A sceptic’s guide to crypto: bonus interview with a16z’s Chris Dixon

This is an audio transcript of the Tech Tonic podcast: A sceptic’s guide to crypto — bonus interview with a16z’s Chris Dixon

Jemima Kelly
This is Tech Tonic from the Financial Times. I’m Jemima Kelly, and this is a bonus episode in our series on the future of crypto. In the last episode, we heard the FT’s innovation editor, John Thornhill, speaking to Chris Dixon, who leads crypto investing for Andreessen Horowitz, the Silicon Valley venture capital fund. They talked about why Andreessen Horowitz is investing billions of dollars in Web3 start-ups and Chris’s vision for an internet built on the blockchain. So here’s that interview in full, and a reminder, I’ll be back next week with the third episode from this season of Tech Tonic. So here’s John Thornhill and Chris Dixon from Andreessen Horowitz. The interview starts with a question from John.

John Thornhill
Right. I’d like to drill down a bit into what we’re talking about when we discuss Web3. I mean, it’s a somewhat nebulous term that people use in different ways. What’s your understanding of it?

Chris Dixon
Sure. So the way I view the history of the web or the internet is in, in broadly three cycles. So the first year we call Web1 was the 90s and basically the 90s. I mean, you had the internet before that in sort of academia and government, but kind of the commercial internet really developed in the 90s. And the key thing in the 90s is that the kind of governing systems were open protocols. So specifically the web is this protocol called HTTP, email, the protocol called SMTP. And so if you were, for example, Larry and Sergei at Google, you know, building your search engine, you were building on this “platform that, that was the web.” And what that meant for Larry and Sergei and for all the entrepreneurs of that era and investors of that era, is that if you build something interesting, you really own that. And that meant that you got to capture the economics. You got to control it. When you build a website, it’s your website. In the era of Web2, which roughly I think of as 2005 to 2020, you had the rise of these giant centralised corporations, namely Facebook, Google, Apple, Amazon, and then a whole set of kind of other ones like Twitter that are smaller, who essentially became the, essentially took over the internet for, for the most part. If you, if you look at, if you look at the data and what people do on the internet, for the most part, they’re using centralised services that are run by companies. Now, these, these had a lot of advantages. These are great services. They’re most, many of them are free. They service billions of people. They provide, I think, a lot of utility, and, you know, just everyone who uses Google knows that it’s an amazing product. And at the downside of it . . . 

John Thornhill
Andreessen Horowitz made a huge amount of money out of those Web2 companies, didn’t it?

Chris Dixon
And yeah. Look, and yeah, I mean, look, and the firm did well, and, and I worked in Web2. My partners, you know, obviously, you know, Marc Andreessen and others at our firm worked in it. And sometimes, you know, people used it as a criticism against us on the Web3 side. I think the, my view of it is, you know, yes, we were involved. Yes, you know, our job is to invest in kind of the frontier technologies, and that was the frontier technology at the time. I don’t think any of us, though, including my partners, expected that the outcome of today, which, you know, to me looks a lot like the way that, you know, a very centralised internet where you have four plus companies that essentially run it. You know, I think it’s, it’s we’re at a point where it could become like radio and TV were 30 years ago, where you had, you know, super concentration, ABC, NBC, CBS. I don’t think that’s good for anyone. I think specifically, for example, I think it’s bad for creative people who try to make money using these services. So, you know, one of the remarkable things about these services is that they, they basically share very, very little of their revenue with, with their, with the people that create all the content on these services. So Facebook, Instagram, you know, Instagram, let’s say, Instagram, they, lots of people, you know, photographers, writers, podcasters, build audiences on services like Instagram. Instagram makes their money on advertising. Instagram shares zero of that money back with the creators. Some of the services are better like YouTube that shares a percentage. Twitch shares a percentage. Facebook shares nothing. Twitter shares nothing. Instagram shares nothing. It’s very, it’s very good for these companies. And you can see this in their market caps and things. They figured out a way to have other people create their content and take basically all of the money, you know? I think so, so when we talk about Web3, just to go back to that, I think of Web3 as a new era of the internet with new architectures and new ways to build internet services that are either built using some of these concepts from crypto like blockchains and tokens. The key feature that, that I think is relevant to your audience is that you can now build new social networks, ways for creators to monetise and all sorts of other games . . . just, you know, any kind of application that you see today on the internet you can now build in a new way using Web3, where the economics and the control of the services are mostly given to the users and not simply to a company. And so this is what you’ll hear people talk about decentralisation. And what I think of decentralisation as essentially is you’re pushing money and power out to the nodes of the network, the people that actually build these systems, the people that create the content of these systems, the people that create the software around these systems, instead of to a few companies. And so, you know, you mentioned that we’ve made a lot of money on Web2, you know, I don’t think that any of us expected this level of concentration. And frankly, I don’t think this is a good outcome, both societally and frankly from a business point of view because our business is investing in entrepreneurs. And I think that the idea of having the internet controlled by five companies is very bad for entrepreneurs and bad for VCs. I think that, you know, if you go back and look at it the first year, the web I think was very good for innovation because it, you had to kind of this level playing field upon which people could build, build new services. And that, and that’s kind of spurred a wave of innovation and entrepreneurship. And I, my hope is through Web3, we can return to an era like that where we get the best of both worlds. We get the kind of advanced functionality and, and all the great things and bells and whistles of Web2 but, but also return to a much more decentralled, decentralised distribution of power and control the way we have in Web1.

