Welcome to the making cents podcast. This is Sam Harris. Just a note to say that if you're hearing this, you are not currently on our subscriber feed. And we'll only be here in the first part of this conversation in order to access full episodes of The Making Sense podcast. You'll need to subscribe at Sam Harris dot-org there, you'll find our private RSS feed to add to your favorite podcast track along with other subscriber, only content.
Don't we don't run ads on the podcast and therefore, it's made possible entirely through the support of our subscribers. So if you enjoy what we're doing here, please consider becoming one. Okay, just a brief housekeeping here.
I hope you all enjoyed the beginning of the Oliver Berkman series on time management that I previewed here in the last episode. Again, the rest of that will soon be appearing over at waking up in our new life section. And the whole point of the section is to bring relevant philosophy and science to bear on the question of how to live a good life and that will include conversations between me and outside experts.
But also courses designed by other people. And we have some interesting courses already in the works. There also, I enjoyed the previous podcast with Peters Ian and Ian bremmer. It was a new format where I invited a subject matter expert to ride shotgun with me and help facilitate a conversation. That was someone outside my wheelhouse. Perhaps. I'll do more of that or even begin moderate and some debates here thought about
Doing that for a while. And this seems like a good provocation in that direction.
And also just a reminder that we launched the best of making sense podcast where we surface, some of the Evergreen episodes from previous years. I know many of you are enjoying that but for those of you who haven't discovered it, it is a separate podcast where subscribers to making sense get full episodes. And otherwise we release half episodes in pod catchers everywhere.
Okay, today I'm speaking with Marc Andreessen. Mark is a co-founder and general partner at the Venture Capital, firm, Andreessen, Horowitz,
He's one of the few people to Pioneer a whole software category used by more than a billion people. And one of the few to establish multiple billion dollar companies, Mark co-created, the first proper internet, browser Mosaic which then became Netscape, which he later sold to AOL for 4.2 billion dollars. He also co-founded loud Cloud which as opsware
R was sold to Hewlett-Packard for 1.6 billion dollars. He later served on the board of Hewlett-Packard from 2008 to 2018 Mark holds a degree in computer science from the University of Illinois. And he serves on the board of several Andreessen, Horowitz portfolio companies, applied intuition, Carta, dialpad, honor, open gov and some sorry networks and he is also on the board of
Meta. Otherwise known as Facebook. And in this episode, we cover a lot of ground. We talked about the current state of internet technology and culture some of what has gone, right? But there is much that is in the process of going wrong. We discussed marks background in Tech, the birth of the internet. How advertising became the business model for digital media? We talked about the three stages of the web and the birth of blockchain.
How successful technology reorders status and Power in society? The Bitcoin white paper, the mystery surrounding the identity of Satoshi Nakamoto the importance of distributed consensus. Bitcoin is digital gold. How Society has performed during covid, James, Burnham, and managerial capitalism the ubiquitous principal-agent problem negative externalities risk and regulation, Trust.
Institutions, what the fuck happened in 1971 regulatory capture, Banning Trump, and Alex Jones from social media, perverse incentives, and philanthropy, and other topics. Anyway. I really enjoyed this conversation. Mark knows a lot about a lot and he's a very fast talker. I'm a slow talker. So those of you who listen to this podcast on 2x are probably screwed.
Or this one.
anyway, I now bring you Marc Andreessen
I am here with Marc Andreessen. Mark, thanks for joining me.
Hey, Sam, it's great to be here.
So, we have a lot to talk about. You are a man of many talents and wide experience, and we haven't hung out much, but I've spoken to you enough to get a glimmer of your polymathic intentions, if not actual achievements. It's really, obviously you cover an incredible range of material in your chest, in your information diet. And I want to get
To what you're most focused on and worried about these days. And I also want to talk about your background a little bit because people will know some of it, but I think in having you recapitulate a little bit of that journey into Tech, you might be able to give us some insights, as to what we should be thinking about now. But first, a high level it what, what do you, how do you describe yourself these days in terms of what you do professionally and what you focus on?
Yeah, some my career is haven't got three states.
Uh, so far. So stage, one wasn't as an engineer, and I was, I was trained as an engineer and sort of that, that sort of method of engineering is kind of central to everything. As it turns out that at least I do and think about, then I became an entrepreneur. So, I went into into business, despite having taken zero business courses and, and sort of went to the School of Hard Knocks. And so, you know, when a business and started, you know, originally my first company with my partner, Jim Clark, and 94, and then my second company with Ben Horowitz and 99, and then so forth and so on, and then, you know,
Is three starting in 2009, was to become an investor professional investor venture capitalist and so that's phase 3 and then maybe someday one more phase. But at least those three of kept me busy so far. Oh and then you know what we do know. So what does it mean to be a venture capitalist? Basically were think of it as like we're a hub that's the sort of center of flows of basically ideas people and money would be the way to think about it. So we, you know, try to stay on the Leading Edge of all the new areas of
G. We try to know all the really smart people who are working on new technology and want to be part of the technology ecosystem. And then we raise we re and then we actually raise money and we invest money. And we, you know, we get very we invest in startups, we get very deeply involved in the companies. We typically on the board where, you know, we're very often the the founders kind of, you know, main outside Confidant advisor, you know, we, we, you know, we get the call when things go horribly wrong and, you know, try to pitch in and help any other, then try to maximize the success for the companies that, you know, the kind of hit a
chord. Yeah.
How would you describe your politics at this point?
