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Naval Ravikant and Chris Dixon on Web3 at the Tim Ferriss Show

Tim Ferriss hosted Naval Ravikant and Chris Dixon at his podcast. It was a mega-episode packed with information and data around the Web3.

In October 2021, Tim Ferriss hosted Naval Ravikant and Chris Dixon at his popular podcast.

It was a mega-episode (two hours and thirty-two minutes long!), packed with information, curiosities, war stories and data around the emerging technology known as Web3.

For the ones of you who haven’t heard of the two guests, here a quick summary.

Chris Dixon is an American entrepreneur and investor, currently operating as a general partner at Venture Capital firm Andreessen Horowitz. Amongst other things, he had co-founded Hunch, a collective intelligence recommender system that was acquired by eBay, and SiteAdvisor, a service that reported on the safety of web sites, later acquired by McAfee.

Naval Ravikant is an Indian-American entrepreneur and investor, co-founder of AngelList, an internet service for startups, angel investors, and job-seekers looking to work at startups. In 1999, Naval had also co-founded consumer product review site Epinions. Naval is well known for having invested early-stage in over 200 companies including Uber, FourSquare, Twitter, Wish.com, Notion, Opendoor, Clubhouse, Stack Overflow and Clearview AI.

I have collected a huge amount of notes from this episode. I am attempting to provide a (more or less) coherent view of the topics discussed in this podcast.

Reading this post will not do any justice to the sheer volume of knowledge discussed in this conversation. I hope going through my notes will convince you that you should actually spend the time to listen to the show.

I did not collect Chris’ and Naval’s thoughts verbatim. Where necessary, I tried to paraphrase to give enough context as to make each point individually consumable.

I tried to be as light as possible in my editing. This did mean two things: 1/ the points below keep a colloquial form (they’re not particularly “well written”), 2/ I combined different pieces into some of the bullet points and got rid of fillers.

I made all efforts to ensure that the overall meaning of each single consideration wouldn’t be altered by my re-writing.

If you like this write-up, come and comment on this Twitter thread.

Enjoy the reading!

Quotes from Chris Dixon

Technology

  • What the smartest people do on the weekend is what everyone else will do during the week in ten years
  • This goes back to the lore of Silicon Valley of the hackers in a garage and Steve Jobs and Steve Wozniak going to the Homebrew Computer Club. It was like a fringe-cultish club at the time in the era of mainframe computers.
  • Why was personal computing happening at the Homebrew Computer Club and not at, let’s say, IBM at the time? Once a company gets to a certain scale, it’s managed by business people, and business people plan on a one to three-year horizon. They’re very good at execution, but typically it’s kind of extrapolation execution: “we have this computer here, let’s make it better”.
  • Another example I like to use is University of Utah in the 1970s. The best venture capital strategy in the 1970s would have been to take a big bag of money and hand it out to the University of Utah because the entire future of computer graphics was at the University of Utah. Why? I forgot the specifics, but some donor liked computer graphics and gave money. I always think about it when I do venture capital. I can sit there and analyze metrics and do all this other stuff. Or, I can just go try to find the next University of Utah. That’s what I think about all the time: “where is that?”. A lot of it now is on the internet. It’s in a Discord, it’s in a Reddit.
  • Composability is to software as compounding interest is to finance.

Blockchain

  • The concept of the blockchain is one of the beautiful computing primitives that, like a lot of those beautiful things, it’s relatively simple at its core.
  • When I first saw Bitcoin, I’m like, “Oh, it’s stored Hashcash.” Adam Smith called capital “stored labor”. Bitcoin is literally stored computational labor (stored Hashcash).
  • When I said blockchains are computers, they are computers. Literally, if you go look at Alan Turing’s on computability paper, von Neumann, or any of the great computer scientists, a computer is something you write code and it can store things. Ethereum has almost Turing-complete programming language and can store information. It’s a virtual computer: a computer that runs on a network of physical computers.

