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

1. 0:00 – 4:33

   Where Are We 25 Years Into the Internet?

   1. SPSpeaker0:00

      Hi, everyone. Welcome to the a16z Podcast. I'm Sonal. We recently took the a16z Podcast on the road to New York City, and so today's episode features a fly-on-the-wall recording of a conversation between venture capitalist and longtime internet investor Fred Wilson of Union Square Ventures and a16z crypto general partner Chris Dixon. The two discuss everything from current tech trends like AI to seemingly more mature trends like mobile and cloud to the advent of crypto. And throughout the episode, they weave through past and present in internet history to reflect on where we are now really to where we may go next. Are we seeing disruption, or is a lot of current innovation just a sustaining innovation, to borrow from Clayton Christensen's framework? Or how about Carlota Perez's framework for tech revolution and financial capital? Does that fully apply to software? And what precisely is so unique about software itself, and how might that affect internet-native applications for things like crypto? The two discuss all this and much more in this episode of the a16z Podcast. As a reminder, 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 is it to be taken as legal, business, investment, or tax advice. Please also see a16zcrypto.com/disclosures for further information there.

   2. CDChris Dixon1:22

      So 2018, you know, uh, I don't know what it is now, uh, 25 years into the internet, sort of the modern, the, the mainstream internet. Um, uh, some, some very large, some, you know, trillion-dollar, uh, tech incumbents, very... Uh, the venture industry has grown dramatically. Tech seems more mainstream. Some people argue it's perhaps becoming mature. You know, may- maybe it's like TV where there's, like, four TV channels and there's four big incumbents. There's all sorts of interesting stuff happening in, like, crypto and AI and new devices like virtual reality and augmented reality and self-driving cars and drones. Uh, there's interesting stuff happening in verticals, so, like, changes in healthcare and real estate, uh, in finance. You know, w- so I guess... I don't know. A question I think about a lot, a- and I'm sure you do, is, is where are we now? And how, how, how does that inform how we think about the next decade, two decades?

   3. FWFred Wilson2:21

      So, you know, I think it's really important to have a framework. And as a lot of people who, you know, follow me and USV know, we're really big fans of Carlota Perez. And if you look at the big technological shifts that have happened over the past 200, 300 years, uh, what you, what you see is that many of them last for kind of a century, right? Like automotive or, more broadly speaking, industrial or manufacturing-based businesses were kind of the technological revolution of the 20th century. And even though internet and tech kind of emerged very powerfully in the '80s and '90s, I think we might argue that internet and tech really is the technological revolution of the century we're in now. And so if that's the case, uh, it's 2018, um, do we have 82 more years to go? And yet, like, we're feeling like it's already a mature sector, right? We're looking at it and we're saying Google, Amazon, Facebook, Apple, you know, they have these massive entrenched, um, platforms, and it's becoming really, really hard to compete with them. How could we have, you know, another 50, 60, 70 years to go? And I think, you know, going back to something that Marc Andreessen said, you know, in the original design of the internet and the World Wide Web, you know, we didn't necessarily get it all right. And so what we have now, uh, in terms of, like, these entrenched platforms is, um, maybe a function of, of what the spec was that we've been building on for the past 25 or 30 years. And if we could, uh, maybe broaden out what the protocols are to a point where, you know, we could have, uh, a, a much more open and level playing field, we might actually have a lot more ways to go. So that's me speaking optimistically about where we are.

2. 4:33 – 8:35

   Why Software Is Different From Cars and TVs

   1. CDChris Dixon4:33

      Let, let me give you, um, a maybe more optim- even a more optimistic view [laughs] which is... So I, one thing I want to... Carlota Perez, and I think it's a brilliant, you know, brilliant theory and explains a lot of history. Um, but I, I wonder if software is different than hardware. Um, and, and let me sort of explain that. So you build a car, you know, 1900-ish. You build cars. You have Ford and GM, et cetera. They get better, but, you know, they don't dramat- they don't... Fundamentally, the car is, has stayed mostly the same. Uh, you know, obviously gotten better, but they're, they're still l- the same basic function, same basic, uh, um, uh, you know, kind of design. Um, and then all the action from, I don't know, 19-, probably, what, -30 to today moved to kind of the quote unquote app layer, right? It was, it was interstate highway system and sub-

   2. FWFred Wilson5:18

      Shopping centers

   3. CDChris Dixon5:19

      ... suburbs and shopping centers-

   4. FWFred Wilson5:20

      Suburbs, right

   5. CDChris Dixon5:20

      ... and trucking systems and-

   6. FWFred Wilson5:21

      Right

   7. CDChris Dixon5:21

      ... the sort of the quote apps of cars, right?

   8. FWFred Wilson5:23

      Right.

   9. CDChris Dixon5:23

      And then TV, right? Like, so TV, you build the TV, you have the radio wave, you know, the, the, the... You build the, the, the physical infrastructure, and then maybe you upgrade color or HD or something, but it's fundamentally fixed, right?

   10. FWFred Wilson5:33

       Right.

   11. CDChris Dixon5:34

       It's fundamentally... Like, once you've built the core, it's fundamentally done, and then you just build around it, right? The internet, as you n- as we of course know, is, is, is, is deliberately designed to be a very, uh, lightweight protocol where all of the, the, uh, intelligence lies at the nodes and the servers and c- and, and, and our software base, um, and can upgrade themselves. Um, and so I guess the... what I would say is I wonder if software, because it's a... it's fundamentally a software net. I mean, of course, at the, at the bottom level it's copper and other, you know, fiber and other things and, and radio waves. Um, but, but the heart of it is software, and I just wonder if software has My view is software has so many more degrees of freedom, it has so much more kind of plasticity, ability to adapt, ability to evolve, that maybe unlike the car and the TV, that the core itself will also dramatically change and not just the apps around it.