So I would say mostly I'm sort of, you know, on an ice floe, all by myself headed slowly, after
see. I think there's a few people on that flow with you
properly or at least on nearby flows drifting together in a part. So I this is, you know, I could go on at length about this. I was always kind of a Centrist Democrat. Like basically everybody else, I knew and in Tech and in the valley the valley is like you know, 99%. Yeah.
The picture is gets painted, The Valleys a bunch of radical Libertarians or something. And in reality, it's just like 99% basically Clinton Democrats and now, you know, kind of whatever we're on Democrats, Bernie Democrats. And so, you know, I was always that up until I call it 2015 2016 and then like everybody else. I was just completely shocked by it. Really by two things. One was Trump winning you know, both nomination the election and then also just the huge shift on the left, you know, that that took place. And so I kind of checked out of traditional politics in 2015 and kind of went on a spirit walk.
Side at the try to kind of reread everything from scratch and figure out what's going on. And I've kind of come out the other side and sort of a weird fuzzy
undefined
state. So I don't even know that I even apply any labels. Hmm. You know, I'm not doing anything politically. I'm completely out of it. So I mostly just trying to learn and understand at this point more than like have
positions. Yeah, well, that describes my own political identity pretty well. This moment perhaps we'll get back to that. I think I don't think we'll focus on politics but the political context one form
much of what we say about the breakdown and rebuilding or failures of rebuilding around institutions and solving the massive coordination problem of, how do we get strangers? Who don't trust themselves? All that much, or trust one, another all that much, to collaborate. But before we talk about your background earlier again, high level, what would you say have been a few of the, the influences or life experiences that
You currently consider most formative of your worldview on a day-to-day basis,
you know, I think you look part of it was growing up in the sort of, you know, Midwest. I used to think I travel sort of this weird road from like rural agricultural, Midwest all the way to kind of high-tech Silicon Valley and it was kind of you know, an unusual thing. And then I discovered years later, I discovered, Tom Wolfe, the Great American novelist reporter wrote a long form. Profile of a guy named Robert noyce, who was basically the inventor of the microchip and the
Later of Intel and they basically the creator of the tech industry as we know it today. And he wrote this profile of Bob noyce and Bob noyce basically was like an Iowa farm boy. You know who grew up in like rural Iowa and then move to, you know, move to the valley and sort of created, that created the valley, create a technology as we know it today. And so it's and then, you know, wolf also pointed out like, that's the story of like Philo Farnsworth who created television and, you know, and many others. And so there's there's like, you know, I always describe the valleys like this intersection of like 1950s Style Midwestern tinkerer engineer. You know, the
Guys with like the brush cuts and the white short sleep, polyester shirts, you know like you see in all the old photos of NASA or something, it's kind of got that kind of square culture, engineering kind of nerd culture and then it's got the kind of 1960s, California counterculture, you know, which is because it happened here, so that kind of stuff, all kind of thread it into it. It's like, it's like balance on knife's edge between those two cultures and so I definitely, you know, kind of come out of that of that kind of former background. So yeah, I mean, going from, you know, there to here, you know, was was was very important, you know, like partnering with my, you know, my business partner, Jim,
Work was, you know, a very successful entrepreneur. You know what, Dad. It was the founder of one of the most successful companies in the history of the industry. And I kind of got lucky on that. I got to work with him at a time when he wanted to start a new company and all the smart people he knew were kind of working at his current company. So he had to go get fresh blood and I happen to happen to be newly arrived and so, you know, we kind of we kind of hooked up and built built our company Netscape that was formative. The.com, crash very formative experience, you know, we hit that really hard and then, you know, look the less, you know, the last 20 years.
The fact, the internet didn't die after 2000 and like, there was like a whole second Tech. Boom. And then, you know, everything kind of magically coming together, starting in 2007, or 2008 between the iPhone and broadband and social networking, and everything else, that created the world around today. You know, all this stuff at this point has worked, you know, Way Beyond any expectation, any of us could have possibly had. So, you know, kind of kind of seeing that all crystallized and come together. You know, has really, really, really taught me a lot. And then, of course, you know, now we're in whatever weird state were in today. Yeah, that's kind of how I got here.
So it, what was your
Deming background before you became an internet Pioneer. Well, you did a CS degree.
Yeah. So I was a classic Midwestern kind of story, which is, of course, you know, the purpose of a college education, is to make money like my fairy stuff. And so, I went to the US News and World Report issue and I think 1988 and I looked up the income levels by bachelor's degree. And of course, the top degree was electrical engineering at that time. And so and then I look for the top W schools. And the Number 3 School was University of Illinois which is right.
As the border. So you know that made those two decisions. Easy I got in school and discovered a hugely preferred software, which I should have known because I was always coding as a kid. But yeah, just software. There's just, yeah, double he's heard, you know, tremendously important and of have done a lot to build the modern world, but software, there's a level of creativity that's just hard to do in Adams. And so, you know, I kind of got seduced by software, and I got a computer science degree.
And so, let's talk through what happened with Mosaic and Netscape for a few minutes. At most people associate, you are now
Name with Netscape but it was Mosaic. First try me, you started this company and what was the name change about what happened there? Well, it didn't start as a
company and so it started as a project. It started as a project at the University of Illinois. And so it started as a federally funded research project at what was at the time at the time, called the national Center for supercomputing applications, which the sort of short version is remember when Al Gore said that he invented the Internet. Yeah. It turns out.
