We have an important preface, an important caveat, an important disclaimer before we get started. And here it is, provided from my lovely lawyers. Here we go. I am not an investment advisor. All opinions are mine alone. There are risks involved in placing any investment in securities or in Bitcoin or in cryptocurrencies or in anything. None of the information presented today or really anytime since you might be listening to this anytime is intended to form the basis for any offer or recommendation or have any regard to the investment objectives, financial situation, or needs of any specific person. That includes you, my dear listener. So, everything you're going to hear is for informational entertainment purposes only. And with that said, please enjoy.
Hello boys and girls, ladies and germs, lemurs and squirrels. How goes it? I hope you are all well. This is Tim Ferriss. Welcome to another episode of The Tim Ferriss Show. My guests today are Naval Ravikant and Chris Dixon. Naval Ravikant is one of the most popular guests on this podcast and for good reason. You can find my first episode with him at tim.blog/naval n a v a l. It was nominated for podcast of the year when it first came out. But, let's get to the bio. Naval, @naval on Twitter, is the co-founder and chairman of AngelList. He is an angel investor and has invested in more than 100 companies including many mega successes such as Twitter, Uber, Notion, OpenTable, Postmates, and Wish, many, many more. You can subscribe to Naval, his podcast on wealth and happiness, on Apple Podcasts, Spotify, Overcast, or wherever you get your podcasts. You can also find his blog at nav.al. I will leave Naval's intro at that.
We have done quite a few interviews together in the past with Nick Szabo and also with Ethereum creator Vitalik Buterin. Chris Dixon, on Twitter @cdixon, is a general partner at Andreessen Horowitz, where for the past 6 years he has been an active seed and venture stage investor. Previously, Chris co-founded and served as the CEO of two startups, SiteAdvisor and Hunch. SiteAdvisor was an internet security company that warned web users of security threats. The company was acquired by McAfee in 2006. Hunch was a recommendation technology company that was acquired by eBay in 2011. Chris has been a prolific seed investor, and that is the right adjective, prolific seed investor, co-founding Founder Collective, a seed venture fund, and making a number of personal angel investments in various technology companies. Chris started programming as a kid and was a professional programmer after college at the high-speed options trading firm Arbitrade. He has a BA and MA in philosophy from Columbia and an MBA from Harvard. He has written about his theories and experiences as an entrepreneur and investor on Medium and before that at cdixon.org. Many of his predictions have come true. A lot of what he's written about has ended up being prescient, and we will dig into that. His a16z, that is Andreessen Horowitz with the number of letters between the first and last, a16z podcast appearances can be found at a16z.com/author/chris-dixon, and once again, you can find him on Twitter @cdixon.
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Optimal minimal. At this altitude, I can run flat out for a half mile before my hands start shaking. Can I ask you a personal question? Now would be a suitable time to ask. What if I did the opposite? I'm a cybernetic organism living tissue over a metal endoskeleton. Damn.
Huh. And Naval, welcome to the show. And Chris, we're going to start with you.
I figured we could begin with something perhaps that most people would consider non-technical, and that is philosophy. So, I would like to hear
first if you could explain why the interest in philosophy, and then I would love for you to tie in your conversations or specific conversations involving advice with Daniel Dennett, and maybe give some context for who that is.
So, back in college, I sort of been into computers my whole life, and I read this book Gödel, Escher, Bach, which was sort of mind-blowing book at the time, and it's all about kind of the connection between computer science and music and philosophy and things like this. And so, when I got to college, I said, you know, I started taking some philosophy classes and really kind of went down this rabbit hole of philosophy and actually was at one point in a PhD program until I dropped out. I was very interested what's known as analytic philosophy, so language, mind, logic, the foundations of mathematics. It's still an area I'm interested in, sort of the history of ideas, I'd say. The history of science, the history of mathematics, how it happens. I by no means consider myself a philosophy expert, and I haven't read that much over the years, but I have, for example, a couple of years ago I went into this whole really big deep dive into the history of logic and computer science, and actually ended up writing this article for The Atlantic about it. And kind of my argument was, which is still kind of my main area of interest, is this idea that you could have a group of people working on something. There was this great quote I started the essay with. It was this computer scientist who said, "If you went in 1905 and tried to find the least practical area of philosophy or any academic field you could, it would be this set of logicians like Bertrand Russell and Kurt Gödel and a bunch of other people like that who were doing these really, really esoteric logical things." But, it turned out that was literally the direct lineage into Alan Turing and von Neumann and all the great papers that came out in the '30s and then that culminated in World War II. So, it literally the history of computing came from this kind of crazy group of like 10 people in 1905. And so, it was that kind of stuff that I was into, reading about that kind of stuff. And the fun thing with philosophy is you can say, "Hey, this semester I'm going to do science and this semester I'm going to do math." So, it's really just a little bit dilettantish or something. Like it's just sort of a fun excuse to go read a lot of smart people. But yeah, but then at one point this this guy in Daniel Dennett who's sort of one of my heroes who's written a lot of great philosophy books, kind of popular philosophy books I highly recommend. And I had the [clears throat] opportunity to talk to him and that was the point at which I was thinking about quitting and doing what I do now, basically startups.
And he said to me, he said, "Look, if you think you're going to be like a great philosopher and that's all you can ever do, you should do it. Otherwise, I would quit immediately and go do something else." I just knew it. Like I was going to be a mediocre philosopher working on footnotes. But basically in these kinds of academic fields, there's like five people that matter every century. And then everyone else is sort of doing, you know, footnote cleanup. [laughter] The other thing me and my friends had this idea that we Look, the best philosophy paper at the end of the PhD you write a dissertation. We came to the conclusion that the best dissertation would be two pages long and have no footnotes. And that was just completely unacceptable in modern academia.
So, we're like there's no way that we can do what we actually consider to be a great cuz you know, truly great philosophy is a brand new idea, a brand new set of ideas. Not that I had them at them. I'm not claiming I was a great philosopher. But if the goal was fundamentally inconsistent with the nature of the program, it was probably not as practical for me.
I don't want to say I'm going to push back a little bit, but interest in philosophy, deep interest in philosophy, and it could be coincidental, seems to be a pattern across quite a few currently adept entrepreneurs and investors in the tech space. Reid Hoffman comes to mind. I mean, obviously Naval is a deep reader and considerer of different philosophies. And just to build on your dissertation comment. And we we don't have to spend a whole lot of time here cuz I still want to do a little bit of background. But for those who don't have first-hand exposure to Satoshi Nakamoto's white paper, how long is that?
It's like seven pages, I think. I have it on my wall, actually in my other office, I have it on the wall and it literally fits on a poster. So, I believe the PDF, you know, depends on the format. You can get them in like printed Bible-like [laughter] formats or you can get them get them as a PDF. I think the PDF seven pages. Yeah, I know it's very short. It's very short and actually probably two-thirds of it is implementation details. The core ideas are probably
Yeah, that's a good point.
Similar to the Bible, there was a whole long period of forum posts and other kinds of things fleshing it out and then the actual code. The concept of a blockchain is a I think one of the beautiful computing primitives that a lot of those beautiful simple things is relatively simple at its core.
I'd like to revisit the logicians for a second. So, Bertrand Russell and these others, so they were the significance of that was largely missed at the time. I mean, of course it was. Hindsight 20/20, but I'd like to maybe use that as a segue to something you wrote in 2013 in a blog post titled I think this is the title of the blog post, What the smartest people do. Might just be a quote from the blog post, What the smartest people do on the weekend is what everyone else will do during the week in 10 years. And among the tech hobbies with momentum, you included quote math-based currencies like Bitcoin, end quote. That's 2013. So, I'd like to ask two questions. Number one is and there were other examples that seemed now to be quite prescient. How did you identify math-based currencies like Bitcoin to fit into the category of what smart people are doing on the weekend? And then are there any current hobbies [snorts] that you're watching with interest?
This goes back to the lore of Silicon Valley of the hackers in a garage and Steve Jobs and Wozniak going to the Homebrew Computer Club. It was like this fringe cultish club at the time in the era of mainframe computers and things. It basically came back to this idea that maybe that's not a coincidence that this keeps happening. That it's these things people are doing on the weekend and particularly they're smart people. You go and you talk to them, they had a good reason. They really understood what a personal computer could be. They had very deep thinking. So by the way, a lot of this is involves actually going and speaking to people and not trusting secondary sources. I really believe very, very strongly that one of the most important things here you can do is just go speak to a lot of people. That's where I get all of my information talking to entrepreneurs, talking to people that are smarter than me. Why was personal computing happening at the Homebrew Computer Club and not at, let's say, IBM at the time? Once a company gets to a certain scale, it's managed by business people and business people plan on a one-to-three year horizon. They're very good at execution, but typically it's extrapolation execution. Like, we have this computer here, let's make a better the next version of it or something like that. And they're not This is sort of Clay Christensen's idea. The got idea of disruptive innovation is that these things come from below. They look like toys. This is another kind of common theme. They come from below, they look silly, the serious people poopoo it, it's not a serious thing. Some of these things, by the way, that people are into the hobbyist things, they just stay hobbies. A lot of it depends on the nature of the specific topic and is it going to follow some kind of exponential improvement curve and things like that cuz the PC, of course, was riding Moore's law and a bunch of other important trends in a way that other fringe hobbies of the time weren't. So, I've always found this to be a small group of very smart, cultish people to be very, very interesting pattern. And one thing I do a lot of I've read a lot of history books, particularly history of innovation. And this pattern happens over and over. So I'll give you an example. Another example I like to use is University of Utah in the 1970s. Every single computer graphics thing today, Apple, Pixar, Atari, the best venture capital strategy in the 1970s would have been to take a big bag of money and hand it out to University of Utah, okay? Cuz they were all the the entire future of computer graphics was the University of Utah. Why? Because some I forgot the specifics, Some donor liked computer graphics and gave money and they're all there. I always think about it like I do venture capital. I can sit there, analyze metrics, and do all this other stuff, or I can just go try to find University of Utah. That's what I think about all the time. Like where is that? And by the way, a lot of it now is on the internet. It's in a Discord. It's in a Reddit. A lot of what I did in that list that I had in 2013, a lot of that came from Reddit.
