[REPLAY] Chris Dixon – The Future of Blockchain at a16z (Capital Allocators, EP.172)

22:05So mainframes, mini computers, PCs, the internet, mobile phones, right? There's been all these kinds of waves of these things. And I've been very interested in how those waves happen and have been interested in, as a career choice, have decided to, I want to kind of go there and try to invest in these new emerging computing platforms. And I'll fast forward, but I think VR is a computing platform. I think blockchains are a computing platform. And I think they have a lot of similar dynamics and development characteristics to the past kind of computing wave. So I joined Andreessen Horowitz in 2013, and I decided I wanted to focus on new computing platforms.

22:39I think that's really exciting. I'm still very excited about things like virtual reality, but I got most excited about blockchains slash cryptocurrency and sort of fast forwarding. I guess it was two or three years ago, we created a dedicated crypto fund, and I spent almost all my time for now three or four years on that. I guess what I would say also is I was thinking about this the other day. I was at the dentist and they had Friends, the TV show on TV, which I hadn't seen in decades. And it was very interesting to see Friends. I think it's from the 90s. What was interesting to me about it is everything almost looked like it was happening today, except for one giant notable difference, which is there were no mobile phones and basically no Internet.

23:16It's kind of like a mirror, like an alternative reality where maybe the fashions were different. I don't know. I probably didn't notice. But almost everything else, it was like today. Except they would have these weird plot lines where like two people couldn't talk to each other from 50 feet away because they didn't have mobile phone, right? And so it's very interesting to think, like, why do we now have these Internet connected supercomputers in our pockets? And yet nothing else. You look around my washing machine hasn't gotten that much better. My car hasn't gotten that much better. Almost nothing else has improved at the same rate.

23:45Right. So why is that? And I would argue people say things like Moore's Law. So Moore's Law is this idea, you know, that you can pack more semiconductors onto a chip and things. I think that's part of it. I mean, certainly that matters. It matters that semiconductor fabs get better and better and things. But to me, that's not really the core concept. The core concept is when you have a new computing platform, like let's say a mobile phone, it goes through multiple phases, but at some point it hits a phase. And so in the case of the mobile phone, this is around 2009, I'd say through 13, where it goes into this hyper speed exponential growth period where the computer itself, i .e.

24:20the mobile phone is getting rapidly, rapidly better, like kind of exponentially better. And in addition, the applications on top of it are getting exponentially better. And the combined result is a multiplier effect between these two exponential curves, which leads to this incredible change that happens in a very rapid period of time and then leads to this shocking thing when you look at friends and compare it to today. We pull out these super, these like Star Trek devices, you know, like it's unbelievable, like how good these things have gotten. And like, why hasn't the rest of the world gotten that way?

24:50The short answer is computers are special because computers specifically have this feedback loop when they hit this golden period of product market fit. They have this flywheel where the applications get rapidly better. And that, in turn, creates economics incentives for the platform to get better, which in turn creates economic incentives for the application. So just like as the phone got better, the camera got better, which then allowed Instagram to come along. And Instagram made photography on the phone even more popular, which in turn made Apple invest more into the camera. And like this beautiful flywheel right now, you have these cameras now on the new phones that are better than DSLRs.

25:26And if you look at the number of photographs taken, it's grown like many orders of magnitude. So that particular kind of flywheel, I think, is this very magical thing. I think we're about to hit that, I believe, in the blockchain world. It requires a bunch of conditions to get to that point. And there's a whole bunch of things that happen at different phases. is I've written blog posts about this people are interested in, but I think of it as there's sort of two major phases of these computing waves. There's this gestation phase where there's kind of these early, like mobile phones. People today might think it began with the iPhone.

25:55In fact, there were 20 years of attempts to make mobile phones. There's a documentary, people might be interested, about General Magic, which was a company in 1993 that was really trying to build an iPhone. There were for a decade, I mean, people say Windows, Microsoft missed mobile phones. They didn't miss mobile phones at all. They had mobile phones in the late 90s. They had very good ones in the early 2000s. I own some of them. They had various other issues with the design and things, and I think which is why they missed that opportunity. There were other great mobile phones like the Trio. There was the early Palm Pilots.

26:22There was the Sidekick. There were a whole bunch of stuff, right? And then eventually it all kind of came together in the iPhone and then Android. And then you had, people forget this, but the iPhone came out in 2007 and then the App Store in 2008. But the real growth happened around like 2009 when you started to get this double flywheel feedback loop between the apps and the infrastructure of the phones. And so I became very interested in this kind of concept. And I said, OK, I want to identify the next major computing platforms and I want to invest in those things and I want to get involved.

26:48I want to help those entrepreneurs and I want to do it through the whole lifecycle of that new platform. Right. And I think there'll be investment opportunities at all stages and they'll be different and they'll change. But that seemed really like a big idea and exciting and and frankly, something where I felt like I could make a personal impact because I felt like I understood it and I could kind of help nudge it along instead of kind of just sort of riding along. maybe actually be kind of a central actor in that new story was the hope. So I'd love to turn to crypto and blockchain in particular, and maybe start with this notion of when you go through the example of an iPhone, you have Apple who had created this initially closed ecosystem.