That story's actually largely true in the sense of what he actually said was in the full quote was I took the lead in creating the internet in the Senate and that story actually is true, which is in the Senate. The US Senate in the mid-1980s funded two things that ended up being very important for my career. One was they funded the internet backbone, the end. It was called at the time nsfnet after the National Science Foundation and then they funded what were called the four National supercomputing centers. When and one of those just happen to be at the University of Illinois, the significance of that was basically they just dropped like a ton of money on these four.
He's for universities including Illinois to basically by state-of-the-art computers and then hook them up to the Internet. And, you know, this is starting in the mid 80s and so by the way, by the time I got there in 89 this was kind of under way. And so we had in retrospect basically, a modern Computing Internet working Broadband, graphical environment just you know basically five ten years before the rest of the world is you can kind of see it working.
Was that pure Serendipity or did you actually know going to Illinois that you were going to have access to unusual, Computer Resources?
Well they were, you know like I said they were number three, ranked for EE.
Nationally, it was like MIT Stanford and then University of Illinois. So that reflective that there were top 10 CS at the time. So they were no. I mean, they were by far the best engineering school in the midwest. At that point it was just too much of a leaf of that point my life to go to the east coast to the West Coast. So right, so it's the reason they ranked so high is because they were so Central. Like they had, they had, you know, they had these very Advanced programs and all these resources and so, I, you know, I had a glimmer of it, I knew about it, but, you know, I didn't fully understand the important till I got there, and I saw it, right? And then, basically, and what happened was NSF, basically just like funded this
Essentially to build the modern internet at the time as a researcher as a researcher. You know, something for scientist at the time. It, this is back in the days. There was actually, was actually illegal to do business on the internet during this period. Right there was something called the, the acceptable use policy that basically banned, all commercial, transactions. So, so it was purely a research thing. Nobody really Envision, it having real world applications at that time, it was just kind of for scientists and academics. But, you know, there was a research group there that have the job of basically writing software to make the internet work for people and we
We had a project that started as kind of a renegade project that became an official project that was this thing called Mosaic which was the first browser that kind of got widely, used it kind of pulled in all the functions, made everything graphical and then made it work really well on Fast and secure and so forth. And then everybody started using that on the internet as it then existed, right? Was basically, that was when I was making six dollars and twenty five cents an
hour. Hmm, yeah. Well, I hope you invested that wisely because I'm told compounding really works
well, so
recently, yes. Right until the last two months.
So then you performed a proper company Netscape and what happened? What, what happened to Netscape as a
product? Yeah, well, so first of all, it was very, it was very tenuous that we ever even started that company because it was, it was so they were such a wall of negativity. It was so universally known that the internet was not something that Ordinary People would ever use right. And you too and if you read the newspapers magazines at the time, they were just wall-to-wall. When they wrote about the internet, it was primarily either as an object of curiosity that would never matter.
Or negatively of this thing's. Never Gonna what year are
we now at 93 94?
Right? Right. Okay yeah, got it 92, 93 94. The the first issue of Wired Magazine. I bought the first issue of Wired Magazine off the newsstand and I think 90 early 93 when I was working on Mosaic or late 92 and I remember bought it. Like 4:00 in the morning, going to make do a snack run. I saw this thing on the newsstand and I you know as excited finally magazine for me and I went back to my office and read it from front to back and it didn't even mention the internet right now. It's okay, I guess.
Yes, I'm on the wrong end of this whole thing. So it's not that wired got anything wrong. It's just that it was universally The View and all the experts said that and all the big company CEOs, said that, it's just, this is not a, this is not going to be a
thing. So what was motivating you at that point? Did you actually believe that everyone was wrong and realize that the internet was going to be a way to not only get rich but just basically do more or less? Everything that was going to prove indispensable in the future or we were you just tinkering and and following your interest without any big picture
Vision.
So it was actually a process of elimination which is we kind of tried everything else instead basically concluded that. No, it was just gonna be the internet. And so my partner Jim and I actually had other business plans that we kind of cycle through trying to do in our at the time. Interactive television was this big idea and then we try to do we had a plan for an online gaming Network. That's sort of like what Xbox Live today is today. We basically work through all these other ideas for kind of advanced you know AOL that point was starting to work a little bit. So it's like what I mean to do one of those like a proprietary customer service and we kind of kept, you know, just we
We have the startup mentality of like okay well it's from scratch. Make a business plan for building a company that does anything like this. And basically we cycle through all the other ideas and then you know, in the background kind of Mosaic kind of kept growing, right? It kept going after I left Ellen. Oh, and you know, more and more people are using it. And it was just like, and I was, and I still had my email login. And so, I have the, I had the acai add, I have the account Mosaic was free for academic use, but it had a, we put a provision in the license that said, you have to pay for commercial use and we just did that as a placeholder. Because we
A business model in Illinois. But I have the email box, I have email box where people would send a commercial inquiries, where they would want to do something, you know, in the commercial sector with a like e-commerce or whatever. And so, you know, there were hundreds and hundreds of hundreds of these like messages coming in from people who want to do crazy, crazy things. Like I want to build a bookstore on the internet. Like, that's crazy
lose my email. Jeff.
Yeah, exactly. What actually you preach off, right? Preach. F, you know, even before that. And so, yeah. So I just like at some point Jim. And I literally looked at each other and were like, okay, this
Thing might actually be the thing like maybe all these other experts are just wrong. Maybe we this actually is the correct thing. And you know I look the internet had all kinds of problems and issues that I could take you through it as long Litany of you know people at all these complaints about it that were correct. It's not secure and you can't do transactions and blah blah blah and it's not fast, right? And it's like well, you know, look if the network effect really takes and lots of people sign up, use this and lots of business come online. Then it's going to drive an investment wave that's going to solve all these other problems which is basically what happened. And so we kind of did what in retrospect was the obvious decision.
