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a16z Podcast | Technological Trends, Capital, and Internet 'Disruption'

with Fred Wilson (@fredwilson) and Chris Dixon (@cdixon) There's all sorts of interesting tech trends happening right now, including AI, VR/AR, self-driving cars and drones (as well as interesting stuff happening in verticals like healthcare and finance) -- and there's a lot also happening in seemingly more "mature" tech revolutions, such as mobile and cloud. But where are we now, really, with these shifts... and how does that inform how we think about the next couple decades? And does a framework like Carlota Perez's -- as outlined in Technological Revolutions and Financial Capital: The Dynamics of Bubbles and Golden Ages and summarized by venture capitalist and longtime internet investor Fred Wilson (of Union Square Ventures) -- fully apply when it comes to software? Because, argues Chris Dixon (general partner on a16z crypto), software "has so much more plasticity, ability to adapt, ability to evolve" that unlike hardware, "the core itself will also dramatically change... not just the apps around it". The total economic value that will be unlocked with the software revolution, observes Wilson, should be orders of magnitude bigger than what we saw with manufacturing for sure. But just how much internet innovation is actually powering true disruption (i.e., is more than just a sustaining innovation, to use Clayton Christensen's terminology)? How do new business models change everything? Dixon and Wilson consider all this and more in this hallway-style episode of the a16z Podcast, where we recorded the two having a think-aloud conversation about everything from the history of the internet and startups, the evolution of capital and infrastructure, to the advent of crypto. How do they they both define "decentralized", what do they think of dApps, and where do NFTs and "crypto goods" come in?? One thing's for sure: It's the most interesting time they've both ever seen in over 30 years of internet work, life, and play. Please note that the a16z crypto fund is a separate legal entity managed by CNK Capital Management, L.L.C. (“CNK”), a registered investor advisor with the Securities and Exchange Commission. a16z crypto is legally independent and operationally separate from the Andreessen Horowitz family of fund and AH Capital Management, L.L.C. (“AHCM”). In any case, the content provided here is for informational purposes only, and does NOT constitute an offer or solicitation to purchase any investment solution or a recommendation to buy or sell a security; nor it is to be taken as legal, business, investment, or tax advice. In fact, none of the information in this or other content on a16zcrypto.com should be relied on in any manner as advice. You should consult your own advisers as to legal, business, tax and other related matters concerning any investment.

Chris DixonhostFred Wilsonguest

Jan 2, 201954mWatch on YouTube ↗

Summaries, chapters, transcripts, and FAQs on this page are made by uListen, not YouTube.

