Bitcoin Bust: What’s the Future of Web 3? w/ Chris Dixon
Opinion | As Bitcoin Busts, What’s the Future of Web3? And What Even Is Web3?
[MUSIC](SINGING) When you walk in a room, do you have sway?kara swisherI’m Kara Swisher, and you’re listening to “Sway.”At the beginning of the year, crypto seemed like it was off to the races, but not anymore. This week, Bitcoin reached its lowest point in 18 months. Ethereum is worth about a quarter of its November peak, and Coinbase’s shares are down 79 percent this year. So is this a momentary slump in a big industry or an all-out crash? That’s what I wanted to ask my guest today.Chris Dixon is a general partner at Andreessen Horowitz, one of Silicon Valley’s largest venture capital firms. As the lead crypto investor there, he has directed billions into blockchain and Web3 investments of all kinds. Chris Dixon, welcome to “Sway.”chris dixonThanks for having me.kara swisherSo Chris and I have known each other a long time, when you were investing in all kinds of different things. But I think I called you the king of Web3 at one point.chris dixonDid you? OK, OK.kara swisherDid I dub you that?chris dixonThank you.kara swisherCan you briefly explain Web3 and how it’s different from Web2, a really succinct explanation for people? I know you can’t boil it down, but try.chris dixonWell, very simple way would be to say that it’s a new way to build networks where, instead of the network being owned by companies, they’re owned by a community of users. And so, you know, you could have a social network where, through tokens and other kinds of mechanisms, the community receives the economics upside of the network, where they control the rules of the network and so combining the best features of the open, decentralized protocols of Web1 with the advanced modern functionality of Web2.kara swisherIn other words, no Google.chris dixonHopefully. In Web1, there’s no company benefiting from the growth of the web. I mean, there are individual companies on the web, but there was no company that owned the network. Right? Whereas, in Web2, you have a set of companies that own the network. And I think we’re at a point now where there’s four or five companies that control most of the internet. And I think that is a bad thing, for a number of reasons. I think it makes the whole thing less dynamic and interesting, but I think, more importantly, for creative people, if you do what you do, or if you’re an artist, or you’re doing — your intermediated now by these companies who are very, very good at extracting all the money.kara swisherAll right, and which Andreessen Horowitz was a big part of. Let’s be clear.chris dixonThat’s true.kara swisherLet’s be clear.chris dixonThat’s true. And I’ll speak for myself.kara swisherRight.chris dixonI was part of it. And I don’t like how it ended up.kara swisherBut uneasy lies the head that wears the crown these days. So let’s first talk about what’s happening right now. Explain the fall-off in crypto and how you are assessing it, as an investor.chris dixonSure. So, I mean, I guess my take right now — I mean, no one really understands the full macro situation. It seems to me this is broader than just crypto.I mean, so if you look at high-growth tech stocks, for example, those are down a lot. I don’t know what will happen next, but to me, this feels more like 2008, I would say. This feels like a macro thing, with inflation and everything else. Again, I’m not an expert on that. And I think the first thing that gets affected are highly liquid, high-growth thinks like crypto and tech stocks. And so we’ll see where it ends up. But I do think it’s —I think there’s a couple of things going on. So crypto has certainly been very volatile over the years, and no question about that. And it’s an emerging category. I mean, we think of it very much in the venture category of an early technology that’s being built out, as opposed to something that’s mature, so that’s certainly a factor. But I think it’s also just this whole macro thing, which we’ll see how that plays out.kara swisherOK. Let’s talk about this meltdown. And Bitcoin, and others, the whole sector you’ve been investing in is being particularly hit more so than any other sector. Bitcoin is currently, at the time of this taping, worth $22,637.In November of 2021, just recently, $68,000. At peak crypto, it was $3 trillion in value. Now it’s $1 trillion. Ethereum, by the way, was worth about $1,200, down from a high of $5,000, also in November. How do you square that, as an investor?chris dixonWell, we have a venture model, right? So we’re not hedge funds, so we don’t go and buy a bunch of things, and bet on momentum, and things like this. So we do —And this is, by the way, a very deliberate choice. We very deliberately said, we want to be a venture fund. We want to have a long-term horizon. We have the same kind of similar LPs to what we have in our main fund, which is they have a 12-year-plus horizon. And we tell them, look —And, actually, one of the reasons we raise this type of crypto fund — I did this, myself. I went out to the LPs, and I said, look, this is just a different thing. It’s going to be riskier.There’s going to be bad headlines. I really believe in it. I’m going to devote my career to it, but you should opt in if you want to. Right? So we have a set of LPs.kara swisherJust for those who don’t know, LPs are limited partners.chris dixonYes.kara swisherThese are the people that give you the money bags, essentially, that you take —chris dixonThat’s right. Yes, they’re the ones who give us the money. So we have a set of investors who have opted into this. I mean, look, and these are big institutions. And I don’t the exact numbers, but they probably put 0.1 percent of their endowments and things into these kinds of — they understand that this is the venture of venture. Right? This is the riskier area of an already risky category.kara swisherThis was a $4.5 billion fund in crypto —chris dixonThe new fund we —kara swisher— blockchain investments. That’s right.chris dixonWe just closed a new fund. Yes.kara