27:26And blockchain to some extent is the complete opposite of that. Why don't you start talking about what happens with centralized and decentralized systems? Yeah. And so one thing I'd say is we live in a recent period where a lot of the most successful computing was centralized. But the history of computing is there's a mixture. So the web, as an example, was a decentralized technology and a lot of the internet. But the web is a specific kind of network on top of the internet. And email is another good example, which is a protocol called SMTP, which is decentralized. And so I would argue the 90s was an era where the decentralized computing won out.

28:00And then the next decade or two, we've had a much more centralized era, as you point out, like with a mobile phone. 95 % of the software in the world, if not more, is open source software. Your Android phone runs Linux. Your iPhone has a huge proportion of the software is open source. Almost every server is running. You know, AWS, et cetera, is running Linux on the other side. That's open source software. That's made by a ragtag group of people that get together on GitHub and design that software. That's a crazy idea, by the way, that I don't think has fully permeated the broader consciousness, that the vast majority of software we use today is made by an ad hoc group of people on the Internet.

28:34and not inside of a company. A lot of the thesis we have with crypto blockchain is that a similar thing will happen with internet services in the same way that almost all software today is made by a group, a community of people who get together and build something. We think the same thing will happen with internet services, not just internet software, a social network or something, right? So like what happened, right, is that open source commoditized software. You have almost no software companies today. They're all service companies because they had to move up the stack because open source kind of ate that layer of the stack.

29:04So they all moved up the stack to the services layer. And what's happening now is that using blockchains, people are going to move up to that layer of the stack. So things like social networks, marketplaces, all these things that are today created with centralized proprietary companies are going to be created, we think, by communities of people on the Internet who come together and build these kinds of new things. And so I'm just, I guess, pointing out that kind of in the history of tech, there have been, I think the PC was, I have this blog post about it. It's called Inside Out versus Outside In Technologies.

29:30So I sort of think of it as some technologies come from the fringe and then make their way in. And I think the web is like that. The PC was like that. If you go back and read about like the early Homebrew Computer Club, Steve Jobs, etc. These were fringe people. The mainstream at the time was IBM building mainframes. The PC was a very fringe movement. The web is a very fringe movement. The original version of Bill Gates' Road Ahead came out in 1995. It was talking about the future of computing. And the word World Wide Web did not occur in that book. They talk about the information superhighway.

29:58People forget this, but there were two visions of the Internet in the 90s. The information superhighway was Microsoft, Disney, Comcast, which was to have these big centralized systems. And you would go buy a box and they would have these video on demand stuff and a bunch of like it'd be like this little playpen like AOL, MSN or something. And then there was this other vision of the Internet, which was the kind of the hacker Unix vision, which was Mosaic and the browser and all these other things, which was the idea that, no, anyone could just build a website permissionlessly and anyone could put up video and anyone could do whatever.

30:27and it was just going to kind of happen organically. And that's the vision that won. And it wasn't obvious at the time. I think people now have a sort of visionist history that it was obviously going to be one that sort of decentralized technology. So anyway, so I guess I would say that I think that because the last big innovation was centralized mobile phones and mobile phones had to be centralized because it's hardware, it's CapEx intensive. Like you just, a ragtag group of people in 2007 could not have come together and built an iPhone. You just can't. You needed a factory. You needed like hundreds of millions of dollars.

30:56You need to make breakthroughs and capacitive touchscreens and all sorts of things. I would say that it's not as contrarian as it may at first appear to think that a major new computing technology would be built by organic communities on the internet, which I believe is what is happening now. And I think it's the most important thing happening now in computing. 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.

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32:30We're now three years later. What's happened with the underlying technology and use cases? So if I could, maybe I'll give a quick summary of the history and of blockchains and what they are. So blockchains were invented by Bitcoin. It was a paper that came out in the late 2000s, a pseudonym in this paper, Satoshi Nakamoto, and this idea of Bitcoin. And the idea was to create a decentralized money system. There's a big debate as to whether it's meant to be focused on payments or store value. It's since become very much about store value, kind of digital gold. A very, very important thing happened in 2015 -ish, which was the invention of Ethereum.

33:07So what Ethereum was, was it said, OK, let's take this core architecture that Bitcoin designed and let's generalize it. So Bitcoin is a computer. I think the way I think of Bitcoin, it's a computer in a sense of that. By the way, what is a computer? A computer is a thing that can store things and run code that operates on those things. Right. And so by that definition, Bitcoin, Ethereum very much are computers. Bitcoin is a computer that runs a specific application. That application is this store value digital gold application. Right. Ethereum said, let's take that architecture and let's generalize it and let's add a programming language that looks a lot like a common programming language like JavaScript.