John Thornhill
I mean, this is very compelling rhetoric, but I’d like to understand in a bit more detail how in a Web3 world would someone who is creating content for Instagram, as it were, keep more money from the content that they produce?

Chris Dixon
Well, there’s, there’s a concept called take rate, right? Take rate in business is the percentage of, of, of the revenue that the centralised company takes. And so on Instagram that take rate is a 100 per cent. They take all of it. On the web it’s 0 per cent, right? I mean, if you go through the web and you go to Google, the web is not taking any of that money, right? The web is, the web is an open protocol. And I’ll just give you an example, a recent start-up that we announced funding for is called Farcaster, which is an essentially it’s a it’s a service similar to Twitter, except instead of being controlled by a company, a centralised company, Twitter Corp, it’s, it’s an open protocol. And it’s, it’s, you know, kind of, think of sort of RSS, except I think RSS had a lot of feature limitations that made it ultimately lose. I mean, the sad fact is RSS was a, you know, just for the listeners who don’t know, it was an open protocol that, that was the closest thing we had to an open protocol that could compete with social networks. And it essentially lost. If you look at the data, it’s, you know, it’s has minimal usage compared to the centralised services and that’s because, in my view, it was, it could not compete on features. It could not, you know, if I go to Twitter, I can be C Dixon on Twitter. If I go to RSS, I have to set up a website and pay $10 a year and all these other kind of wonky things. And so Farcaster is an example — it’s very early, just so you know, these are, in this case, it’s a, it’s a raw start-up, it’s a seed stage start-up — but it’s an example of something that I think has this feature parity with advanced modern social networks. But it doesn’t have a take rate. It doesn’t, it doesn’t take any of the money. So if you, if you create something on top of it, you keep that money. If you’re a developer who builds on top of it, you keep that money. They can have maybe a low take rate. And you see this in Web3 like OpenSea, for example, is kind of the closest thing I think you have to a kind of big centralised service in Web3, and the take rate’s 2.5 per cent compared to 100 per cent in Instagram. So they take only 2.5 per cent, and that’s not because they’re altruistic, it’s because Web3 is architected differently where the data is controlled by users, and they can leave and they can exit. And so the centralised services have far less power. One of the reasons that Twitter has so much power, right, is I’ve spent 15 years on Twitter. I built a big following. I can’t leave Twitter, right? I can leave, if I might leave, if my email hosting provider, you know, takes too much money, I can leave that email hosting provider, that Web hosting provider. With Web2, you’re, you’re stuck in these silos. You build an audience, and you’re stuck there. And that’s why they have so much power. I mean, we can go into it, but, you know, has to do with network effects and Web2 have the network effects accrue to these companies.

John Thornhill
You’ve described Web3 as a kind of golden age for creatives. Could you give us some other examples of maybe companies you’re investing in or models that you’ve seen where creators can make money out of this?