swisherRight, which is just in time. Have you been getting a lot of calls today, or this week, or recently?chris dixonFrom LPs?kara swisherYes.chris dixonI haven’t got a single call, to be honest.kara swisherReally?chris dixonYeah.kara swisherThey’re not like, oh, oh? Oh, no.chris dixonI mean, a lot of them, we’ve been working with for 10 plus years. We spent a lot of time trying to educate and just have people understand things. I’ll do some kind of webinar or something at some point, soon probably, to talk to people and things. But no, I think we have a very patient —kara swisherSo they’re not freaking out at this very moment? Because people tend —chris dixonNot that I’ve heard.kara swisherNot that you’ve heard. So do you remain bullish at this moment? Is that the time to double down in the way you think about it? Because these are the moments where investors go, oh, dear.chris dixonYes. I mean, I’m very bullish. I mean, the way I look at it, and you know the history of the internet and tech. I think of it as two independent processes that happen. There’s the financial processes, and it’s this crazy uncle that’s jumping up down. I thought last year was too high. I think this year, it’s too low. This is my editorializing. I’m not giving investment advice. But it just seems wildly volatile to me in a way that doesn’t fully make sense. Then there’s a separate track, which I focus on, which is the product and tech track, right. And that’s, what’s the pipeline of good products? How’s the infrastructure? Is it built out? So you think, I put blockchains into the history of computing, where if you go back to World War II, every 10 or 15 years or so, there’s been a new computing wave. And for each of those — and I’ve spent a lot of time thinking about this and reading the history of it.Each of those waves had what I call the incubation phase. So you think about mobile computing as an example. You had companies like General Magic. I think it was ‘93 or ‘94 or something, right? As early as that. I was watching “Die Hard” the other day and for some — not “Die Hard,” was it — “Lethal Weapon.” For some reason, it was on TV. And they had a cell phone in the 80s. It was hilarious.kara swisherThe big one. I had one of those. Don’t laugh. Don’t laugh about those.chris dixonSo, I mean, it’s not like this immaculate conception where the iPhone appears.kara swisherYou’ve seen this before. But let’s stick to the news for a second. I want to get to the analogies, to other things. But Celsius, a crypto bank, decided to halt withdrawals for nearly two million users. And Binance, the crypto exchange, briefly halted trading. It feels like we’ve all seen “It’s A Wonderful Life” and we know what a run of the bank looks like, right? When that happens, what are people to think?chris dixonWell, I think we should talk about regulation, maybe. Look, we’re pro regulation. And I think that a lot of the issues here are the fact that there is not enough regulation around these things. So we’re not directly involved in Binance or Celsius or Terra or any of these. But my view is that generally, we’ve had almost no guidance from the regulators, and that they’ve been doing what’s called regulation through enforcement. So selective regulation actions. I was on the board of Coinbase for a long time. One of the frustrations there was that they would spend all this time and money being compliant, and then they would always have some kind of offshore competitor that was flouting the rules. And what would end up happening is that for whatever reason, the regulators spent all their time on Coinbase. So let’s just take stablecoins as an example, which has been in the headlines with Terra Luna, right. So there’s U.S.D.C. which I consider the gold standard for stablecoins. So U.S.D.C. is co-sponsored by Coinbase and circle.kara swisherExplain what it is. This is dollar.chris dixonSo it’s a blockchain token that’s worth $1. And it’s worth $1 because there’s a dollar literally sitting in a bank, right. And it’s audited. And it’s like, is it perfect regulatory-wise? I don’t know. Maybe they could upgrade a little bit.kara swisherIt’s considered one of the safer ones.chris dixonYeah. But I mean, there’s literally a dollar in the bank. And that’s very, very different than some of these what are called uncollateralized stablecoins, which have been in the headlines where there’s nothing in the bank. Right, it’s just literally backed up by another token. And of course, what happened is “It’s A Wonderful Life.” Right, there was a bank run. And so I think in a sensible regulatory regime, it’s the regulators that make a distinction between those two things, right? They would say, OK, there’s rules.If you’re going to call yourself a stablecoin and you’re going to market it and you’re going to say it’s safe to — this is the worst part, I think, is the marketing to consumers — you need to do certain things, right. But those rules don’t exist.kara swisherSo people don’t know crypto lenders don’t have to answer to any regulators. And investors have no protection as they would in a bank from for the F.D.I.C.chris dixonYeah. Look, I’m not an expert on this, but, look, I think clarity would be great. And so for example, there’s a new bill that’s proposed. I don’t know how far it’ll get, Lummis, Gillibrand. We’re generally supportive of that. I do think you need regulation. It’s clear, especially recently with these blowups, that this is not good for the space, this is not our vision of the space. We don’t want to see that. And so I think this idea that somehow we’re all kind of promoting this Wild West thing is not the case. We’ve spent years going to D.C. and trying to talk to regulators and get what we think is regulation that balances innovation and consumer protection.kara swisherSo let’s talk about Gary Gensler, who’s the head of the S.E.C. It’s not clear who’s going to regulate it, too. We’ll get to that in a second. But predicted turmoil in May. Jamie Dimon, who owns a big bank — who runs a big bank, no longer says cryptocurrency. He calls them crypto tokens. He’s always