It's what is the current definition of the frontier? And there it was a time when it was Wild West, there was a time when it was conquistadors and people setting sail in the age of sail. And today it feels like the frontier is on the internet. And even on the internet, the frontier is within Web3 and crypto because it's sort of the least regulated, the most decentralized, the most permissionless 24/7 365 markets that are self-funding. Hackers from all around the world can participate. You can be anon or pseudo anon or just have a cryptopunk as your profile. And nobody has to know who you are. matters is the output of your code. And if it works, you can make huge amounts of money. Satoshi Nakamoto may end up being the richest person who ever lived and could have pulled it off completely anon. And that's not the only one. There are huge fortunes being made and lost on this decentralized anonymous frontier. And now I think we're seeing Web3 starting to pull in all the talent. All the smartest people in Silicon Valley seem to be looking from their 9-5 jobs into 24/7 Web3 and figuring out how to participate. Every company that I'm involved with that's not a Web3 company calls me and asks me about a token or a Web3 angle. And obviously, some of it is just to make money, but some of it is this this appeal of open-source, open platforms, portable data, user privacy, user control keys, and community-owned and generated networks.
So, I want to hop in here. This is all very important and we're going to come back to it and we're going to get to a definition of terms also just for people who are not familiar with Web3. Before I get to that, just because I want to try to create a thread going from 2013 in that blog post to here. University of Utah, how did you find this particular University of Utah math-based currencies like Bitcoin in 2003 or or just prior to that? And then we're going to bring that into Web3.
Like a lot of these things it started with I think friends. Naval could have been part of that. Fred Wilson, there's sort of early group of people that were kind of getting interested in Bitcoin. I used to be technical. I'm not particularly technical now, but I went and used Bitcoin and I was particularly interested in the programming language around it, which I can talk more about. Now we have uh platforms like Ethereum with with much more robust programming abilities. So I you know, I went and kind of used it and the idea I have to say it appealed to me initially. I had come from I should first saw it actually cuz it used this thing called hashcash. So hashcash is the algorithm that is used for Bitcoin mining, what's called mining, which is a way to incentivize the people to run their computer and run part of the Bitcoin network. I started a computer security company in 2004 and it actually looked at using hashcash. So hashcash is talked about for a long time as a way to fight internet spam. I mean this is what I was working on. The idea was why do you have spam? It's a tragedy of the commons problem where because it costs zero to send an email, if you can make $100 every million emails, spammers will just do that. And so one idea that went back really back to the I think the '90s was the idea of charging somebody a little bit to send an email. But then how do you do that when you don't have native internet money? And so the idea was you force them to do a computation. And I actually had looked at commercializing this at one point. I didn't do it. But I couldn't figure out the whole thing.
When I first saw Bitcoin, I'm like, "Oh, it's stored hashcash." Adam Smith called capital is stored labor. And so that's what Bitcoin actually from my vantage point back then it was like, "Oh, wow, it's hashcash but it's stored." And that was actually what got me initially interested in it and then I started going down the rabbit hole as we say. You'll hear this phrase a lot from crypto people because it's very much this looking glass experience where the outside narrative is just so incredibly not accurate about about Web3. And once you go and learn it yourself, I get an email now and Naval's probably getting this, too, every day now from a Web2 person, a good entrepreneur, saying, "Oh my god, I didn't understand what this was, and now that I do, it's like completely changed my life." It's a transformative thing when you go down that rabbit hole. So, I kind of went down that rabbit hole, although there wasn't as deep a rabbit hole back then, but I think probably I'm guessing that we all had a similar experience.
I read about the Byzantine generals problem and the solution to that and I realized, "Wow, you can now organize people without rulers." Could you explain what that is, Naval?
Yeah, Byzantine's generals problem is a problem that basically says, "How do you get people to coordinate when nobody knows each other, nobody trusts each other?" And by using proof of work, aka hash cash, you can say, "Well, I've done the work to have a credible vote." And so, anybody who hasn't done the work hasn't done the vote. And so, now you can take systems that before would have to be run by centralized authorities, ranging from the government running money to Mark Zuckerberg running Facebook, and you can replace them by a credible vote of all the people participating in the network, and you know they're not cheaters, that they get to have a say because they've done the work. And one way to do the work is hash cash. But that's essentially what blockchains and Web3 do. Web3 basically says, "Okay, we can now run this network through the people who have invested into the network, and they can invest with money, they can invest with resources, or they can invest with proof of work, which is sort of the most robust way to do it while keeping it decentralized." But I think this may lead us into We're probably getting to the point where we should define what we mean by Web3. Uh and I think uh Chris has articulated one of the better definitions out there, one of the best definitions.
And perhaps, Chris, we could also start, just to show I don't It could be change, it could be evolution, but you know, Web1, Web2, Web3, if you could lay it out.
The way I think about it is Web1, the internet, of course, existed before the '90s, but the web, sort of this this killer app on top of the internet, was created in 1990. And so, I sort of think of Web1 as let's call it 1990 to 2005. The key thing with Web 1 is it was dominated by open protocols. So, the web has a protocol called HTTP, email has a protocol called SMTP. These were the platforms you were building on then. So, if you were Larry and Sergey and you were building Google, you were building it on top of HTTP, on top of the web. And the web was open, which means no one controlled it. And what that means from Larry and Sergey's point of view is they knew if they built a successful product, a successful search engine, they would own it and they would control it. And you couldn't have somebody come along and say, "I'm going to take 50%" or "I'm going to shut you down." It's the web, it was open. And similar to let's say in economics, if you talk to an entrepreneur or an investor, they'll say they like to invest in countries with predictable rule of law. They don't like countries where the government seizes the assets and things like this. It's the same thing that happens with startups and entrepreneurs. They want to build on a platform that they know they can trust. And so, that was what was so great about that first year of the web and why you had so much incredible innovation and investment. And it was, I think most people would agree today that was sort of a golden period of innovation. But, the products were limited in the in the sense that they tended to be I call it skeuomorphic where people were taking things from the offline world like magazines and putting them on the internet. If you go back and look at the '90s web, it was very much experienced like a magazine. You didn't have things like social networks and user-generated content in nearly the same degree. That started really kind of percolating this year people call Web 2, let's call it around 2005. And at that time you had sort of two competing models. Like let's just take Twitter. There was an open protocol called RSS that was the obvious thing to compete with Twitter. And it's still around, but it's not nearly as popular as Twitter and Facebook and everything else. And so, there were sort of open ways to build social networks in the 2000s and then there were closed ways to build them. And for a variety of reasons, I won't go into all the details, the closed ways won. And a lot of it had to do with the ease of use. The way I think about it is Web 2, the open protocols were just limited in what they could do. So, if you wanted to set up a website in 2008, let's say, and you wanted to have sort of simulate the functionality of Twitter, you'd have to go get like a web hosting provider, buy a domain name, and do a whole bunch of other things. Everyone tried to kind of reuse domain names, essentially. Domain names in in the earlier in the pre-blockchain world, they're the one thing you can really own on the internet, it's your domain name. You control it. And so, the open side kept trying to kind of use the domain name again and again, but it costs $8, you have to go set it up, it was very technical. Meanwhile, you go to Twitter and it's like three clicks and you choose your name and you're in and your friends are there and and then mobile phones came along and the whole thing accelerated and here we are now with five plus companies that kind of control the internet. So, web 3 is coming along and so, web 3 is my definition is it's an internet owned by users and builders orchestrated with tokens. So, this new concept of a token is the kind of the key concept of web 3. This comes sort of historically from the movement that started with Bitcoin, although I think it's sort of a different branch of the genealogy or something. And a lot of the stuff's actually built on a different crypto network called Ethereum and then there are other kind of alternatives to it. The big kind of innovation with Ethereum was it's fully programmable, it's a computer. It's funny, I this is the most controversial thing I've said on Twitter, I got this huge when I said blockchains are computers, they are computers and literally if you go look at Alan Turing's on computability paper, a computer or Von Neumann or any of the great computer scientists, a computer is something you write code and it can store things. Ethereum has a almost Turing complete programming language and can store information. It's a virtual computer, a computer that runs on a network of physical computers, which is I think what kind of trips people up, but it's a computer. It's a very powerful computer that has new properties that prior kinds of computers didn't have. And one of the things you can do on these you can create these things called smart contracts, which are code that will continue to run in a certain way and you can also create these things called tokens. And tokens can be fungible, like kind of cool cryptocurrencies are, or it can be non-fungible NFTs. And they can be something like which I think some people have heard about now, which are things that can be represented by a piece of media, for example. You're buying this collectible basketball card or this collectible work of art, things like that.
Why tokens are so important is they now provide a mechanism by which value and control can be given to users and builders as opposed to simply decentralized companies. So, you can build today there's two things. One is remember before I said the functionality wasn't quite there for for the open side in Web 2, it's now there. You can now build something that looks and feels like Facebook or Twitter using open protocols and using this new kind of philosophy where the value and control accrues to the users of the network not to a company because there is no company. And you're going to see more and more things products launched like this where there is initially there'll be some kind of R&D organization that helps create these protocols, but over time they go away in the same way that there is no Bitcoin company and the Ethereum has a non-profit foundation that supports R&D, but there is no Ethereum company. And this is how I believe the most important internet products will be created in the future is through this kind of new means. And why will it be done this way? One is it's better because wouldn't it be better if the drivers on the Uber network owned Uber and got to participate more in the value creation and also in the control and governance of that system? I think that's clearly a better thing for society and I also think it's it's just going to be a winning product. If you look at people in these Web 3 communities, no Web 3 company no crypto company has ever spent a dollar on marketing including Coinbase I was on the board for years no marketing. Why? Because tokens are self-marketing. When somebody owns something and feels skin in the game, they want to go talk about it. They want to evangelize it. I think Web 3's not only better for the world, but it's also going to beat Web 2 because it's going to be more popular because the people get really excited when they actually get to participate. The internet is 100% the most important invention of this century. That's I don't think that's hyperbolic to say that. And we're literally talking about how is money and power going to flow on the internet? This is such an important issue and yet it's caricatured in the press [clears throat] and things is like tech bros money this and that. It's so misunderstood and it's so important which is why I get fired up about it because I feel like if people like me and Naval don't explain this, that this thing is a very important thing, I guess I'll say.