   12. FWFred Wilson6:26

       So I think certainly the total economic value that will be unlocked with the software revolution should be at least one, maybe two, maybe three orders of magnitude bigger than what we saw with manufacturing, automotive, you know, for the reasons you describe. I just think that that's just... If everything, if we can get everything into software-

   13. CDChris Dixon6:51

       Yeah

   14. FWFred Wilson6:51

       ... then just imagine, like, what the possibilities are, right?

   15. CDChris Dixon6:54

       It's the expressive power, the, the, the, the... It's the design sp- a much richer design space.

   16. FWFred Wilson6:59

       Right.

   17. CDChris Dixon6:59

       You can do, you can do so many... You can encode any kind of human process can be encoded in software.

   18. FWFred Wilson7:03

       Yeah, I mean, even, even, you know, the greatest thing about Tesla is the over-the-air software upgrade. It's like literally I get in the car and all of a sudden I've got a new upgrade, and there's, you know, new software all of a sudden. Like-

   19. CDChris Dixon7:13

       And they actually fixed, they actually fixed, like, the braking and stuff, right? With the software-

   20. FWFred Wilson7:16

       They can fix anything. But I, I read today that they pushed an update to people who were, who have cars in the affected areas of Hurricane Florence, I don't know-

   21. CDChris Dixon7:23

       Yeah

   22. FWFred Wilson7:23

       ... to make their batteries last longer.

   23. CDChris Dixon7:25

       Wow. Oh.

   24. FWFred Wilson7:25

       Right? Like, so that they could-

   25. CDChris Dixon7:27

       Yeah

   26. FWFred Wilson7:27

       ... go long without charging.

   27. CDChris Dixon7:28

       Yeah.

   28. FWFred Wilson7:28

       That's fucking amazing. [laughs] Just think about that. Boom.

   29. CDChris Dixon7:30

       [laughs]

   30. FWFred Wilson7:31

       Kind of imagine, like, Elon Musk woke up think- thinking he was gonna do that, and he just hits a button. [laughs]
3. 8:35 – 13:22

   Disruption vs. Sustaining Innovation: Mobile, AI and Big Tech

   1. FWFred Wilson8:35

      Disruption maybe-

   2. CDChris Dixon8:35

      Yeah

   3. FWFred Wilson8:35

      ... is a better word.

   4. CDChris Dixon8:36

      I think there's a lot of innovation, right?

   5. FWFred Wilson8:37

      Right.

   6. CDChris Dixon8:37

      I mean, there's great stuff happening in AI and self-driving cars and...

   7. FWFred Wilson8:41

      Right.

   8. CDChris Dixon8:41

      But it feels like-

   9. FWFred Wilson8:41

      But a lot of that's accruing to-

   10. CDChris Dixon8:43

       Yeah.

   11. FWFred Wilson8:43

       AI's a really good example.

   12. CDChris Dixon8:44

       Yeah. Yeah.

   13. FWFred Wilson8:44

       Right? So, you know, if you, if you look at the big tech companies, um, I don't think that they were disrupted very much by the, the shift from web to mobile, and I don't think they're gonna be disrupted very much f- by the adoption of AI, uh, powered software.

   14. CDChris Dixon8:59

       But anyway, I think it, it may just, it may further entrench their monopolies because of the data, the f- fact that, that you're differentiating the AI through data, and, and they're most likely to have the most data.

   15. FWFred Wilson9:07

       I mean, I, I forget where I read this. This is, this data's now four or five years old, but if you look at the top 100, uh, mobile apps and you look at what the top 100 websites were before the iPhone came out, it's not a very different list, right? So s- you know, those companies, Facebook I think is the perfect example of this, saw that the mobile phone and mobile apps could potentially disrupt them. They pivoted their focus to get there, and they got there, and the net of it is that they're in a stronger position than ever. So I don't think, y- you know, that a lot of the, um, innovation is currently powering a lot of disruption.

   16. CDChris Dixon9:47

       One thing that mobile did, you know, you take the ride hailing as an example, it did enable new behaviors which allowed for startup opportunities that...

   17. FWFred Wilson9:56

       Right.

   18. CDChris Dixon9:56

       Right? I mean, so it did, uh, you know... Every- I think of it as every new computing platform has new capabilities.

   19. FWFred Wilson10:01

       Right.

   20. CDChris Dixon10:02

       And generally, startups will exploit the uniquely new capabilities, and incumbents may or may not successfully port over to the platform. In the case of mobile, they did, but it also unlock- You know, so you had the, the, the intimacy of the camera-

   21. FWFred Wilson10:14

       Right

   22. CDChris Dixon10:14

       ... allowed for-

   23. FWFred Wilson10:15

       Right

   24. CDChris Dixon10:15

       ... Snapchat and s- and things.

   25. FWFred Wilson10:16

       But, but even that, you know, I've always thought that the maps layer could commoditize the entire ride sharing business. Hasn't, right? Like Uber and Lyft and a bunch of other companies, s- bunch of companies in Asia dominate that business, but I don't understand why the map on your phone, whether it's an iPhone or an Android phone, isn't the ride sharing application, and then all of these ride sharing networks are just-

   26. CDChris Dixon10:43

       I would bet maybe what Google wants to do longer term, I mean, one would think with their self-driving car effort and their maps-

   27. FWFred Wilson10:47

       It just seems like-

   28. CDChris Dixon10:48

       You've got a but- you use Google Maps, you open it up, you got a button, get a car, right? And...

   29. FWFred Wilson10:51

       Like, w- why doesn't that happen today? I don't get it. Like, how... I mean, I don't, I don't understand why the map interface hasn't become the default interface for dispatch of a- of anything, whether it's a scooter or a car or a bike or whatever. Maybe it's just like it's gonna take some time.