been not very into this. And I think there’s a reason why. He has reasons of his own for doing that. But at the same time, he looks safer, right? He has this idea of safety and he wants to hold onto power at the same time. So what do you think the government should be doing here? From your perspective, what’s the most promising regulations that are most important?chris dixonI think clarity. Yeah, I mean, look, I don’t understand all the dynamics of Washington. I think there’s some kind of —kara swisherOh, you’re not stupid. Come on.chris dixonWell, like the C.F.T.C. and S.E.C. are like —kara swisherI don’t get these difficult Washington people, Chris. You’re one of the smartest people I know. Sorry.chris dixonI get the formal stuff, but there’s also this political dynamic, as you’d expect, between the C.F.T.C. and the S.E.C. The way they go, the C.F.T.C. — even when you’re a commodity, you still need regulations. You need regulations around market manipulation and cornering the market and wash trading. And the C.F.T.C. —kara swisherC.F.T.C. regulates commodities, the S.E.C. regulates securities.chris dixonYeah. And so by the way, in any framework, I think you would have regulation around tokens. It’s just a question of whether you have securities regulation. And I think that my guess my tea leaves reading is that the power has shifted to the S.E.C. under the Biden administration, and Gensler has been very active. And I think a lot will probably depend on the midterms.kara swisherSo the Biden administration issued an executive order in March ensuring responsible development of digital markets. And your thoughts of the executive order for Biden, because a lot of people in your industry welcomed it because it acted like you were a real boy, I guess. I don’t know what to say. How important was that?chris dixonI think it was important. I guess the regulatory experts we have on staff said it was important. But sort of, T.B.D. Let’s see what happens afterwards. It was a pretty general statement.kara swisherIt was very general.chris dixonYeah.kara swisherAgain, let me get off a regulation in a minute. But if you don’t understand regulation fully, who does? Where is the big thinking on this? Given you put in a lot of money.chris dixonWe have a great team of people. You can understand the basic tech and everything else, but until you’ve lived and breathed that world for 10 years, you probably don’t really understand all the dynamics. So, you know, we have a great team. For each kind of regulatory agency, we have former officials who advise us and things. So I don’t know if anyone has a full — I mean, it’s very complex. The U.S regulatory — it’s many different institutions or state level.kara swisherSo that adds to the uncertainty from your perspective.chris dixonIt does. It does. It’s very complex.kara swisherSo let’s talk about the 2008 analogy and efforts to mainstream cryptocurrency. So how much of this fall-off is a recognition of systemic risk? Because some people are comparing it to the 2008 financial crisis. Do you agree with that? Because this is still a very small area. Housing is a $43.4 trillion value industry. Gold, $10 trillion. And of course, those underwent, especially housing, a lot of volatility.chris dixonI think today, as of today, the total market cap of all crypto assets, including Bitcoin, which is the bulk of that, is $1 trillion, which is half of the value of Apple stock. But, I mean, it’s tiny in the global economy. It’s tiny. Like, it’s nothing compared to housing, credit, stocks. It’s literally less than half of Apple. I mean, I get it. It’s very high profile. It’s headlines of these spectacular failures. Although I will say, in the spectacular failures, even this Terra Luna, which was a disaster, right —kara swisherExplain what that is for people who don’t know, very briefly.chris dixonSo yeah, it was what I was alluding to before, is an uncollateralized stablecoin out of Korea, which — you know, kind of — marketed, itself as being a relatively safe investment and basically went to zero. And —kara swisherSo not so safe.chris dixonIt’s not safe. And I think that silver lining on that, look, it was contained. It was one thing. It wasn’t a systematic risk. So far, there’s been no contagion. If you think about 2008, right, I don’t understand how the global banking system works, but clearly, like when Bear Stearns went down, there was this systematic risk of the government bailouts, things like this. Look, I mean, this is really like — like I said, it’s half of Apple stock. It’s a relatively small nascent category.kara swisherRight. But is this from your perspective a 2008 moment for crypto?chris dixonWell when I was doing 2008, I was thinking more — I was editorializing beyond crypto, I guess. I was saying just like when I talked to friends in the finance community broader than crypto, I’ve just never seen such negativity, I mean, since 2008. Like the world’s ending. I don’t know if you’ve had that experience. I’m surprised at how negative people are.kara swisherYeah. Well I’m not, because one of the things is you all push yourself out there as the next big thing, right? I mean, that’s what it is. Part of the similarity is to the push to go mainstream far too early and the narrative around democratizing access, just like subprime mortgage market.chris dixonOh, yeah. I mean, I meant the broadly — the trickle negative economy. Not just crypto —kara swisherYes, yes, yes. But crypto’s getting a lot. Getting a lot a peak moment for — this was around the Super Bowl crypto ads. Was it too early to say how fantastic you all are? Or were you worried about that as someone who’s a big investor?chris dixonI wasn’t saying how fantastic we are. But look, I think — let me say something else, which is I think within the crypto industry, there’s really two factions, right. There’s the faction we consider ourselves part of, which is what I described before, the Web3 builder faction. And then there’s this other aspect, which is I would call the casino. I generally dislike the casino aspect of the crypto