Web3

  • Web1 (the internet), existed before the ’90s. But the web, sort of this killer app on top of the Internet, was created in 1990. I think of that as Web1 – let’s call it 1990 to 2005. The key thing with Web1 is that it was dominated by open protocol. The web has a protocol called HTTP, email has a protocol called SMTP and these were the platforms you were building on then. You had so much incredible innovation and investment, and it was sort of a golden period of innovation. But the products were limited in the sense that it tended to be kind of read-only. It tended to be skeuomorphic where people were taking things from the offline world, like magazines, and putting them on the internet. If you go back and look at the ’90s web, it was very much sort of experience like a magazine. Then came the Web2, let’s call it around 2005. At that time you had two competing models. Let’s just take Twitter. There was an open protocol called RSS. That was the obvious thing to compete with Twitter. RSS is still around, but it’s not nearly as popular as Twitter and Facebook and everything else. There were sort of open ways to build social networks in the 2000s. Then, there were closed ways to build them. For a variety of reasons, I won’t go into all the details, the closed ways won, and a lot of it had to do with the ease of use. The way I think about it is: in Web2, the open protocols were just limited in what they could do. Now it’s time for Web3: my definition is it’s an internet owned by users and builders orchestrated with tokens. This new concept of a token is the key concept of Web3. This comes sort of historically, from the movement that started with Bitcoin.
  • You can now build something that looks and feels like Facebook or Twitter using open protocols and using this new kind of philosophy where the value and control accrue to the users of the network, not to a company. You’re going to see more and more things and products launched like this, where initially there’ll be some kind of R&D organization that helps create these protocols, but over time they go away. In the same way that there is no Bitcoin company, Ethereum has a nonprofit foundation that supports R&D, but there is no Ethereum company.
  • No crypto company has ever spent a dollar on marketing, including Coinbase. I was on the board for years, no marketing. Why? Because tokens are self-marketed. When somebody owns something and feels skin in the game, they want to go talk about it. They want to evangelize it.
  • The Homebrew Computer Club of 2021 is probably a DAO.

NFTs

  • “The Web2 companies convinced you to give away your creations in exchange for little hearts. But yeah, tell me about how NFTs are the real scam”
  • NFTs are going to be broad. It’s a core new concept: the idea of truly owning something on the internet.
  • Modern gaming companies (and probably the best ones) are things like Fortnite and Supercell, Clash Royale, and League of Legends. The model they use is: the game is completely free. You can play completely free forever. The only thing you buy are cosmetic goods. You can’t buy goods that make you win because people think that would kind of undermine the integrity of the game… it’s all just to look cool, status flex. That’s a $40 billion a year industry, just the virtual goods alone. Those virtual goods are kind of locked into the game and all the money is going to the company.
  • Don Hoffman, who’s a genius developer and product designer, created Loot. Loot is just these little cards that have an inventory like a Dungeons and Dragons style game. Those themselves are NFTs. But what’s so cool about it, is that it inspired a whole community of people to build around it. It’s almost like if Ernest Hemingway, instead of writing the book, wrote just the first page of the book and then let the community add the next page. Don wrote, “This is the beginning of it, now let your imaginations go wild.” There won’t be one canonical game: there’ll be a hundred different things in the Lootverse.
  • Another lens to look at NFTs through is this: think about you go to the museum and you see a Roman statue. There’s sort of two ways you could interpret that. One is the piece of stone and that’s sort of “NFT is just a JPG”. The other, I think the correct and more sophisticated way, is to see it as a community artifact. It has meaning and value, that statue as part of that community of ancient Rome. It had its meaning. And I think the same thing is true with NFTs: NFTs are artifacts of networks. They derive value to the extent that they reinforce that community’s values, norms, language and memes.
  • One of my favorite things to do is look at old computer ads. It’s funny because, in the ’80s, all the computer ads had a married couple at the table doing recipes. Steve Jobs, as much of a genius as he was, the best idea he had for what to do with the computer in 1983 was a couple organizing their kitchen recipes. I think we’re probably in the “kitchen recipe period” of NFTs, which is awesome.
  • If you’re a business, and you want to find some really good customers, people that own CryptoPunks are probably really good customers. I think you can see a world where, instead of doing the Web2 companies surveilling you and trying to figure out your interests, you’re just declaring your interest through NFTs. It’s done in an opt-in way. That’s pro user: the user has the power.

