the data is written on private databases that belong to Facebook, that belong to Amazon, that belong to Google, that belong to these platforms, who eventually were able, because of the power of compute and AI, harness incredible value from it that wasn't fathomable 20 years ago. But today, the data has become the most valuable asset in the world. It's the new oil, as it were. You know, if it wasn't for the fact that we had all this data, you wouldn't have ChatGPT, you wouldn't have Google, you wouldn't have Facebook, right?

3:35You wouldn't have any of these things. So what's happened now in the world of Web2 is that we have all become digitally colonized. We live in a digital feudal society where every time we contribute value to the platform, as in Instagram, as an example, and we share a photo, we might think it's fun and entertaining, but in reality, we're working for Zuck. We're basically just giving him free data every time we do it. We're engaging people freely and we don't get paid for it. Meanwhile, through the value of the data we generate and the derivative that comes from it, not only do they generate huge quantums of value, they also then package it, know stuff about you, and send it back to you in a refined way.

4:14Like, oh, I know you like Japan, or I know you like t-shirts or whatever, and let me sell that to you because now I can target you. So we've become the product. And essentially, all the value is centralized around these platforms. That's Web2. There's an irony in all of this, which is it's capitalism that produced Web1 and Web2. and functionally Web2 became a series of authoritarian regimes, right? Where the people had no power, but the large data companies and social media companies controlled everything. I was making a joke recently with somebody. I was at an event and this girl stood up in front of us.

4:49Somebody was taking pictures of her and she was doing all of her poses. And the person sitting next to us leaned over to us and said, she's a famous influencer. And I responded very cynically. do you mean she's a freelance employee of an algorithm? That's a good one. Sure, she makes a lot of money and sure she has quote unquote influence, but she works for an algorithm and they can change that algorithm tomorrow and she has to constantly work hard for the algorithm. That's her boss. That's her boss and she's owned by that algorithm. Right. But Web3 is not that. It's more democratic. It's more egalitarian.

5:24It's more this is ours and we all get to choose what it looks like. The irony being that capitalism created the authoritarian model, and now we're rejecting it. I think this is part of the issue, which is that when you think of shareholder capitalism in a classic way, it's always about maximum extraction. It's about the zero-sum outcome. And it's no longer thinking about what is sort of broadly beneficial to a society in a sustainable manner. And often when we talk about sustainability, we often talk about green and energy, and that's fair. But there's another aspect of sustainability I think we forgot to think about, which is how do we sustain a capitalist framework in a manner where everyone can make a reasonable amount of income together?

6:06So meaning that someone can have great success, not at the expense of others. Not at the expense of others. Exactly. And I think this is the problem that we have in society broadly as well, because of course, many of the issues we have today, the revolt against capitalism, and frankly, the threat against many thoughts around democratic institutions comes from the fact that there's huge inequity. These people have so much money, that's not fair anymore. We always looked at America as the place of the American dream, because anyone can make it, so to speak. And whether that was true or not, almost didn't matter.

6:34It was this meritocratic dream. And I think that's gone, that's disappeared for many Americans. They no longer believe in the American dream, because it feels like the person, if you have money, is just big money. So money has become feudal in itself. And part of it is because the governments weren't set up to deal with data monopolies. They didn't understand the value of data. And now they become so big that you really can't take them apart. And it probably isn't feasible anyway. So you need a new paradigm that is more equitable. And that's actually really what Web3 means. So what Web3 does, and why blockchain is relevant, is that now the data is written to a public infrastructure, which is the blockchain, which is effectively a database structure, where now I'm able to have data that is owned by the community as supposed to owned by a central power.

7:20What happens is you can own a stake in the network that you're contributing to through the blockchain. So imagine every time you were posting something on Instagram, instead of basically getting nothing in return, you receive a bunch of tokens that represent your stake, essentially, in the value that you've contributed to the network. In this new paradigm in Web3, everyone becomes a stakeholder. So your customers are no longer just consumers to be extracted from. They kind of become quasi-shareholders in the ecosystem that they're basically helping contribute to because you're providing more value to that network.

7:53You become a stakeholder in that ecosystem and so become a co-contributor. That's why Web3 is known as the web of ownership. And sometimes people get confused about it because they say, what do you mean? Well, that means you can own a piece of the internet. It actually does because whatever data paradigm it now exists and is created, you can now own a stake in that. And this is perhaps best represented in a network layer like Ethereum. A lot of people go like, well, what is this? Well, really, it's a public database infrastructure, which has banking-grade facilities, which is why you can have all these financial transactions and the safety and security around that.