world. And I don’t support it. I think if you go back 10 years, you’ll never see us supporting that or promoting that. And I think it’s a negative influence. I don’t like these commercials that promote this stuff. I don’t think it talks about innovation. I think it’s sending all the wrong messages. It’s the FOMO, everything else. I don’t think that stuff’s good, and I don’t know if it needs to be regulated or something else. But I don’t think it’s helpful.Now I feel very strongly that I don’t think that we should throw the baby out with the bathwater. I think that the core tech is very important. And I absolutely think we need, in the near term, some sensible regulation. I want to see it balance so that we can still build the things I’m describing. We can build social networks and marketplaces and all sorts of new things. And, look, I think this is the most important thing to counterbalance the power of the big tech companies. There’s no credible other contender for something disrupt — there’s no other disruptive tech in the world right now in my view that’s actually going to have a chance to take down these companies than Web3.kara swisherWhich is, though, something that Jack Dorsey, who I would call a crypto evangelist, is also against the people who are doing the investing, like yourselves. He’s pushing back on the centralization of this kind of thing.chris dixonWe get hit from all sides.kara swisherWe get hit from all sides. He’s been pushing back on the centralization. I always love when the man says, fight the man. That’s my favorite part of the entire equation.chris dixonThey were the most guilty of all. You remember the kind of — I think of it as the worst case of the bait and switch against developers, where you remember there was this huge ecosystem. And there was venture firms investing in Twitter apps.kara swisherI was at that conference.chris dixonI know.kara swisherYeah.chris dixonAnd then they just shut it all off. They killed it. And to me, that was a really — I mean, my friend Fred Wilson, he was on the board. I think he was on the board then. And we talked about it a lot. That was his crypto moment. It was like, wow, this should have been a protocol. Twitter should be a protocol. It should not be owned by a company.kara swisherWhich is what Dorsey was pushing for, right, under Bluesky.chris dixonYeah. And so, anyway, so I think that we share his values there. I think the implementation he’s pushing, I don’t believe in it.kara swisherRight. One of the things I had a really interesting discussion this week at Andrew Ross Sorkin’s conference — I led a panel on crypto — is the idea of inequity in it. Does it increase inequity if you’re pushing this on people? And by the way, it’s a much more — there’s much more diversity in the investing here. One in five adults — this is interesting — suddenly, especially millennials, own at 36 percent versus 6 percent of boomers. More Gen X than Gen Z. More men than women. It is more diverse. Many people of color think this is an opportunity to get in on things, right, early in the situation.And others think, no, no, it’s another opportunity to take from this group. How do you look at that? Does it really give power to everybody? Because that’s not what it looks like from ownership and things like that.chris dixonI mean, look, I think, can it get worse than Web2? Web2 I think was the most concentrated both economic and control power centralization that we’ve seen economically in decades. So, I mean, look, as you mentioned, we were one of the beneficiaries. We’re a venture firm that invests in a bunch of those things. Basically the beneficiaries were the founders, the investors and maybe some of the employees, right? And that’s it. And I think my view is a lot of reason people are upset today on the internet — I mean, there’s a bunch of reasons, obviously. It’s complex. But I think one reason is they feel left out. A lot of people feel like, I helped build Airbnb. I was one of the early Uber drivers. And, how come I’m left out of this, right? And so I think it’s a very powerful idea. The next Uber — well, maybe it’s not Uber, maybe it’s an A.I. marketplace or some futuristic thing. But the next kind of great networks can actually — the people that build it could actually own it. That’s one of the core values of Web3, is the tokens of the ownership goes to the communities. I think it’s a very powerful idea that people can own some of it. And so I would rather see people earn it and not have to pay for it. That’s our view. And that’s actually what we recommend to companies — don’t sell tokens to the public. Airdrop tokens to the public. Give them tokens for helping you build the network, for doing work.I would love to see that be the mechanism by which we have more democratic wealth and not selling —kara swisherWasn’t that the hope for the first internet? The government owned it.chris dixonIt was. It was.kara swisherThe taxpayer paid for it. And somehow —chris dixonIt was.kara swisher— the owner of your firm is one of the richest people on earth, right? That kind of thing. Or Mark Zuckerberg, or Jeff Bezos, or Elon Musk.chris dixonIt was. It was And I think a really interesting question is that, if you read Tim Wu, who I think is a really good writer —kara swisherWho works for President Biden.chris dixonYeah, his view would be — I think his view of the master switch would be this is some inevitable thing that happens with all media consolidation. I understand this is a contrarian view, but my view is I don’t think it’s inevitable. And I think the internet’s different. I think the internet’s different than hardware based media. With radio and things, it just made sense. Or broadcast TV you only had room for five channels or something.The internet is a software base. It’s designed to be a very plastic software-based medium where you can — I think we still have a chance to redesign it. It’s 30 years into it, right? I don’t think it’s hyperbole to say the internet’s the most important invention of the century, of multiple centuries. It’s a very big deal, and it’s