Quotes from Naval Ravikant

Web3

  • Web3 is what is the current definition of the frontier. There was a time when it was the wild west, there was a time when it was conquistadores and people setting sail in the age of sail. Today it feels like the frontiers on the internet is within Web3 and crypto because it’s the least regulated, the most decentralized, the most permissionless, 24x7x365 markets that are self-funding, where hackers from all around the world can participate.
  • Every company that I’m involved with that’s not a Web3 company calls me and asks me about a token or a Web3 angle. Obviously, some of it is just to make money. But some of it is this appeal of open source, open platforms, portable data, user privacy, user control, keys, and community-owned and generated networks.
  • Digital private keys enable digital private property. We finally have private property on the internet and we don’t need people like Spotify or even the studios and the labels to determine who owns what private property and hold it with their database entries and their lawyers.
  • The beauty of Web3 is, for the first time, all the data is actually open. The data is literally living in the blockchain or in distributed systems, but it’s secured. It’s actually secured far better than these corporations can secure our data because each is secured by our own private key. So each of us has a safety deposit box in the cloud that we can give selective access to with our private keys to people who need them when they need them and then close them off again.
  • One of the reasons why the Web3 revolution is going to be so non-linear and so unexpected and so fast is because open code means these applications plug into each other like LEGO blocks.
  • In open source, you only solve each problem once. If somebody has built a good version of how to solve a certain problem, I’m just going to reuse that and reuse it again. Maybe I’ll fork it, maybe I’ll improve it a little bit, maybe I’ll put it to a slightly different system, but essentially, at the fundamental level, each problem only has to be solved once. So composable means that it’s like LEGOs or it’s actually digital LEGOs, where I can just copy the LEGO and then build on top of it.
  • Composability even goes beyond software, even though that’s how it’s commonly used. It even goes into media. For example, today, if I want to build something on top of the Star Wars platform, I’ve got to go cut a deal with Disney, but in the open source composable NFT world, artists are basically giving away the concepts.
  • I made a big mistake early on in the history of blockchains. I thought what we’re going to do is replacing Uber, and Facebook, and Twitter with Web3-enabled primitives, and networks that come out of those. Now I don’t necessarily think so. I think we’re just going to create brand new things that we can’t yet even predict or identify. But we’re going to end up shifting our attention to those things. So Twitter and Facebook will still be fine, will continue to exist. But our attention will be on these new applications that are uniquely enabled by primitives like NFTs and tokens.
  • For the first time we’re seeing DAOs, which are these Distributed Autonomous Organizations, take off in Web3. DAOs are not quite corporations, they’re not quite communities. They’re not quite networks or platforms. They’re like their own new thing that are a mixture of all of the above.
  • Crypto is to venture as venture is to value. In other words: investing in crypto is to investing in venture capital what doing venture capital is to value investing like Warren Buffett does. It’s crazy.

Technology

  • Byzantine Generals Problem is a problem that basically says: how do you get people to coordinate when nobody knows each other and nobody trusts each other? By using proof of work, aka Hashcash, you can say, “Well, I’ve done the work to have a credible vote.” So anybody who hasn’t done the work hasn’t done the vote.
  • Now you can take systems that before would have to be run by centralized authorities, ranging from the government running money to Mark Zuckerberg running Facebook, and you can replace them by a credible vote of all the people participating in the network. You know they’re not cheaters that they get to have a say because of they’ve done the work.
  • We’re used to thinking of a computer program as an application run by a third-party where they control the code, they own the data and they own the platform and the economic benefits. Then we get our scraps.
  • “Every generation invents its own new Ponzi scheme and rejects the previous generation’s Ponzi scheme.” And now we’re moving in much faster times.