8:24But then any person who can basically build on top of it, it's a public infrastructure. It's like having Goldman Sachs banking infrastructure available for the world to build on. But it's not owned by any one entity. It's owned by everyone who owns Ethereum, which also means that if someone builds value on the network, another person who happens to own Ethereum will benefit from it just because he's also participating in the network. And so everyone grows with this together. So this is the stakeholder capitalism perspective. This is an important distinction because you and I are both diehard capitalists, just not the version of capitalism that is the predominant one today.

8:59You call it shareholder capitalism. And it is a bastardized version of capitalism that is basically run by a few for the benefit of a few. And it goes counter even to the invention of the stock market. I mean, the stock market was invented so that the average working person could share in the wealth of the nation. And now we see massive decline of middle class involvement in the stock market, I think in part because of cynicism, because it's no longer for us. The stock market is controlled by a few to benefit a few. And to your point, we have to be careful about throwing the baby out with the bathwater, which it's not capitalism, quote unquote.

9:35It's not Adam Smith capitalism that's the problem. It's this Jack Welch shareholder, Milton Friedman version of capitalism, shareholder capitalism that is the issue. And what you're describing data, data is followed in the same path. It's run by a few for the benefit of a few. You and I are capitalistic idealists that say, no, everyone should share in the wealth. And we have no problem with people making more and we have no problem with people making less. But the disparity can't be as great. And it has to be a fair system. Correct. It used to be a more fair system. I don't think there's a perfectly fair system.

10:06But a more fair system was replaced with a grossly unfair system. And government was completely left behind where all the regulations about the internet are from 1996. Yes. Which is a joke. Yes. It's created a great sense of injustice. And so society, and including our democracies in the world, are not recognizing that actually if you reject capitalism, you also reject innovation and growth and all these things. So it's just how you reform capitalism. And so this is a novel problem that we have today. And the concentration of data, I kind of liken it to this example of, imagine if you had oil in your backyard a thousand years ago.

10:42You'd say, take it away. It's just something I don't need because you didn't understand the value of it. That's what we're doing with data right now. We're giving it away. We're posting stuff because we don't know what the value is. And Facebook and Instagram and all these platforms intentionally disintermediate us from the knowledge of what that data is for. So I don't know, for instance, what I'm worth to Facebook. And they don't want you to know. So I'm mixed in this sort of mix of all these users where maybe I'm worth$10 ,000 to Facebook, but maybe I'm worth$1 to Facebook. I don't know. But as far as you're concerned, you're worth just$1 and therefore I shouldn't bother about it.

11:15But I guarantee you, like yourself, for instance, you're probably worth millions of dollars to Facebook and Instagram because you're creating engagement. You're creating people to come to you. How many followers do you have on all of your social media platforms that are engaging? Yes, ostensibly for some value for you. But you don't own the networks of these users. You don't even know who they are. So the user that came to the platform because of you, because of your content, might then go and buy a product because you were saying something or you brought them there. Why don't you get paid for that?

11:46You were the reason they're there to begin with. And eventually, it reverses. Eventually, they have all the power and suddenly you have to be there because of them, ironically, even though you gave them the customers. And that's basically what's so unfair about the whole system. We should all be paid for our time online. When you think of the context of someone like John Rawls in terms of how he thought about in terms of justice, that essentially it's okay to make a lot of money so long as everyone else actually benefits from it as well. And you're not worse off as a result of this. And that's actually, I think, what really capitalism used to do.

12:21We used to talk about how capitalism was broadly good because it created employment and it created networks and it created opportunity. And capitalism wasn't this extractive thing that it has become today. But again, I think Web3 will solve that because it gives it to us at the data level. For instance, if every time I used Instagram and I received a small share in my value I contributed, I actually become a stakeholder. I actually benefit from the growth as well. Not only do we become a stronger and more loyal customer, that's the other thing. I also basically benefit. What we really mean is that it's okay for people to make money.

12:55Like we don't mind that people make more money than us so long as you don't make money at our expense. And it used to be the fact that executives have always made more money and CEOs have always made more money, but they took care of their employees. And if you did good work and you looked after your fellow colleagues, that you could stay with us for as long as you wanted in good times and in bad times. that we're in this together and we'll take care of each other. And the reason we were okay giving our leaders more is because we trusted that our leaders would take care of us. And there's a deep-seated social contract there.