very early on.And I agree with you, Web1 didn’t go the way it should have. It surprised me, frankly. I didn’t fully understand what was happening until 2015 or something, when I was like, holy shit, this is becoming like broadcast TV. I was naive. But I guess, to me, a question I think about a lot is, is it inevitable? And maybe it is, and the cynics will say this is just another V.C. firm trying to find some new trend or something. I don’t think it’s inevitable that the internet has to be owned by four companies.kara swisherSo who is building this so far? How do you think about when you’re investing. Because certainly — Adam Neumann just popped up, and I think you gave him the money, right, from WeWork. Talk about that, for example.chris dixonSure.kara swisherIt seems like the same people to me.chris dixonYeah. Well, so, again, you’re seeing the headlines are juicy. So that’s Flowcarbon.kara swisherRight.chris dixonAdam, like a lot of entrepreneurs, I think is — or former entrepreneurs is investing in things. And so he invested and helped incubate. He’s not operationally involved. I know it’s a good headline, but he’s not operationally involved. He’s just —kara swisherWait, how do you push against that idea? It’s not the same people. Like Mark is on the board of Meta, right, which owned the last one. And look, you make your own investments. I understand how venture capital firms work. But how do you prevent that? How does it become good for people who weren’t able to get in on the thing which creates a casino-like environment? Which is problematic.chris dixonI mean, for one thing, I think this goes to the Jack Dorsey critiques of a16z owns Web3. Just empirically — so take Ethereum as an example, which has been one of the things Jack has critiqued. I don’t know what we own, but it’s far less than 1 percent of Ethereum. I don’t know, I haven’t added it up. In the old days of venture capital, firms that own 20 percent, 25 percent, I would say probably — we haven’t added up, but the average maybe now, even on early stage investments, is 3 percent. Something like this. And this is, by the way, not just crypto. I think it’s just the steady march of the commoditization of venture capital and just the bunch of reasons why ownership levels have gone down and things.kara swisherWell, the idea that a cap table has more people on it than the same 12 people.chris dixonYeah. Yeah, I think there’s a bunch of reasons why. But so I think just empirically, we just don’t — something like Ethereum, it’s very widely owned. And tens of thousands of people involved and no one really controls it. And I think, to me, it’s really notably different than, you know, Web2 kind of companies.[MUSIC]kara swisherWe’ll be back in a minute. If you like this interview and want to hear others, follow us on your favorite podcast app. You’ll be able to catch up on “Sway” episodes you may have missed, like my conversation with John Doerr, and you’ll get new ones delivered directly to you. More with Chris Dixon after the break.So let’s talk about this idea of grift and scam. And so I asked actually people. But one of the questions that we got a lot of is, how much of crypto is scam at scale? How troubling is that? When you say there’s all these things that aren’t backed by anything, that they’re come and go, when you see them shut down, like how much of a problem is that?chris dixonYeah. Look, as I mentioned, I think that regulation would be good. And I think there is a bunch of this stuff. I mean, look, a lot of it, I think, happens as anonymous groups offshore. I have to say, look, we have probably 80 crypto investments now. And these are real entrepreneurs that would pass any test of any venture firm of really brilliant technologists dedicated to what they’re doing.So my daily impression is not at all that. Now I read Twitter and I see this other stuff that goes on. So for example, there’s a company we’re investors in called Uniswap, which has pioneered this thing called decentralized exchanges. I won’t go into the details. But what immediately happens is they get copied, because everything’s open source. So they got copied by Sushiswap. And all the copies go off and do all sorts of crazy stuff, right?Meanwhile, Uniswap, they’re in — I’m in New York, they’re in New York. They’re down the street in New York. They’re all in an office. They’re the most earnest, nerdy, great entrepreneurs you’ll ever meet. They have a team of lawyers. And then they have all these scammy clones, and so I do think there needs to be. And frankly, it’s frustrating, because that’s their competition.kara swisherThat they have to deal with. And you guys are seeing it actually in some problems at least related, like you’re saying, clones in plagiarism in one of your recent investments, OpenSea. This is like an eBay for NFTs. This is Non-Fungible Tokens, one of the kind of digital assets. There’s a ton of scam encrypted security flaws verified by blockchain but not actually secure. How do you deal with that when it’s open season like this? What is the mechanism for doing that?chris dixonWell, so OpenSea is an example. I think we first invested about a year and a half ago. And I believe they were 10 people. They now have a couple hundred people. If you go look at their executive team, they’ve hired from Facebook, you know, senior people from Facebook, Lyft. A whole bunch of other places. They went from low numbers in 2020 to, I don’t know what it was, tens of billions in GMV last year. They just grew incredibly quickly. I know there has been a bunch of articles. There was The New York Times article last week about them. I was frustrated by that article. That was frustrating. I mean, I don’t want to get into the whole media thing, but like —kara swisherPlease do.chris dixonI — I don’t know.kara swisherI’m a big girl.chris dixonLook, I mean, I think a lot of it is a standard — you’ve chronicled startups, like eBay early on, et cetera.kara swisherThey certainly do.chris dixonLook, if you get to know Devin and OpenSea, the C.E.O., they are very, very earnest, classic, well-meaning