NFTs

  • A lot of people, when they first see NFTs, their reaction is, “Well, I can just right click and save that JPG. Why does this thing have value?” And hopefully people who look into NFTs move past that pretty quickly. The simplest response is: “Yes, you can also photocopy any piece of art”
  • NFTs are like webpages. Because a webpage is programmable, a webpage can do anything, it’s Turing-complete. It can run any piece of code. We have these essentially Turing-complete programmable objects that are now suddenly scarce that you can own and that you can transfer. You can link them to the digital world through smart contracts and you can link them to the real world through social contracts.
  • What blockchains do is they allow open composability and programmability between all these objects, in the digital domain. And there are smart contracts that regulate those, and then social contracts that regulate it in the outside world. NFT is no different. If Bitcoin can have value, if Ethereum can have value, then in theory, an NFT can have value as long as the smart contracts of the social contracts and the community enforcing it have value. Of course, that means most of them aren’t, but some of them will.
  • Gall’s Law is a rule of thumb for systems design. It basically says that a complex system designed from scratch never works, and cannot be patched to make it work. A complex system that works is invariably found to have evolved from a simple system that worked. So in that sense NFTs are primitive, and people are going to recombine, and assemble, and compose these primitives to create incredibly complex systems.
  • It’s a bizarre idea to think that the only people who can own items in the metaverse are big corporations. You’re basically saying only Zuck is allowed to own the metaverse. Why can’t we each own our own room, our own space, our own property in the metaverse? Denying and pushing back against NFTs and cryptos is basically saying: “We’re not going to have a collectively owned future. We’re going to have a corporate-owned future, and we’re going to have a government-owned future.”

Regulation

  • For a capitalist and democratic society to ban crypto, that makes no sense to me. If we’re to ban NFTs, or try to put them into financial regulations which essentially banned it, is basically saying, “No, you artists are not allowed to own your own output, and deal directly with the fans. You have to be serfs working on Spotify’s farm or working on YouTube’s farm.”
  • Essentially decentralizing money threatens the nation state: Central Bank Digital Currency is the exact opposite of a cryptocurrency. That’s the complete centralization of money with no intermediate banks, or monetary instruments under the eye of the all-seeing state. And on the other hand, you have people just carrying their own money around whether as a coin, or as a JPG, or as a smart contract, or as an IOU or some kind of a weird program. Unfortunately, we’re trying to apply laws that are almost 100 years old, to try and regulate this incredible explosion in internet commerce, and market making in digital, private property.
  • Any regulator that stops the next generation of artists and musicians and gamers and game developers from owning their platforms and their work is going to go into the wastebasket of history as a villain. It’s that’s simple.
  • Most investing these days is done over Zoom. It’s no longer done physically in the San Francisco Bay Area, especially in Web3 and crypto land. Most of the entrepreneurs are overseas and now almost none of them in their right mind are considering moving to the United States. Whereas before, if you’re in China or India, the default would’ve been, “I’m going to move to California or to the United States”, now it’s like, “Yeah, maybe I’ll go to Miami. Maybe I’ll stop in the US, but no, more likely I’m going to Singapore, or I’m going to Switzerland, or I’m staying anonymous on the web, or I’m going to be on some little island nation just moving around.” This is really, really bad news for all the people who are counting on their pension plans to pay out in valuable US dollars. Because the only solution we seem to have in the last two years to the COVID phenomenon, is devaluing the dollar.
  • Aggressive regulators (who are purely financial regulators) are now getting their claws on the web and are going to regulate this thing into overseas. You can’t stop it. It’s ultimately code and code is just speech and speech is just ideas. You can’t stop ideas. You can push them down one place and they’ll pop up somewhere else. And the internet is a big place. Short of turning off the entire internet, the internet will figure out how to create, store, allocate and use digital value.
  • Composability is the ultimate open API. So I think there is a model here for an enlightened regulator to do the right thing and get just as much credit for letting Web3 flourish as the original set of regulators did for Web1.
  • Our old model was: go back to Marx, and the Theory of Labor, which is that capitalists own the means of production, labor has to seize the means of production. Someone still has to run the factories. so we hand them to the state. The state runs the factories and you get these horrible cars coming out of the Soviet Union. Well, that didn’t work! What makes sense is for the workers to own the means of production and the users the means of production in proportion to how much value they’re providing, essentially they should all be shareholders. And there should all be shareholders in an open system with no corporate overlord and no state overlord in proportion to the value they’re providing into the system.
  • Now that we have internet native money, we could start creating true internet, native corporations, internet native collectives, internet, native projects, internet native platforms that are owned by the users and nipping it in the bud at this point would be a huge mistake because all we would’ve done is would’ve created the internet native money, but we would not have allowed it to have all of its use cases. We would not have allowed it to create the new internet that we need to live in.