Which was we just laid in hard on that, right?
And how did the business model? Get anchored to ads because of all the things that could have gone differently in the beginning and maybe the tech wasn't there. You just said there was no way to pay for things but it seems like that could have been an early priority and I'm not sure you entirely share my my view of just how diabolical the ad based economy has been in the end but I wonder what was that moment? Like when
Where you just slap a banner ad on it. And that's how you monetize the future of digital media.
Yeah. So it's because we had no, we had no native money. Alright, we had no native ability to money. We had no way to do microtransactions. We knew this at the time, so we knew right up front. We like look, there needs to be a way to send receive money. There needs to be waited to be Commerce, the needs to be way to do microtransactions, we knew this at the time. There were two kind of big things and we were in a position to do it because we have the, we have the browser, but we also have the servers and the e-commerce software and all the back of the back end stuff. So we were in a position to do all this.
So we figured there were two parts of the problem. Part 1 was cryptography, right? So basically security right? So to be able to have like secure, you know, secure communication and we invented this protocol called SSL for secure cryptography. It's the first widely used kind of delivery of if the science of cryptography to Consumers, you know, sort of happened as a consequence of the Netscape browser and an SSL and that's by the way that's still in use SSL still the right encryption method for the internet today so that part worked and then the other part was like, okay you need to plug into the existing banking system, right? And you need to be able to plug in
So people can load, you know, have their credit card or debit card their bank account or checking account because they've got all their money somewhere and they've got to be able to, you know, kind of get it to the internet. And so for that we went and we started talking all the big Banks and the big credit card companies. And, you know, we got again, this set of wall of skepticism. And everybody kind of told us basically, basically off off. This is never going to work and then we got our big meeting that kind of really hammered this on for me we found this guy just I guess I shouldn't name names specifically but one of the very big credit card companies, let's say
There was a CTO who was like considered we were told he was like the Visionary for the payments industry and the guy that everybody listened to and it's like if you can get him on your side you know, you can really do something here. So we had him to our office. He had not used the internet or mosaic and Netscape at that point. So we sat him down in front of a workstation and you know, with the keyboard and a mouse and a big screen and you know, had it all queued up for the demo and said, you know, now basically pointed on the, the, the first link on the screen and I said, you know, click here. And so, of course, he reaches up with his finger and touches the screen. And this is
You know, 1994, right? So there's no touchscreens. Yeah, so nothing happens. Then I'm like, no, no, you use the mouse. And so then, of course, he looks at the mouse and then, of course, he picks it up, right? And so, in any awhile, how could that possibly be the case? Well, because the, the entire banking payments industry, at that point was on mainframes from 30 years earlier. They, you know, they didn't do new things. That's not what they were in business to do. And so I remember in that meeting, you know, it's just like okay this is it were sunk, there's no way that's going to happen. So so you know, we tried Microsoft try at other people.
They will try it and it's just there was never any way to do it and so, you know, if you can't charge people for things and you got to run ads and that basically is what
happened. Hmm. Let's maybe give us a short primer on the stages of development. Here we have me web-one web to and web three. I'm imagining, you envision web 3 is ushering. In a new age of monetizing. Everything potentially, you know, secure trustless way, Reckless climb there. What do we mean by web 12 and 3 at the
This
point, sure. So my partner, Chris Dixon has sort of the best encapsulation of this. He says web one was read write and so the big breakthrough was you go online, you could read stuff, you could see stuff, you could do searches. You could do all this. But you were like, you could consume web to was what he calls read. Right? Right. So, and that's sort of the social networking blogging video, YouTube, you know, kind of user generated content area, right? So not only could you read, you could do what you do. You could, you could, you know, not only listen, you could produce podcasts and that led to the kind of the whole, the world that we've been in. And then he says, web 3 is
Read, write and own, right? And own means you can own value, right? You can own money, you can own digital assets, right? You can own, you know, you can, you can have ownership claims on things right? Or you or you or you know, you could equivalently, you could say readwrite, pay, you could say read right? You know, make money, you know, you could apply, whatever term, you want to that third one, but basically basically feel in all of the economics and all of the capability of having incentives and ownership that really should have been there from the start. That like I said, you know, we try to get in from the start but
I just didn't have the technology for now. We basically have a chance with these new technologies, a blockchain cryptocurrency web 3. You know, we have this we have basically we think a chance to kind of do the other half of the internet is how I think about it. Or, you know, the other third and it's basically have a trust layer, a money layer, and an ownership layer that rides on top of the sort of untrusted unowned, you know, kind of space has been the internet so far. And then kind of, you know, fill in all the things that we wish we'd been able to, from the start. But now, we can actually do,
I wouldn't be alone.
On a noticing that there's a fair amount of skepticism about web 3 at this point and a fair amount of schadenfreude watching cryptocurrency crash or almost crash in recent months. Do you view that skepticism as truly analogous to all of the naysayers around web one when they thought the internet was just going to be a bust? And that no one was ever going to migrate away from, you know, they're answering machine. Even this email thing wasn't going to take off or do you think there is?