   30. CDChris Dixon11:07

       Yeah.
4. 13:22 – 17:32

   Lessons from the Early Internet and YouTube

   1. CDChris Dixon13:22

      It's funny 'cause I, I talk to people now who I think weren't around during the early internet, and a lot of people will say, uh... I hear it a lot that, that, uh... "Well, the internet came along and, you know, by '94 had all these killer apps."

   2. FWFred Wilson13:33

      [laughs]

   3. CDChris Dixon13:33

      And it's, like, incredibly [laughs] ... You know, I think one fun exercise is to go watch movies from the '90s as a way to kinda go back and look at it. And first of all, the interesting thing, right, the internet just doesn't exist. There's no mobile phones.

   4. FWFred Wilson13:44

      Right.

   5. CDChris Dixon13:44

      Every once in a while someone will, like... It's like this ritual. They'll say, "I'm gonna go online." And, like, the very phrase, like, go online, right, kind of is, is this kind of archaic phrase that, that is from that era, right? And it's... And then, like, there's beeping, and there's this and that. And then there's, like, "You've got mail." And they get on, and they do this thing, and then they get off. And, like, it's this thing, and it's this thing you do for 10 minutes. Um, but it almost basically... If you actually watch movies from the '90s, like, the internet... Th- even that doesn't happen, right? Except for, like, Hackers or some-

   6. FWFred Wilson14:08

      Yeah

   7. CDChris Dixon14:08

      ... a couple of, like, specialty movies or something, right? Um, and it was essentially, you know... I mean, it was, like, literally waiting for an image to load. And, like, innovations at the time were things like having the image load in a less annoying way-

   8. FWFred Wilson14:20

      Right

   9. CDChris Dixon14:20

      ... because it was that slow.

   10. FWFred Wilson14:21

       Like, I remember listening to what we would now call podcasts, um, over dial-up, uh, in '97, '98. Um, a friend of mine, Josh Harris, had this company called Pseudo, and he was making basically audio and video-

   11. CDChris Dixon14:36

       Wasn't it kinda like Justin.tv, like-

   12. FWFred Wilson14:38

       Yeah, yeah

   13. CDChris Dixon14:38

       ... he was filming his life and-

   14. FWFred Wilson14:39

       Yeah, yeah.

   15. CDChris Dixon14:39

       Yeah.

   16. FWFred Wilson14:39

       Yeah, he, he, he was just 15 years too early.

   17. CDChris Dixon14:43

       Yeah.

   18. FWFred Wilson14:43

       But he had all the right ideas.

   19. CDChris Dixon14:44

       Yeah.

   20. FWFred Wilson14:44

       And, you know-

   21. CDChris Dixon14:46

       All the, all the ideas that happened at Webvan, Instacart, like, they all... all of them... I had this ga- this board game, I still have it somewhere, it was called Dot Bomb.

   22. FWFred Wilson14:54

       Right.

   23. CDChris Dixon14:54

       And it was, like, making fun of all the terrible ideas. I blogged about this once. And it was, like, this joke game about all the stupid ideas of the '90s. And it's literally, like, every unicorn s- like, hot company-

   24. FWFred Wilson15:04

       Right

   25. CDChris Dixon15:04

       ... today. [laughs] It was, like, internet money, you know, grocery delivery, like... [laughs]

   26. FWFred Wilson15:09

       Right. Well, you know, y- you and I are friendly with an entrepreneur here in Nor- New York named Adi Seidman. Adi Seidman had YouTube-

   27. CDChris Dixon15:14

       I know, I know

   28. FWFred Wilson15:15

       ... in, like, '99.

   29. CDChris Dixon15:16

       I know.

   30. FWFred Wilson15:16

       It just, like, it didn't make any sense in '99. Like-
5. 17:32 – 21:57

   Cloud Infrastructure and Developer Experience

   1. CDChris Dixon17:32

      Okay, so going back to, to what's happening today then, right?

   2. FWFred Wilson17:35

      Right.

   3. CDChris Dixon17:35

      So kind of the big... I mean, I think there's, th- uh, there's multiple layers here, right? So there's kind of the big core tech trends. I don't know if, if you agree, but I think it's kind of AI, kind of the proliferation of new kinda computing devices, crypto.

   4. FWFred Wilson17:47

      I still think cloud... I think s- I think cloud is still... I mean, cloud's, like, a 10-year-old story. Um, but I still think cloud is driving a lot of innovation. Like, still think-

   5. CDChris Dixon17:57

      Cloud infrastructure or apps? So SaaS or apps? Both.

   6. FWFred Wilson17:59

      Well, I'm thinking the infrastructure kind of concept.

   7. CDChris Dixon18:00

      Okay. It's, it's pretty amazing how having the fresh code base, having the fresh attitude, the different perspective, you can just... You can kinda type them-

   8. FWFred Wilson18:06

      If you could build on S- if you could build on Stripe versus you couldn't build on Stripe.

   9. CDChris Dixon18:10

      Yeah.

   10. FWFred Wilson18:10

       You know? Like- That was a big difference.

   11. CDChris Dixon18:13

       Yeah.

   12. FWFred Wilson18:13

       Like, that whole pa- I mean, and now-

   13. CDChris Dixon18:15

       Well, just the whole modern, I think in a developer ex- I think the whole concept of, like, developer experience-

   14. FWFred Wilson18:19

       Right

   15. CDChris Dixon18:19

       ... like, really thinking through, you know... I think you, you didn't, didn't, uh... You're, obviously, you're an investor in Twilio.

   16. FWFred Wilson18:25

       Right.