Chris Dixon
Yeah. So for example, we’ve made a number of investments in, in what we call Web3 gaming. And so these are games, video games, so think of something like Roblox or Minecraft. These are, and these are developers. One of I think really exciting things is they’re coming out of top companies, you know, game design companies like Riot and Blizzard and Epic and things like this. And they’re, and they’re coming out and they’re saying, hey, we want to build new styles of games where the business model is virtual good. So just to step back for those who don’t know, the kind of the most dominant and, and, and growing business model in video games today are selling virtual goods. This is how Fortnite, Fortnite is a free game. League of Legends is a free game. Each of those games makes billions of dollars a year selling virtual goods. So you’d buy, for example, in Fortnite, you know, you buy skins, which are outfits for your characters which are purely optional, but people buy them, and they make billions of dollars. But right now, all that money goes to the company. It goes to Epic in that case, or Riot. So one of the exciting things in Web3 is you have this much more of a peer-to-peer economy. So you have individuals, creative people can create those skins. The, the company behind it still makes some money. They take a tax. But that’s, instead of the tax being 100 per cent, the tax is like 5 per cent in some cases or something and 95 per cent goes to the creative people. And so instead of having an economy, you basically have, these modern games — EVE, League of Legends, Fortnite — they’re, they’re, they’re economies. They’re quite literally economies. They have, they have economists who manage them. They have, you know, essentially internal federal reserves and things like this. And they think about it that way. These are, the idea with Web3 is you can have economies, but you can have economies that are, that are kind of truly peer-to-peer, meaning the users can make money, too, instead of just the company behind it. And that’s a really exciting idea and unlocks, I think, one of the reasons I think we’ve seen so many people kind of coming out of these top game companies that want to create things here, is it’s one of the kind of big new ideas in gaming, first big new ideas in gaming in a while. And it’s exciting, and it enables a whole new kind of wave of, of design and architecture.

John Thornhill
One other way of looking at this is, I think, to compare it maybe to Wikipedia, and I’ve heard you talking about that as kind of miracle of a decentralised, crowdsourced, open resource, kind of Web2.5, I think you called it. How would that have been different? How could people benefited from the content that they created in that kind of Web3 world?

