Chris Dixon - Empty Rooms: Web3 After the Fall (EP.380)

24:22There's also plenty of good ones. Ethereum is one example of a good one. There are Solana and a lot of other major blockchains. If you read some of the popular press, so Warren Buffett and Michael Burry and these other folks will say it's rat poison and magic beans. I think that there are tokens that are probably magic beans. It's software. You can design good and bad economic systems. I think The broad mainstream characterization that they're all the same or they're all meme coins is just simply not true. One needs to look into the details and there are good and bad designs. I hope people start to appreciate that because it's a fascinating area that intersects economics, computer science, the future of the internet.

25:03And there's all sorts of interesting work to be done there. And so part of my point with all of this is also just to say, hey, we want more people to enter. We want more smart minds. This is a really fascinating area. I find again and again, there's this intellectual barrier in blockchains where until you've gone a certain level of depth, there's a lot of skepticism. And then there's sort of this breakthrough moment where they get farther along and say, oh, wow, I had no idea. It was just interesting. And there was this much stuff going on. You got to dig through the bad stuff and the misinformation.

25:33So over the last two years, when you had time to put this book together, a lot quieted down in the space you've been investing in. And the beginning of that period of time, you had just raised a large pool to invest. And I'm curious what happens when the prices of the types of things you would invest in collapse, and then you go out to deploy capital. I started my first company in 2004. I was a consumer internet company. It was a very hard time to raise consumer internet. The world was very negative on that. I mean, the internet was growing. It was post.com crash. The general sentiment was the internet's cool, but it hasn't worked as a business.

26:15And it was way overhyped. Google's IPO changed that. And then of course, the next five years with Facebook and everything else changed that. But at the time it wasn't. I started off my career in a contrarian mode. I also did a lot in 2008 or co-founded a seed funded with friends called Founder Collective, where we did a lot of early mobile investing, 2008 through 10. I've been at Andreessen Horowitz for almost 11 years now. I've been through many, many cycles. My mental model is there's prices and then there's innovation. They're really two different charts that are somewhat unrelated. And the innovation chart, in my mind, is mainly driven by platform shifts and major new technologies.

26:54And so in retrospect, 2008 was a very good time to invest because you had the combination of the platform shift to mobile and you had a big pullback with the financial crisis that had all sorts of effects throughout the venture ecosystem. Sometimes the Mr. Market is up and technology is up. Sometimes Mr. Market is down and technology is down. But I think the best opportunities in my mind are when Mr. Market is down and innovation is up. We're doing stuff on a 10-year cycle in our business. So where the market is today is your entry price. People talk about interest rates. I don't think it's relevant to early stage venture capital because again, it's like any exit would be 10 years away.

27:35And fundamentally to get there, it's just so much more driven by the quality of the team and the ideas than it is any macro factors. You can get caught up in things going up and down and all these other kinds of things. I just always go back to the fundamentals of venture capital and that's people, new technologies. Blockchains have their own price performance curve. There's a whole bunch of features of the infrastructure that need to get better. There's the security, the cost, performance, the latency. So I spend a lot of time thinking about that. I spend a lot of time thinking about people and try to mostly ignore all of the financial stuff.

28:10When you look at the innovation and technology development over, say, the last couple of years, there's waiting for this iPhone moment at some point in time that could happen. And if anything, we've seen that not in the blockchain, but in chat GPT and AI. So how are you thinking about that potential for what that awareness will come in the iPhone moment in blockchain? To give you my framework, the way I think about it is every 10 to 15 years, on average, there's a major new wave of computing. And that's gone on since the advent of computing in World War II, mainframes, mini computers, PCs, internet, mobile.

28:44The last wave was not just mobile. It was mobile, social, and cloud. It was three things. And I remember in 2008 or nine or something, they used to joke about AI, but then they joke today about blockchain and metaverse and things like that. But it turned out to be very true. All three worked. And all three actually ended up reinforcing each other. So the reason that you could go from 400 million to 5 billion devices was mobile phones and the killer app. People spend two and a half hours a day on social networks. That was the compelling reason to get them. And then cloud is the backend that let you build services that connect billions of people.