   17. CDChris Dixon18:25

       I think they, one of their big focuses was kind of the time to help, time to delight or something-

   18. FWFred Wilson18:29

       Right

   19. CDChris Dixon18:29

       ... or time to Hello World, of just, like, immediately getting in there and-

   20. FWFred Wilson18:32

       Like, the idea of introducing text messaging into your app, like, uh, people are like, "What's the big deal about having to be able to text natively from an app?" But you think about it, and, like, so many little things, but they're big things, are enabled by an app being able to text you, like, with a two-factor code or your car's arriving or whatever. Like, like, and to do that before Twilio was, was, like, hard, and, and now it's, like, five lines of code.

   21. CDChris Dixon18:59

       And where, but where... How do you think about... So, you know, in that, in the cloud infrastructure world, you have AWS, Azure-

   22. FWFred Wilson19:06

       Yeah

   23. CDChris Dixon19:06

       ... Google Cloud.

   24. FWFred Wilson19:07

       That, that I think is game over mostly. Like, maybe there's somebody who's gonna come out from left field and-

   25. CDChris Dixon19:12

       Game over in the sense of incumbents are winning, or AWS has won it, or?

   26. FWFred Wilson19:16

       I think incumbents. I think Google's gonna take some share. I feel like what Google's doing is they're going top-down into that market. They're going to some of AWS's biggest customers and they're saying, "You know, we've got some better tech." Maybe they do, maybe they don't. "We'll do it for less, and we'll care about you where they don't." They're taking share. But I, I think it could be like Amazon has 60% of the market, Google has 30% of the market, and Microsoft has 10% of the market. I think it's gonna be a three-player game in that business, and that's good.

   27. CDChris Dixon19:44

       I think the ch- the thing I hear from Google is the challenge is it's just the, the sort of the high-touch concierge enterprise kind of model which those company... You know, the, whatever, the Citibanks of the world-

   28. FWFred Wilson19:54

       Right

   29. CDChris Dixon19:54

       ... expect, is just not something they're, they're used to, although they have, now they have Diane Greene, and that, I think a lot of them-

   30. FWFred Wilson20:00

       So maybe Microsoft will get there, you know? 'Cause Microsoft is used to that.
6. 21:57 – 26:22

   Enterprise SaaS, Jobs and the Grind-It-Out Era

   1. CDChris Dixon21:57

      Well, I think also on the app side, I mean, SaaS a- I mean, I think we live in this world where we think everything is, you know, is, is SaaS based. And-

   2. FWFred Wilson22:03

      Right

   3. CDChris Dixon22:04

      ... uh, uh, the, the data I see, and it's something... It's, like, sub 10% of corporate applications today are still... You know, it's un- it's unbelievably low. The, the-

   4. FWFred Wilson22:11

      Right

   5. CDChris Dixon22:11

      ... right? I mean, it's still... People are still using, you know, I don't know, you go to the, whatever, you go to the United desk, and they've got, like, a DOS interface. You go here, and they've got Windows.

   6. FWFred Wilson22:19

      It's crazy. [laughs]

   7. CDChris Dixon22:19

      Yeah, no, I mean, the government hack was, like, COBOL, you know?

   8. FWFred Wilson22:22

      Right.

   9. CDChris Dixon22:23

      Like, and so... And, and a lot of it's more modern, but it's still, like, it's Windows, it's-

   10. FWFred Wilson22:27

       Right

   11. CDChris Dixon22:27

       ... whatever. It's not... So I, you know, we live in this kind of world of where we think everything is SaaS delivered. And so, you know, and you see these really interesting things happening where, like, vertical SaaS is an interesting trend, right? Where you see this, you know, whatever, massage parlors need, uh, their own billing and-

   12. FWFred Wilson22:43

       Right

   13. CDChris Dixon22:43

       ... reservation system or something, and it turns out that's a big market, and people, those people previously wouldn't really have software. Um, I kinda think of it almost like people have this view that, like, AI is gonna come take the jobs, but they have this kind of, uh, anthropomorphic idea that it's gonna be like The Jetsons, like this robot is gonna come in and take and, like, "Move over, I'm gonna type and do it." But what actually, the way that the jobs are actually taken is a much subtler thing, which is these, these new software applications just, just, you know, whatever, your new, you know, payroll system, your new payroll SaaS app, just suddenly you don't need as many people in your payroll department, right? And it's a much subtler thing, and it's not a one-to-one transition, and it's not a literal thing of, like, kind of like Elon Musk AI comes in and, like, replaces your payroll department. It's just, like, more and more, uh, uh, uh, just kind of incremental software, um, uh, comes in and just makes everyone more efficient, which takes jobs. Now, um, I think also will create many jobs. They'll just be... It's just always harder to envision the jobs that are created than it is to envision the jobs that are destroyed.

   14. FWFred Wilson23:51

       What you're talking about right now I think is where a lot of the action is in startups and venture capital right now. If I look at where, you know, a lot of the dollars are being invested, where a lot of the value creation is happening, uh, where a lot of the bigger companies are getting built, it is sort of in that enterprise SaaS area. I think consumer has gotten harder because of some of the things we've been talking about before, but I don't think that enterprise SaaS has gotten harder. And so in a way, I think for- We've thought for the past four or five years it's more of a grind-it-out execution, operational, not super sexy style of startup and style of investing that has been winning the day, and the things that were kind of happening in the latter part of the last decade where you had, like, a Facebook come out of nowhere, a Twitter come out of nowhere, a YouTube come out of nowhere, where VCs were making 100 times their money on these huge, big consumer breakouts, we see those, but not as many.

   15. CDChris Dixon24:51

       Yeah, I mean, the great thing about SaaS, right, is the business, once you have those customers and they like your software, they stick with you.

   16. FWFred Wilson24:55

       Right.