33:41And you can do anything you can think of, you can program and you can run it on the Ethereum computer. Ethereum is a very, very important generalization of blockchain computing. An obvious question is why would you as a programmer want to run something on the Ethereum computer as opposed to running it on AWS? Or in general, why would you want to use a blockchain? I call blockchains computers that can make commitments. And so what that means is you write some software on the Ethereum computer and you can write some software that says, I'm going to build a social network. And on this social network, I'm going to commit to you that if you make a post, I'm not going to take down your post unless X, Y and Z happen, like some kind of like strict computer terms.

34:20Right. If you're a developer building on my social network, like you, my take rate is X and it will never change. And I'm committed to that. Or I'm going to build a currency like Bitcoin. And I'm going to say one of the commitments Bitcoin makes, There's only ever going to be 21 million Bitcoins, right? And you don't have to trust a person, the inventor of Bitcoin, a company. That's built into the very fabric of the computer, that commitment. So Bitcoin makes various commitments like there will only ever be 21 million Bitcoins, that if you hold a private key, this secret code for your Bitcoin, you will always be able to get that Bitcoin, right?

34:50Those are certain commitments Bitcoin makes. What Ethereum lets you do is make generalized commitments. So you can make your own currency on top. I can make ChrisCoin and ChrisCoin can say, has these various features. there's going to be 10 million Chris coins. And you know what, once I write that code, you don't have to believe that I will do that because you can just look at the code. By the way, everything on a blockchain in the crypto world is open source. You just go read the code and you can look at it, right? Compare that to if Google said we're going to have Google coin, okay, or Facebook made some commitment, right?

35:16Or whatever. How would you know they're going to keep that commitment? You would have their assurance of it. But like companies change their mind all the time. And in fact, tech companies have a long history of changing their mind. But developers have been experienced for years and years with gaming platforms, with Facebook, with Twitter, where the API rules change, the take rates change. There's huge issues that we have, our startups have with the Apple App Store. They change the rules all the time. They arbitrarily decide to do things. Platforms have a long history of kind of changing the rules.

35:41So one of the really interesting features of blockchains is you can make a platform where the commitments are baked into the code. You can create internet money. There's a big area now called DeFi, decentralized finance. You can create new kind of financial systems. You can create new social networks. And then all these things have the key feature when they're built on a blockchain of being able to make commitments. Commitments that cannot be overridden by the developers. It cannot be overridden by anyone. They're baked into the code. That is a new thing that never existed before blockchains, right?

36:08Because before blockchains, all computers ultimately were just owned by somebody and that person could just change the code. And so you could never credibly, before a blockchain, make some kind of commitment that anyone would have any belief in beyond their belief in the person who owns that computer. So that's the big new thing that you can do with the blockchain. And we're just saying anyway, so Ethereum came out 2015. Since then, Ethereum every day, probably meet an entrepreneur who's building software on top of Ethereum. It's a very, very active developer platform. Stanford has a blockchain cryptocurrency course for computer science undergraduates.

36:42It's the second most popular computer science course at Stanford, about 200 students, and almost all of them at the end of the course build applications on Ethereum. I mean, that's kind of what you do in the blockchain world these days. So Bitcoin gets a lot of attention and Bitcoin is very important. And we're excited about Bitcoin and we have investments in Bitcoin, but it's just sort of the tip of the iceberg of what's happening in the blockchain world. What's also happening is Ethereum has limitations. There's all sorts of interesting stuff going on that are improving on that. There's things that are built on top of Ethereum to kind of improve the performance.

37:11There's competitors to Ethereum. We're investors, by the way, in all sort of different layers here. We're investors and competitors. We're investors in things that build on top. We're investors in new blockchains that are targeting specific use cases like video games and other kinds of things. There's all sorts of interesting applications being built on top. And so there's this whole kind of rich world, which I think is not talked about as much in the broader context. And I think as a result, people kind of think when they hear crypto blockchain, they think of Bitcoin has branding. I think a lot of it goes back to 2017 or even 2013 that people kind of associate with crypto anarchism, libertarianism, etc., which I think is somewhat accurate with respect to Bitcoin.

37:48Bitcoin is one very important specific blockchain. The technology is, I think, much more broadly applicable. So when you think about where we are in the life cycle of these use cases, how far away are we from your average consumer being able to use something on a blockchain for call it economic activity in some sense? That's the hardest thing to do. I think, I believe when I was talking about these computing cycles earlier, I think that they're in some ways sort of predictable in how they happen. I think it's what's very hard to predict is the timing. So the iPhone came out in 2007. I had a friend who was a mobile gaming entrepreneur for many years and quit in 2006 because he thought it was just never going to happen.

38:28And if you kind of look back, it was like this hockey stick and it was right before. So it's very hard to know exactly when these things are going to really hit. I would say the short answer is somewhere between one and five years. There's a bunch of very interesting new blockchains focused on payments, including Libra, which is Facebook's blockchain effort. The insight there was sort of the learnings that these projects took from the Bitcoin world is that people wanted two things different than Bitcoin. One, they wanted price stability. So if you look at Libra, Celo, there's a whole set of these new payment blockchains.