entrepreneurs who are building things as fast as they can. But it’s not perfect. It’s growing very quickly. And look, I’m biased, but I feel like some of the coverage is just only focused on the negative stuff.kara swisherBut is it a good thing — I’m not trying to be negative here, but is a good thing to democratize crypto when it’s still so insecure? One of the things that I always had a problem with all these — they would just put it out there. I remember when Facebook put out — I’m just using them as an example — Facebook Live. And I kept saying, what about people shooting each other on this? What about a mass murder?And they were sort of like, Kara, you’re a bummer. We’ll fix it later. And I’m like, well, how about now? How about we fix it now? And then we don’t have that later kind of thing. Is it a good idea to democratize and push the idea of democratization when it remains unsecure? Can you not anticipate what’s going to happen until it happens?chris dixonI think there’s always a trade-off on these things. I don’t think that the Facebook move fast and break things is the right answer. And just like, throw stuff out there and not be thoughtful and responsible about it. But I also think that there’s an important value of being inclusive and democratizing these things.kara swisherSo is cities owning Bitcoin — that hasn’t worked out so well for Miami or Eric Adams. Is that too early, when everyone tries to jump on a bandwagon? Is there anything you do to say, let’s just slow down? Or not?chris dixonYes. I mean, we always — we’ll talk about it as a venture at class. And I think there’s a lot of — the Casino stuff I alluded to earlier promotes these things as more mature, the way that a stock is more mature. And my view is that most retail investors should get tokens for free by doing work and helping to build the network and not buying them.kara swisherRight. So they don’t risk themselves, initially.chris dixonYes, that’s right. And that’s the advice we give people, and that’s the playbook that we run.kara swisherThat it’s a speculative asset. Which is something I said.chris dixonYeah, it is a speculative asset. Yeah. I mean, but as our tech stocks, there’s a bunch of stuff. But yes —kara swisherLess speculative, I suppose, on some level. They have records.chris dixonMy own take is — this is me editorializing. I think I learned this in 2008. When shit goes wrong, everything gets correlated and everything’s speculative except for cash and treasury bills. So I don’t know. That’s my head.kara swisherYeah, so you have a mattress full of money, Chris. So a couple more things. Let’s talk about the technology. Because there are a lot of critics around the technology and how it works out. So you have issues of regulation, of security, all kinds of things. Talk about the blockchain technology itself. There’s a lot of people saying this is not the next internet. This is impossible to scale. Can you sort of talk a little bit about the technology?chris dixonYeah. So what is a blockchain? So blockchain is — I think of it as a new kind of computer, something like Ethereum. You can write code for it and it stores information just like it’s a virtual computer. It’s a network, but it’s a computer. And it’s a computer where the code you run will continue to operate as designed. I call it computers that can make commitments. For example, you can write code that says, take Bitcoin to only ever be 21 million bitcoins, and that assurance is given to you by the computer, not by the person behind the computer. Right, so you think of a traditional computer. If Facebook said, I’m going to have Facebook coin, there’s going to be 21 million coins. And they’re running it on some server. The management team could just change their mind. So what the interesting property of a blockchain is you can write code that’s autonomous code. And that lets you do these things like DAOs and tokens and other kinds of things.kara swisherExplain what a DAO is for people who don’t know.chris dixonSure. So DAO is — it’s a Decentralized Autonomous Organization. So it’s basically a blockchain-based internet native organization that could just — whatever an organization could do. They could create software, they could, you know, play e-sports. They could do whatever it might be. But they’re a bunch of people that get together. Someone called it a Discord with the balance sheet.kara swisherThat’s correct.chris dixonThe community gets together, and they —kara swisherYeah.chris dixonBut now they —kara swisherI was going to create one to buy Twitter out from under Elon.chris dixonI think what’s cool about that, you think about that — to me, Wikipedia is one of the great wonders of the world. The fact that a bunch of random people on the internet who aren’t even logged in and they’re anonymous, can come together and create what I think is a pretty good information resource. And by the way, was very controversial from 2001 to ‘07. I remember it was getting banned in schools and things.I think it’s a miracle that we have this crowdsourced encyclopedia now. I think it’s always a shame every year when Wikipedia is begging for money, right? And thank God Wikipedia as a product doesn’t really need any product development. Right, if they were trying to build a search engine like that, they would have run out of money and lost. And so one of the exciting things with DAOs is you now have the great internet native behavior of crowdsourced behavior, a bunch of people coming together. But now they can have resources. And it’s an investment opportunity. That’s the way I look at it.kara swisherRight. So speaking of that, you were on the board of something like Coinbase, which is a middleman, if you have to figure it out. And there was tons of those in the beginning of the internet. What do you think about that idea of who — what is the most promising of the Web3 investments when people are thinking of them, and which are you most wary of?chris dixonWell, my own, I guess, bias is to really lean into the futuristic things. So the vast majority of things we’re involved