A greater foundation for a perception of misspent dreams and failures of scaling the technology, I'm either around the the energy concerns, the cost of it. All the capacity for fraud, the Tulip Mania aspect of the kind of the investing landscape and the speculation landscape there. How much of this is an echo of the, the early 90s and how much of this is a genuinely new condition of uncertainty.
Yeah. So there's a lot in there and we can, you know, we can
To reach those points. Here's the big thing. I'd say, overall, look, a lot of things just don't work, right? So a lot of people have ideas for things that don't work and so, you know, it's always possible that the critics are correct and it's always possible. Something either is just never going to work or the other possibility is things are just too early, right? What happens a lot of new technologies is they just take time, you know, there were people doing analog, there were people doing mechanical television, 30 years before Philo. Farnsworth did electronic television didn't mechanical television. Like the 1880s 1890s with like spinning wooden blocks representing pixels, right, right. And so there's this prehistory and
like, what was it? Paris had a telegraph system working through, flashes of light, through a long blast tubes, under the streets of Paris and like the 1830s It Right? Which is not practical because the tubes kept breaking but like, people, you know, people have that idea way before the telegraph rolled out. So, so anyway, you know, look for any new technology. Maybe you're just early, maybe you're just wrong altogether, maybe. It doesn't happen for the new technologies that do work. You see, basically a pattern of the reaction to them. And I used to kind of think I was make, I was kind of fantasizing this, and then I found a book that kind of explained it.
His book by this MIT guy named elting morison 50 years ago where he kind of goes through. This is even free internet but he goes through the whole history of new technologies and he said, there's basically a three-stage process to the adoption of a new technology. Stage one is just ignore. Right. We're basically just people pretend, it doesn't even exist. And of course, that's, you know, the internet was ignored, basically from the 1960s through to the like I said, Planet even into the even in the early 90s stage, two is basically vigorous protest and that's the stage where basically, it's like a it's like basically here, the 30 reasons this can never happen.
Or called the reasons phase, right? So here's the 30 reasons it's going to ever happen. And usually, what that is, this is a laundry list of everything is technically wrong with new technology, right? So the internet it was is too slow and it's not graphical and it's this, and it's insecure and hackers and, you know, fraud and, you know, almost all these sort of, you know, basically fat. By the way, real issues, right? These are all issues that actually had to get fixed and then ultimately were fixed. And then he said, stage 3, stage 3 in the book, he says, is when the name-calling begins. And so stage 3 is basically rage and what
He says is, it's basically rage, especially the existing power structures, basically just like go incandescent with rage and and he said the reason for that is because any new technology that works is a reordering of status and power right in the system. And basically the, you know, the status quo is, you know, what do they hate more than anything else? You know, reordering of status and power, right. There's only downside for them and so they just go crazy. And that's when they pull out all the stops and they call you names, and they try to put you in jail and they do everything under the sun, they can possibly do to sabotage it. And then, you know, then look at it, has to prove itself, right? It has to know,
To get through those three gauntlets. Like, it has to be a real thing. So, so like I said, it's not predictive that? Because something goes through this, it is going to work, it's just that every single time, something else like this, it goes through these stages. And so at this point like I'm like, I'm like a nerd to it, right? Like it's just I've seen it now. So many times in the exact same sequence of things that I'm just like, okay, fine, you know, bring it, this is what they're going to do. We're just going to keep going
what percentage of your time and commitment of resources at this point is focused on web.
Three. I mean we might actually need to. I know I've done this on other podcast. We probably should Define web 3 a little bit more just differentiating, you know, cryptocurrency from everything else that could be done on the blockchain but you can do that. But it. But then how much of your attention and material resources are aimed at that at the moment?
Yeah it's look it's a very big push for us. So we have a very big group in the space. Now it's probably a third of I would say you know, you could you could Top Line it and say maybe a third of the firm in terms of accommodation of people in
Money, right? Which for us is, it's one of our big, it's one of our biggest. It's one of our
biggest things, okay? So, to give me the Potted definition of web, three at the moment.
Yeah. So let's take the three terms that we kind of get in kind of conjoined. So so blockchain is like the underlying technological breakthrough. So basically what happened was this, this this this person, he she it or they named Satoshi Nakamoto.
Never identified. Are you swearing that this is not you. It is
definitely not me. Although, if it was, that's exactly what I would be saying, yes. But still I
trust you somehow in
This trust
was environment. Well say you know same is true for you. If it was you you'd be asking you to be pretending. Ask me the question without knowing to. So
I think it does stand a better chance of being you giving different backgrounds, but do you have any suspicions about who it is or whether it's a single individual?
Yeah. There are suspicions. Most of the people in the space, think it was a combination of people. It was a, it was a deep technological breakthrough, and it built on, you know, it was one of these things that built on 30 years of Prior work, as he gets one of these things that had kind of a long wind-up before in before it happened. And so it was somebody and he
It, or they post a lot on forums and you can read all the posts as it was in development. You can kind of see, whoever it was had like a very deep knowledge in the space and that that kind of reduces it down to a pretty small, number of candidates, just given the nature of the technology at that time. So it was probably people think it was a handful of those people probably working
together. This is the Bitcoin white paper which one is this 2010
9 2009 2009 by the way profoundly significant by the way just profoundly significant this gets Miss rate. 2009 was the low of the economy and the stock market and everything else in the hive.