Chris Dixon
Well, so yeah. So Wikipedia, I think Wikipedia is one of the kind of miracles of the modern era. It’s a wonderful service. You know, I think a lot of people who started, I believe, in 2001 at the time you had these, you know, encyclopedias, digital encyclopedias like Microsoft had a product called Encarta. And, you know, when Wikipedia came out 2001, it was, it had, it had very few, few contributors, and the content was, was quite bad. Meanwhile, Encarta, you know, they had beautiful pictures and content written by experts. But what happened over time is that Wikipedia, you know, attracted more contributors. And of course, and eventually had this kind of flywheel where the contributors created better content, more users came. That then led to more creators. And if you recall, for those, for those old enough to remember, Wikipedia was very controversial. It was banned on college campuses. There were lots of news articles talking about this level of inaccuracy and, you know, and the kind of risks that it would undermine experts and all sorts of other things. And as I recall, it was roughly 2007, there was, I think it was Nature or some scientific journal that did a study and actually found Wikipedia to be, to get, to getting sort of comparable accuracy to, to encyclopedias created by experts. And of course, today, I think most people would agree it’s an incredible resource. You know, I think one of the challenges Wikipedia is, and by the way, I think Wikipedia is amazing and I, I, a lot of what we’re doing is, is in other areas where you haven’t seen that level of decentralisation so, so I’m not being critical of Wikipedia, but, but there are issues. So for example, I just saw a stat recently, there’s, you know, there’s something like, you know, a thousand times as much content around Star Wars on Wikipedia than there is around like a bunch of other, you know, scientific topics. It’s, it’s, you know, it’s, it’s a group of enthusiasts and enthusiasts have various motives and interests and things like that. But look, I’m not criticising Wikipedia. I think it’s actually a wonderful service. I’m much more critical of sort of the things that haven’t been decentralised the way Wikipedia has, and specifically social networking services for, you know . . . You think about like . . . let’s take music as an example. So music, and I’m not criticising any specific company here, but, but if you just look at most musicians today, they’ll tell you they make very little money on the internet. Most of them make most of their money, not sure, you know, Taylor Swift or something, if you’re, if you’re sort of an ordinary, not top 50 musician, you basically make your money offline through merchandising and touring and things like this because the digital economics are so bad. Does this have to be this way? Like, why? Why? Why do they make, why do musicians make so much more money offline? It’s because offline there aren’t these giant, I mean, there are Ticketmaster and things, but for the most part, they can go sell T-shirts directly to their fans. So one of the, one of the things I’m really excited about, for example, in Web3 and crypto or NFTs where we’ve invested in a number of services Sound.xyz, Royal and a few others where essentially musicians can sell directly to their fans without being intermediated by a company like Facebook or Twitter. Digital collectibles and other kinds of digital items using, using NFTs that, that let them, I think, do a couple of things. They let them give their fan base a new, new kinds of interesting experiences. But more importantly, they, they, they can make money directly from their fans in a way that without 99 per cent of the money going to Spotify and other centralised intermediaries. I think you could see a similar kind of dynamic in other, I think we will see a similar dynamic in other areas of, of online creation, podcasting, writing . . . I mean, look what Substack is on writing. Substack is not a crypto kind of Web3 company. I think if you’d asked a lot of people five plus years ago, can a writer with a newsletter make $1mn a year selling that newsletter to their audience? People would have thought you were crazy. You know, there are many writers making that kind of money now in Substack. I think what Substack demonstrates is the power of when you remove the intermediaries, how, how much better creator economics can be. So a lot of people, I think there’s a common myth out there that the internet is bad for creative people economically. I think it’s not the internet that’s bad. I think it’s these giant centralised intermediaries. And once you remove them as Substack shows, you can, you can, you know, you can transform the creator economics and specifically this is concept for those who are interested. Kevin Kelly, who’s this great writer, thinker, entrepreneur, has this, I think, kind of, amazing kind of canonical article called 1,000 True Fans from 15 years ago. And the idea was the internet would enable a creative person, instead of having to to kind of get to scale and have millions of fans and make pennies off of them, could instead go and find sort of their thousand hardcore enthusiasts who are willing to drive and see their show or buy their cookbook or whatever it might be. And if you do the math, that if you, if you have a thousand people and they’re each paying, let’s call it 20 bucks a month or something like that, you can make a really interesting living. And so the basic idea is once you remove all these giant intermediaries who take all the money, you can unlock all sorts of new, interesting economic possibilities for great people.

John Thornhill
I’m really intrigued by this idea of kind of removing the intermediaries and decentralising the power and so on, and this Web3. And how is that squared with how Andreessen Horowitz is gonna make money out of this world? How, how are you going to return the fund to your investors?

Chris Dixon
Yeah. So I’ll give you an example. So, you know, so, so the short answer is it’s a different, it’s a, it’s a completely different kind of economic model in Web3 and crypto in which our investments are mostly in tokens instead of, instead of companies. And so to give you, and so what does that mean? So to give you an example, let’s take Ethereum. So Ethereum is, you can basically think of Ethereum as a giant computer in the cloud that is owned by nobody. It’s sort of run by 20,000 people. You know, anyone can kind of go on and, and, and be part of the Ethereum computer. Other people can write code for the Ethereum computer, which are called smart contracts. And then a third set of people can go use those, that code. A lot of the crypto and Web3 stuff you hear about is built on Ethereum. It’s sort of the most popular platform. Ethereum doesn’t take, it doesn’t have a take rate, doesn’t take any money from people. It does charge what are called gas fees, which essentially you can think of as the similar to the fees that old mainframe computers would charge, sort of you pay for the amount of compute you use. And the way it works is then essentially you can think of that, those payments, so as a system gets more popular, people are required to, to, to pay to use it. And that money that’s, that’s, you know, that’s sort of its “revenue” is, is given back to the, to the holders of that token called ether. And so it’s, you know, so there’s sort of a whole economic model built around it that is based on that, that fundamentally is driven by the demand for using the Ethereum computer. So that token will be valuable to the extent that, that, that the Ethereum supercomputer becomes more and more popular. And so the way we make money is we buy the tokens, very simply. And so we’re essentially making a bet that, that, that, that computer will get more popular. Now, very importantly, those, those are tokens out there, and there are people that work on Ethereum, but there is no, there is no Ethereum company, right? There is no, like, this is ultimately controlled by, there are people that first created the system like Vitalik and other people, but at this point, you know, Vitalik is kind of the, the head of kind, of the, has a bully pulpit, but no actual control. And it’s, it’s controlled by the community in the same way that something like Wikipedia is.