29:16They all happen. My experience in technology is generally all of the above. It ended up reinforcing each other. When I joined the firm 10 years ago, I said, hey, I want to work on the next computing cycle. And I invested in a bunch of blockchain stuff. I led our investment in Oculus and VR and a bunch of AI investing and all these new emerging areas. That's still my mental model. And so I'm glad AI had its iPhone moment. I think blockchains and some other things too, like VR and metaverse, is also very likely to eventually work. And I think they actually will intersect and reinforce each other in interesting ways.

29:48That's a very deeply held view I have that I think is very strongly supported through historical evidence and under the underlying technology, the deeper you go, the more I think you can argue this. With respect to the blockchains, I think the FTX and all those scandals and things from two years ago set everything back significantly. One is the negative sentiment around it. Blockchains are fundamentally a social technology. They're about connecting people. And when people have a negative view of it, that slows that down. It deterred some entrepreneurs. It led to a regulatory response, which I think has been a misguided regulatory response that set unintended consequences to discourage innovation.

30:28My mental model is we took a year to hit on the timing, but I don't see any reason why we aren't on track. We have lots of great people working on it. We have a bunch of compelling early apps. We have some apps at scale. I think people underestimate things like stable coins. Stable coins last month were something on the order of 600 billion in transactions. That's been growing very quickly. It's happening in the developing world. I hear both data and anecdotal stories about this that make it feel very real. It tends to be correlated with countries like Argentina that have questionable currencies.

31:02NFTs are widely considered dead. There were 8.6 billion in NFT sales last year. I think these things are much bigger than people realize. Then there's a whole wave of emerging new things, some of which we're investors in that are coming up. I believe it's easier to predict what will happen and much harder to predict exactly when it will happen. I remember mobile phones, General Magic, you can watch a documentary about them. I think they were 1993 or 1994, where they tried to create an iPhone. It was actually a lot of the same folks who actually did create the iPhone. So that was 13 years too early.

31:30I mean, for those who were involved in tech, as I was, there was BlackBerry, Sidekick, Trio, Palm Pilot. There's a whole prehistory. What happened, a lot of it was the underlying tech. So the Moore's Law, you could pack more semiconductors on a chip, the modems got better, touchscreens, all those things happen. You had the greatest genius of the 20th century in computing, Steve Jobs, come in, which certainly doesn't hurt. It was pretty clear that was going to happen at some point. And I think a similar thing probably with ChatGPT. OpenAI is brilliant and Sam Altman and all those folks deserve all the credit in the world.

32:02I think there's been charts and things to show this. So if you looked at the trajectory of GPUs and neural networks, you would have predicted somewhere between, let's call it 2022 and 2025 or something that you'd start to see human-like LLMs. So I think that's a really important force. And I look at that a lot. How are blockchains evolving? How's the underlying infrastructure evolving? When can we get to the point where someone can come along and relatively easily create a social network that really truly rivals Facebook and Twitter from a feature point of view, but also offers economic incentives and better take rates and better control properties.

32:37And so truly have feature and economic parity with decentralized services and offer other things. I remember people trying to do things like Uber before Uber, before the iPhone. And there were all these location-based services before the iPhone. But the problem was, as a software developer, you had to both do everything Uber did, like deal with taxis and build a network of black cars, but also you had to be a GPS expert. One of the brilliant things that Apple did, and this happens in all computing movements, is at some point that underlying infrastructure got abstracted away. You could just make a function call and say, tell me where I am as a developer.

33:12And that meant you could have a team that actually is an expert on taxis and didn't have to be deep on the technology. That's starting to happen now with AI, right? You can build a wrapper around ChatGPT and not be a deep expert on how to build a foundation model. You're going to get this division of labor, which is a very, very important part of computing movements. If someone's going to disrupt, I don't know what, dental billing software with AI, they need to be a deep expert in dental billing software. The odds that you have this intersection at one company of experts in dental billing and experts in foundation models is very, very low.