Point following the financial crisis, right? So, it was the last year. You would expect a major new break. Everybody was in a horrible mood in 2009. I remember very clearly because we started the firm then and everybody was like uniformly, negative that you could start a new Venture Capital firm and so in the middle of just like complete misery and by the way in the middle of like the collapse of the fire financial system, right? The sort of what we call the tread Financial system, right? Just being like completely trash and discredited and falling apart and having to be bailed out, right? This like magic thing happens, this paper comes out and it just like, you know, basically redefines the industry. It was a very special
moment.
Did you see its significance
immediately? No, I didn't know. I know, I wouldn't claim that you know it was something kind of people knew about everybody read it. People talked about a lot, it was like a parlor game in Silicon Valley for the first five years or so, which is it's like you know like even in Silicon Valley, right? It's like, okay, this probably is not going to be a thing like really internet money. You know, geez, right. Like all the reasons why that, you know, you shouldn't be able to do that, can't do that, it won't work. But you know what, the the Silicon Valley parlor game of that is less maybe for, you know, some people had foresight and so
But a lot of people didn't and a lot of us were like, wow, but wouldn't it be cool if it did, right? And so then the Parlor game was like, wow, like you know what? If you know we always have the joke is like, on Earth to write, you know, this stuff is all working, right? And it's like well what would the Earth to be like if it really had Bitcoin everywhere? And it's like, wow, this is a really cool idea. And then at some point, you know, we and others were just like, okay, like we need to stop being idiots here and basically just be like yeah, this is actually a thing. This is actually going to happen. The stands a very good chance of actually happening. I credit our partner biology is kind of awesome, you know.
As the guy who kind of got us really clued in on this and you know kind of set us down at one point. It's like look you guys have to stop thinking about this as I pathetical like. This thing is actually happening and so you know, we were early relative to the world but there were other people in the valley who were ahead of us. Hmm.
And is there a kind of an initial cash of Bitcoin that has not been claimed? Which is satoshi's coin or there's an initial wallet that has still has the coin sitting in it? Or what's the story there?
Yes, this is part of the great kind of
Mythic Legend behind the whole thing. So you know all the Bitcoin is basically based on this underlying science of cartography, right? Which is a it's an ancient science but in its modern form you know it's a 50 60 year old kind of thing in terms of the the way we use the Technologies now the so called public key cryptography and so it's all based on that and as part of that you can have what are called private keys that are Uniquely Yours. And as part of that, you can sign messages with your private key and and such that anybody in the world can decode them or read them. But only, you could have
I've written them, right? So you can have like, absolute validation that you were that you were the right, you were the Creator, and then the, the and then Bitcoin wallets basically work. The same way. Like you have a private key for the wallet and anybody who has the private key, can decrypt it, right? It's like a bearer instrument in that way but anybody who doesn't have the private key you'd like can't you know they have no claim to it. And so in very you know, long the over the years, various people show up and claim to be Satoshi but like none of them can like demonstrate that they have the private key. None of them can, you know, so therefore you have nothing. So anyway, we sort of know, we know how to recognize Satoshi
And we see it or they, which is, they can use their private key to sign things. They could also use their private key to unlock the money. I don't know what the current value is. I'm gonna guess it's somewhere in the neighborhood of 30 to 50 billion dollars, u.s. dollars today, we did a sitting in a wallet somewhere that the Satoshi key unlocks that money has never been touched.
But that, that's an extraordinary fact, if, if it's a single individual or a group of people, I mean, this is even without that, this is one of the best-kept secrets ever. But when you look at the
Treasure of Sierra Madre incentives that are growing with that kind of wealth locked up in a box. How do you explain that? This is just this, this person is ideologically, so pure and enamored of the Brilliance of this founding myth and moment that they're just they're not tempted to suddenly own 50 billion dollars.
Yes exactly. So this is the amazing thing. The fact that money was not claimed for a long time, right? And by the way, the messages,
After the Bitcoin, white paper came out, Satoshi, stop posting in public and so and by the way, you have to pause for a second here to say, how prescient must this person have been to not only develop this thing and write it and create it. After basically 30 years of people trying to do the same thing, by the way, like this was the Breakthrough. How prescient was he had or they that not only did they get the technology right? But also, they knew ahead of time that they needed to stay Anonymous, right. Like that's not normal. Like it's not like I've never been enough. It's like it's not normal in our industry to be anonymous. Yeah.
Yeah. And so whoever it is had like tremendous, tremendous foresight to know to do that. And then yeah, to not claim the money. So the prevailing view for a long time. Was he? She it or they are dead, right, right. Which is the most most obvious thing and, and, you know, there is at least one candidate for Satoshi who did pass away. So, you know, it's certainly possible. That's the case. It's also possible, by the way, something very embarrassing happen. It's possible. He she it or they'll offer
forgot their key. Forgot that he would be
embarrassing. Yeah, the kind of thing that might torture you for a long time. And then, this weird thing,
Happen. I don't remember there was Newsweek magazine. Did this cover story claiming that they had uncovered Satoshi Nakamoto and now they okay? So this is several years ago. Now this huge Newsweek cover story and they said we found Satoshi and the identified, an older gentleman, who is a Japanese American named Dorian Nakamoto who is like an aerospace engineer or something. In likes, it forgets, the Southern California somewhere, like don't say San Diego, Orange County. And they did this entire expose about, he's the guy and the whole time. He's like, I'm not the guy, I'm not the guy, I'm not the guy, I'm not the guy and they're like, yes, you
Our and, and, you know, in the, in the Cs Community. Like we're all like, well, he's not a computer scientist. He's not, he's a seems like he's like a smart engineer, but he's doesn't have this background like this. Seems weird. So anyway, there was one final message signed by satoshi's private key. That came out at that point and it literally was I am not Dorian Nakamoto and then Satoshi has since gone quiet. And so now we're back, we're back to the great mystery, which, you know, I hope you know. I don't know. I do actually, I don't know if I hope it gets solved. I would, you know, the engineering me would like to know. But, you know, it may be better for
You know, I think the world should have some mystery to it and if this is the fundamental breakthrough that sort of as a division in, you know, before, and after a civilization, we never find out who the person was that. I think there's something romantic about that, so yeah, I kinda hope we never find out. It's a great story.