John Thornhill
So just so I understand, this is very different from the traditional VC model where you would take an equity stake in a company and then sell it on and you’re making money out of the tokens that of the companies . . .

Chris Dixon
That’s right, and that was, and look, that was a big, that was a big change. That’s a big part of why we created a separate crypto fund. It required a different, a whole different set of things, including, I mean, I went out and raised money separately for this crypto fund from a, from a sort of subset of our investors who are, who were kind of into this new idea. And it requires a whole sort of different legal structure, a different custody structure. And it’s a pretty big shift. You know, obviously, I see it as an opportunity for us to, to lean in and be on the frontier. But, but, you know, it has all the risks of kind of a new category.

John Thornhill
Other people have different visions of the kind of future of the internet. And Tim Berners-Lee, the inventor of the world wide web, talks about re-decentralising the web. I mean, he acknowledges, I think like you, that there are many flaws in the Web2, and, 2.0, and wants to kind of hand power back to the users and has come up with a new system called Solid, which he’s working with people at MIT to give people more control over their own data. Would you consider that to be Web3? Do you think that kind of idea will work?

Chris Dixon
Yeah, I mean, so, you know, he’s obviously a legend and, and, you know, created the internet and, and, or the web and, and I have huge respect for him. I think that, I think that there’s a couple, I think that there’s, that there’s, you need to do a couple of things to, I mean, the, the incumbents we talked about Google, Apple, Facebook, etc are very powerful. They’re very popular with users. I think that a very important part of taking them on is creating a new set of incentives and economics for, so, so that, for example, creative people, like the way that we will ultimately, we, Web3, will ultimately, I think, win over services like Instagram or TikTok, etc is by offering the people that create the content on those networks significantly better economics. And so I believe kind of incentives and economics are a core part of how, of any kind of credible plan to replace the giant Web2 incumbents. I don’t see how you get there without, without significantly better incentives and economics. It just seems to me a core part of how you, you know, can take on some, some set of incumbents that are so powerful. And I don’t know the details of his new system, but the last time I looked, it was much more very interesting architectural ideas. But I didn’t see the economic component there. Maybe, maybe that’s been updated. And so I don’t want to speak on that, but, but I do think that’s a core part. Like I think, I think it’s also what creates a controversy around Web3 and crypto because, you know, you once you have economics, you have speculation and you have people taking risks and all sorts of other things. And that creates the controversy. I believe that it’s a sort of a double-edged sword that you need that, that, you know, I’m not a fan of, I think that of all the speculation and other kinds of, you know, there’s obviously a lot of bad things that have happened in the space. And by the way, one of the things we’ve been calling for is we really think that, that, that we need smart regulation in the space and that there’s been under-regulated. And we’ve talked a lot about that. But, but at the same time, I believe you really need those economics and that value the sort of new incentives for creative people, for users to have a chance to really take on.

John Thornhill
Let’s talk a bit about the regulation that you’re talking about there. I mean, on the one hand, you’ve kind of tried to draw a distinction between the people who are building Web3 and the people who are kind of running a casino and gambling on Web3. How are regulators gonna divide one from the other?