I'll just, if it's okay with you guys, share a little bit, speak for a second, and also try to paraphrase as a muggle, and then I want you to poke holes in what I say. So, first I'll say that I'm relatively new to this sphere, but like you said, once it started to land or sink in, I felt something, and this is going to sound very odd, perhaps, but this like physiological quickening that really kept me up. I was not able to sleep well for about a week straight. And that only happens to me every like five to seven or five to 10 years because I started to see some of the possibilities and some of the beneficial societal changes, and on and on and on that not just could or already in a sense a byproduct of this paradigm shift. So, tell me if this captures some of the essence, and then either of you can poke holes in it, but just to highlight a couple things. So, people might think of Web 1 as read-only, largely read-only, and open. Then we have Web 2, read-write, but as we've seen it, it's become more centralized with a lot of these large companies. And you don't own, like you said, aside from maybe a domain name, you are not in control of your own destiny. You have very few rights. Your reputation is not transferable if you are on a platform like Twitter. You can be deplatformed, and we put that aside, but it's it's centralized, right? You're at the whim of a handful of companies, which a lot of people will sign up for, like you said, because of convenience, ease of use, etc. Web 3 then appears to introduce a number of things including property rights and decentralization. And this is not going to be a perfect comparison, but like if people think of say like REI and a co-op, it would differ in the sense that we're not going to necessarily going to have management per se with a truly decentralized platform. But what I have seen first hand and I want to give people a concrete example just to point out a very niche group perhaps that I've seen benefit very clearly and that has been artists. And so I want to talk about this just for a second because I have friends who are photographers, friends who are graphic artists, friends who are musicians who were crippled financially by COVID when they couldn't tour, when they couldn't do things because they're only getting paid 1 cent per stream on some of these music streaming services. With the ability to create unique pieces of property in the form of NFTs and launch projects, their futures have entirely changed. And I want to highlight something for folks and that is it's not because of the initial sales price. The model for authors, the model for musicians has some royalty component, but you kind of get paid up front and then you have a pittance of some percentage that you make on the back end. But with a smart contract, like you said, if we think of Ethereum as this world computer, with a smart contract instead of a ton of middle men who are kind of taking the lion's share of profits, you can set in advance certain things that happen automatically, like if you are an artist and your work is resold and then resold again and resold again, well, if you're operating in a traditional art world, you get paid once, that's the end of the story. Instead of that, now people are making the lion's share of many of them of their income from these secondary sales and it's all done automatically. They don't have to trust some agent or a broker or a rep or curator to pay them. They don't have to audit accounting because it's all on the blockchain. So I just wanted to give that example and [snorts] wonder if either of you would like to elaborate on any aspect of that, correct any aspect of that, or give an example of other things that you're seeing that are exciting to you.
Yeah, I would just only summarize what you guys have said because I think you've approached it the right way. But basically what you're saying is that digital private keys enable digital private property. And so we finally have private property in the internet and we don't need people like Spotify or even the studios and the labels to determine who owns what private property and hold it with their database entries and their lawyers. We can each do it ourselves. We can finally each and and Chris got made fun of on Twitter for this. We can each own a piece of the internet, but it's absolutely true. We can create digital scarcity and it is a very powerful thing because then it can map to real-world scarcity because the real world is not completely abundant in everything. The real world does have scarce economic resources. And so we can have digital scarcity and digital private property. And in a web 3 context, there are three critical things that both of you have touched on, but I just want to summarize them for the listener that really make web 3 so unique, so distinct, and so revolutionary. Which is in a normal model we're used to thinking of a computer program as an application run by a third party where they control the code, they own the data, and they own the platform and the economic benefits. And then we get our scraps. We put up tweets, we put up podcasts, maybe we get a few shekels from Spotify, maybe we get a few hearts on Twitter and a few retweets, but it's not a lot. The owners of Spotify are getting far richer than the creators and the podcasters on Spotify and the musicians on Spotify. Not to pick on Spotify, they're just emblematic of the whole thing. And we've had this transition where it's like Web 1, okay, who won that? Microsoft, maybe Netscape, and and Google was a big winner of Web 1. And then Web 2, who won that? Well, it's Apple and Google and maybe Facebook. And is Web 3 also going to be controlled by big companies? No. The beauty of Web 3 is for the first time all the data is actually open. The data is literally living in the blockchain or in distributed systems, but it's secured. It's actually secured far better than these corporations can secure our data because it's each secured by our own private key. So, each of us has a safety deposit box now in the cloud that we can give selective access to with our private keys to people who need them when they need them and then close them off again so they're not leaked in the next credit reporting hack or the next big company hack. And then who owns the platform underneath? As Chris said, it's a contributors own the platform instead of corporations own the platform. And all the people who are pro co-op and who are pro collectivism should be embracing this because now we can own the platforms that we are actually building with our collective creative efforts. And finally, developers love this because the code is now open instead of being closed. So, it's this insane concept, a revolutionary concept, where we flipped applications from being closed code, corporations own the platform, and users are the data to open code, contributors own the platform, and users own their data. And so now these things become completely composable. And I think one of the reasons why the Web 3 revolution is going to be so non-linear and so unexpected and so fast is because with open code means these applications plug into each other like LEGO blocks. You go buy a LEGO for your kids, well, it connects to every LEGO piece that your kid already owns, it connects to all the other LEGO pieces of the kids down the block, and they can build anything they want out of it. And that's how code on Web3 works. That's how data on Web3 works. And that's how even ownership on Web3 works, where I can own a little piece of every platform that I contribute to. And this is absolutely a revolution.
Naval, could you define a word which comes up a lot in Web3, composable, and what that means, how people use it?
The beauty is this is all open source. So, it's not even APIs anymore. I don't you have to access through the very limited APIs that a Twitter might expose and then take away later on as they famously done. I can literally connect to the code at any point that I want to. And then in open source, you only solve each problem once. So, if somebody has built a good version of how to solve a certain problem, I'm just going to reuse that and reuse it again. Maybe I'll fork it, maybe I'll improve it a little bit, maybe I'll port it to a slightly different system. But essentially, at the fundamental level, each problem only has to be solved once. So, composable means that it's like Legos or like digital Legos, where I can just copy the Lego and then build on top of it. So, the effect to a competitor is like a Voltron type thing, where all of a sudden all the apps in Web3 can sort of team up to create any app needed. Example is there was an innovation in DeFi called automatic market makers, which is instead of having to have an exchange where you have paid market makers and firms on the other side ensuring liquidity in any market. You know, you go on the stock market and you buy a stock, there's someone else on the other side who is paid to provide liquidity to sell you the stock at the exact moment that you want to buy the stock. But in Web3, we created this innovation with DeFi actually called automated market makers, where you can just do it through code. Now, once you've done that in code, and the most famous company there is Uniswap, which is of course an interesting investment, so congratulations, Chris. But once it's done, then anybody else can copy it. Then it can just be plugged in, dropped into any new application. So, if you look at for example games that are going to come out that are Web3 based, they're going to have entire market economies in them. They will have custody solutions. They will have NFTs built inside of them. They'll be completely composable in that any piece from any other app can plug into any other app permissionlessly. And so, you're building an edifice. It's almost like building a civilization or a city of interconnected apps instead of these silos in which the data is not portable, the code isn't portable, the users aren't portable. So, that's that's probably way longer of a definition than you wanted, and Chris can give you a crisper one, I'm sure.
I think that was great. I think I like to say that composability is to software as compounding interest is to finance, right? It's sort of this magical thing where if you get it going, it has a sort of exponential hockey stick. I think related to what Naval said, I think one thing people who aren't in the tech business may underestimate is how dominant open-source software is. So, open-source software went from a curiosity in the '90s. I was I happen to be watching a thing about Microsoft in like 1999 in the antitrust case. The word Linux doesn't come up. It's all Java. Of course, what actually happened is Linux is the thing that won. 99.9% of the code in the world is open-source software that that runs. So, every server you talk to on a data center, that's almost all Linux. Your Android phone is Linux. Most of the software on your iPhone is open-source. How did open-source win? It's composability. It's what Naval said. You only have to solve each problem once. Once you solve a problem, just go on GitHub and fork it and reuse the code. What Web3 is doing is it's taking that level of rapid innovation and applying it to web services in addition to the software. The one thing software couldn't do is it couldn't run itself. It relied on a company to run it. So, a lot of the tech industry today is take open-source software, add a little bit of extra proprietary software on top, and then instantiate it, run it, and then charge for it. It's software as a service. And that's great. And they they provide value, and they should make money from that. But, the kind of key thing driving underneath is this composability of open-source software. And now, we're going to extend that to this new area.
Yeah, composability even goes beyond software, even though that's how it's commonly used. It even goes into media. So, for example, today if I want to build something on top of the Star Wars platform, I got to go cut a deal with Disney. But, in the open-source composable NFT world, artists are basically giving away the concepts. Yes, you can always right-click and save an image or the code and then modify it, but you can build on top of it. So, people will be building games, they'll be building cultural artifacts, new memes, new music on top of NFTs, and more value accrues to the underlying NFT
Because now it's becoming more popular. And at the end of the day, the value of a piece of art or media is directly proportional to how the community around it and who's using it and who's promoting it and who's working with it. So, it kind of blows away this idea of copyright and intellectual property, and instead it creates the most powerful memes in the world, memes in the broad sense of music and movies and books included memes, not just the little internet memes that we're familiar with, and media itself becomes composable. And the greatest artists are going to have the greatest distribution. It's why, not to pick on our friend, but you know, one reason why I think Joe Rogan and others make mistakes by going to Spotify, is that the power of a meme, the power of an idea, is determined by how many computers it's running on. The power of a program is how much computation power it has behind it. The power of an idea is how many brains is it running in. So, if you have good ideas, you want to spread them as far and wide as possible. It's why I'll never charge for a piece of content, and no one in their right mind who has good ideas should. You don't want to restrict the avenues. You want people to recompose your ideas. Akira the Don takes stuff that I say and remixes into music, and there's Smart Nonsense out there making videos and cool animations out of it. And Jack Butcher does visualizations, and this is all free. Or Eric Jorgenson does the Almanac. I don't have to do any of this. It's all composability around media. Now, I don't have an underlying monetization mechanism, but if I wanted to, I could issue NFTs against the original content, and there are collectors and people who will pay for that. And my content is just becoming more and more famous. So, that's an example of composability in action that extends beyond just software. Composability is a very, very powerful concept, and if you want to, for example, I know a lot of your listeners create a lot of content. They're content creators and innovators and creators themselves. And if you want your content to get as much out there as possible. Don't hold anything back. If you have good ideas, you want to spread them as widely as possible, and you wish you should be so lucky that other people come and compose them with their own content and create new memes and new ideas.