33:44So you need a division of labor and you need that to be tied up in a bow and a really simple interface. And that's still evolving around blockchain. It's not there yet, but I think it will be in the near future. We're going to take a quick break in the action to tell you about SRS Aquium. Want to make sure your M &A processes aren't stuck in the past? Partner with a company that's been defining the future of dealmaking for nearly two decades instead. When it comes to M &A innovation, SRS Aquium has reshaped the way that deals get done, streamlining processes for maximum efficiency and minimum headaches.

34:22professional shareholder representation, online M &A payments, digital stockholder solicitation. SRS Aquium pioneered each and continues to set the bar for game-changing innovation. So leave the days of disjointed deal management behind and define your future with SRS Aquium, the smartest way to run a deal. Learn more at srsaquium.com. That's S-R-S-A-C-U-M. Q U I O M.com. And now back to the show. I'd love to walk through some of the state of development of some of these common areas of blockchain and just get an update on where they are. So you started with stable coins. So big volume. How are stable coins being used today?

35:11I was just talking to someone who runs one of the larger stable coin infrastructure companies. And he said that the average dollar value is under$100. There's a lot of data. Much of it is peer-to-peer. And there's a lot of anecdotes and data that people are using Tether on Tron and other blockchains that has become a Venmo in certain parts of Asia. And that's growing. I mean, like you save fees, the user experiences are getting quite good. If you do anything international, as an example, last time folks listening tried to international wire, we did one recently that was one of our firm's investments and it took two weeks to get there.

35:45And you call these people and they give you these weird numbers, Fed reference numbers, et cetera. And literally, I don't even know where the money is. It's just a crazy thing. Whereas you can go on Ethereum and you can send a few seconds and far cheaper. Coinbase has done a lot of really good work now. They have a wallet app. They've made it much, much simpler and lower fees. I think it's not quite there. It's still got user experience issues. You have to choose which network and just stuff that should be abstracted away. But I think a bunch of smart people are working on it and it will get there.

36:12access the dollars around the world. We take it for granted here, obviously. The dollar is the most popular product in the world. The dollar, then Coca-Cola and Marvel, I don't know what the ranking is, but the dollar is the killer app of the United States. It's very popular and people want access to it. And from a policy point of view, I would argue that's a good thing. It's frustrating that some policymakers are trying to fight against stable coins when it seems pretty clear that popularizing the dollar should be in our interest. How about the NFT world? I mean, there was certainly a lot of hype, a lot of activity, but as you said, eight and change billion dollars of trend act and activity last year.

36:47Where is that all happening? A couple of things about NFTs. The standard was finalized in 2020. So it's a four-year-old technology, just to give people context. An NFT is a container for digital ownership, and it can contain anything. A lot of people think of NFTs as being an avatar or a piece of art. That's how some early people happened to use it, and that's what got media attention. For example, an NFT, when I was talking about blockchain-based social network, T can represent your username. So like I'm C. Dixon on Twitter and the NFT holds that. What that means is the user controls that and the service doesn't control it, I control it.

37:21So if I don't like what the software provider is doing, I can take my NFT and move it to another service. So it's about shifting power. It can be my audience. It can be my data. It can be my records, my financial records. It could be an object in a video game. So like I can earn points and armor and whatever and take it from one game to another. It's just a technical wrapper for allowing somebody to own something as opposed to the way the internet is architected today, where everything you get is owned by the app. You go to an app and the entire universe is owned and controlled by them. And so this is a new architecture where the app does some things, but the user also has some control.

37:57That's what an NFT is. It can be a piece of art. It can be an avatar. That's true, but don't confuse the technology with those specific uses of the technology, which I think is one of the things that's happened. There's still this very active market around trading art. The so-called one-on-ones, which are art. There's generative art is popular. There's these avatars like Bored Apes and CryptoPunks. Like a lot of things in the crypto world, some of it is speculation and some of it is an artist actually selling to their community. I obviously want to see more of the latter and not the former. or investors in a platform called Manifold, where it's a way for artists to sell digital collectibles to their audiences.