So I derailed you, you did not yet differentiate Bitcoin from all else that can happen on the blockchain.
Yeah. So blockchains the under. So basically the white paper basically came out the Bitcoin wipe, it's very short, people can read it. And basically the basically it says we have this basically a data structure called the blockchain.
Which is a way to do decentralized permission list. Basically data structure that everybody agrees on which we could talk about sort of, it's sort of a way to do it a database, but in a database that kind of spread out across the internet, call that the blockchain. It's literally a chain of blocks and then. So and that the computer science term is distributed consensus. And so that's if you read the computer science literature like that, that's the thing. That was solved. That's the technology breakthrough, like the, you know, the cold fusion, or whatever of the thing. And they basically said, there's a, there's sort of an immediate and obvious use case for this, which is digital money, because if I have it,
Have a basically, a database, internet-wide database that records, you know, debits and credits, or records ownership of assets. Then basically, I can just basically those slots can represent money, they can represent value, and if you own the slot today, you on the money. And if I own the slot tomorrow, you know I own the money and and and there it goes and it's this giant is this way to get agreement. So say distributed consensus way to get consensus of who owns what across the entire internet. And actually what happens and this is a subtle point is the use case of the cape
Ability of doing digital money is sort of an artifact, it's sort of a natural consequence of having this kind of database. And then, by the way, it turns out you also, you also want a form of digital money to make a blockchain work because you need to pay the miners, right? And so the way the blockchain works as people run the code on their on their computers. And you know, that cost them some amount of money primarily in the form of power. They got well, they gotta buy the computers and they got a power, the computers and store them somewhere. And so the way the miners get paid is with the currency that sort of emerges from the system. So you've got the, you got the blockchain which
Sort of infrastructure. And then you've got this like use case, artifact, spin-offs emergent thing which is kind of this, you know, the coin the the currency that comes out the other end.
That was that original pairing and then immediately upon that release people started to say, okay, that's great and you know, the the True Believers right up front were like okay that's great that's obviously going to happen. And then they basically right from the beginning, they started saying okay what else could you do with the blockchain? And that leads to all these other use cases that people are talking about now and that's what we call Web 3. So we use the term web 34, all of the basically use cases of the blockchain which includes digital money. But the other you know, hundred ideas that people are pursuing
today, right? Right? And and how much
Of your investment and bullishness with respect to web 30 is predicated on the expectation that Bitcoin will endure Bitcoin specifically as a if not the only cryptocurrency and store a value, the a major
one yes a bit coins, really unusual and it goes back to this original kind of founding, you know, mess reality which is very unusual. Which is it's not changing, right? And so and if you just think about technology like we have,
An adage in the valley it's like, it took Technologies like bananas. Like, like it goes it new technology becomes obsolete, almost immediately, right? Like I ship and you know, so you see this all the time now I ship a new whatever. This that video game player, whatever it's like you know a year later it's likely you know it's last year's news it's the previous iPhone model right? And and so you know it's the great glory of the tech industry is like we keep pushing this stuff forward we can't be keeps doing new things and so you know we there's a museum in San Jose called it, you know, the Museum of whatever computer Museum, Computer History Museum is, you know, it's fun to go to but it's, you know, every single thing.
It is something nobody uses anymore. Yeah, because they're all Obsolete and so any other area technology you'd say, you know, Bitcoin comes out, the founder vanishes, it doesn't change. It's essentially unchanged. They made a little tinkering around it, but it's essentially unchanged since 2009 is now 13 years old. It's obviously going to be completely Obsolete. And by the way, lots of other people have developed, lots of new block chains and lots of new forms of cryptocurrency and lots of new with three things and so forth along the way. And so shouldn't it just kind of fade away. You know, it's got a, we honor it as the Forerunner of what we have, but we're building better systems now.
The thing that's so unusual about it and on this topic is that it is digital gold, right? And so it's sort of one and only like real foundational, fundamental use cases store value and basically it's like, okay is digital gold and so like what would you if you were going to basically write a spec for digital gold? What would you say? Would be the main thing you would need from it? And the main thing you would need from it is that it doesn't
change, right?
Right. So this is like the one application of Technology I've ever seen where it's actually a benefit, right? It's a part of the bolt case for it that it
Some change in particular because it's the amount of it doesn't change. You're not going to find much more of it suddenly.
Yeah, that's right. The amount, the amount of it is fixed amount of it is fixed. But even more than that it's like Bitcoin 10 years. It's the only thing I know of where 10 years from now 20 years from now 100 years from now is going to be running essentially the same way that it runs today. Hmm. And it's just literally because like, Satoshi is not here to change it and nobody else is going to change it and like, it's just, it's on his track and so, but it's if it's, if it's literally digital gold, if it's like a permanent store of value, then all of a sudden you've taken what historically be a weakness turned into a strength. So so
So my best guess would be that Bitcoin is sort of digital gold. My best guess though. Also would be that it's new systems being developed today or over the next you know 10 years you know that will basically take all the other use cases and there and again it's the same thing but quite is not changing Bitcoin. Can't actually do all the other use cases and so it's going to have to be new developments and so we're in the and Camp, you know this has become a very you know, this is, you know this is this is a full-fledged religious War at this point. So there are you know, very strong Believers with a great deal of kind of force and energy.