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I'd love to add just a couple things here, just to give some sort of spice and specifics to some examples, as you just did. And to further explain why this stuff has kept me up late at night.
[laughter]
By the way, Tim Ferriss Show is just going to become a crypto podcast. Going to convert into that over time.
No, it will not. It will not. I promise folks, even though I'm getting pulled into the deep water and getting spun into the vortex, I'm able to tread water and I will not pull everyone in with me. But, this stuff is important. I think it's very important to explore and it's excited me because I have seen how much good creators, good authors, good musicians have struggled because they are not good at marketing. But, they have diehard fans. Maybe a small group of diehard fans, but they have some number of diehard fans and many of the listeners of the podcast will recognize the title of an essay or blog post called 1,000 True Fans by Kevin Kelly. I know that Chris, you've also written about 1,000 True Fans. You can find it at kk.org. I recommend it consistently all the time. And what Web3 allows you to do is align your interest with collective interest with other true fans self-interest by allowing them to own digital property that you create. And what has excited me is I'm seeing a lot of experimentation. So, we were talking about some of the advantages of Chris, you were talking about some of the advantages of Web3. One of the advantages of Web3 is also, it appears and please correct me if I get any of this wrong, guys, is that it is very easy, relatively speaking, compared to say Web2 era, for many companies or projects to reach escape velocity. So, if they're raising money, for instance, they might raise once or twice small amounts of capital and then they have a token and they're able to sort of control their destiny through a collective who act as stakeholders. And in addition to that, if we look at an example like Bored Ape Yacht Club, people can take a look. You're seeing because of the composability, right? This Lego block aspect and low barriers to entry with respect to cost that people are able to experiment widely. And in the case of Bored Ape Yacht Club, and thanks to Punk 6529 for sharing this particular example with me because I wasn't aware, in addition to selling the JPEG associated with this NFT, this property title that gives you this digital asset, commercial rights were also provided to at least some purchasers of these Bored Ape Yacht Club. So, then you have people who are going out with their specific Bored Ape and creating coffee companies or creating craft brew companies. I've never seen anything like that before. And certainly, if you're a young tech-savvy intellectual property lawyer, your services are going to be in need. So, good to get up to speed. But, the fact that all of these experiments can be run concurrently at such low cost says to me that the ecosystem is going to produce through natural selection and evolution and recombination of different types lots of things that will be very exciting. And you know, it doesn't even matter if 98%, 99% end up being garbage because the winners, kind of like finding Amazon or Google in '99 or 2000, will end up being so impactful. And maybe that's just me drinking the Kool-Aid. I don't know, but that's how it feels to me.
Yeah, I mean like you're right. Bored Apes, I think that the recent drop they did with the mutant apes, so they did this thing where you got like a potion and you could get kind of your mutant counterpart. I think they made $100 million. I don't as far as I know, they haven't raised venture capital and they made $100 million on that one drop. So, certainly, yes, it's a different economic model. They take it farther where you get the commercial rights. The next stage what people are playing around with now is to actually have the community create narratives. And so for example, Wattpad, you know, these kind of fan fic community. Imagine the next Harry Potter, the future Harry Potter is owned by the NFT holders. And they get to decide, they get to write all sorts of interesting fiction. And then they get to vote and decide what becomes canon and what is not. Imagine the passion people have for Star Wars and all these other kinds of communities. And now imagine they own a piece of it and they control a piece of it. It's about to get really interesting. I don't think there's been this much creative kind of energy since the '90s. I don't think mobile compares to it.
Now we get into the meat of it, which are NFTs, non-fungible tokens. And this is something that Chris has been on from day one. Of all the investors that I know in the entire space, Chris has been the first one who got into NFTs in a big way and has stayed consistent on. In fact, February of this year, I remember meeting with him, all he wanted to talk about was NFTs. I didn't even understand at the time. And I was like, 'Yeah, whatever, Chris. That sounds cool, nice toy.' And now I'm like, 'What did you say again?'
So I sort of missed NFTs, but NFTs for me answered a whole bunch of questions that I didn't have the answer to before. One question was a bunch of people showed up and they bought Bitcoin early and they get to get rich in this giant wealth transfer as we move from fiat currencies into sort of scarce math-backed currencies as Chris also once called them. And so does that just mean that the people who showed up in 2009 to 2015 or 16 get rich and everybody else kind of is a popper? No. There's a funny quote out there floating around where somebody said, 'Every generation invents its own new Ponzi scheme and rejects the previous generation's Ponzi scheme.' And now we're moving in much faster times. So the previous generation's Ponzi scheme might have been Bitcoin or Ethereum. If you think about what Bitcoin is, Bitcoin shows up and says, 'We reject fiat. We reject printed money. We reject kings and rulers and tyrants. We want the people's currency.' Great, we got that. And then someone says, 'Wait, you can create your own currency? Well, I want to create my own currency.' So you get all these altcoins and everybody steps up and says, 'Well, I got my own currency.' So ironically, there are now probably more currencies out there than there are tokens. There's more currencies than Bitcoin. And so, people are fighting to say, 'Well, instead of your ledger of record, let's use my ledger of record.' And NFTs are people come up and say, 'Actually, maybe digital value, digital assets are like fashion. They're culture. They're always emerging. They're always composing. They're always combining. They're always going out of style.' And just like in the real world, anything that's in fashion can hold value. It could be real estate, which is a real use case. It could be oil. It could be gold. It could be every single house. It could be every single business. It could be a pair of shoes. It could be a laptop for a brief period of time. The same way, every digital asset that has a community and a culture around it can hold value for some period of time. Now, of course, it will be very non-linearly distributed. The vast majority of objects will trend towards zero value. It may be flashes in the pan, but at least this gives a chance for everybody who's coming late to the crypto revolution, late in quotes cuz we're still so early, gets a chance to say, 'Okay, we can define any object as having value that we believe has value.' And these cultural memes that we're creating around NFTs, like Bored Ape Yacht Club, they don't have to harass you into hodling them. Hodling is this meme in the Bitcoin community, where you got to hold your Bitcoin. It's a misspelling of hold, called hodl. But in the NFT world, you hold for sentimental value. If you're Punk 6529, someone comes up to buy your punk, you're not going to sell it. In fact, I think just famously recently, one of the punks who's using it as a Twitter ID, cuz it's the new blue checkmark on Twitter, but it's actually validated and verified through wallet ownership, he got offered something like $10 million for his CryptoPunk. And it was just kind of a random generic little 8-bit pixel CryptoPunk, but he refused to sell because that was his identity. And he basically had to say, 'Even though I may not be worth that much money, I'm not for sale.' And that actually made it a cultural meme and icon. And now his CryptoPunk's probably worth even more. So, NFTs are this absolutely fascinating rabbit hole. I think Chris was probably the first investor to identify them at scale going all the way back to his Dapper Labs investment. These are the people who built CryptoKitties and evolving from there. So, I would just love to hear Chris go into NFTs like the evolution of them and kind of where they're headed.