38:35And the average NFT sale is sub$10, which I think is a very nice sign because that suggests much more what I would call patronage plus, as opposed to speculation. Patronage plus meaning you're buying it because you like the musician and you're supporting them, it can become a collectible. It's evidence that I was one of the first thousand fans of some emerging artist. And it's a cool piece of artwork or something. And it's just a collectible record album. Secondly, it can be used for people who are doing backstage passes. They're doing online to offline. If you have the NFT, you get to go to this event or vice versa.

39:09And so there's just people are playing around with it. But I think that's the healthy use case in my mind, shifting power back to users and social networks and video games and letting them own aspects of it and have the ability to switch providers. Speculation exists and analogize it to homeownership. The primary reason that we as a society want homeownership is that it's psychologically beneficial for people. It's healthy for people to own a home and raise a family there. It also aligns incentives. People that own homes are more likely to invest in their homes. They're more likely to invest in their communities.

39:40So I think we generally as a society agree homeownership is good in the same way I would argue digital ownership is good. As a byproduct of homeownership, we have speculation, house flipping, real estate markets. And I think also as a society, we've said, hey, those are okay within guardrails because it provides liquidity and price discovery. And there's a service to liquid markets and speculators. I think what I would say is in the blockchain world, all people think of it and all of the attention is on the speculation. The speculation should first have guardrails and secondly, should be secondary to the primary purpose, which is digital ownership.

40:14The reason my book is called Read, Write, Own is about three years of the internet. And the own is about this era and ownership being the key concept. That is the core thing blockchains enable is they enable digital ownership. And that lets you build services with new architectures that shift power to the edges of the network. What's happened with the engagement of some of those networks around something like Abort Apes or CryptoPunks the last couple of years? There was definitely a downturn in prices and a series of scandals that just created a lot of negative sentiment around the technology.

40:44And that just scared a lot of people away. but I think these are still from a venture capital scale point of view, quite interesting. When you buy an NFT, it varies depending on which project, what you're buying. So you're certainly buying a digital object. In many cases, you're buying the IP rights to the artwork and the creative aspects, which is the case with board apes and crypto punks. And then there are organizations like there's the company Yugo, which we're investors in, which does not own the NFTs, but it creates applications and other things around the ecosystem. The interesting thing with these board apes and things is building a network around them, building a community.

41:22In an ideal world, you'd have these core assets, and then you'd have a series of applications built around them. There would be games and social experiences. Let's take Top Shot, which is another project we're involved with, which is an NBA collectible cards. So they started off with the cards and you collect the cards, and that's just sort of its own experience. But that's since over time, they and other people have released a series of games and other kinds of experiences around it. In the same way that when I was a kid, we'd have baseball cards and we'd make up different games and this and that.

41:50So it reverses the direction. So with traditional web services, you have a company that creates a game and then creates a bunch of objects inside of it. And it's a fully controlled experience in the same way that if you go to a theme park or something, it's a fully controlled experience by one company. The way I think about these NFT projects is the goal is to evolve them more like cities in a bottom-up way. So you create these assets and these communities, and then people build applications around them, and it comes bottom-up. It's early, but we're starting to see that happen. What's happening with DeFi?

42:24Decentralized finance is a series of applications mostly built on Ethereum that were launched a few years ago. And so, for example, Uniswap is a decentralized trading platform. They're large services, and they've stuck around and done well. I think the other important thing to note is that during the volatility and downturns, when you had the failure of FTX and BlockFi and Celsius, all of these blockchain services worked perfectly. I should say the good ones like Compound, Aave, Uniswap, Maker. One of the reasons they worked is that one of the benefits of decentralized finance is it doesn't matter if the person running it wants to embezzle money, they can't.

43:02I like to say, instead of don't be evil, it's can't be evil. It's just open source code running that the person who created doesn't control anymore. And so they can't rug you. It's in the code. And as a result, all of these things worked as designed and they managed to survive the volatility and the bad actors and everything else. So I think that was very positive. I think the next step for DeFi is to some extent, it's been a cul-de-sac. It's stuck in the crypto world. to get beyond that, I think is really a organizational slash policy thing. To me, an AMM, which is how Uniswap is architected, it's called an automated market maker, but it's a new way to do trading, a very clever new way that I think many ways better than how existing exchanges work.