   17. CDChris Dixon24:56

       So it's like an annuity, right? And it's very, it's a very high margin annuity. Um, it's, it's, it's a challenge to get those customers, and you have to get... There's a lot of detailed kind of sales and marketing execution to go reach efficiently. I mean, that's kind of the trick in a lot of those companies, how do you efficiently reach the massage parlor, the whatever-

   18. FWFred Wilson25:14

       Right

   19. CDChris Dixon25:14

       ... the small business payrolls, you know-

   20. FWFred Wilson25:16

       Right

   21. CDChris Dixon25:16

       ... uh, the person who needs payroll. Um-

   22. FWFred Wilson25:18

       Yeah, the founders all complain to me. They're like, "Every venture capital meeting I take, they wanna know CAC over LTV."

   23. CDChris Dixon25:23

       Yeah.

   24. FWFred Wilson25:23

       "They wanna know our-"

   25. CDChris Dixon25:24

       It's very metrics driven. It's very-

   26. FWFred Wilson25:25

       They're like, "They wanna know our sales power. They wanna know, like, you know..."

   27. CDChris Dixon25:28

       Yeah.

   28. FWFred Wilson25:28

       And, and I was like-

   29. CDChris Dixon25:30

       Your magic number or, you know

   30. FWFred Wilson25:30

       ... 'cause, 'cause honestly that's what separates the winners-
7. 26:22 – 32:34

   Changing Capital Markets and Token-Based Participation

   1. CDChris Dixon26:22

      So let's maybe talk a little bit about the changing capital market world.

   2. FWFred Wilson26:26

      Mm-hmm.

   3. CDChris Dixon26:27

      So, um, the venture world has changed a lot. There's new f- ways to fund startups, um, uh, including, uh, you know, crowdfunding, which you've been really involved with. There's, you know, the ICOs and the kind of the crypto stuff that's, that's kind of, uh, s- you know, emerging. There's a lot more venture capital. There's a lot more stages of it. There are these mega funds. You know, I guess, what, you know, how is it, how, how have you seen the industry change over time and think about that?

   4. FWFred Wilson26:54

      Well, I think the, the first thing I would say is what you said, is that I think there's more capital available for founders today than there's ever been, and I think that's a good thing.

   5. CDChris Dixon27:06

      Yeah.

   6. FWFred Wilson27:06

      You know, a lot of people in the venture business, uh, or who, the, the people who give us the money, you know, think there's too much money, and maybe yes, but the reality [laughs] is, like, what's good for founders is good for the venture business. I just kind of believe that as, like, a fundamental truth. So there's a lot of money out there. Um, the traditional angel seed, early stage VC, then growth VC market, I think, um, the explosion of capital is probably more in the later stage, you know, with the SoftBanks and Sequoia going out and raising however many billions they raised and, and so on and so forth. And I think that if anything, there might, may have been a slight contraction in seed and angel and early stage money in the past few years. But I think that what's interesting about crypto, um... So first of all, you know, there's a lot of people who, who went and, you know, used tokens or, or just a crypto business plan or a business model to go tap into, like, a lot of new money that was showing up in the world of crypto. Um, and, and I think that that may, you know, certainly in 2017 and even now there's, there's a lot of that money sloshing around, but I think what we're really seeing, um, and I, I'm, I'm an optimist here and I'm hopeful about this, is that we're seeing a new capital market being built. We're seeing a new way of raising capital, um, that's global from the ground up, um, that's not subject to these, I think antiqu- a- antiquated laws around who can invest in startups and who can't invest in startups. And just unleashing the, the startup capital markets to be global and anyone can play is, is great. It's a huge innovation, right? And I understand there's people out there saying there's gonna be scams and, you know, people are gonna invest and lose all their money, and I get all that and I realize that that's, that's not all good, but in general I think that making it possible for everybody to invest in, in these, you know, high growth opportunities is good, and I think it's good for founders that, that, that the capital markets for what they're doing are gonna continue to grow.

   7. CDChris Dixon29:23

      I mean, the fact that today you have to be m- uh, literally a millionaire to invest in startups, right, to be an accredited investor. If you actually participate in an ICO, it's, it's very complex, right?

   8. FWFred Wilson29:32

      Right.

   9. CDChris Dixon29:32

      You need to download like a wallet.

   10. FWFred Wilson29:34

       Right.

   11. CDChris Dixon29:34

       You have to, like, put in a long hexadecimal address. I don't... I mean, and I have, I, I am pretty, pretty sure that almost all the people that participated in those things were technical people that were into crypto. I mean, the vast majority were. Um, and those are people, like, and I just said, like, anecdotally around Silicon Valley, these were, like, programmers who were very sophisticated, who understood exactly what the technology was, who were not m- maybe not accredited investors, and who felt like now they finally found a market where, like, they understood the product, you know, right? I mean, they were customers of the product. They were literally protocols built for developers, and they would use it, and they could participate in this. And the idea that, uh, you know, a non-technical wealthy person is able to invest in that, but this programmer who really deeply understands the protocol is not just seems strange, right?

   12. FWFred Wilson30:19

       Very strange, and wrong. The other thing is, you know, if you were an early user of Facebook, you might have said to yourself, "Oh my God, this thing's gonna be huge," right? It was... So let's, let's say that was 2003 or 2004 or 2005, whenever that was. When did Facebook go public? '11, '12?

   13. CDChris Dixon30:38

       Something like that.

   14. FWFred Wilson30:39

       Right, so it was, like, seven years before you could eventually become a shareholder on Facebook.

   15. CDChris Dixon30:44

       Yeah.

   16. FWFred Wilson30:44

       But if you're an early user of Bitcoin, you had Bitcoin day one.

   17. CDChris Dixon30:47

       Yeah.

   18. FWFred Wilson30:47

       Right?

   19. CDChris Dixon30:48

       Yeah.