with are pure protocols and blockchain applications. And so one of the reasons we’re not involved with things like Celsius and BlockFi is, to me, those are more Web2-ish. So we try to be maybe err on the side of futuristic, I guess. I’m very excited about — I’ve been spending time in L.A. I’m very excited about the intersection of Web3 and media.I think one of the interesting things in the media world right now is they, like me, are very unhappy with the Web2 incumbents. They see them as those companies of having inserted themselves in the middle, between them and their audience. So you think about what Substack did. And Substack’s not crypto, but I think of Substack as Web2.5. Right, so what Substack said is, hey, let’s get rid of the intermediaries. They used email, by the way. One of the web one, the classic decentralized protocols. One of the few places where you can still reach your audience and not have an intermediary. And the result is you have journalists making a lot more money than I think people thought they could. So some are, yeah. But look, I think if you told people five years ago you’d have people making a million dollars with email newsletters, they wouldn’t have believed it, right? And I believe we can do the same thing for many other categories of media, and I think we can do that in partnership with a lot of people in L.A. and the media world who are excited about these ideas and really get it and get the value proposition and really want. But they’re just very unhappy with the Web2 incumbents.kara swisherShould you do it with the media companies who are centralized, or the creators themselves?chris dixonYeah, sorry, the creators. So we just announced one with this great guy, Rob McElhenney, who’s an actor, writer, who created “Always Sunny in Philadelphia” and “Mythic Quest.” And he’s creating this thing I’m really excited about, which is — we call it the decentralized story creation. So imagine you had the — you look at these communities, like the Star Wars communities or the Marvel communities online and how excited they are, and they write fan fiction and they talk about it all day.Now imagine if you could have the next “Harry Potter” or the next “Marvel” that was actually created by an internet community and owned by the internet community. And they could go and tell stories and everything else, but they would actually control it through a DAO. And that’s like, for example, what Rob is doing. And you’re right, yeah, you’re absolutely right. It’s not the company. We’re partnering with Rob.kara swisherIt’s not a new idea. United Artists, that was the idea behind United Artists when it was —chris dixonLook, nothing’s new. I mean, in my view, nothing’s new under the sun. Every tech idea is an old idea. It’s just finally like you have the right tools to do it. This is my view. So I agree, it’s not. Any great idea is not new, right?kara swisherSo media is a big — I had a long discussion once with George Lucas about this. I’m like, why do you give them anything? It’s all yours.chris dixonLook, I think the soft underbelly of the Web2 companies is the creative side. It’s amazing that they got away with taking 100 percent of the revenue for the YouTube shares, whatever they share, 45 percent. But the fact that Facebook, Instagram and Twitter, right, they make their money through advertising. And they share zero of it. It’s a remarkable thing. And these creators are supposed to just be happy with likes and things. I think that’s their weakness, and that’s what we’re going after. Is we’re going to say, we’re going to create better tools and networks for those creative people.And if they move over, we think that the audience will move over, too, right? And I think that’s a really, really important topic that I think only Web3 is really addressing.kara swisherYeah.chris dixonAs an example.kara swisherIt certainly appeals to their greed and narcissism. But in any case, when you think about — and mine, too, by the way. When you think about the critics that you have on the anti-crypto, what is their best argument? What is the one that you go, they have a point?chris dixonYeah. I mean, so one thing I’d say is also inside of crypto, we have a lot of critics. And we have a lot of debates. It’s not as if this is all just happy and so — and look, I think some of the things you brought up — scalability, regulation — these are all legitimate topics. Look, I think a lot about talent. I think that V.C.s don’t build these products, right, entrepreneurs do. And we need to get more talented people. I think that’s really ticked upward in the last year.But there’s a long way to go. I think just continuing that.kara swisherWhat about their argument that it can’t be scaled? This is not the internet. This is —chris dixonThat’s just not true. I mean, we have a whole team of computer scientists, and we’ve done a lot of work on it. And I just — I don’t know. Some of the critics I just found frustrating, because I don’t think they’ve done much research, frankly. Some of these former entrepreneurs who are running around saying stuff, it’s just, they just haven’t done the work.kara swisherThey did build the internet, so they do have a little bit of credibility, it looks like. And some of them are quite —chris dixonSome of them did.kara swisherYeah, some of them did. Yeah, that’s right. Who really built the internet, Chris?chris dixonIt was a community.kara swisherYeah, yeah. Well, didn’t turn out that way. But so when you think about the excited, you sound most excited about the media part. The idea of, I don’t know, LeBron James owning things. Or whoever it happens — whatever creator it happens to be.chris dixonI think, look, I think it’s writers, podcasters. I think this should be a golden era for creative people. You can write something and reach eight billion people. This is the Kevin Kelly — one of my favorite essays is his essay, if you remember his 1,000 true fans.kara swisherI do.chris dixonThis is one of the core promises of the internet to me, was the idea that you could have 1,000 true fans, right. You