43:46I think for that to really scale, we're going to need the participation of big institutions, the Black Rocks, et cetera. I think there's some interesting ways in which that may be happening and could happen. You have lots of trading that happens among those institutions. And you think about it, say you have a series of 10 big financial institutions and they want to come up with a way for them to build a system to trade or interact. How do they build that? Does one company build that and then the rest use it? Do they create an independent organization? In some ways, you can think of a blockchain as a political solution.

44:18It's a way to recruit great engineers because they want to work on it and there's a financial model to incentivize them. and it's neutral. So all these different 10 institutions that maybe don't trust each other, don't need to trust each other. So you can think of a blockchain as solving a technical problem and recruiting the right people problem, but also a political problem. I would argue a lot of problems in the world, especially on the internet, are incentive and coordination problems. How do you get these actors to coordinate? I think payments is a good example. Why do we still pay 2.5 % for payments?

44:46Why are there even payment startups? Payment startups, they basically have to go and do BD with banks and all these different international places? Because really, we don't have a global payment system. We have thousands of sub-payment systems that are patched together. So why don't we have a global payment system? Is it a technology problem? No, we can move bits across the internet securely. It's a coordination problem. It's getting all these different actors to align around some system and trust that system. A lot of them feel a little bit rugged by Visa and MasterCard having started as nonprofits and then becoming these dominant intermediaries.

45:17How do you introduce a new intermediary in a way that people will trust it? I hope that in the next couple of years, we're going to see more applications of things like the innovations in DeFi, which I do think were important innovations, applied to broader use cases, including the quote, real world assets. A lot of recent excitement has come with this approval of Bitcoin ETFs. And we'd love to hear how that renewed interest has sort of disway through the entire ecosystem of the things that you're looking at in blockchain world. Yeah, it's an interesting time because I've been in this space for over 10 years now.

45:55And the veteran way to look at it is there's just all of these cycles. If indeed this is another cycle, this would be the fourth cycle. I think the more mainstream view is most people didn't pay attention to crypto up until 2021 or something. Maybe they'd heard about Bitcoin. Then it all first on the scene, and then it went away. So I do think this is interesting now. You said Bitcoin, the price has gone up. It seems to be driven by the ETF and therefore institutional interest. And that's had an effect on the rest of the market. One way to think about the price of Bitcoin is people voting in some sense.

46:32People are voting by buying Bitcoin. And I think one thing that we've seen now over 15 years is there's a lot of people in the world who like this idea. They like the idea of digital ownership. They like the idea of Bitcoin is a financial service that's owned by the community and not by a gatekeeper. People like that idea. It keeps coming back. 50 million Americans own crypto. It's a popular idea. There's clearly energy behind it. What a bunch of us are trying to do is channel that energy into societally positive outcomes. We would love help from people in power to do that. I don't think they're doing it right now.

47:04People start to realize this is something that's not going away, that the best way to handle it is to figure out the right guardrails and the right way to channel the energy. The energy is going to be here. There's a lot of energy behind these movements. The best way to deal with them is to channel the energy into societally productive things. And that's what we're trying to do. And we're here to help if folks want to do that. To me, one of the most important things is around the policy side. When I went to DC the last two years, the general narrative was crypto didn't exist. It suddenly happened in 2021, and then it went away.

47:33And so why would we need to go and sit down and come up with sensible policy around this stuff? Let's just let it all play out on the courts, which has basically been the attitude. I think people will realize now is it's not going away. What's happening too is there's meme coins. That's become a big thing in the last three weeks. Meme coins are crypto tokens that are designed to have no purpose. Dogecoin was the original one. One of the many unfortunate things about the current policy approach is that it encourages meme forms. Because if you create a token and it's just a Dogecoin type thing, and then people trade it and it has no utility, there's no rules against that.

