SCBC 2024 - Chris Dixon & Anthony Borquez

Yeah, so first of all, it's great to be here. Briefly on my background, I was into computers my whole life. I was programming. I actually took a detour studying philosophy in college and got into mathematical logic and other kinds of areas, but then in the 90s really fell in love with the internet. I think specifically, I kind of think of it as it was inevitable that once we had millions of computers in the world, we would connect them. But the fact that they were connected not through a company like AOL or Comcast or some other kind of centralized company, but the internet as it was originally designed through academia and government — they were connected in this open and decentralized system. So no one owned the internet; there was no gatekeeper, no toll taker. You could create a website, build an audience, be an artist, a business, a nonprofit, or just an individual, and you'd have a direct relationship with that audience. You had your little plot of land and built something. I go through this in the book in the first part — I go through the history of that era. My argument is that those incentives in that early era, the fact that you could have your own little plot of land, is a lot of what led to this golden age of innovation and all these amazing companies and startups in the 90s and early 2000s. I call it the read era. So the read era is roughly 1990 to 2005, the write era is 2005 to 2020, and the own era — I believe and hope — is the next era. The idea was that in the 90s, most of how you used the internet was to consume information. Like a lot of forms of media, when first developed, people copy it — early films were just a camera with a play in front of it. Over time, people learned how to do close-ups, establishing shots, and discovered the native grammar of film. In a similar way, the internet in the late 90s was like brochures and catalogs, just consumption of information. Then there was the internet bubble, the crash; I started my first company in 2004, as we were still in the crash and things were emerging. That was the beginning of the read-write movement, or web 2.0 movement. That movement was a bunch of people — I was part of it — who said, 'Couldn't the internet be more than just a great way to consume information and democratize consumption? Couldn't it also democratize the publishing of things?' That was the idea — a two-way meaning that the user can be a first-class citizen and create content. That was the rise of blogging and social media. That core idea led to YouTube — I have a case study in the book about YouTube — and obviously Twitter, Facebook, and all these other things. I believe that created all these great things. Now we have this amazing internet with 5 billion people; you can access it very inexpensively with a $10 Android phone and have access to amazing services, many of which are free. So a lot of wonderful things happened as a result of that movement. But there was a trade-off, I believe. In the process, we changed how we build internet services. 90s internet services were protocols, built as open, democratized systems. No one owns the web; it's a set of standards and a lingua franca that computers talk to each other in a certain way, with no centralized owner. Same with email. In the rise of the read-write era, that was led by corporate-owned networks — Facebook, Twitter, etc. So over time, more and more power was concentrated in those companies. Fast forward to today, and I go through the stats in the book: the top five companies basically control 95% of the traffic and the money. And I think things like AI, which is amazing and has many positive benefits, is a technology that also rewards companies with lots of capital and data, and I think it will kind of increase that consolidation. That has many positive effects but also negative effects — it's become much harder for startups to build on the internet. The apps you use today, like social networks, almost all were created 10-plus years ago, with companies started 10-plus years ago. This whole kind of business — it used to be a common thing in venture capital that every month there'd be a new breakout social app. That basically ended because these platforms got so powerful: they copy features, they throttle distribution, do other things. So it stifles innovation. It also puts a tax on creative people. If you're a creator on TikTok or Instagram, if you create things on the web or email, you have a direct relationship with your audience; you can charge money, have a subscription, put ads, make money directly. In social networks, you can't do that; they take all the money. The top five social networks last year made $150 billion in revenue, and they took all that money. So you can kind of picture it: as a network, there are users and creators, and then the network operator in the middle. In the 90s architecture, the money and power flowed to the edges. In the modern architecture, it flows to the center, and that has all these consequences — many of which are negative from the perspective of creators and startups. So that's the first half of the book, the motivation. Going back to your question, I got excited about the internet because of its open and democratic nature, because it was this community-owned system. I feel like I worry we're losing that. That led me about a decade ago to start getting interested in blockchains, and that's the second half of the book — how I describe what blockchains are and how they might let us create a new way of internet services that counter these consolidating effects.

Yeah, I got interested... Whoever that philosophy student is, will tell — there are different types. One of the great things about philosophy is you can do philosophy of anything. I did a lot of math, language, and logic, and philosophy of mind actually has overlap with computer science and AI. But look, I think I learned how to write, which is very important for writing a book. A lot of my career was built on blogging. To the extent that people want career advice, I think learning how to write is a very powerful thing today on the internet. If you have interesting thoughts about things, you can very quickly make a name for yourself. That's a lot of how my career happened — about 15 years ago, I did a lot of blogging. Philosophy is a great intellectual playground. But no, I was into computers before, took a detour, and then came back into it because of the power and inspiration I got from the internet. I've spent my whole career now in the internet space, as an entrepreneur and then investor.