   20. FWFred Wilson30:48

       So, like, what's great about crypto is that I think it allows the early adopters to not only be users, but also participate financially, if they want to. If they wanna hold onto their Bitcoin and, and go along for the ride, they can do that. And that's why I think the, this token business model is so exciting, is that in a way it kinda takes the world of investing and the world of, um, using and combines them. And, like, there was this... I read this blog post last week about, like, there's two parts of crypto. There's the money part of crypto, and there's the utility part of crypto. And-

   21. CDChris Dixon31:24

       Tech and money, I think it was.

   22. FWFred Wilson31:24

       Yeah, tech and money, right. And, like, the money people are, like, Bitcoin maximalists, and they're really focused on hard money, and the, and the, and the tech people are Ethereum maximalists, and they're, they're focused on, you know, dApp platforms and smart contracts and all that. I don't buy that w- at all. I... Th- that to me is ex- I mean, not, I'm not arguing that that's what the world is today. I think that, I think that w- I think it was Eric Tornberg who wrote it, and I thought it was very insightful about where we are in crypto right now. But I reject that idea, and I think what's powerful about crypto is that they're the same thing.

   23. CDChris Dixon31:55

       Mm-hmm.

   24. FWFred Wilson31:55

       That using and investing are the same thing, that they... And you don't have to be a user to be an investor, and you don't have to be an investor to be a user. But if you wanna be, you can be both, and it's just as easy to be... Like, it's just as easy to be both, right? Um, and, and that I think... It's just not right th- uh, particularly for a lot of these businesses where the user is the product.

   25. CDChris Dixon32:23

       Yeah.

   26. FWFred Wilson32:23

       Right? Facebook users made Facebook. Twitter's users made Twitter. You know, YouTube users made YouTube, right? It's just not right that the people who make the product have no participation in the value appreciation.

8. 32:34 – 37:51

   Network Life Cycles and a Token-Based Twitter

   1. CDChris Dixon32:34

      Well, and, and I think, and beyond that, right, to me, to me one of the great tragedies in the history of the technology industry is that what happens, and there's this sort of life cycle of every network, right?

   2. FWFred Wilson32:44

      Right.

   3. CDChris Dixon32:44

      And I, but I use network in a very broad sense. I include, I think Windows is a network, right?

   4. FWFred Wilson32:48

      Right.

   5. CDChris Dixon32:48

      So it's a network between developers and users.

   6. FWFred Wilson32:50

      Right.

   7. CDChris Dixon32:50

      Right? Um, and there's a life cycle, right? And they start off, and, and at the beginning there's sort of this, you know, the, the network, the platform wants to attract everybody, and they play very well.

   8. FWFred Wilson32:59

      Right.

   9. CDChris Dixon32:59

      Um, and so they, you know, and they provide tools for the third-party software developers. Facebook early on says, "Hey, media companies, come work with us."

   10. FWFred Wilson33:06

       Mm-hmm.

   11. CDChris Dixon33:06

       You know, they're solicitous. And then over time, you know, then you hit the kind of growth peak and everyone, it's a party and everyone's having a good time. And, like, you know, if you're growing 100% year over year, you know, you don't worry too much about stuff. And then eventually the top of the S curve comes, right? And then it become... That's when things get ugly.

   12. FWFred Wilson33:20

       Right.

   13. CDChris Dixon33:20

       And that's when... And it's not, and I don't blame any of the management of these companies or the boards. I think it's just the logic of the business model. The logic of the business model is sort of, it, it forces them at that point, when, when things start to slow. Uh, like Google, like Google Search. Like, if you look at mobile, like, it's hard now. You get all sponsored links on mobile. They just keep adding more sponsored links. You have Yelp going up in front of Congress and doing, you know. Like, when it's the growth period, "Hey, great. We'll have two, one, one little-

   14. FWFred Wilson33:45

       Right

   15. CDChris Dixon33:45

       ... ad at the top," and, like, you know, but when-

   16. FWFred Wilson33:47

       But the point is, when the pie's growing, no one's fighting-

   17. CDChris Dixon33:49

       That's right

   18. FWFred Wilson33:49

       ... over a piece of the pie. When the pie [laughs] stops-

   19. CDChris Dixon33:51

       Yeah

   20. FWFred Wilson33:52

       ... growing, people start fighting over the piece of the pie.

   21. CDChris Dixon33:53

       And so, and then what happens is these networks have these kind of internal battles, right?

   22. FWFred Wilson33:57

       Right.

   23. CDChris Dixon33:57

       And, and those are the most vicious ba- Like, that's the funny thing about tech, and I think that, like, people outside of tech don't... So traditionally in economics, people think of substitutes as the competitors, right?

   24. FWFred Wilson34:04

       Right.

   25. CDChris Dixon34:05

       So the hamburger and the hot... There's an example I always use.

   26. FWFred Wilson34:07

       Right.

   27. CDChris Dixon34:07

       The hamburger and the hot dog are the competitors. Whereas in tech, actually the hot dog and the hot dog bun are the ones that have the most vicious fights.

   28. FWFred Wilson34:12

       Right.

   29. CDChris Dixon34:13

       Microsoft, Netscape. You know, Facebook, Zynga. Like, Twitter-

   30. FWFred Wilson34:16

       Right
9. 37:51 – 41:15

   The Digital-First Transition: Offline Bias and Esports

   1. CDChris Dixon37:51

      Let me, let me just try this out. I, I have this theory. See what, see what you think of this theory. I have this theory that we are in the middle of a transition period where, um, [lips smack] uh, the digital world is becoming more, more important, uh, to the point... But we're in a transition period in the sense that we still... It, it's even in our la- We still, we still think of the, the phys- the f- the offline world as primary.

   2. FWFred Wilson38:11

      Mm-hmm.