38:58Essentially, they have a currency that's pegged to the dollar or some other kind of familiar thing. And then secondly, they're very high performance, high throughput, low cost to transact. I would sort of say that they'll do for payments what I think of was WhatsApp did for messaging. The pre -iPhone world, you had SMS. It cost, I don't know what it was, 10 cents a message. It's amazing to think about now. People were on different networks. One of the big breakthroughs of the BlackBerry, right, was BBM, was a messaging service, which was sort of cross -network. You could go across AT &T and T -Mobile.

39:28I think it payments very much like that today. Try to send international payments today. It's very expensive. You know, you send these wire service things and you pay dollars, if not more. There's different networks, different banking systems. It all doesn't interoperate. So that's kind of what you can kind of think of the payment blockchains is doing. There's a bunch of interesting stuff happening around video games. The growing and dominant business model for video games today is around virtual goods. Maybe people either play Fortnite or have family members who play Fortnite, as an example. That's a multi -billion dollar revenue business.

39:57All the revenue comes from buying virtual goods. So you buy a better emote, which is like a dance move or outfit or whatever, and that's what you're paying for. It doesn't even make you better at the game. Actually, that's like a philosophical thing. It just makes you look cooler. And so one big area that's exciting is you can take virtual goods and you can take them out of the game and have secondary markets and bring them from one game to another and do all sorts of things like that. And that's an exciting area that's just starting to develop. There's a bunch of interesting stuff happening. I mentioned before DeFi, decentralized finance, which is so, for example, like lending protocols.

40:29So what that means is you can lend money to the actual code. It's a very new concept. The code itself takes the money, not the company. There is no company. It's just literally a piece of code. You can lend money to the code and the code will pay you interest for lending money to it. And in turn, the code turns around and lends money to other people. And it all does is algorithmically. And you're literally lending money to the code. Everyone who ever created the project could disappear and go away. And the code just runs. It's just this autonomous code that just runs all day and runs on the Ethereum blockchain.

40:57And that currently, I think the current numbers, if you look today, there's something like $12 billion, billion with a B in those protocols being lent out as we speak. And that number has grown very, very rapidly. and will continue to grow. And it has this really nice feature where you can be anywhere in the world. You can be in South America and you can get the same interest rates and you can get as somebody anywhere. It's just a piece of code, a global piece of code on the internet. I think it's the way it should be. And by the way, it's all open source. It's permissionless. You can build on top of it.

41:24You can build around it. One of the really cool things happening in DeFi, people call it money Legos, which is you can take, because everything's open source and what we call composable, meaning I can take your piece of code and this piece of code over here and I can combine them and write a new piece of code that uses both of them. And so even if I wrote the code, it's no longer mine. It's just this thing out there. Anyone can access it. And people are taking these things and repurposing them and kind of building, that's why we call them Legos, is they built a whole bunch of little basic building blocks and other people come along and recombine them.

41:53And it's happening very, very rapidly. And all the, I think, exciting principles of open source, which is like it's completely open, no IP, no patents, nothing like this. Anyone in the world can access it. Complete level playing field. some kid in some random place and come along and build something and it's a hit app. A lot of these, actually these applications that are pseudonymic, I couldn't even know if they made them. There's like a really popular, trendy, new options platform that's made by a pseudonymic group that we just know them by their handles, you know? So like this is the new world.

42:23And then by the way, you don't need to know them because you can read the code. It's all open source. Like you don't have to trust them. You trust the code. How do you think about where we are today in the evolution of the programming of these applications compared to a couple of years ago? I think with respect to crypto blockchains, we are pre -iPhone moment. We haven't had the breakthrough platform yet. I think we're somewhere, if you map it to mobile phones, let's say, I think we're probably 2004, 2005. I hope at least that we're like a year or two away from kind of the iPhone moment. And we've invested in a bunch of things, which we think could be the iPhone.

42:51Thinking about from an investment and entrepreneurial point of view, you can make money and really contribute to the world at any phase along this development cycle, including now. It's not, we're not quite there yet. We haven't built applications that reach hundreds of millions of people yet, but there's still lots of interesting work to create. And then once we kind of get into that exponential period, the nature of the work will change because you'll be doing probably less infrastructure work and more application level work, more things that are directly user experience. Just like today, like with the mobile phone, most of what people do is things that directly interact with end users.

43:22Whereas early on, you tend to do more infrastructure. Do you think that it requires at some point in time, a killer app to draw the attention to hit that inflection point? I think that often happens. With mobile phones, you could argue it was the BlackBerry killer app. The BlackBerry story is very interesting. There's a good book called Losing the Signal. It's the history of Grim, the company behind BlackBerry. Their hypothesis, so mobile phones, people had tried mobile phones for years and failed. And they came along in the early 2000s and said, you know, our theory as to why they failed is no one has identified the killer app, to your point.