On all sides of this. And so there's definitely, you know, schisms on this but we were kind of a big tent kind of thing and we're making, we're making all the bets we're including a Bitcoin.
So but the you're betting that Bitcoin doesn't become the digital currency. You're distinguishing it as a store of value from it being a in an efficient and scalable digital dollar essentially.
Yeah. So it can't and its current format camps, it can't be the digital dollar it. The the the, the transaction,
Icing system of Bitcoin. The way the blockchain works. It's not built for that level of scale and performance, right? Yeah. And you can see that by the way because there's a cost associated with transactions, their so-called mining fees. And you know the cost to clear a transaction through Bitcoin is not. I don't know what it is today but it's not trivial and so and and then there's long delays and so we just like it's just not going to be able to do that. And that's today, right? If it actually takes on, you know what, you know even I like a quarter of the global economy, it's going to be many you know orders of magnitude bigger than it is today. And it's
We'll handle it. So so this is the, this is the downside of Satoshi, no longer being with us is like, it's not adapting to be able to like on Earth to Satoshi stayed involved in Bitcoin became everything. But like that's that's not that's not what's happening with one. Now look having said that there are smart entrepreneurs that are developing layers on top of Bitcoin where they're going to try to like make that happen that you know, Jack Dorsey use a smart guy as a whole effort to try to like have layers on top of Bitcoin to do this kind of thing. There are other people trying to do it. So there are people trying to kind of augment Bitcoin and kind of turbocharged in different ways. Maybe some of those efforts will
work or maybe it will just be brand new systems. There's also by the way, a big transition, a big technology transition underway, you know, you know, there is no way Bitcoin work with so-called proof of work, where you solve all these math problems you know to sort of validate that you own what you own. So way the underlying transaction processing engine works, there's sort of an overall architecture change being kind of proposed in the industry which is to what's called proof of stake which is a sort of a much less energy, you know, sort of aggressive thing. And so if a theorem is switching from from performer to prove,
Rufus take and so forth. Estate works like it's one of these phase shift that happens in the industry. Worth just things work differently on the other side. Bitcoin would remain proof of work because it's kind of can't change but you'll you may have these new systems that just fundamentally work, both different and much better for like high school transaction processing that. That's it. That's a you know, that's a TBD but like we're pretty confident that that has a good chance of
succeeding. So I guess that's a now. I want to kind of pivot to if not politics, you know, politics adjacent a larger societal concerns.
You know where we are at this moment in history, how technology is coming to the rescue or failing to come to the rescue? And I guess I as a starting point to this chapter in the conversation I would reference the essay. You wrote early in covid titled, it's time to build which was really this, you know, the the technologists and entrepreneurs and in your case, VCS heart cry for over, just the misspent energy of the moment.
Just how much how we should. So many of us at the time, we're feeling that we really needed to seize this opportunity to shore up our society against, you know, the forces of fragmentation. And it really was an opportunity to get our heads straight. And I don't know how you feel about this, but I think, I, you know, looking back on. I mean, obviously, we're still in covid land to some degree, but I look back on it as a kind of failed dress rehearsal for something, much
Each worse. And I think that I think there will be things that are much worse and I'm not drawing the comforting lesson that I wish I could draw from our performance, the over these last couple of years that we've learned many lessons, even if we've made some obvious mistakes, we understand what those mistakes were, and we're not going to make those mistakes again. I just feel like we're, we're all waking up from a bad dream and in the waking State, some of the horrible creatures of the dream, or
With us. And that we're not all that much wiser. Take me back to the moment. You wrote that essay and give me your your view of the last couple of years. What did covid do to us?
Yeah, so that sa was a primal scream. I think it probably comes across that way and I can say that in the essay. So so it was it was at a very specific moment. It was when, you know, covid of sitting in New York City and you know, we all thought, you know, we all thought covid-19 hit as hard everywhere. It's fortunately, it didn't, but like, you know, in retrospect like there were specific moments like that, you know?
Italy was a catastrophe and then Iraq. And then, you know, New York City was a catastrophe. There were some others, but it, you know, it. Fortunately, it didn't actually hit the rest of the country, the way to New York, but at that moment it seemed like we were all really in for it. Yeah. To the degree to which New York was in for it at that time which was very catastrophic for people in New York at that moment. You know, those were the days of just like constant wailing you know, as ambulance you know, sounds everywhere in New York. And so the mayor of New York he will be, we need to be sensitive part of Bill de Blasio put on a call and said, you know, if people with rain ponchos could, please donate them to local hospitals for use of search.
Grounds.
Yes, that inspires confidence in our civilization, just like gee.
You know, by the way, this is a family podcaster. Can I
swear this, I swear to your heart's content Jesus,
you know, I'll just give the light of Jesus Christ. Like, like really like, you know, the civilization of the United States of America 240 years in or whatever. Literally, like we're using rain ponchos for surgical gowns in hospitals, in New York City. Honestly. Like that's where we got into, you know, we don't, you know, you don't have masks, we don't have this, we don't have that. And now we don't have a freaking surgical gowns
It's like I said, this is just ridiculous and so that sort of
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