48:11If you start adding to it and trying to make it useful, like I'm describing, like make a game around it, that's when you run into murky area with the SEC. Because it's about how we test, it's the efforts of others. and it's if people are buying the token because they're relying on you adding to it, that's the issue. So there's this really reverse thing I think happening now where people are afraid to build useful products, but it's perfectly legal to build useless products. And so this is why I feel very strongly that we need to have better policy around these things because a sensible way to do policy is to look at a technology holistically and every technology, whether it's blockchains or AI or the internet or whatever it might be, there are good and bad use cases.

48:55And a smart policy says, how do we maximize the good and minimize the bad? That is not the policy that we're taking today. I think it's actually in many ways the opposite. What I worry about right now is we're going to have sort of this wave of silliness and then it's going to be attributed to the blockchain world when in fact, most of the blockchain world actually is saying, hey guys, we need to fix this. We'll see. I have no idea where markets will go. So as you focus on both the projects and the people, what have you seen in this downturn about who has stayed and continued to develop blockchain projects?

49:29There's a lot of people who are kind of what we call kind of crypto native. They're people that grew up in this world. And a lot of the projects, if you just look at the people involved, that's their background. A lot of them came from open source kind of world. They believe it's important that the internet remain open and dynamic. And so maybe there's sort of an ideological component there. In some ways, these sort of cycles are good and bad in the sense that when the market turns down, you have fewer people entering, but you also have the people that are there are much more committed. At the margins, it can be negative at the downturns because it's harder to recruit executives and things like that.

50:06I feel like there's a critical mass you need in any software movement to build the things you need to build. And I feel like we have that. It's always good to have more smart people working on something, but I feel like we have enough. It's just about getting it done now and fixing the policy side so that people can actually build what they want to build and not spend all their time with lawyers, which is what's happening today. As you look out, what do you think the risks are in this core thesis not working? Well, I think the policy stuff I've discussed, I think that's also a risk for AI. I think it's a risk for everything.

50:39I think it's just the world has changed. And it used to be that the internet and software world existed in this libertarian sandbox. I think any major tech movement now is going to intersect with policymakers very quickly. Like AI, there's these very important questions like, is open source AI legal? If it's banned, which I think some places seem to be moving towards, that will end up in a very different world. It'll end up in the world where you have five companies that control the technology and just a very different economic structure. With blockchains, I think if we don't do the right policy, we're going to end up with just a bunch more meme coins and other things and never really get to this world I'm describing, I think.

51:17That's a big thing. Mark Andreessen, I joke about this. He says there's no bad ideas in software. There's just too early. I can't tell you how many things we use ever on a daily basis where I remember a moment when everyone was like, that'll never work. I had this board game at home. It's from 2004. I think it was called the Dot Bomb board game or something. And it was all the bad ideas of the 90s, like on-demand taxi, at-home grocery delivery, internet payments. It's a list of things you should have invested in the next five years. I just feel like once you have enough smart people working on a problem and enough people excited, which we have in the blockchain world, it's a question of timing.

51:52I think the only variable now in the way the world has changed is the policy vector. I feel like that's the main risk. As you put the book out, what are some of the common critiques that you've gotten of non-believers. One critique was this hasn't happened yet. And it's been around. Why hasn't it happened? And where's your chat GPT moment? That's fair and legitimate. It hasn't happened yet. And the onus is on people like me and the community to make it happen, to prove that we're right. I think we will be right, but it hasn't happened yet. What else? I'm sitting in the middle of two worlds in my book.

52:23It's become tribal and political, unfortunately, where some people say things like the energy use, which is true of Bitcoin. It's not true of Ethereum and the other systems, which are proof of stake. Or they'll say it's all scams or something, which again, there are scams, but that's not the whole world. There's the people on the one side who just knee-jerk hate blockchains. And that's 10 % to 15 % of the population. I'm just guessing the numbers I've heard from politicians and things. And then there's some percent that love it, but most of the world's open-minded. And then on the other side, there's hardcore Bitcoiners.

52:52They believe that no other token should exist. And Ethereum is their archenemy. There are people that love the meme coins and the gambling aspects and think people like me are out of touch. These are the critiques I get, and they critique the book for the same reasons. From the one side, blockchains are evil. The other critique is just this libertarian side. But we see ourselves, we're trying to mold this, as I mentioned before, into a pragmatic, productive movement, harness that energy and put it into this and lean into the aspects of blockchains that help us return to the best parts of the early internet.