43:50And we believe the killer app will be essentially with messaging, what we call today WhatsApp. And they realized the only way to do this is to build everything ourselves. So they built the full stack, as we say, like they built the device, they built the operating system, they built the network, they went and got the minutes, you know, the cell minutes, they built the backend encryption, they built the whole thing. And they did it because they had to, to make what they imagined, which is let's call it the WhatsApp experience or something, right? And they did that. And it was wildly successful.

44:14And then they, of course, did not adapt. I mean, actually, they're still around in reasonable evaluation. I don't know what they are, but they certainly aren't as culturally relevant as they were. But then what happened is Apple came along and said, you know what, the world has changed. And now we can build a general purpose computing platform, which has messaging as a single feature and yet has many other killer apps as well. You know, if you go back to the early PC, I would say the killer app was probably word processing and desktop publishing. Spreadsheets were important, too. But that was sort of the killer app.

44:42Microsoft building the word processor and all these other. And that was really what drove a lot of the early PC stuff. And I think with crypto blockchains, the Bitcoiners would argue it's Bitcoin itself. I think Bitcoin is important, but I think a little too eccentric for the billions of people kind of scale. I think payments, as I was mentioning, is a very likely killer app. I think payments could be the BlackBerry. You could think of in some ways these payment blockchains I described earlier is trying to do kind of what BlackBerry did. They're trying to do for blockchains what BlackBerry did for mobile phones.

45:09I think longer term, the financial stuff like lending and things like this are very interesting. I think the idea that if you think about the process now where I go down to Citibank and give them my money and get, I don't know, zero percent interest, something close to zero percent interest. And then I walk down and buy food at the Vietnamese restaurant. And the Vietnamese restaurant, meanwhile, walks down to Citibank and fills out a bunch of forms and tries to get a loan. And they don't even know who that restaurant is. And they have some convoluted ancient process. God knows what it is running Cobol or something.

45:38I don't know what they do. Decide to give them a loan. When in fact, I know that restaurant directly. And there's a whole bunch of reasons why, like, you could imagine a system where the mediation is happening through software and not through these giant, very inefficient legacy organizations like these giant gold banks. Right. And instead, I'm lending money to a software platform. That software platform is efficiently deciding based on lots of interesting Internet knowledge as to how to lend it out in turn. So I think longer term, other financial services like lending, as an example, are very interesting.

46:11But we probably need a lot more things to happen to make all of these technologies more accessible. The user experience has to get better. The performance has to get better, et cetera. Your fund was really one of the first in the space that had a significant institutional following. And I'm curious what you've heard from your investors about their perceptions of the space as it's evolved the last couple of years. I think on the institutional side, with respect to crypto blockchain, there's broadly two narratives, right? There's the Bitcoin narrative, which I think has, from what I can tell, the financial world has become more accepting of, I guess.

46:47You're starting to see institutions, hedge fund managers, etc. think about Bitcoin as a substitute for gold. So there's that kind of thread. Again, I'm pro Bitcoin, but I very much view it to the first principles of venture capital. Venture capital is about investing in very smart people who want to be on the cutting edge of technology and build new things. And if you just sort of headcount the very smart people that come to us that are in Silicon Valley, that are coming out of top computer science programs, etc., something on the order of 10 % of them, I would say, are building blockchain applications.

47:21So for me, it's a relatively simple kind of way to explain it, which is our core job is to invest in these great computer scientists and entrepreneurs who want to build the future. And a significant portion of them are building crypto blockchain apps. And so for us to properly do our job, we should be investing in them. And then there's a bunch of reasons why you need a separate fund for that, including the fact that the assets we're buying are different. They're not traditional equity and things. we're actually buying directly these digital assets. And so that creates all sorts of interesting other kinds of complexities around legal and accounting and custody and a whole bunch of different things.

48:00So for me, it's really first principles. From the outside, it may sound kind of like this wacky new thing. For me, it's actually just bread and butter venture capital, which is we follow the talent and we provide the money and resources and maybe some coaching and guidance. But fundamentally, it's about what are the smartest people excited about and where are they going and spending their time and building new things. And so looking at that lens, I think it's far less wacky and different than it may appear from the outside. So you touched on this one key difference in these different assets, different forms of assets that you own.

48:35I'm kind of curious thinking about it's one thing to say you're following the talent and what they're developing. And it's another thing to figure out how that's going to transfer into an economic return if it's not in the form of a company. So what are the different variations of the assets that you own? Once you understand how those, what we call token mechanics work, that bet then comes down to what are the applications being built on this platform and why would they attract more and more users? We can be right or wrong about it, but that's sort of traditional venture capital. Like, hey, will this be a popular thing?