Chris Dixon
Yeah, and so it’s complicated, and there’s many nuances. Maybe I’ll give one example because it’s been in the news, which (inaudible) and policy solutions are being discussed right now, which are stablecoins. So stablecoins are, are tokens, you know, cryptocurrency that, that is pegged to something like the US dollar. In the case of stablecoins, you have many different varieties of them, and so you have one called USDC, which is co-sponsored by Coinbase and Circle, which for every token you have that, that is, is a dollar. There’s a, there’s a literal dollar sitting in a bank account that you can go redeem and that’s audited and transparent and everything else. So that’s one extreme, which I think is the good extreme. Like that’s the right way to do a stablecoin. And then you have other cases, some of which have been in the headlines like Terra Luna, which collapsed, where they were, the only thing backing it was, it was this kind of circular system where the only thing backing Luna was, was other tokens from that same system. So it was all kind of this circular kind of thing. And then you had basically a bank run scenario where everyone, you know, left the system and it collapsed. So, so that’s, that, those are just two examples of good and bad. And I think one of the things I found sort of frustrating is that both in terms of how regulators have treated it so far and, and just generally the kind of press coverage as these things have all been lumped together when in fact they’re, I think, something like USDC has very strong collateral, a you know, very good kind of auditing processes, etc . . . And then you have these other examples where, you know, the risks were much higher and not sort of properly disclosed. So I think that, it’s, what I hope is that we end up with policy solutions that make the right distinctions between the good ways to build these systems and the bad ways.

John Thornhill
Yeah, I mean, there are a lot of other people who are very sceptical of this world who are also kind of calling for kind of more interventionist regulation. And I think in June, there were 1500 computer scientists and technologists who wrote to Congress are calling for a more responsible regulation of crypto assets, and they like, to quote the letter that they wrote, they said, “The catastrophes and externalities related to blockchain technologies and crypto asset investments are neither isolated nor are they growing pains of a nascent technology. They are the inevitable outcomes of a technology that is not built for purpose and will remain forever unsuitable as a foundation for large scale economic capabilities (Chris Dixon talking over).

Chris Dixon
There’s a set of these kind of the same critics that come over the studio deal, and there’s a bunch of these that they’re like ten people that keep orchestrating these kind of, I would call them astroturfing, kind of fake campaigns to criticise this space. Like, I don’t I mean, like . . . 

John Thornhill
Tell me, why are they wrong?

Chris Dixon
Because they cherry-pick bad things. They don’t, they, they ignore all the good things. They, you know, I’ve yet to meet one of these, I’ve spoken to a lot of critics have been in the space for ten years. I’ve yet to meet one who actually was very deep in the space and spent time on the kind of positive side. We have 90 portfolio companies in the crypto Web3 space. I spend all day every day with them. These are the smartest, you know, most earnest and creative entrepreneurs I work with. I never see any of those, those folks discussed by these critics. I think you can take any, look, you could take, you saw this during the, you know, the post-dotcom era, Pets.com. You can if you want to focus on only Webvan and Pets.com and ignore Amazon and Google, you know, you can do this with any year of technology. You can cherry-pick the bad things and ignore all the good things. And I think there’s a real risk with that as a country that we end up, you know, we’ve done a very good job, the US has done very good job being at the centre of the last two years of the internet. And I think it’s important to get into the nuance and the detail. And yes, there are bad things, and we should we should come up with smart regulation to reduce or eliminate that. But I think it’s throwing the baby out with the bathwater to start to try to ban new types of computing architectures. I think that’s, and I think an intelligent discussion of it, would go through the strengths and the weaknesses and try to figure out how we lean into the strengths and how we reduce the negative things. And there are negative externalities. I don’t deny that. I think it’s just, you know, I think it’s cherry-picking, exaggerating the bad things and ignoring good things.

John Thornhill
I’d really like to kind of return to this issue of how people are gonna make money in this world. And I think Peter Thiel famously said that all start-ups should aim to become a monopoly and dominate a market in order to extract money from it. And I mean, most often that’s not possible to achieve, but that should be the intent of any start-up. How does that philosophy square with the idea of decentralising power, giving ownership and control and reward for the content that is produced back to the people who create this content? And in other words, I mean, Peter Thiel seems to suggest that you can only make money out of the gatekeepers from, from the internet.