Yeah, I'm obviously I'm very excited about NFTs. I think that they're very broad what I would call primitive. Primitive just so you understand like the way we kind of use it is cuz these are kind of key building foundational building blocks of the internet. And I think that most of the issues that develop or some of the things I talked about earlier about how you can only you were limited in what you could build using open methods. And a lot of the problems frankly I think come from advertising. The fact that we didn't have native payments and tokens and all these things we now have. What Google wanted to do they wanted to have a digital closed loop. And a digital closed loop prior to crypto you could really only do that with advertising. And so we built this giant infrastructure. The internet now is powered by banner ads and search ads and things like this. And that has been great for a few companies. It's generally been really bad for creative people. There was someone who had a great tweet yesterday. The web two companies convinced you to give away your creations in exchange for little hearts. But yeah, tell me about how NFTs are the real scam or something. It was some
Yeah, exactly. [laughter]
Formulation like that. Like it's kind of amazing that they've convinced all these people oh you know Instagram what do they pay out? Zero. Facebook zero. Twitter zero. YouTube 50%. Apple just for having the phone they take 30%. Do you know how many businesses can't survive when you take 30%? It's kind of crazy that we put up with this. So, now as you said put aside NFTs just look at like Substack. So, there's no crypto in Substack. So, what's going on with Substack? It's a platform and like a sort of a newsletter platform you can go to as a writer and have people subscribe to it. It's relatively simple really elegant idea. But the interesting thing you see now is you see writers who previously might make I don't know what $100,000 or something getting a million dollars a year. And you see a lot of people saying hey that shouldn't happen. We were told the internet is bad for creative people. The internet is not bad for creative people. Web 2 is bad for creative people. Spotify, I just saw the stat the other day, Spotify advertises the stat. They have 8 million artists, 14,000 of them make 50,000 a year, the rest make less than that. Those are businesses, you have costs, you basically it's very hard to live below that. So, 14,000 kind of make a living out of 8 million. Is that working? And I'm blaming Spotify, by the way. A lot of that money goes to labels, and I think Spotify is a good company. It's the model. It's the logic of that model. So, and then you have these cases of like this musician Blau who I think he's like a medium-sized artist on Spotify, he did an NFT drop, he made $11 million. So, even if you assume that $11 million is a bubble or something, people say it's a bubble, if he made $100,000, it's transformative. It's the same thing that's going on with Substack. And so, what you have is now you have this really powerful new way for creative people who were previously getting banner ads at best, very poor monetization, are now able to go and create all sorts of interesting things. And this is we're seeing the early versions of it. You could create a JPEG, you can create digital album art, sort of an obvious thing that musicians are doing now. But it can be much more than that. It's just an object. Just like in the real world, we have all sorts of different classes of objects. We have art, we have utilities, we have NFTs are just as broad a concept. And so, I think you're going to see all sorts of interesting experimentation where, you know, maybe you a musician, you get something that's beautiful, but also you can go use in different ways. You can take it from a game or bring it into another experience, or you use it to go to a real-life show as a ticket. And it's also a means of patronage. I think one of the things I experienced I really encourage people to participate in these communities to understand them. I buy NFTs on Foundation, which is one of our investments, which is sort of an high-end art NFT platform, curated platform. For example, there's this science fiction writer who I sorry, graphic designer who I bought a bunch of his NFTs, and he DMs me, and now we're friends. And it's like I never understood people that gave to bought physical offline art. I've never had any interest in it. Now I kind of get it though because I'm like, 'Hey, this guy's cool. I want to be part of his network. I do venture capital. I hang around with tech people all day. It's fun for me to be able to talk to an artist. And at the same time I can support him in this sort of non-transactional way and be his patron.' And see, you know, some people are buying stuff on these websites to make money. Some are doing it to patronize. Some are doing it to I think down the road we're going to see more and more utility use cases. The gaming is really interesting right now. This I think the world hasn't seen this yet, but I will tell you we have a games group at our firm that doesn't do crypto. And it's close to 100% of the things they're seeing now. These are people out of These are founders that come out of like Riot and Blizzard and things like this. I think it's close to 100% of the meetings they have now involved NFTs. The games people get this. They're at the cutting edge. Especially the kind of the younger ones, the next cohort, and there is going to be so much interesting stuff. And these things are going to be real utility. So you can take this piece of art, you can take this sword, and you can mix and match and move it around, and they all kind of immediately get composability and why it's important. And we're just going to see wave after wave of very creative things. I think of an NFT as it's as general a concept as the webpage. Think about the website. When it first comes out people are like, 'Oh, it's a website.' You know, and they try to kind of map it to the offline world. It's like a brochure. But then as we saw over this sort of 30-year period, all of these clever people come and they innovate. It's not a website. It's a social network. It's a SaaS tool. It's a this. It's a that. NFTs are going to be just as broad. It's a core new concept, the idea of owning something on the internet. Another way I like to think about it is like imagine if in the real world we couldn't own anything. And every time you go This is kind of a wacky analogy, but like every time you go to a hotel or restaurant they're like, 'Oh, you got to change your clothes and buy a new outfit.' This is how the internet works today. And then you leave and like, 'Hey, you got to give that stuff back.' Right?
And then one day somebody comes along and they say, 'No, you can take it with you.'
Imagine the amount of innovation that would kick off. That's kind of what's been going on in the internet. We had this sort of renting fiefdom design, and we've just kind of broken it open. And so, people say, 'Oh, it's a bubble this and that.' I think it's just the beginning of this incredible 20-year kind of creative run, I believe.
I'd love for Chris for you to talk a little bit more about the gaming because I think NFTs in the gaming context are easily understood by a lot of folks, even if they don't game. But, a lot of the applications make sense to me. So, I mean, you could talk about anything you want, right? I mean, Sorare is kind of interesting, but I think even more interesting, not necessarily more interesting, but there's been talk, and I think some of this might be kind of bright-eyed, bushy-tailed idealism, but the possibility of say universal basic income when we look at let's say something like YGG, or could you just speak a little bit to that and what that means cuz it's so interesting to me. And interesting is a lazy adjective. It's eye-opening and exciting.
What's the model today in video games? Video games are interesting because there've been new waves of technology, but the old wave still exists. So, the old way to buy a video game was something like Madden. You pay 60 bucks or whatever it costs these days. That's still around. That business is still around. There's companies like EA that do that. But, then you have layered on top of it all these kind of new more modern, what I think of more modern companies. And like, probably the best ones are things like Fortnite and Supercell, Clash Royale, and League of Legends. These are basically the model they use is the game is completely free. You can play it completely forever, and the only thing you buy are cosmetic goods. So, you can't buy goods that make you win cuz people think that would kind of undermine the integrity of the game. So, it's all, you know, just to look cool, status flex. And that's a $40 billion a year industry, just the virtual goods alone. And this, by the way, same thing is going on with NFTs. It was laughed at 10 years ago, 15 years ago. It was a big joke. Of course, it wasn't and it's very important. But, you know, those virtual goods are kind of locked into the game. Also, when you buy the virtual goods, all the money is going to the company. So, what games like Axie Infinity, where investors in one of these kind of new crypto games, is instead of it being you buy the goods from the company, it's much more peer-to-peer. It's much more the way eBay and Craigslist, it's you're buying it from another person who themselves were able to basically improve the NFT by playing the game. And so, in the case of Axie, you have something on the order of 100,000 people, many of whom are in the Philippines, who make a living playing that game. And so, they go and they do a bunch of different stuff, and people call it grinding, like you kind of play a bunch of stuff, and then they improve the NFTs, and then other people who maybe have more money than time buy them from them. And the company only takes because it's like a 3% take rate or something, as opposed to much more like a marketplace kind of fee, as opposed to taking all the money. The kind of protocol will take lower fees, but in exchange, you've got this really kind of cool, vibrant economy. And basically, like Axie really kind of broke out. I think it's one of the four games that have 800,000, which is the max, Discord users, and it's one of the four. So, it's one of the most it's like 2 million-ish active users. Like very, very popular game. By the way, not in any of the app stores cuz Apple and Google are trying to fight Web3 bans. And then yet they still have that kind of user base. And I think Axie, you know, Axie's probably the thing that really inspired a lot of people. YGG meant mentions a separate company, which we're actually also investors in, which is Yield Guild Games. It's very cool. It's almost like a it's what we call DAO, but essentially, it's an online software kind of organization where people can essentially get loaned Axies, so they can go play it and not have to pay the upfront costs, and then earn money. So, it's like this kind of guild model that you have in games, where people kind of get together and join on the same team, but suddenly, you can have sort of real money involved, and people make real livings. So, I think that the games industry, a lot of sort of the next generation of talent saw this and were excited.
Thank you, Chris. I'd love to add also just a few other I'm not going to give it a ton of detail. I'll let people look these folks up, but from the creator standpoint, just bridging back to that, if we think of NFTs, I guess, on a very, very basic level as property title of some type, there's actually a lot more that you can sort of embed into an NFT. So, for instance, Dmitri Cherniak, I'd encourage people to check out. Dmitri, incredible digital artist, incredible coder, really. So, his art is code, and famous for a project and series of pieces known as Ringers, but also, if you check out the Eternal Pump as an example, and I believe I'm getting this right. If not, I'm sure the internet will correct me, and I'll make amends in the show notes, but what an artist can do is provide first access to future projects through certain sets of NFTs. And they can also create in real-life interactions or requirements for people to go to, say, a certain location to mint, i.e., purchase, say, a given NFT. So, there are all these permutations providing future privileged access or requiring real-world actions, say, to be eligible to purchase or to receive a given NFT. The sort of Cambrian explosion of experimentation is beyond anything I have ever seen, and I've been in tech in one way or another since 2007, so not that long, I guess, in the sort of long-term view of things, but I've never seen anything like it. Naval, do you have anything you'd like to add?
There's a really interesting subtle point that both of you've been touching upon that may be worth making explicit, which is that I think a lot of people, when they first see NFTs, their reaction is, well, I can just right click and save that JPEG. Why does this thing have value? And you know, hopefully people who look into NFTs move past that pretty quickly, but you both give examples of how these things have value that you can't just right click and save as. The simplest one is just yes, I can also photocopy any piece of art. Doesn't mean that I have the actual art. There's still provenance, there's still a linkage, there's still authenticity to the art itself. And the simplest way to see that is for example, Bored Ape Yacht Club, let's say we're building a metaverse. We're building like a 3D virtual space and hopefully it's not Zuck, hopefully it's some crypto emergent thing on blockchains that we're all using that's open. Well, if I walk into two rooms, one room has the authentic Bored Ape Yacht Club and it's got the actual nice photos of the apes or the CryptoPunks or whatever hanging on the walls and my software tells me that and then I walk into a different room which has all fakes and copies and my software immediately tells me now you're in the fake one, where do you think the cool kids are going to hang out? Where are the rich kids going to hang out? Where are the parties going to take place? So, all of a sudden having NFTs and this authentication gives spaces actual value and so it allows you to create a metaverse which then has a distinction between space A and space B. But that's just the simplest level. What you've also given examples of is in a game, an NFT is a smart contract. It's a thing that is usable within the game and a copy of the NFT is not. If I have a special piece of loot or a special item that I've picked up in one game and then the developer or the same blockchain or the same group of users went to a second game and I get to port my NFT over, well, that authentic NFT is going to have some value whereas a right click save JPEG version is not going to have any value. And then finally, Tim, you gave the example of an NFT can also be a social contract between the creator of the NFT and the fans of the NFT so that you get it acts as a ticket for access to future rights and a fake one is not going to get you that or it gives you access to future pieces by the artist first and so on and so forth. And I love Chris's example of it being a webpage because a webpage is programmable. A webpage can do anything. It is Turing complete. It can run any piece of code. And so, we have these essentially Turing complete programmable objects that are now suddenly scarce that you can own and that you can transfer and you can link to the real world and you can link them to the digital world through smart contracts. You can link them to the real world through social contracts. By the way, Bitcoin is only linked to the real world through social contracts. I know that's going to be a controversial thing to say, but essentially it's a social contract between the community of Bitcoiners to accept Bitcoin, to accept that as a canonical ledger. So, the same way among the Bored Ape community or among the CryptoPunk community or whatever, the toads or the frogs or whoever they are, whichever community, there is a social contract to accept these as the canonical avatars. So, essentially what blockchains do is they allow open composability and programmability between all these objects in the digital domain through and there are those smart contracts that regulate those and then social contracts that regulate it in the outside world. And NFTs no different. If Bitcoin can have value, if Ethereum can have value, then in theory an NFT can have value as long as the smart contracts and the social contracts and the community enforcing it have value. Of course, that means most of them aren't, but some of them will. I want to also come back to Sorare for a second. And I'm an investor in a few funds that have stake in Sorare. That's not why I bring it up. I bring it up because I listened to a podcast by a guy named Andrew Steinwold on Zima Red interviewing I'm blanking on his last name, but his first name is AJ who was I believe a data scientist at Amazon who then went on to become a Sorare player. So, let me explain for a second. I'm not going to do it justice, but if you can imagine collecting and this is again, not going to do it justice and either of you should correct me if I get this wrong, but digital trading cards that represent specific players that you can assemble into teams that are then benchmarked against real-world sports performance to determine how well your team does. With said team, you can win money in leagues of different types. Now, people are like, 'Okay, fine. Sports betting, interesting.' But, where it starts to get super interesting is because it's correlated to real-world play. With these composite teams, you then have, right now for instance, funds being created where they're hiring effectively digital sports managers. They're buying and loaning out these players, these NFTs, and then doubling down on the people who perform best as sports managers. And one of their dream/goals is at some point to take all of this sports analytics intelligence and data science and to buy an actual sports team and to apply it there. Kind of like sabermetrics and the Oakland A's and Billy Beane back in the day. But, in an environment where they can simulate and test and split test and multivariate test over and over again. I'll give one other example of things to come and maybe it's already happening. You guys can probably speak to this, but let's say you buy a piece of artwork that is in the form of a digital NFT. And I suppose that's a redundant term, but in the form of an NFT. Right now, if you need a loan, you might secure that loan with collateral such as your home. And if it's not happening already, in the near future people will be able to do that with collateral of high value that is secured and verified on the blockchain, right? You're not going to have to go to Sotheby's and get all the provenance and the letters and the this and the that, which is going to take forever. You'll be able to instantly verify it and then secure loans against something like a high-value NFT. Could be a Ringer, could be a Fidenza, could be a CryptoPunk, could be anything. I mean, there're going to be many different options. And I think those are things that just are not immediately apparent. They certainly weren't immediately apparent to me when Kevin Rose was the first person to show me cryptopunks, and I was just flabbergasted. But when you start to I mean, they look, they're cool. I think they're amazing on a bunch of levels, but it's deceptively simple on the surface, and the implications are unbelievably nuanced. So, I just wanted to give a few of those examples.