13:27And where I think capitalism broke is where those in positions of formal authority, those in positions of leadership, broke the social contract where I will take more, but I will not reciprocate by taking care of you in bad times. And things like trickle-down economics and so on. I mean, these are all the theories based around that didn't work for that reason. And it sort of came from this other perspective of this free market liberalist idea of efficiency. So this is the thing where, you know, we basically were willing to sacrifice everything for efficiency. It didn't matter what kind of efficiency, efficiency through the machine, capital efficiency, this efficiency, that efficiency, sort of removing the human equation out of this.

14:06because basically we were reducing everything to what could be faster and better and supposedly more efficient. No, I mean, you're creating sparks in my head right now. It was never about efficiency. It's about constant improvement, which is not the same. And constant improvement is fundamentally about people and their ability to generate ideas. And it's not about looking at numbers and trying to extract value out of the number. And in typical American fashion, we left the people out. and I think what you and I are both debating which is capitalism is by human beings for human beings it was you know the value of competition is it should ultimately create a better product and the way Adam Smith described it is it's not so much about the butcher or the baker or the cheesemaker it's that if the butcher is driven by competition to make the best meat and the baker is driven by competition because there's other bakers out there to make the best bread and the cheesemaker is driven by competition make the best cheese, what you and I get is the best sandwich.

15:04And that's what competition is supposed to do. And that's Adam Smith, that we are supposed to be the beneficiaries of the competition. And we are no longer the beneficiaries of the competition. And what Web3 is attempting to do is, ironically, in a technology product, reinsert the human being back into the equation. So I often describe blockchain not as a sort of pure technology, as in often people critique blockchain is. Isn't it just a database, a decentralized ledger? What's the big deal? What blockchain is, is a consensus mechanism. What is consensus? It's agreement. It's a political system because you have to vote on things.

15:43Now at scale, you basically have the protocol that navigates itself based on how people vote on it or decide on it at scale, which is how the consensus mechanism works. And that means that we can now actually have trust in the network itself because now you have to negotiate with a network, which you didn't have to do before. Like in a classic shareholder model, you don't negotiate with anyone. You negotiate with the top, a small number of people. But in a network, you have to negotiate with the entire network and in the past. So for instance, democracy. How do you create a democratic framework in your organization in which you can practice democracy every day?

16:22Well, you can't actually do that in a physical way because in the physical way, you have to prove, first of all, are you Simon? Are you there? I have to get your voter record. I have to get your background. And then basically, you have to make a decision. This whole process is so lengthy and so expensive that every time I basically exercise my democratic muscle, it can only happen once every few years. It can only take place in certain structures because it's difficult. Even if you're a corporation, if I'm actually going to make a vote, I have to issue the prospectus. I have to send it to everyone.

16:51Everyone has to read it and then vote in it. And then they have to send in the records and the ballot. It's just a lengthy process. on blockchain, you can actually make a vote, issue the decision on a daily basis if you wanted to. And because I own the NFT, I own your digital certificate, I know exactly who you are, I can basically enact it instantly and at scale. So I can literally make decisions through blockchain because I can trust basically what happens at network. Okay, NFTs. I struggled with understanding the value of the NFT. You converted me. and I think because your definition of an NFT or how you understand its value is very different than I've ever heard which is you view it as a reflection of cultural value so let's let's delve into that okay first this is why you must never let engineers be marketers where you name something a non-fungible token the only word I understand that is none yes like I appreciate it's not a fungible token?

17:50If only I knew what a fungible token was. Right. So, you know, tech terms aside. So the way that we should, you know, think of the point of an NFT or non-fungible token is that it's a way to store permanently on blockchain, a receipt of a digital item that you own, that is yours. And that is unique through this unique ID, hence why it's called non-fungible token, as in, it is not something that is the same. It is unique. So maybe another way to say it's uniquely identified token might perhaps be the more obvious framing of it. Which is, by the way, in my world, I'd rather name things by what they give you rather than what they don't give you.

18:32But okay, so it's a uniquely identifiable token, a uniquely identifiable receipt. Exactly, right. And now, so what does that really mean, right? Well, what it means is that it's a way in which you can now store your digital history, your digital context, and all the records attached to it. And so I'll give you a simple example of our wedding rings. Wedding rings may start off with something that is quite tradable because all wedding rings in a Tiffany store might be exactly the same and they cost the same. But the moment you give that wedding ring to your partner, actually it becomes non-fungible.