   3. CDChris Dixon38:11

      And the... And, and, and you see this, by the way, in all the critiques of Bitcoin, for example. Oh, like, in the end, a lot of, like, the, you know, traditional economists critiquing it, it, it boils down to, oh, it's this, it's fake money. It's-

   4. FWFred Wilson38:21

      Right

   5. CDChris Dixon38:21

      ... it's, it's digital, therefore it's fake, right? And, and, like, for example, like, to think that gold, which, you know, has whatever, beside out of dental and speaker wire or something-

   6. FWFred Wilson38:28

      Right

   7. CDChris Dixon38:28

      ... has no real utility, like, to think that that has some kind of, like, ontological, like, higher status than a digital good is, I think, evidence of this sort of offline, uh, bias, right?

   8. FWFred Wilson38:39

      Right.

   9. CDChris Dixon38:39

      And, and, like, and I think you hear it. I, by the way, I, I notice this whenever people use the language. Esports, right? Notice e-commerce. Like, when you, you have to preface.

   10. FWFred Wilson38:46

       [laughs]

   11. CDChris Dixon38:47

       The online one is the one with the modifier, right?

   12. FWFred Wilson38:49

       Right.

   13. CDChris Dixon38:49

       Right? And so at some point, by the way, you, these things will flip, and it'll be like, that's commerce, and then there's offline commerce, right?

   14. FWFred Wilson38:54

       By the way, you say that the predecessors to Bitcoin were called e-money.

   15. CDChris Dixon38:57

       Yeah. [laughs] No, no, and, and-

   16. FWFred Wilson38:59

       And there were a lot of predecessors

   17. CDChris Dixon38:59

       ... and whenever you, whenever you have a modifier on the thing, you know that people think it's subordinate.

   18. FWFred Wilson39:03

       Right.

   19. CDChris Dixon39:04

       Right? But eventually it'll flip, and it'll be like-

   20. FWFred Wilson39:05

       Right

   21. CDChris Dixon39:05

       ... Amazon is commerce, and Walmart is, oh yeah, it's like, you know, meat space or offline commerce or IRL commerce, or whatever they're gonna call it. So I think we're in this transition period. And, and it's funny too, because, like, you know, Fortnite made $300 million last month on dance moves, right? Emotes, right? Right? And so digital goods have become a, a massive industry, for example, in video games. And, and, uh, and, and there's, there's digital resources, domain names. You know, I've always bought d- I've, I've been a longtime collector of domain names. I'm like, look-

   22. FWFred Wilson39:32

       Me too [laughs]

   23. CDChris Dixon39:32

       ... it's a little piece of the internet. Like, of course it's gonna be valuable, and I've always wanted them, and I hold onto them. Um, and, and that's a multi-hundred million dollar-

   24. FWFred Wilson39:38

       I've never sold any of those either, by the way.

   25. CDChris Dixon39:39

       Yeah, me neither.

   26. FWFred Wilson39:39

       I, I never sell a domain, you know? [laughs]

   27. CDChris Dixon39:41

       [laughs] I feel like-

   28. FWFred Wilson39:42

       Why would you? [laughs]

   29. CDChris Dixon39:43

       It's on- I mean, it's the inter- You own a piece of the internet.

   30. FWFred Wilson39:45

       [laughs]
10. 41:15 – 49:31

    NFTs, Digital Scarcity and Crypto-Native Ideas

    1. FWFred Wilson41:15

       Well, I, I think, I think this is where what geeks call NFTs, non-fungible tokens, um, you called, um, I think you just call them digital goods.

    2. CDChris Dixon41:23

       Crypto goods. Yeah.

    3. FWFred Wilson41:24

       Crypto goods.

    4. CDChris Dixon41:24

       Yeah.

    5. FWFred Wilson41:25

       I think the innovation here is that these, um, digital assets, um, can be scarce, can be one of a kind. Um, you know, the reality is, like, we've never had the ability to make a digital good, um, non-replicable, right? And that's, I think, what, you know, has held back a lot of the business models around digital goods, um, is just, like, if you had an MP3, you could give it to a million people. If you had an, you know, uh, an MPEG, you could give it to a million people. So, um, I was explaining this to somebody last week who's trying to, like, figure out, you know, uh, crypto, and I said, "You know, think about all of the digital goods that you earn in a video game," right? And you spend, you know, you're obsessed about this video game for, like, six months, and you collect all these-

    6. CDChris Dixon42:16

       Yeah

    7. FWFred Wilson42:16

       ... incredible video, but they're stuck in the game.

    8. CDChris Dixon42:18

       Yeah.

    9. FWFred Wilson42:19

       Like, imagine if you could take them out of the game and you could put them in your wallet, or think about just, like, your bank account, right? And then another game comes along, and you could literally take them to another game. And this person [laughs] who I was talking to, who was a skeptic, like a fucking skeptic like you wouldn't believe, he's like, "Holy shit. My 12-year-old would just be all over that. Like, that's, that's like you have just given-

    10. CDChris Dixon42:42

        Yeah

    11. FWFred Wilson42:42

        ... my 12-year-old his, like, nirvana." And I said, "But, but that's what we're doing here. Like, that is, that's where we're going." [laughs]

    12. CDChris Dixon42:49

        I think, I think games will be the first to adopt this stuff because they, uh, they just tend to be very kind of fast cycle time-

    13. FWFred Wilson42:55

        Mm-hmm

    14. CDChris Dixon42:55

        ... experimental. But I also think-

    15. FWFred Wilson42:56

        Well, also, no, no, it's not just that. It's also who's playing them

    16. CDChris Dixon42:59

        But it's a... You mean the, the, the kids, the kids that are sort of more open to new technology?

    17. FWFred Wilson43:03

        Yeah, they, like, them, like, tell a kid to download, like, an Ethereum wallet that has NFT capability-

    18. CDChris Dixon43:08

        Yeah

    19. FWFred Wilson43:09

        ... and move their games out of Fortnite into their Coinbase wallet or, like, th- th- that's not gonna get in the way.