Yeah, I just want to drop one quote in here, which floats around on the internet. It's called Gall's Law, and it's a rule of thumb for system design. And it basically says that a complex system designed from scratch never works and cannot be patched to make it work. A complex system that works is invariably found to have evolved from a simple system that worked. So, in that sense, NFTs are primitive, and people are going to recombine and assemble and compose these primitives to create incredibly complex systems. And everyone who competes with NFTs with a centralized solution, as happens inside every game or every social network, is trying to design a complex system from the top down. And it's kind of a miracle that it even works. So, this is all part of the decentralization user ownership revolution of Web 3. We own the NFTs. They're simple, they're portable, they're programmable, they're composable, and people are going to recombine them to create these complex systems that work that are going to be impossible for larger companies to compete with. And we can already see that Apple and Google don't like NFTs, and so you're not going to see a lot of Web 3 applications on the phones anytime soon. And even I think recently it was Valve, which runs Steam, the game distribution service, said that they're not going to have NFTs on there or NFT-based games on there. And they're going to miss out. They're going to miss out on the largest boom in internet gaming since the beginning of internet gaming.
Chris, I'd love to ask you a question. Thank you, Naval. To come back to a word that you used, and we've spoken about this separately on the phone, because I wanted to know how the hell to pronounce this word. Skeuomorphic.
All right. So, skeuomorphic. Maybe you could give some historical examples of like skeuomorphic design and what that means. And you've written before that one of the most common mistakes people make when evaluating new technologies is to focus too much on doing old things better. So I imagine we are seeing and will see a lot of people are trying to copy and paste web one or two for web three. So I'd love for you to just spell and then give some examples of skeuomorphic design. And then after that to give some examples if you can of sort of web three native/emergent applications or instances to just illustrate what might be possible.
Yeah, so skeu- I don't know if I'm spelling this on this podcast. S K E U morphic.
Morphic, yeah, you got it.
So it was I think it was a Steve Jobs word. He used this word and he used it to refer to visual design. So if you remember the original iPhone had like a book app and it had wood grain bookshelves. And so it was this concept in design of taking something from the offline world and using that design in the online world to make it look more familiar. For whatever reason me and my colleagues started using this word all the time internally like three or four years ago. I'm not sure if we invented it or got it. I mean, not invented it but like sort of ported it over from the design world. Early films look like plays. They put people on and they would walk around and they stage it like plays. And then over time kind of film developed its own kind of new grammar. And so you had a close-up and you had an establishing shot. You go look at the old movies, they would just show Grand Central Station for like 10 minutes. And they learned over time you could just show it for like a second and the human brain would figure it out. And this happens with every new technology. The first cars, they're mimicking the horses. And so the early web for example, right? It was like brochures and magazines. So the opposite we call is sort of native. So you can do kind of web native stuff. Like it can be a two-way medium. It can be code. You can do all sorts of other kind of cool stuff. So I think it wasn't until kind of the mid-2000s that people really started exploring the quote native web experience. And I believe the best investment approach was to bet on the native stuff. So I remember when YouTube was out, there were sort of two classes of video apps. There was the YouTube ones and then there was these other ones which were basically saying, 'Hey, we're going to take CBS and put it on the internet.' Enterprise software kind of model. People don't remember there weren't YouTube stars back then. So it was all these just kind of silly viral videos or things that infringed on copyright probably, right? So when they got bought by Google, that was really controversial cuz it was the widespread meme kind of like crypto today. It's all this shady, dark, and illegal stuff. But what they understood, the founders and Google to their credit, is that this was the true native video on the internet. And that once you created this experience, this thing where you could embed the videos and it worked seamlessly and there weren't permission paywalls all around it, that this huge creator community would come up around it. And you'd have this whole new And now today, Dude Perfect guys messing around with the basketball stuff or whatever and didn't exist back then, has more subscribers than all the sports leagues combined on YouTube. Not only were the native products the winners, but the native creators were the winners. And so this is a concept we use a lot internally. People who know me will tell you I always when I'm negative on something, it's cuz it's skeuomorphic. People want to take blockchains and do like supply chain management, offline ticketing.
These are Sorry. I'm glad there are entrepreneurs in every category and I respect all entrepreneurs, but those are skeuomorphic ideas. I think they may work, but they're not going to be the thing people talk about 10 years from now. It's going to be this new stuff, the NFTs. So let me give you an example of a really cool project. There's a thing called Loot. I don't know if you've heard of Loot. It's this game
Yeah, Loot by the former creator of or I guess the creator of Vine.
Yeah. Yeah, Dom Hofmann, who's a genius developer and product designer, created this thing Loot. And what Loot is is basically it's just these little cards that have an inventory like kind of a Dungeons & Dragons style game. So it'll say 'Magic cloak.' Just literally those words on a page. And those themselves are NFTs. But what's so cool about it is that it inspired this whole community of people to build around it. It's almost like if, you know, Ernest Hemingway, instead of writing the book, wrote just the first page of the book. And then let the community kind of add the next page. And so that's what Gohm is. He wrote, 'This is the beginning of it. Now let your imaginations go wild.' And by the way, there won't be one canonical game, there'll be a hundred different things that all kind of use they're in the lootverse. It's this whole tapestry of creative people adding different bricks into this new structure. And that's just a very profound new way to think about building a game. And something you couldn't have done without, as Naval called it, these very simple new building blocks. And it's exactly this simplicity that makes them so powerful and the way you can recombine them. And that's just an early experiment. There'll be many more cool experiments like that. But what's cool about that experiment, what do they say, like the Velvet Underground or something had only a thousand fans, but they all started bands kind of thing. Loot doesn't have like millions of users, but the people that like it are the best product designers in the world. I think it's going to be one of those moments where, in the same way, Naval, you remember this, Delicious and Flickr, there was this period of like 2003 to five and kind of all the core web two primitive stuff happened. And people was like, 'Oh my god, like tagging.' I mean, it sounds hilarious today. Tagging was like a breakthrough. It was a conceptual breakthrough. Because before that it was like, 'Oh, you have to have categories. Everything has to be mutually exclusive bucket.' And every website had this thing on the left. Everything had to be in a bucket. And tagging came and said, 'No, it doesn't have It's like you have a computer with a lot of powerful capabilities. You can just make a tag.' And then a default public. That was a revolutionary concept. So there was this period, I think we're in that kind of period now in this world where there's this really creative core that's developing these cool ideas. And those will provide kind of the road map for the next wave.
Yeah, the Flickrs will lead to the Pinterests.
Yeah, your skeuomorphic idea runs even a little deeper. And the skeuomorphism can work, too. Like if you look at basic computers, we use a desktop computing paradigm. There's a desktop, there's files, there's folders. That's skeuomorphism from the physical world. And it can help people to reason by analogy into how to use something. But at the same time, I actually share Chris's skepticism of skeuomorphism in this space. In fact, I made a big mistake, which is early on in the history of blockchains, I thought what we're going to do is we're going to replace Uber and Facebook and Twitter with Web3 enabled primitives and networks that come out of those. Now, I don't necessarily think so. I think we're just going to create brand new things that we can't yet even predict or identify, but we're going to end up shifting our attention to those things. So, Twitter and Facebook will still be fine, will continue to exist, but our attention will be on these new applications that are uniquely enabled by primitives like NFTs and tokens.
I think that's right. I think like look, I mean, people still use Microsoft Office. It's still around. The internet didn't get rid of it. I think these are just layers and layers and I think the same thing, I agree. The value is created in the cool stuff will be in the native kind of cutting edge stuff.