could go and create some niche topic. And as he said, these would be the people that drive to see you and buy your book. And this is what kind of — I was early involved as an angel investor in Kickstarter. And that was the dream there. I don’t think it was fully realized.I do believe that this should be a golden period for creative people. I think it should be a golden period for developers. I think software developers could have a much better situation. Think about the Twitter example, where they could be building tools and all sorts of other things around. I think it’d be better for the social networks. The spam problem on Twitter, why does Twitter have spam? Because there’s one company trying to solve it.Email solved it through a community. Right, they solved it through market forces. Right, you had a whole industry of anti-spam. I think there’s a whole bunch of reasons why this is just a better way to do things.kara swisherSo when you look at sort of the economic devastation that’s happening in the sector you’re most invested in that you’ve really — but what does it take for an investor not to give up or somehow — how do you best answer people that are like, you sold us a bill of goods, or, this is not the way you said it was going to go — how do you feel, I guess, about that?chris dixonI’ve been through, I don’t know, five downturns or something. I think 2008, I cofounded a seed venture fund. I think the whole world almost had decided that the tech world was not a good place to invest. And I just fundamentally believe that smart people with good technology ideas are a good investment, regardless of the market. That’s what we do. That’s what we promote. And I can’t predict the future, but I think this could be one of those times where a bunch of really great people build important stuff.kara swisherAll right, last question. I’m going to close with this issue around Google and sentient A.I. I think it’s nonsense. But I’m curious what — it’s just, they just have a lot of words that they’re searching and know what to fill in. But that’s my dumb way of explaining it. How do you look at that? Because you’ve been an investor in A.I. also. How do you look at that?chris dixonHow do we look at that particular case study? I mean, I don’t —kara swisherAnd where A.I. is going.chris dixonYeah. I mean, so I don’t know, that case — I mean, there’s always — this goes back 50 years to early parlor tricks with A.I. ELIZA as a famous example.kara swisherELIZA is.chris dixonWhere — yeah. So there have been people who knows the psychological state of the person who was convinced of that. And I don’t want to speculate. Look, I’m not involved directly in A.I. anymore. As you may remember, I had an A.I. company before.kara swisherYou do. That’s why I’m asking.chris dixonActually worked. So it was 2008. And I thought if you’d ask me then, if you asked me 2011, we sold the company to eBay, I would have said A.I.‘s just never going to work. And then two years later, it worked fantastically well. I haven’t played with the dolly thing directly. And I think some of these things you have to use yourself, because people will cherry pick examples, and it’s hard to know, is it just an elaborate parlor trick, or is it really getting smart? But I do think that the results are stunningly impressive in that area. It’s just, yeah, I mean, the rate of improvement.kara swisherBut they don’t have feelings yet, do they?chris dixonDo machines think? And someone famously said, do submarines swim? Right? It’s like, do they swim? I don’t know. It feels like semantics. They certainly move fast in water. I don’t know if they actually say it’s swimming.kara swisherGood line.chris dixonSo, I mean, we’re certainly headed for very advanced machines. I think an important question is, who owns that technology? I think it’s right now going to be owned by probably a couple of companies.I will say, just I’m an observer in this industry now, but I think the results are stunning. And if you just track the, quote, unquote, Moore’s law of this space, they’re going to keep adding more computers, bigger neural networks. And I think they’re on a trajectory of something like 10 to 20 years of having the same number of neurons as a human brain. So I think we can kind of track out. And then you add in things like quantum computing and all these other kinds of X factors, and it does feel like — there’s broadly in the tech world right now, you could be negative and say everything is fixed and incremental. On the flip side, you could argue between virtual reality, Apple’s going to have something, Facebook stuff’s getting more impressive. A.I., Web3. Stuff going on in bio, engineering. This could be this crazy time of really advanced new technologies. And they’re all going to reinforce, the same way that cloud, mobile, and social reinforce. Right, you couldn’t have had —kara swisherFinally.chris dixonSocial networks wouldn’t have gotten so popular without mobile, and they couldn’t have run without cloud. You could have these three things reinforcing in a really powerful way. And I think we should probably grapple with that as a society, because it’s both good and bad.kara swisherAnd do androids dream of electric sheep?chris dixonElectric sheep, yeah, that’s a good one.kara swisherAnyway, Chris, thank you so much. I really appreciate this.chris dixonOh, for sure, Kara. Thank you for having me.kara swisherI always like talking to you. I now have a list of people I don’t want to talk to anymore, and you’re not on it.chris dixonOK, that’s good. Appreciate that. [MUSIC]“Sway” is the production of New York Times Opinion. It’s produced by Nayeema Raza, Blakeney Schick, Caitlin O’Keefe and Wyatt Orme. With original music by Isaac Jones, mixing by Sonia Herrero and Carole Sabouraud, and fact-checking by Michelle Harris and Mary Marge-Locker. Special thanks to Shannon Busta, Kristin Lin and Kristina Samulewski.The senior editor of “Sway” is Nayeema Raza, and the executive producer of New York Times Opinion Audio is Irene Noguchi. 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