49:07Are these people good at building it? And will they build something people want to use? So in that way, it's very much like a traditional venture capital bet. Now, one of the exciting things about crypto is that you can build tokens, digital assets, you can come up with any structure you can come up with, you can invent new types of assets. So there's other ones. So for example, there's what are called governance tokens, which let you vote and control the system. So imagine a future social network like Twitter, but it's built on blockchains. And imagine that there are decisions being made around, for example, what are the rules around misinformation or who gets deplatformed or all these kinds of decisions that today are made by employees of Twitter.

49:44What if instead that happens sort of democratically through the Twitter token holders who would vote on these decisions, right? And would those tokens have value as a result? There are other tokens which essentially generate cash flow, the system charges fees, and that those fees are then given out to the token holder. So in some ways that behaves more like a traditional financial asset. So there's all sorts of different ones. And actually, one of the things we do when we assess a crypto investment, in addition to the usual things you do in venture capital, like assessing the team and the product and the technology, is we then look at how is their digital asset designed and do we believe that it will accrue value if they succeed in the other aspects of it.

50:21And I'd say to me, that makes it more interesting and newer and exciting new ideas there. That said, now that we're 10 years into the advent of Bitcoin and five years since the start of Ethereum, people have kind of converged on a few different token models. The Ethereum resource token, there's a kind of governance token. There's a few different models that have become more common as people have learned. And so people have been buying digital assets for a long time. So like domains is an example. Cdixon .org is I owner. In the 90s, there were a bunch of people, domainers, who went and bought a bunch of domains.

50:54And it turns out, actually, if you go back outside of an angel investment in, let's call it, say, Amazon or something, buying domains was probably the best, single best investment strategy in the 90s. Pizza .com recently sold for $10 million. At one point, you could buy these things for $8 off the shelf. So domains are digital assets. You're buying domains in the 90s. you were betting this internet thing is going to get more popular. These are scarce. These are like real estate. They're like scarce resources. And as the internet becomes more popular, these domains will go up in value. IP addresses, if you're familiar with those, like the 236 .132.

51:26You may have seen these. Those also, they're scarce digital assets. They've gone up dramatically in value as long as the internet. So it's not that new of a concept in a way to have these, basically have these things, these scarce resources associated with a new network that if the network becomes popular, the resources will too. All right, Chris, I want to ask you one more question before we turn to a couple of closing questions, which is, what is the next blog post that you're ruminating on? I keep trying to make these concepts simpler and simpler. It's been difficult to mainstream these ideas.

51:57And there's a lot of diffusion and just different concept, whatever, just different ideas floating around there. So I've spent a lot of time and actually one of the things I'm ruminating on is like, I keep trying to come up with simpler and simpler ways to kind of explain blockchains and blockchain computing. I'm very interested in the idea of, and I've thought a lot about it. I have a lot of thoughts around how one would technically architect a decentralized social network. I think we're at the point now where you could build a really credible, high performance, great user experience social network that was built on top of a blockchain.

52:24And I've thought a lot about that. And I have a bunch of stuff I've been writing about that. I just don't know. I think the audience for that might be relatively small. So I blog a lot less now than I used to. And I think it's partly because I just feel like my interests have become esoteric, maybe. I don't know. But then again, my experience with blogging, I used to blog a lot, is that it's very hard to predict which blog posts resonate. And so part of me wonders if I should just maybe write more and he'll have a bunch of flops, but maybe one or two will land. And then with your investment activities, as these projects are getting developed and the investments are in different forms, does that give you more bandwidth compared to traditionally serving on a bunch of boards that's time intensive?

53:00In the crypto world, we do governance, but we don't do it through boards. We do it through the token. So we own a bunch of tokens And they have votes. It's very interesting. And we've been building it up. We just announced we hired Anthony Albanese, who is the chief regular officer of the New York Stock Exchange. He joined us. And he's going to be part of this, probably leading up this effort, which is what we call crypto network operations, which essentially is how do we get involved in these blockchain communities in a way that we can positively contribute and do traditional governance roles of oversight.

53:31So the way it literally works with these things is that there are forums, people have discussions, and then there are votes. and you vote with your tokens and you do it like this cryptographic method where you prove you have them and then you actually vote. We also do this thing we call delegating. We want to make sure that the networks are sufficiently decentralized. And so in some cases, because we were the early venture capital investors, we own a bunch of the tokens. We want to make sure we aren't, sort of doesn't skew too much towards us. And so we've delegated a lot of them. There's a whole system for doing that.

53:57And so we delegate to other organizations in the community who we think will play a positive role. That takes a lot of work. We have to go and vet candidates and actually go do it, like technically. That's how we envision the future, which is, it's kind of more like the public shareholder. You know, if you think about what, I don't know, you know this world better than me, Value Act, or I don't know, are they the good ones? I don't know. Like if you think about good activist shareholders, I think if it's much more like that, like we'd be part of a community, we would publicly discuss these things and then we would vote on what we think is the best.