Let me make a couple recommendation for folks who are listening. Here's a book and a movie recommendation that you guys might make fun of me for this. But the first is go read Snow Crash and appreciate how prescient that book was. It's an enjoyable read. Neil Stephenson, incredible book, but go check that out and then perhaps at the same time or even beforehand, watch or rewatch Ready Player One. And certainly there are aspects of it that I don't think are right around the corner, but I think a lot is coming
Sooner than people expect. That is what I've at least come away with conditionally at this point having immersed myself for the last few months very, very deep down the rabbit hole. And with that though, I want to play proxy for listeners who are saying, "Okay, well, we're hearing about all of the amazing things. What are some of the weaknesses or challenges associated with Web 3? And I'll start with one. So, I remember purchasing some of these NFTs and then having someone recommend that I share that online. And I go, 'Wait a second. If I share it online, then people are effectively looking into my bank account full of assets that are worth certain amounts. And all of that is preserved in the blockchain.' And they're like, 'That's right. You're your own bank.' And I'm like, 'Uh, I'm not sure if I 100% want to be my own bank in the sense that people use external banks for a lot of good reasons, right? They don't want to have gold bars and money stuck into a mattress in their own house and have to deal with home defense and so on.' I do think it appears there are some sort of technical solutions or services coming that could address some of these things. I'm just wondering
I've been to your house, Tim. I think your home defense is pretty good.
Yeah, my home defense is fine. That's true. I think but I'm an edge case, right? So, not everyone has like multiple firearms placed in multiple locations. That's a longer conversation. It's not because I'm a crazy person. Although some people would disagree. But, the question is like what are some of the challenges because there have been points where I'm like, 'Okay, would I prefer Amazon to see my entire purchase history or would I prefer the entire internet to possibly see my entire purchase history?' I don't know. I at this point in time for me personally, probably Amazon. And will the solutions that come to address some of those concerns once we get to millions of wallets instead of say 500,000 wallets engaging with certain types of NFTs, will those services be antithetical to the ethos and promise of Web 3? So, I just want to throw that out there and hear whatever comes to mind for you guys.
For me, security is a big issue. I've been outspoken about crypto for quite a while. So, I had to very carefully move all of my investments into custodians and funds so that I don't hold anything directly, but this is only possible because you can be your own bank. But the good news is you can be your own bank in very limited circumstances. You can take the majority of it and stick it with custodians and just like there's places you can store your physical art under garden lock and key, you'll be able to put your NFTs, at least the valuable ones, into NFT armories and repositories. There's going to be multi-signature where multiple people have to agree to move something. There'll be time delay where it can't be moved for 6 months or a year. So, we can help mitigate all of that. The industry is working on all of that, too slowly for my comfort, but it's happening. You can also keep your anonymity in multiple ways. We mentioned Punk 6529, who is a purely Twitter identity. People don't know who that person is in real life, but they're already regarded as a good NFT collector and curator. You can also create new wallets on the fly, and the software is getting better and better for that. So, you can literally do each purchase out of a different wallet, which may be hard to trace to the previous one because there are enough ways to anonymize it, at least from the general public, or if you're using things like zero-knowledge proofs from almost anybody. So, these problems will get solved, but they are problems today, which is kind of what makes this space hairy. When the time comes that anyone can mint and hold and move an NFT easily, it'll be a joyous moment, but also a lot of the so-called alpha in the space will be gone.
Yeah. Chris, do you have anything you'd like to add?
Yeah, I agree with that, and I think related, closely related to security, of course, is usability and just how to make everything easy to use and secure. I think it'll all get worked out, but I agree with Naval that it's not there yet. To me, the biggest challenge in the space is probably the messaging around it. I think there's a lot of misunderstandings around it. I think some of that is sort of self-inflicted by us, by the community. I think some of it is just hasn't diffused out into the broader world. So, you just have a lot of people who react negatively to crypto, Web3, etc., and I think that could also lead to overzealous regulatory actions, too. And so, I think that is I think it's very important to do I think what we're trying to do here and just sort of explain these ideas. I think ultimately though what usually convinces people is they need to kind of decide for themselves they want to dive into it. I've literally in 8 years in the space, I have never met somebody who's very well informed on the space and also deeply skeptical. Never.
If you're deeply skeptical about the idea of owning digital property, then understand it. You're not only denying capitalism on the internet, you're a metaverse denier. Because if you look at the metaverse as articulated in Neil Stephenson's Snow Crash or in almost anywhere else, there is this concept of there is property in the metaverse. And obviously some people own property in this jurisdiction with that property. And it's not just you can enter into my room because I can just right-click and copy and save your room. There's authenticity around this is my room. These are my objects in my room and I can shuffle them around. I can control who comes in and out and I can control what happens when someone tries to quote-unquote sit on my metaverse couch. Are they allowed to do that or not? So, all of this programmability comes from ownership. And it's a bizarre idea to think that the only people who can own items in the metaverse are big corporations. You're basically saying only Zuck, no offense to Zuck, I actually think he does a better job than he gets credit for. But you're basically saying is only Zuck is allowed to own the metaverse. Only he can own the entire metaverse. Why can't we each own our own room, our own space, our own property in the metaverse? So, denying and pushing back against NFTs and cryptos is basically saying we're not going to have a collectively owned future. We're going to have a corporate owned future. And we're going to have a government owned future. I can see why the Chinese Communist Party wants to ban crypto because it is antithetical to the idea of users owning things. But for a capitalist society, for a democratic society, for a collective society to ban crypto, that makes no sense to me. For it to ban NFTs or try to put them into financial regulations, which essentially ban it. It's basically saying, 'No, you artists are not allowed to own your own output and deal directly with the fans. You have to be serfs working on Spotify's farm or working on YouTube's farm.'
This might be a complete 90-degree turn, but I'm going to ask anyway, and we'll see where it goes. Going back to one of your many, many posts at cdxn.org. This is an oldie, 2009. Um... All right. I forget what's up there. Yeah, we'll see if you're about to get canceled. No, you're not going to get canceled. So, I do have a question about one very, very questionable paragraph. No, that's not what I'm going to do. What is hill climbing in computer science?
So, hill climbing, it's a classic kind of algorithms. The metaphor is think of a landscape with a bunch of hills. And the goal is to get to the highest point. But, put this constraint on, let's say it's foggy, you can only see a little bit in front of you or behind you. And so, there's a class of algorithms that sort of basically talk about what's the optimal way to climb that hill. One obvious one is if you're on an incline, go up. But, the problem there is you might get trapped in what's called a local maxima, which is you just happen to start on a small hill. The next iteration of that is what's called simulated annealing, which is you add some randomness in there, too, to sort of avoid just simply going up the first hill. And so, this post I wrote, I think you're talking to This is a popular post. It's called climbing the wrong hill, and I was making the analogy from these algorithms to a career. And the idea was, just like in a career, you do want to sort of climb the hill you're on. But, the mistake I saw a lot of young people making was they're at McKinsey or Google or something, and they see kind of the next prize is 6 months away, the next promotion, the next bonus, whatever it is, and they kind of are on that treadmill, and not willing to go, for example, join a startup and take a what appears to be a step backwards, but is in fact a much bigger hill. And they get caught up in the kind of local maximization thing, They end up I think you find a lot of people who are unhappy in their careers when they're in their 30s and 40s, it's cuz they hill climbed the wrong hill. The lesson I take from the computer science is to add some randomness to some exploration. There's a concept in machine learning is called exploration versus exploitation. You want to always have a balance between, for example, I try to use this when I order food. So, I will make sure that sometimes I'm exploiting. Exploiting means I'm going to my favorite restaurant, but at half the time I'm also trying a new restaurant. This is a core concept in machine learning when you design these systems is sort of how to optimally kind of come to conclusion. So, that's the idea a little bit. It's just you should add I think people in their 20s, for example, should add not randomness, not literally randomness, but exploration. They should go try a bunch of different things. See what's the right hill. And also be willing to take a step back.
Yeah, you want to keep your schedule open as much as possible so you can follow your own natural intellectual curiosity. I mean, ironically, the best career of 2021 was to be a JPEG collector. And I figured this out too late, but it's hilarious how many of my friends have gotten rich collecting and flipping JPEGs. And the best career of 2020 was probably to be a DeFi yield farmer, whatever the heck that means. Go Google that. So, it's insane, but the world is moving so fast, adapting so quickly. The frontier's in crypto, it's digital. If you have a natural intellectual curiosity about any of these things, your moment will come. It may turn out actually with the Axi people and the YGG people that the best upcoming career, the best current career might have to do around gaming, just playing a game a certain way at a certain time. Good news for all the gamers out there.
Yeah, I want to read two paragraphs from that blog post, which is climbing the wrong hill. Fantastic memory. And I should say the context is you're discussing hypothetical job candidate. But the lure of the current hill is strong. There's a natural human tendency to make the next step an upward one. He ends up falling for a common trap highlighted by behavioral economists. People tend to systematically overvalue near term over long term rewards. This effect seems to be even stronger in more ambitious people. Their ambition seems to make it hard for them to forego the nearby upward step. People early in their career should learn from computer science. Meander some in your walk, especially early on. Randomly drop yourself into new parts of the terrain, and when you find the highest hill, don't waste any more time on the current hill, no matter how much better the next step might appear. So, why don't you read this in part because in the last few months paying attention to Web3, which I feel is late, but that's only because my peer group is very weird and an edge case. I feel like it's not even the end of the first inning, not even close. It's like the anthem before the game has even started. And I have never seen so many highly intelligent, ambitious, capable people drop whatever they are doing, in many cases really attractive things, to dedicate all of their time to this. I've never seen anything approaching it en masse. It's not a trickle that slowly builds to more than a trickle. I mean, it's people immediately deciding this is where they want to spend 24/7 on. I don't know. Perhaps I just don't have a macro perspective over a long enough period of time, but certainly in all of my time in or around technology, I've just never seen anything like it. And at the very least, that means it's something that's worth taking a very close look at.