It's kind of like a player-coach transition. I fell in love with the startup world. I didn't know about it until the late 90s, when I had friends doing it in New York. For me, it was a real revelation. I think it's more commonly known today because of things like Y Combinator and movies like The Social Network. Back then it was less well-known. When I discovered it, I thought, 'Oh my God, this is amazing — you can work with really smart people and create cool products.' I liked the risk aspect, building something and not knowing if it will work, facing how the world reacts. It's stressful but exciting. I did two companies. For students thinking about that path, I think it's a fantastic career. But like a player-coach, at some point your ankles start hurting. It's hard — a lot of entrepreneurs have trouble with work-life balance; there is none. It's a hard lifestyle to maintain. If that's your skill, the other place to apply it is at the coaching level, which is investing. In venture capital, you meet with entrepreneurs, typically early stage, one to three people teams. We try to go deep in the area, understand it, meet people who know more than us, give them money. At our firm, we have a different model — we really emphasize our operating team. We have 500 people at the firm, and the significant majority are not investors; they help startups succeed — marketing, talent recruiting, go-to-market, corporate development, research, engineering. The thought is we'd like to invest in people who are highly technical and product-focused. Those people probably haven't spent time going out and meeting millions of engineers; they tend to sit in a room thinking. So we try to bring our networks — we know all the interesting engineers in tech and all the possible enterprise software customers — and supplement those highly technical founders with those networks. It's a fascinating job. For those thinking about this path, I personally think it's better to start with operating in startups because it gives you insight into investing and makes you more credible and empathetic with founders.

I've gotten better. I sold my first company in 2006 and immediately wanted to start investing as a side thing. Many people do that. I started, and I've learned a lot. It's very interesting because the feedback loop is very long; it takes a long time to know if a startup is working. So it takes a long time to learn this business, and you almost inevitably make really dumb mistakes — both investing in things that don't work and, more importantly, not investing in the next big thing. You learn a lot and kind of tune your neural network. But it's a cliché that a lot of it is about the people. The challenge is you have to be deep enough in an area to have a thorough conversation about someone's product or technology idea, but you also have to be intellectually humble enough to realize this person knows more than you. I like to have a really good conversation for multiple hours, go through the product, understand the concept. The idea is not static; it changes over time as the world changes. Has this person thought about all the twists and turns? In the end, if you over-impose your theories as an investor, you do a bad job. When I started investing, I had a security company I sold to McAfee, then did a bunch of investing. My worst investing was in my alleged area of expertise — security. I realized later it was because I was projecting my views onto people, finding people that fit my theories of the world, instead of finding the right balance of being knowledgeable but ultimately betting on someone who's really talented and knows more than me. Does that make sense? It's endlessly interesting. I've done it a long time and feel like I'm constantly learning and never figuring it out. Then the world changes — AI comes out, blockchain world changes, everything intersects with technology, culture, and economics. You can never get great at it; you have to constantly keep learning, reading, thinking, and talking to people. That makes it fun.

Well, before I get into blockchain, I will say that I think this could be the most exciting time in the last 80 years in computing in some sense. You can see we now have AI working. Blockchains are working, and I think they're going to work much better in the next couple of years as infrastructure improves. A lot of these things have incubation phases and then break out. You have new devices like virtual reality, self-driving cars, biotech and AI, and in LA, defense tech and space. A lot of things are happening at once. It feels like all this stuff that was building up over my career is now happening. If you look back, if you were born in 1900, you saw the beginnings of automobiles and airplanes, and by your 60s, landing on the moon — incredible progress. People argue we've been in an era of stagnation, but it feels to me like we're heading for an era of technology acceleration. Maybe I'm drinking the Kool-Aid too much, but I feel this is the most exciting time in a very long time to be graduating from school and having these opportunities. Entrepreneurship at large — investing in startups, working at a startup, starting a company, probably investing in startups — is a fantastic career. It's risky, but the people I know in my career who had high integrity, worked hard, and were smart — maybe the first startup didn't work, but almost in every case, they eventually had interesting successful careers. You need to think of it as a career, not that this one startup will work, because sometimes it won't. We routinely fund people second and third times when their first couple don't work if they are high integrity and worked hard. So I'm preaching to the choir, but it's a fantastic time and career path. Specifically with blockchains, for those in it, it's been very cyclical obviously, with ups and downs. We had catastrophic stuff two years ago with FTX and other scandals. That was a lot of the motivation for writing the book. I felt when that happened, the world had seen the bad side of blockchains, tokens, and crypto. But there's this other side — a really productive, powerful, positive side — and that story wasn't being told. I wanted to tell it. My hope is we're now starting to see the positive side realized. A lot of things needed to happen. One key one is infrastructure had to improve. If you look at AI, why did it happen now and not 10 years ago? A lot is infrastructure, specifically GPUs. The first paper on neural networks was in 1943. There was an AI bubble in the 1980s — a long progression. Finally, you can build neural networks big enough thanks to improvements in GPUs, which came from video games. Similarly with blockchains, you had Bitcoin in 2008. The big next moment was Ethereum in 2015, which generalized that idea into a general-purpose computer anyone can program. That was like going from a single-purpose computer to the iPhone App Store — anyone can write an app. But it cost $40 or something for a simple transaction in gas fees. When something costs $40 to do, the only things you can do are high-value finance things like DeFi and ICOs. Now, as people may know, you have layer twos, Solana, the recent Ethereum upgrade, penny transaction costs, better security, performance, latency — all necessary conditions for great internet-scale applications across different categories. I envision a world, and talk about in the book, where you can build blockchain-based applications that are social networks, games, financial services, AI — anything you can build in a corporate model, you can build in a blockchain model. That wasn't possible three years ago; I think it probably now is for the first time. You're starting to see it — we're investors in a social network called Farcaster that feels very much like a web2 social network in user experience. It's not at that scale yet, but many things are emerging. You can now build user experiences that are on par with web2 user experiences but have additional features blockchains enable, like tokens and composability. I have chapters in the book about the specific benefits of building an internet service on a blockchain.