54:27So that's how we view governance in the future. How do follow -on funding rounds work in these? Is it somewhat similar? Yeah. So it's a great question. It's complicated. But I think essentially you should think of it as the early stages, some of these companies start off more like traditional venture investments where there's equity. And then there's also what we call token rights. This is sort of pre -launch. And then once they launch, there are tokens out there and they're issued by a blockchain and the company no longer controls things. So there's really these two phases, pre and post -launch.

54:55So pre -launch, it looks more like a traditional venture -backed company. Post -launch, it's not. And the way they do follow on funding is it's literally controlled by the code. I mean, so at this point, like if you go look at these, there are very large treasuries, but the treasury is literally, I mean, I know it sounds crazy, but it's controlled by the code. And the only way that humans have oversight of the code is by voting on these governance votes. And so the community can go and decide to allocate some of those tokens to different things, or even to sell some of those tokens to build up the treasury.

55:25But it's truly owned by this crowd, if you will, right? So yeah, so once they're launched, and generally they don't need fund, they don't need fiat funding anymore because it's just code. They don't have fiat expenses. The people working on Bitcoin today are open source contributors who probably own some Bitcoin themselves and therefore want to have some financial interest in seeing Bitcoin succeed, but they aren't getting paid for it and they don't raise money or anything like that. And are the economic incentives sufficiently strong for coders and these open source networks to keep going? I think that in some cases, yes, some cases no.

55:56and the ones where the answer is no, it's a learning experience. And it's a big topic that we actively talk about is how to make sure that in going forward, this is something we basically that we, the community has been learning over time, is how do you best set up the company's treasury, the tokens, such that it will incentivize future development. So I think actually one is literally an active area of work. We think that, for example, that the protocol should allocate a bigger chunk of tokens to software development as opposed to other activities and are trying to work with entrepreneurs to figure out the best mechanisms.

56:27But your question's very much on the cutting edge of the whole field right now. If you make it this far each week, you're probably ready for the closing questions. But wait, there's more. If you sign up for a premium membership, you can access our premium feed, which includes an additional set of closing questions each week and removes all the ads from the show, including this little pitch to subscribe. Hop onto the website to sign up. Thanks, and let's get on with it. Well, Chris, this is super, super interesting. I want to turn to a couple of closing questions before I let you go here. What's your favorite hobby or activity outside of work and family?

57:05I like to read a lot. I like to read a lot of history books. I'm a big believer that the best and maybe only way to have any insight into the future is through history. I'm particularly interested in the Victorian era of entrepreneurship, I guess. I've read a lot there. I sort of think of that era, Thomas Edison, Westinghouse, Tesla, maybe a little later than Victorian, but Henry Ford, Wright Brothers, Morse, Bell. I think of it as this amazing period where you had basically a thousand Elon Musks or something. I mean, these towering figures. I read a lot. I'd say that's kind of a boring answer, but I read mostly history books.

57:40Do you think there was anything unique about that period of time that fostered such a wide range of the successful entrepreneurs? Well, one thing clearly, in the same way that we're now living through the computer science age, they were living through the electrical engineering slash mechanical engineering age, right? So just the fact that you had these new things like electricity, obviously, it was a huge breakthrough. And you could do all sorts of things, the railroad, the automobile, mechanical engineering breakthroughs, and then, of course, the whole path of light bulbs. I think it's partly just all of these trends coming together.

58:11I think somewhat controversially, I think the relative lack of regulatory frameworks, they were very aggressive in a way. Think about railroads. Today, you would need effectively unlimited eminent domain to do what those people did back then. So, I mean, it's not just regulatory, but it's also just, let's call it fewer vested interests. Things weren't as built up. You didn't have as many, you had to build a World Trade Center, right? Like they had to negotiate for 10 years with all these different regulatory bodies and owners and this and that versus the Empire State Building, which is famously like, you know, whatever it was under a year.

58:41Maybe it's Greenfield, Brownfield or pick your metaphor. But it was partly regulatory, partly. I think just if you read it, just the level of aggressiveness of these. It's like that's why I said Elon Musk, like almost all those people I mentioned, by the way, they ended up bankrupt at the end. I mean, it's not like a happy ending, but just incredibly aggressive, fertile new technology territory, relatively fewer regulations. What's your most important daily habit? My ideal day, I have this framework, if you want to call it. I try to do an hour of exercise. I run, and it's a big deal for me. It keeps me sane.

59:15And then my ideal day, I would do an hour of running, an hour of reading, an hour of writing. I find that each like the first hour of each and ideally in the morning when you're kind of fresh and as opposed to later. And then, you know, of course, meetings and email and everything else. I would say also like one thing I've experimented a lot with is trying to balance between the humanities and the sciences. So like maybe the writing will be programming computers as opposed to actually writing. Maybe the reading one day will be fiction. Another day I've gotten very obsessed with this idea. So are you familiar with like the keto diet and all this other kind of keto?