Yeah, the big danger here, of course, is the final boss. Crypto and Web3 have not gone mainstream yet. They're in their infancy. I don't know, what is it, like 10 million wallets or something out there among Americans or even globally? Like that, yeah. Yeah, it's small. It's in the tens of millions. So, we have to move to the hundreds of millions and eventually billions. And it has to go through the same adoption curve that Web2 and Web1 did. And in theory, it could even go faster as long as there aren't too many obstacles in the way because tokens naturally have incentive mechanisms built in. As Chris pointed out, the token companies don't need to do much marketing. The marketing is done by the users. And so, the problem is that where we started was we actually decentralized the hardest thing. The hardest thing to decentralize is money. And once you have money decentralized, then you can own private property. But essentially, decentralizing money threatens the nation state because a central bank currency, central bank digital currency is the exact opposite of a cryptocurrency. That's a complete centralization of money with no intermediary banks or monetary instruments under the eye of the all-seeing state. And on the other hand, you have people just carrying their own money around whether as a coin or as a JPEG or as a smart contract or as an IOU or some kind of a weird program. And unfortunately, we're trying to apply laws that are almost 100 years old to try and regulate this incredible explosion in internet commerce and market making in digital private property. And they're just not going to get it. And we recently have a very aggressive SEC and CFTC that are now fighting to extend their domain. And I think we could end up in an upside-down situation where innovation in the space gets driven overseas, underground, and out into the internet where it will still succeed because the natural endpoint of crypto is maximum decentralization and maximum privacy. It's going to just make it happen a lot faster. It's going to make it happen outside of the United States. So, the Web3 revolution could happen outside of the United States. One of the big problems with being a Web3 investor or even user these days is the KYC around the wallets, around the purchases, around the sales, the fact that a lot of these coins you can't participate in their offerings. You have to have offshore entities or more likely be a non-US citizen to even get into these. It's becoming very, very restrictive. And all we seem to be focused on is investor protection and not at all on innovation or creation or creativity. And I know Chris and his team have been fighting the good fight. And A16Z crypto has probably done more work than anybody on the regulatory front, backed up by people like Coin Center and so on, but they put a lot of work into it.
I also want to chime in as a Luddite who's just barely finding his footing or losing his footing with some water wings at the very least, but it also strikes me that, as you said, Chris, sometimes the true believers can be their own worst enemies in the sense that people still use Word. I still use what people might consider legacy tools every day. And these technologies or these currencies are not mutually exclusive. And I think that it behooves the communities who are adopting and developing these tools for many reasons to be more inclusive with their consideration of having multiple options viable into the future, which I think is inevitable on some level. And certainly, it is unhelpful and counterproductive to overstate the case for the eradication of central everything. Most people don't want to pave their own streets or handle their own garbage disposal. I mean, there are valuable services provided by the state, and it's hard to appreciate the full value until it's taken away. If anyone was here in Austin during the freeze, you realize very quickly how dependent we are on many of the services that are provided. And I think there is and will be certainly for a very long time a role for centralized banks, and that if people in fact want these technologies to continue to develop, and I think that many regulators may feel like they're caught between a rock and a hard place in part because the messaging is so exclusive from the kind of die hard and true believers oftentimes. But as Naval you said the economic case for allowing a thousand flowers to bloom in the Web3 ecosystem within the United States is hard to overstate. At least that's what it seems like to me.
Yeah, any regulator that stops the next generation of artists and musicians and gamers and game developers from owning their platforms and their work is going to go into the wastebasket of history as a villain. So that's simple.
Yeah, and to your point Tim, I think that some of this was sort of self-inflicted and particularly around [clears throat] there's certain we call maxis, people that are into certain tokens and they think only that token should exist. So there's Bitcoin maximalists, there's Ethereum maxi, you know, etc. Those folks are just they tend to be kind of loud and somewhat aggressive and I think that's done a lot of the branding in the space. It's sort of people's common view of crypto has comes from some of those folks who some of them like in the Bitcoin world are they have a political angle to it. There's sort of this libertarian aspect to Bitcoin. And I think as a result, particularly as we're seeing now, that the democratic side thinks of crypto as the enemy. When I think that the stuff we're talking about, the Web3 stuff, is actually very very aligned with I think a lot of the left agenda, which is better distribution of wealth reigning in the power of some of the big tech companies. The difference is we're arguing to do it through innovation and competition not through regulation, which won't work, by the way. If they cut up Facebook and the Web3 networks, it's not going to change anything. It's exactly the same thing. Is Instagram still going to be Instagram and the economics are going to be the same. And it's going to be just as centralized. That's just not going to work. The thing that will work is let innovators and entrepreneurs go build a better internet. That's what we want to do. This to me this is not a political movement in that sense. It's a technology movement. And it's somehow gotten associated with politics. Things in this country right now, it's very heated in the political world.
Everything is politicized.
That's a big challenge we have. It's just it's a really kind of go and explain these things. I think the good news is we have truth on our side. Everything I'm saying here and everything I've tweeted is mathematically provable, including the fact that a blockchain's a computer and the power of this new paradigm, but there's a lot of communications challenges ahead.
So, let me ask both of you, and maybe I'll start with you, Chris. If there are which I know there are, at least certainly in the broader listenership, broader audience, regulators, lawmakers, policymakers, and I've met a lot of these people, and I think part of the challenge is simply becoming educated from reliable sources when it is so difficult. I mean, it's difficult, bordering on impossible, for me to separate signal from noise if I'm trying to just take it through a funnel, like sort of waterboarding of information, and I would like to ask you if there any particular resources, or could be essays, books, anything, where people in those positions could start to begin to understand the fundamentals of what we're discussing.
One of the things we try to do is create materials for this. So, we have, for example, which I could share the link afterwards. It's like a 35-page overview for policymakers. Great. That kind of talks about the benefits and things like that. So, we've been trying to create materials like that cuz I think it's one of the things that's been lacking is just all the good things that we've all talked about earlier, the meaning, the Twitter stuff, everything else. It's what's wonderful about this world is sort of the chaos, but at the same time, it's also useful to have a 30-page booklet sometimes. [laughter] So, what we've tried to do, kind of add that a little bit on there. So, yeah, we've tried to create a bunch of materials to sort of explain it. Our firm, we believe in innovation and we believe in America. A lot of other people in crypto will do things with offshore entities and things. We don't. We tell people you should be based in the US, you should be a US company, pay US taxes. Uniswap, they're in New York City. They have an office in Soho. They hire people from New York. They go to their office. We have some European investments and things, but most of our investments are here in America. And I believe Hayden Adams, who's the founder of Uniswap, Robert Leshner, the founder of Compound, the OpenSea founders, all of these other founders in our portfolio, I believe they're heroes. I believe they are heroes who are on the cutting edge of the frontier and creating very important technology that will transform the internet. And I believe that over time more people will come to realize that these are people in the mold of a Steve Jobs or a Henry Ford. This is how America stays ahead. We believe this completely and we believe this is critical for the future of the internet and critical for the future of this country. That's why we're investing so much in it.
I'm just going to add one thing for people who are listening. I'll create a short link. It'll be live by the time you hear this. tim.blog/dixon and that will take everyone to the show notes and will include a link to the booklet that you mentioned, Chris. Naval, sorry for interrupting.
No, no problem. Yeah, the United States became the most powerful country in the world for many reasons, but recently it's been because we are the home of creative technology. Most creative technology on the planet comes from the United States. Now, is that because we create all the entrepreneurs? No, we attract all of the entrepreneurs because we had the most freedom. Technology entrepreneurs are creative people and they want to go where they are the most free to create new things. And so, if we stop being a gravitational attractor for the best entrepreneurs on the planet, we're eventually going to lose our technological leadership. And that means we will not be able to pay for our extravagant social programs. We won't have the abundance and the deflationary drive that technology innovation and productivity growth have provided. So, I'm just concerned because I do talk to a lot of entrepreneurs now who are overseas. Most investing these days is done over Zoom. It's no longer done physically in the San Francisco Bay Area, especially in Web3 and crypto land. Mostly entrepreneurs are overseas. And now almost none of them in their right mind are considering moving to the United States. Whereas before, if you're in China or India, the default would have been I'm going to move to California or to the United States. And now it's like, 'Yeah, maybe I'll go to Miami. Maybe I'll stop in on the US, but no, more likely I'm going to Singapore or I'm going to Switzerland or I'm staying anonymous on the web. Or I'm going to be on some little island nation just moving around.' This is really really bad news for all the people who are counting on their pension plans to pay out in valuable US dollars because the only solution we seem to have in the last 2 years to the COVID phenomenon is devaluing the dollar. There was a funny line that went out on Twitter where somebody said, 'Now we know what would happen if aliens invaded the Earth. The Fed would cut interest rates.' And that seems to be our answer to every crisis. Cut interest rates, print more money. Well, that's selling the asset that we already have. Eventually, you run out. The beauty of our model is that the entire world uses the US dollar as its stable currency, as its ultimate stable coin. And so every time we print a dollar, 70 cents of that dilution, that inflation goes overseas. But that's eventually going to go away. We can't just keep printing our way out of problems. We actually have to create. We have to innovate. We have to improve productivity. And that means that the next generation of technological innovation has to be based here where they can pay their taxes, where they want to live and spend and eat and consume here. And I'm just concerned that all the combination of ambiguous and aggressive regulations where regulators who are purely financial regulators are now getting their claws on the web and are going to regulate this thing into overseas. You can't stop it. It's ultimately code and code is just speech and speech is just ideas. You can't stop ideas. You can push them down one place and they'll pop up somewhere else. And the internet is a big place. So short of turning off the entire internet, the internet will figure out how to create, store, allocate, and use digital value. And that's exactly what's going on. And if you try to stop that, you're just going to miss out on the greatest wealth creation and innovation since the internet itself came into being.
Look, Naval and I, we could very easily invest in other countries. We don't want to. I mean, frankly, like when you're investors, it's easy to move around and invest other places and things like this. I just think it'd be a real shame if that's the outcome.
Let me add to that for just a second. And what I'd like to add to that is number one, there are many ways to easily incentivize innovators to create things here. We don't have to sort of go through the playbook, but you know, regulators, policy makers, I think have pretty good idea of what the historically effective approaches are, and I want to come back to that in a second. Uh we've already seen what happens when things get locked down in a place like China. And this is obviously a ball in play, but a lot of people will just relocate if they can, depending on many different factors, but you see a lot of hotbeds hopping up in places like
Like a there's a ton in Singapore.