Chris Dixon
Yeah, well, I think, I mean, I think, I think corporations have their own logic. And I think I agree with Thiel that ultimately corporations will try to maximise their value, their shareholder value. That’s what they do. That if, if you look at all of these companies, so take Google, famously, the founders said, don’t be evil. We’re not going to put too many ads on the page. Eventually, you know, they, they’re now, I think, so basically retired. And you have professional management there. And I don’t know, at least my experience on Google, is the whole thing’s ads now. And so, so we like to say, and so I just think you should expect, I would expect any company to try to maximise shareholder value. That’s what they do, and I think that’s what Thiel was getting at. And you know, in the extreme case on the internet, you have network effects, which lead to monopolies, which is what you have, I think, with, with companies like Google and Amazon and Apple, you know, or something close to monopolies. And so my, my view and what blockchains do is we don’t, we don’t pretend that human nature will change. We build new systems as we like to say they can’t be evil instead of don’t be evil. So we assume humans will try to build monopolies and try to do all sorts of selfish things. But what a blockchain does is it builds into the architecture, the rules of the system. And so even if the founders who are well-intentioned leave and professional management takes over and all sorts of other kinds of things happen that humans will do, the architecture of the system guarantees things that I discussed before, like the take rate or who controls the system or how the economics work. That’s the key thing in something like a system like Ethereum is everything is all of the kind of the promises the system makes are baked into, the baked into the architecture and can’t be changed. That’s a very, very important concept in Web3 can’t be evil instead of don’t be evil. So I agree with Thiel. That’s what humans, that’s what business people will try to do. Of course they will. They’ll go try to create monopolies and big businesses and maximise shareholder value. What we can do to create a better internet, I believe, is create new systems where the network effects accrue to the community instead of to companies. And therefore it makes it much, much harder for, for those people to go build these kind of network effects like monopolies.

John Thornhill
And what gives you the confidence to believe that the incumbents aren’t going to just muscle in on this new world, and it really is going to be the insurgents that win?

Chris Dixon
Yeah, they could. I mean, you know, this is sort of, I think of Clay Christensen’s frameworks where you have sustaining and disruptive technologies. I think of, so I think, for example, there’s another really exciting technology people talk a lot about today is AI. I think AI is very exciting. I think AI is a sustaining technology. There are, if you look at the investments that Facebook and Google and companies like that are making, they’re making massive investments in AI. And it’s very likely the benefits of AI will accrue to those companies because they control all the data and all the, you know, the big computing systems and everything else that let you run those, those, you know, kind of take advantage of this new technology. So far, they’ve almost, almost, I say, outside of Facebook or Meta, they’ve all essentially ignored Web3 and have, I think, are full of you know, employees who are sceptical of it. And a lot of them are sort of active on Twitter as sceptics and just sort of are culturally averse to it, which, you know, in the same way that software companies pre-internet, you know, were culturally averse to, to the internet and desktop companies were culturally averse to mobile. I think this happens over and over, and I think it’s the mark of a true disruptive technology in a Christensen sense. And so, so far, I’ve seen no evidence that these companies will muscle in. Maybe they will at some point. I see that as an opportunity. And so we have, I think, a, you know, a much wider berth for our start-ups to operate and as compared to areas like AI and virtual reality where the incumbents are making significant investments. But I guess time will tell.

John Thornhill
And you think that this crash that we’re seeing in the crypto world at the moment is an opportunity for you? I mean, there’s that great investment phrase in there that you should be greedy when everyone else is fearful. Is that very much your philosophy?

Chris Dixon
I mean, I would say I wrote a Twitter thread about this recently. My experience having been, I guess, in the, in the internet for about 20 years now, is that innovation is mostly independent of financial markets. So a lot of great companies are created, and some, some are created, not markets, a lot are created in down markets. You just look at the, look at it historically when these companies were started. And so yeah, I do, I do think it’s an opportunity for us because there’s a lot of great entrepreneurs entering the space. There’s a lot of great ideas, and, and prices are lower. And so, you know, as in venture capital, you’re, you know, that, that you’re buying, hopefully, buying low, selling high at some point and having things that, you know, investing in things that appreciate. And, and so, so my experience has been downturns, you know, have been opportunities in venture capital. But we, you know, we don’t, we don’t try to, we’re not financial analysts, macro economists. We don’t try to kind of time the market, mostly just see ourselves as being in the talent business and finding great entrepreneurs regardless of the financial cycle.

John Thornhill
But we must end it there. But thank you very much, Chris.

Chris Dixon
OK. Thanks a lot. Appreciate it.

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Jemima Kelly
That was Chris Dixon from Andreessen Horowitz, speaking to John Thornhill. Thanks for listening. We’ll be back with a regular episode of Tech Tonic next week.

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