CHAPTERS

0:00 – 4:33
Where Are We 25 Years Into the Internet?
Chris Dixon asks whether tech is maturing around trillion-dollar incumbents. Fred Wilson answers with Carlota Perez's framework, suggesting the internet may be the technological revolution of this century. He proposes that broader, more open protocols could extend the runway.
- •Dixon notes big incumbents, a bigger venture industry, and talk that tech is maturing
- •Wilson says he and USV are big fans of Carlota Perez
- •Past technological revolutions lasted about a century
- •Entrenched platforms may stem from the original internet spec
- •More open protocols could create a more level playing field
4:33 – 8:35
Why Software Is Different From Cars and TVs
Dixon argues that software has far more plasticity than cars or TV, so the core itself can change rather than just the apps around it. Wilson agrees the value unlocked could be orders of magnitude larger, citing Tesla's over-the-air updates.
- •Cars and TV fixed their core and the action moved to the app layer
- •The internet is a lightweight protocol with intelligence at the nodes
- •Software offers a much richer design space
- •Tesla pushed an update to extend battery range for Hurricane Florence-affected cars
- •Over-the-air updates could change service models and industry structure
8:35 – 13:22
Disruption vs. Sustaining Innovation: Mobile, AI and Big Tech
The two distinguish innovation from disruption. Wilson argues big tech weathered the shift to mobile and will likely weather AI, while Dixon notes mobile enabled new behaviors. Dixon frames much current innovation as sustaining in Christensen's sense, and Wilson names crypto as the disruptive one because it changes the business model.
- •Wilson says the top mobile apps resemble the pre-iPhone top websites
- •Dixon says AI may entrench monopolies through data
- •Mobile enabled ride hailing and Snapchat
- •Wilson wonders why the map app isn't the default dispatch interface
- •Crypto is disruptive because it changes the business model to monetizing via tokens
13:22 – 17:32
Lessons from the Early Internet and YouTube
Dixon recalls how the 1990s internet barely appeared in movies and how many early ideas were too early. The discussion on YouTube credits broadband, social sharing and the embeddable player, plus venture funding.
- •Dixon notes 1990s movies barely showed the internet
- •Many ideas now seen as unicorns appeared in the dot-com era, such as grocery delivery
- •Wilson says Pseudo was about 15 years too early
- •Broadband was 80 to 90% of YouTube's success, per Wilson
- •Embeddable players broke the destination-site model
- •YouTube sold to Google because it needed someone to fight content owners
17:32 – 21:57
Cloud Infrastructure and Developer Experience
Back in the present, the two name core trends and Wilson argues cloud still drives innovation. They discuss Stripe and Twilio, then the AWS, Google and Microsoft competition and how startups benefit from cloud.
- •Core trends listed: AI, new computing devices, crypto, plus cloud
- •Stripe and Twilio made hard capabilities easy to build into apps
- •Wilson predicts a three-player cloud market
- •Microsoft's enterprise strength and bundling versus Google's technical advantages
- •Wilson says 90 to 95% of USV-backed companies build on AWS
21:57 – 26:22
Enterprise SaaS, Jobs and the Grind-It-Out Era
Dixon says under 10% of corporate applications are SaaS, and vertical SaaS is an interesting trend. He argues software takes jobs subtly rather than through robots. Wilson says enterprise SaaS is where much venture activity is, while big consumer breakouts are rarer.
- •Dixon says SaaS is a small share of corporate applications today
- •Vertical SaaS serves markets that previously had no software
- •Software takes jobs through incremental efficiency, not one-to-one replacement
- •Wilson says VCs now press for metrics like CAC over LTV
- •Enterprise SaaS has several credible competitors and softer power laws
26:22 – 32:34
Changing Capital Markets and Token-Based Participation
Dixon asks how venture has changed. Wilson says capital is abundant, especially late stage, and sees crypto creating a global capital market. They argue that tokens let early users participate financially and combine using and investing.
- •More capital is available for founders, concentrated in later stages
- •Crypto offers a global capital market beyond accredited-investor limits
- •Programmers who understood the protocols were excluded from investing
- •Early Bitcoin users could hold it from day one, unlike early Facebook users
- •Wilson rejects the split between the money part and the tech part of crypto
32:34 – 37:51
Network Life Cycles and a Token-Based Twitter
Dixon describes how networks turn on their ecosystems once growth slows. Wilson recounts Twitter's open API and the decision to restrict third-party clients under an attention-based model, imagining a token-based Twitter. Both describe aligned users, developers and miners in token networks.
- •Platforms court developers early, then fight them at the top of the S curve
- •Hot dog and bun competition is the most vicious in tech
- •Wilson wanted an open Twitter but the ad model pushed against it
- •A token model could have made Twitter the protocol with third-party clients on top
- •Token holders align users, developers and promoters, though regulators may find it scary
37:51 – 41:15
The Digital-First Transition: Offline Bias and Esports
Dixon offers his theory that we are in a transition where offline is still seen as primary. He cites e-commerce and esports naming, Fortnite's earnings, and domain names. Both say digital assets will eventually be seen as real.
- •Digital is dismissed as fake in critiques of Bitcoin
- •Modifiers like e-commerce and esports signal that online is seen as subordinate
- •Fortnite made $300 million in a month on dance moves, per Dixon
- •Both hold domain names and never sell
- •Dixon compares esports to mobile's hockey stick
41:15 – 49:31
NFTs, Digital Scarcity and Crypto-Native Ideas
Wilson and Dixon discuss non-fungible tokens as a way to make digital goods scarce, starting with games and creative work. Wilson shares lessons from early internet investing about native ideas versus ported ones, and both prefer new crypto-native things like DAOs and staking over putting existing assets on a ledger.
- •Game items could move between games via a wallet
- •NFTs could give musicians and creators a digital-scarcity business model
- •Wilson imagines art released gradually like mined Bitcoin
- •Early internet investments ported offline businesses and were the wrong move
- •Staking and DAOs, such as Numerai, are examples of crypto-native ideas
49:31 – 54:24
Crypto's Missing iPhone Moment and Decentralization
Asked how long crypto will take, Wilson says networks must become secure, decentralized and fast, comparing the state to pre-broadband internet and pre-iPhone mobile. They discuss decentralization as trust and nobody controlling the network, and Wilson closes saying the interesting work is under the surface.
- •Crypto networks need scalability, trust and developer experience
- •Both compare today to internet pre-broadband and mobile pre-iPhone
- •Dixon says decentralization means trust and Wilson says it means nobody controls the network
- •Wilson hopes for networks as fast as an ATM network
- •Apps like games may demand the infrastructure, as GPUs and Netscape examples suggest