    20. CDChris Dixon43:14

        But I think the other thing with NFTs that excites me is I feel like this should be a wonderful time in history for creative people.

    21. FWFred Wilson43:22

        Yes.

    22. CDChris Dixon43:23

        Um, with, you know, four billion smartphones, and the ability to just sit down and write something and create a piece of music, and from a business model perspective, it hasn't been. And, and so one of the things that's really exciting to me about NFTs is if you let's take music as an example, right? Um, so mostly on, like, selling the, the song itself has become a not great business model. And so a lot of musicians have moved to... They go where the scarcity is, right?

    23. FWFred Wilson43:45

        Yeah.

    24. CDChris Dixon43:45

        And the scarcity is offline, and so it's shows and merchandising. And so one of the really exciting things to me about NFTs is the idea that you can reintroduce digital scarcity and have, whatever, exclusive album art, exclusive whatever. Maybe this is... To me, it seems like a very promising new business model, not just for games, but for writers, for musicians, for, uh, you know, whatever, you, you know, filmmakers, video makers. Um, uh, it reintroducing scarcity, allowing kind of business model innovation, um... I mean, ga- game-

    25. FWFred Wilson44:15

        Well, the cool th- the cool thing is it, it, it, it doesn't have to be, um, that there's only one of them. It could be there's a million of them, or in the case of Bitcoin, 21 million. We still haven't mined all the Bitcoin, and we're nine years into it now, right? So, like, imagine if you made a song. I just came up with, I think, a pretty cool idea. Imagine if you made a song and there was 21 million listens to it, and you had to mine the listens, right?

    26. CDChris Dixon44:45

        Yeah.

    27. FWFred Wilson44:45

        Like, but it was gonna take maybe 5 or 10 years to mine all those listens. You know, actually, you get 21 million listens pretty quickly on the most popular songs.

    28. CDChris Dixon44:53

        [laughs] Yeah.

    29. FWFred Wilson44:53

        But, like, imagine if there was some mechanism of releasing a piece of art or a piece of music that felt more like mining Bitcoin than it did-

    30. CDChris Dixon45:02

        You could never do scarcity pre... There was no way to ever do that.
11. 49:31 – 54:23

    Crypto's Missing iPhone Moment and Decentralization

    1. CDChris Dixon49:31

       Obviously we're both excited about crypto. How, how long... And then there's all these great ideas floating around, but it's early. Um, you know, w- h- how long do you think it'll take to play out, to, to sort of... I mean, it'll obviously hopefully take many decades, but, like, when will we start to see meaningful applications used by people beyond the kind of crypto enthusiast?

    2. FWFred Wilson49:50

       I think that, um, we've gotta fix... It's the broadband issue. We gotta figure out how to, um, get crypto networks that are truly secure and decentralized, um, that can handle much higher transaction processing speeds than what we have today.

    3. CDChris Dixon50:09

       It's, uh, it could... I think it's, to me, it's a, the, it's think of the crypto network as a computer.

    4. FWFred Wilson50:14

       Right.

    5. CDChris Dixon50:14

       And the computer has different design criteria. It's very different than a traditional computer. It's a network, right?

    6. FWFred Wilson50:18

       Mm-hmm.

    7. CDChris Dixon50:18

       But, but in, you know, the consensus mechanism, et cetera, makes this abstraction that's a computer on top. And you need trust, you need developer experience, you need scalability. And yeah, it's, it's like we're internet pre-broadband, we're mobile phone pre-iPhone.

    8. FWFred Wilson50:31

       Exactly.

    9. CDChris Dixon50:31

       We're, you know, you pick, like-

    10. FWFred Wilson50:32

        Like, remember, like, remember when-

    11. CDChris Dixon50:33

        The danger, the side effects and-

    12. FWFred Wilson50:34

        Remember when, like, people were building, like, um... What were they called? Were they called, um, the... Was it, was, like, WAP or something? There was, like, some-

    13. CDChris Dixon50:41

        Yeah, yeah.

    14. FWFred Wilson50:42

        There was some standard for building applications on-

    15. CDChris Dixon50:44

        It was poor. I had, I had this, like, I had this poor friend who was, like, into mobile from, like, the '90s, and I think he, like, gave up in 2006. He's like, "It's never gonna happen." [laughs]

    16. FWFred Wilson50:51

        By the way, that's what we are. We have not had our iPhone moment in crypto yet.

    17. CDChris Dixon50:55

        Yeah.

    18. FWFred Wilson50:55

        And, and like, actually-

    19. CDChris Dixon50:56

        So we need the iPhone moment, and then we need-

    20. FWFred Wilson50:57

        That's what I'm waiting for.

    21. CDChris Dixon50:59

        Yeah.

    22. FWFred Wilson50:59

        And, and, and, you know, it doesn't have to be totally decentralized. There's this whole narrative around, like, you know, where, where on the decentralized curve is enough. I just think, like, decentralized means that nobody controls the network, and that's kinda, to me, fundamental. Like-

    23. CDChris Dixon51:14

        To me, it means trust.

    24. FWFred Wilson51:15

        Yeah.

    25. CDChris Dixon51:15

        And that mean... And that, that... It goes along with nobody control. Like, it's-

    26. FWFred Wilson51:17

        Right

    27. CDChris Dixon51:17

        ... you tru- you trust the network. I trust that if I have this NFT, I really have it.

    28. FWFred Wilson51:21

        Right. Because-

    29. CDChris Dixon51:22

        Right? And, and no one can take it away. No single person can take it away. No bad system engineering can take it away.

    30. FWFred Wilson51:27

        What's the quote? Like, "Power corrupts, absolute power absolutely corrupts," or whatever it is. But, like, look, you just said, like, w- when Facebook realizes that they've got the keys to the castle, you're gonna start to extract rents. Like, it's just, it's just-

Episode duration: 54:24