53:25And there are people that it feels to and people that it doesn't. You can imagine the corporate incumbents, the Web2 winners, would have a natural resistance to anything that could be disruptive to them. How do you think about the strength of those businesses as they impact the future of the development of the blockchain? So if you go back to Clay Christensen, there's sustaining and disruptive innovations. I think of the really exciting innovations, one in which the economic model is misaligned with the incumbent economic model. AI is an amazing technology. The challenge as an entrepreneur or an investor in startups in AI is the incumbents get it.

54:01And they have very smart people and it's aligned with their business model. If you're Google Cloud, this is another service you can sell. It's not some crazy new thing. Disruptive technology re-ranked the incumbents. And it did that because it was an economic issue. I believe Sears owned, I think it was Prodigy or CompuServe. They literally owned one of the top three internet service in the 1980s. My point is they were ahead of the curve. Barnes & Noble saw the internet coming. They all did. The challenge was it was a completely new business model that was not aligned with their existing business model.

54:32They would have had to shut down their stores and convert them to robotic factories. I think there's always this retroactive thing where you're like, wow, those people were dumb. They weren't dumb. They were smart. But it was just a really, really tough lift to go and literally redo your entire business. That's why the internet was so disruptive. I think a lot of these other technologies are really important and cool. I think AI, for example, is sustaining. I think blockchains are disruptive. Blockchains are very, very hard to respond to. If a social network comes along that has a zero take rate instead of 100 % take rate, meaning it takes zero of the money and not 100, that's very hard to respond to.

55:06As an investor, that's, to me, more exciting, these disruptive ones. They're harder to get off the ground. They're harder to explain. You have to write books about them. You can't just write blog posts or something. If they get going in the right way, they're very, very hard for the incumbents to respond to because it's just so misaligned with everything they do. They have such high cost structures. they're so wedded to these business models. I just think the main risk is not that, is not the responsive incumbents. The main risk is just tripping over ourselves or policy or just not building the right products or something or not growing them in the right way.

55:39But I think in the score of incumbent response, we're in a really strong spot. As you've gone through this downturn and maybe at the beginning of another upcycle, what opportunities have you been excited about that you feel others have just left for dead? I think my whole sector, if you believe what I believe, there's a lot of opportunity. There's many different ways to do venture capital. The way I like to do it is in the more contrarian way. Famously, there's a two by two matrix of consensus, non-consensus, right and wrong. And I think the most interesting place to try to be, it's hard to do is non-consensus, right?

56:14We just stick to our program, which we've always done. Ignore the noise, continue investing in both good and bad markets, focus on people, focus on core technology. I've done this now for a long time. And it's just the methodology I believe in. There are other crypto funds out here. There's basically no Silicon Valley investment in the last two years from multi vertical VCs. I call it the kid's soccer problem. You ever watch kid's soccer where all 22 are running after the ball? This is Silicon Valley VCs and maybe it'll be something else next week or next month or something. And all of them now, they had no interest in AI.

56:53And then suddenly their deep conviction and they're trying to prove on Twitter how they've always been into AI. And the way we do it at our firm is we have verticals, we pick the rules, you stick with it. We've done AI for 10 plus years. We've done crypto for 10 plus years. We've done bio for 10 plus years. And you'll have good and bad vintages. And there's times when it's up and times when it's down, time to write a book and other times when it's 24-7. And that's just the way it works. But I believe in that kind of venture capital. If you just run around like kid soccer, average thesis will lead to average outcomes.

57:25What have been your biggest lessons or takeaways broadly about investing from going through four such severe cycles? I started my career in the internet downturn, and then I was active during the financial crisis. So if you're an internet person, 2003 and 2008 were, at least so far, two of the worst times. I think probably people from that era maybe have a different view of the world because of that. One of the lessons you took was that you need to manage through those cycles. So the typical advice to venture-backed companies to have an 18 to 24-month runway. So meaning enough cash to survive that.