19:02It becomes unique. It becomes special, but only to you and them. But more than likely, it's something that is priceless to you. It means some history to We're so attuned to sort of collecting and owning things because they form part of our identity. They're our history. It's our photos. It's the clothes. Oh, I hiked there. You know, I climbed Everest with it. There's memories attached to my stuff. More important than memories, there's stories attached to all of my stuff. Exactly. And stories is our culture. Like we're shaped by these stories, right? They form everything about us. Why do we care about ancestry?

19:33Why do we care about our legacy? Because we care about our history, which is our story and the story of our people and our culture. and even our nations, right? These are all attached to it. And how do we get attached to them? They come from essentially these items that are rare, unique, and personally identifiable. So this could be flags, this could be clothes, this could be all sorts of things in your life. You probably have thousands of them. Now, in the digital world, we couldn't have that. We only had our memory. But now with NFTs, you can actually do that. For instance, if I'm playing a game and my skins were NFTs and I won this victory.

20:10Actually, that now becomes my NFT. And I can know that this was proof because that's the other thing about blockchain. It's the proof to say you did this as well. It's like this notch. It's not just your memory. It says, oh, you've achieved this victory or you've been to this place. And so it accumulates through the blockchain a record of what it's done. Maybe the skin had 100 victories or 1 ,000 victories. So a blockchain is simply a ledger. It's simply a book where we keep track in a very old-fashioned way. From the 18th century, you open up the book and there's in beautiful cursive writing, a ledger of all the transactions.

20:43Exactly. Of everything you've done with this. Except it happens to be in a digital form. That's pretty much it. Exactly. But they can now do this at scale with every item, which means also that you can share the culture of that experience with a much larger audience. I mean, how many people buy a Rolex to tell the time? How many people buy a Birken bag so you can put stuff in it? And of course, the answer is you don't buy it for the utility of the bag. You buy everything around it. You buy the story, the culture, the context, the meaning, the membership. And that's basically what NFTs represent.

21:17But here's the thing about NFTs, what makes it more powerful. Now I can certify you the proof on the blockchain that it's authentic. When you go and buy a fake Rolex and you go around pretending you have a fake Rolex, you don't go and say, look at this fake Rolex. It's great, great deal. You should do the same thing. You go around wearing a fake Rolex to pretend that you're part of the membership. And how will you know? Well, someone has to analyze it, they have to look at it, they have to study it to actually know whether it's real or not. You're not going to say and say, hey, that Rolex looks fake, right?

21:43They just assume that you have it and assume so. But in Web3 with NFTs, you can tell the difference between a fake NFT because of the fact that the blockchain certifies it instantly, which also means I can now give you network effects based on the real boarded user. For instance, I can go to someone with the real NFT and say, I'll let you into my club because I want you to be a member of this, or I give you a discount, or I give you a special exposition because I know you're this real customer. I mean, if a marketing company could market authentically to every Ferrari owner or every Tesla owner, then that's not worth a lot of money.

22:21I mean, what are we paying Facebook all this money for? To try to target your customer, right? But actually, I have no idea who this customer is because I can't certify this. But with an NFT, I know exactly that you're this customer. You can't forge that. You can't fake Let's back up a second. And I want to double click on your analogy because I think it's so good, which is if I ask somebody who's got a Birkin bag, why on earth would you spend tens of thousands of dollars on a bag? And clearly putting stuff in it is not going to be their answer. A lot of other bags worth less money can do that.

22:49And they'll say the quality. And much better too. Yeah, exactly. They'll say the quality. They'll say the leather. They'll say it's Hermes. I've always dreamed of having one. So there's the status symbol. It's the projection. It's not that I just have it at home. I carry it out because I want people to see that I've got it. You know, it's like I always joke that there's a reason they put logos on the outside of things. It's because we want people to know. But the reality is, it's worth whatever I think it's worth. And it's the story that I'm trying to tell about myself. And to some people, it is a complete waste of money.

23:22And to some people, it is worth every single penny. And it's for the holder of the bag to determine what the value is. In other words, you're absolutely right, which is the value of things is 100 % reflection of how we perceive the world, the stories we want to tell, and whatever's going on in the world today. It is a cultural reflection. And the only thing an NFT is, is it's in a digital format and allows the digital world to participate in the real world. But also because it's digital, it scales faster and more transparently. Sometimes I find that a lot of people don't understand how ownership works.