59:46And so and I do intermittent fasting. I was trying to do Silicon Valley things. I think of a similar thing with how you spend your mental time. I have this idea, unpublished blog post I call Media Keto. The idea is think of media consumption kind of like you do with food. And I think of social networks like reading Twitter and things is like sugar. Reading the news, I consider sugar. I don't read the news much. Reading a book is protein. Writing is protein. Speaking to a friend or someone you like is protein. I think a lot about that. You can't control how your brain responds to stimulus. What you can control, I think, is kind of the meta level of where you decide to direct your brain.

1:00:21I found I had a dramatic improvement in my happiness when I really don't read. The only news I read is stuff that comes to me on Twitter, like tech news and other news will obviously come to you on Twitter. But I really, really, really try not to get caught up in reading news websites and things like this. Really cut back on social. I don't have a Facebook account. I have a LinkedIn account. I can't get rid of Twitter, unfortunately, because I just depend on it. But I try to really cut down on usage. I only use it on the desktop. This is my best way to do it. And it's not because I'm pro those services.

1:00:47They're amazing services. I'm not anti them. I just find from my own kind of attention and cognition and things that it's just my brain and everything just feels so much healthier and better when I read a book or I talk to somebody, right? I do spend a lot of time thinking about that and trying to improve that. And I mess it up all the time. I fail at it. But that's a big, important thing, a habit, I guess I'm trying to develop. What teaching from your parents has most stayed with you? I had very hands -off parents, which for better or worse. And that's how I got into computers and things like this is they had no interest in them, but they encouraged me and let me do whatever, you know, just sort of, hey, like computers.

1:01:20OK, great. Do more computers. And so and it was a different era. You know, we didn't have a lot of the video games weren't as good and the Internet and things like this. So me and my friends would play with computers and then make up weird board games to play and things like this. So I guess this is maybe a bit of a cliche now, but I have come to really believe in this concept of I think it's very important for people to have play and hobbies and interests and to develop those interests. And I guess it's affected the way I think about the world in the sense that I think a lot of very important things come from those side interests and hobbies.

1:01:54And a lot of what we kind of consider productive work is important, but oftentimes can fall prey to short termism, I guess. and kind of groupthink and other things. So I don't know, that'd be one, I guess. All right, last one, and we'll turn to a couple extra for the premium members. What life lesson have you learned that you wish you knew a lot earlier in life? I do wish I had moved to Silicon Valley earlier. I spent most of my career on the East Coast and I love the East Coast, it's wonderful. But if you're gonna do tech, like there's a lot of debate now with the pandemic, maybe that will change and things will spread out.

1:02:27But in retrospect, it was all fine and it worked out. But like, I do think just if you're going to do something, going to that place, just that I think a lot of people spend way too much time prepping for things. You go to school, you do this, you do that. If you want to be a tech entrepreneur, go to Silicon Valley and become an entrepreneur. Like, if you want to do X, go do X. I wrote a blog post. It was popular a long time ago called Climbing the Wrong Hill. And it was about this idea that in people's careers, I think you get caught on kind of a local optimum. Imagine the career landscape is a hilly landscape.

1:03:00and there's the highest hills where you kind of want to get to. It's very easy to sort of be walking up a hill and feel like you're succeeding. This is like you're at a job, you're at McKinsey, and you feel like you're doing well and you're getting a promotion next year and you're doing this. But my long -term goal is to go be an entrepreneur, right? But then what happens is you get caught on that hill because at each moment it's like you're getting up higher on the hill and you're getting a promotion and you're away from this, and it becomes harder and harder to make that kind of leap over to the other hill.

1:03:24And there's all sorts of ways to rationalize it. Oh, I'm learning, I'm prepping. And I think that my biggest learning is just that's all a trap. If you want to do X, you've got to do like sometimes I'll have people that are younger come and ask for career advice and they say, well, what should I do? Should I stay at this job? Should I do this? Should I do that? Like, what should I say? It's always funny because if you ask, well, what do you want to be in 10 years? And they say, I want to be an entrepreneur. And then like, well, how come all of the choices you presented to me don't involve that thing?

1:03:50You know, it's very obvious advice, but somehow I didn't understand it for a long time. And I think there's all sorts of ways you rationalize. And there's social pressures too, right? You're at whatever. You're at some fancy school. You're at a fancy company. You're at Google. And every time you go, your parents think it's great. And your friends think it's great. And wow, going to some unnamed startup is scary. And people will say I'm dumb. And there's all sorts of pressures and signals and other things that I think lead people astray here. I think the right answer is very simple, which is nothing simple.

1:04:20I don't want to make it too simple. But if you're sure that you want to do X, go do X. The shortest path to that is to do X and not all these other complicated things that somehow, at least I was told to do. Chris, this is super fascinating. Thanks so much for all the time. Yeah, thank you. I appreciate it. Thanks for listening to this episode. I hope you found a nugget or two to take away and apply in your investing and your life. If you'd like what you heard, please tell a friend and maybe even write a review on iTunes. You'll help others discover the show, and I thank you for it. Have a good one and see you next time.

1:04:55Thank you.