58:00I've always run everything at a four-year runway. The way I see it is Mr. Market may go away for three to four years. So you better have cash in the bank. But I don't really listen to the public market otherwise. It's just this thing that goes away every once in a while and you can't raise money, but it doesn't really matter or have any real signal for fundamental innovation. It's just too far removed. Coinbase did this well early on. They always ran things at a four-year runway. And if you look at it, that was very, very smart. And they saw downturns as an opportunity to take market share. And a lot of their competitors went out of business or got desperate or something.

58:35I think any area where you're kind of an emerging technology area, you need to run things at that kind of four-year horizon, ideally, free minimum, because you're just dependent on the moods and sentiment of the broader world and exogenous factors that you can't control. And so I have developed over the years a playbook of here's the type of people we try to invest in, here's how we advise them to operate the company. Ultimately, a startup succeeds or fails based on their product traction, and there's a million ways to succeed and fail. But we want to make sure that all the basic stuff and the cash management and legal and operational stuff is buttoned up.

59:09The other thing I would say is where I disagree with the world is I see software as much more malleable than most people do. I think of software as in many ways an art form. And this affects my investing in the sense that when somebody says something like, there'll never be a great blockchain app, to me, that's like saying there'll never be a great mystery novel. You're short human creativity. I'm long human creativity. And I think of software as having these sort of genres and movements. And AI was a genre and movement. And metaverse is a genre and movement. and blockchains are a genre and movement.

59:41And just like in any creative area, there will be brilliant people that come along and it's a huge mistake to write off one of those movements because whatever, some theory that you have, anything you can imagine and think of, you can design in software. It has the same degrees of freedom as a blank page of paper writing English. You've got as much freedom with a blank page of paper writing Python. And it's a creative medium and an investor should think of their job in the same way that a book editor might think of their job or something. Your job is to find great writers who embrace some exciting new medium and make something great.

1:00:18Chris, I want to make sure I get a chance to ask you a few closing questions. Which two people have had the biggest impact on your professional life? Ron Conway is a well-known angel investor who's been helping entrepreneurs for decades. And I met him when I was raising money for my first startup. And it was funny, he introduced me to multiple people to give sort of diligence. I think they all said negative things about my idea, but he's still invested. And we've worked together for the whole time. I see him all the time. We talk. He's been an incredible supporter. He's emblematic of the best part of Silicon Valley, which is the karma, give back, help people.

1:00:52I try to learn from that and practice that. Mark Andreessen and Ben Horowitz at the firm, I joined them with the thesis I described to you earlier about the computing going through multiple waves. I'd been doing angel investing and other things, but I was like, I want to scale it up. I believe there will be new waves in computing in the future, and I want to be involved in them, and I want to invest in them. In the ideal world, help shape and influence them. I think they had created one of the few organizations that had both the resources and the willingness to do that. All right, Chris, last one.

1:01:24What's the best advice you've ever received? I used to be somewhat obnoxious, maybe, and then I thought I was smart in college and things. I would always argue about everything. And I really wanted to win arguments. It's probably pretty obnoxious, to be honest. You know, just show off or something. And that's part of why I ended up studying philosophy as an example, because you just get to sit around and argue all day. And I remember when I started doing business, someone said to me, he said, you know, in business, there's no right answers, there's only right outcomes. That could be misinterpreted.

1:01:54You got to take it in the right way. But I remember thinking about that a lot. And I think I practice it now, which is the way I think about the world now in my professional life is the outcomes. Where do I want to bring this company, this movement, this employee? What's actually matters is getting that outcome and being impactful. And all of the other things are these meaningless parlor games of trying to prove you're smarter, you're right, or something else. It was helpful for me to moderate some of my tendencies. Chris, thanks so much for joining me and sharing this update on what's happened in your world of blockchain and crypto.

1:02:29Thank you, Ted. I appreciate it. Thanks for listening to the show. To learn more, hop on our website at capitalallocators.com, where you can join our mailing list, access past shows, learn about our gatherings, and sign up for premium content, including podcast transcripts, my investment portfolio, and a lot more. Have a good one, and see you next time.