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Who Will Own the Internet? A16z’s Chris Dixon on AI and Crypto

The a16z Show

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  • Intersecting Tech Waves
    • Tech waves come in sets, like mobile, social, and cloud.
    • AI, crypto, and new devices are the current intersecting trends. Transcript: Steph Smith Chris, thanks for being here. Yeah, thanks for having me. I always love hanging out with you. Obviously, you spend most of your time in crypto today. How do you generally see crypto and AI interacting? Chris Dixon Yeah, I mean, so I think, first of all, my kind of meta view is that the technology waves tend to come in pairs or triples. 15 years ago, it was mobile social cloud. And I’m always giving this speech to entrepreneurs. They tend to reinforce each other. And so mobile was what took computing from hundreds of millions to billions of people. Social was the killer app that hooked them. And cloud was the infrastructure that made it possible. And so you couldn’t really have all three of them. And I remember back then, people having debates, which are better. It turned out they were all better. And they were all required. They were all required. And so I think of that with AI, crypto, and maybe new devices as the other kind of probably robotics and self-driving cars and VR and things. I think of those as the three interesting things going on. And I think they all kind of complement each other and work together. It’s a new way to architect internet services, a new way to build networks that has a bunch of different properties, which I argue are beneficial for a bunch of reasons and can do a set Of things you couldn’t do before, essentially. (Time 0:02:32)
  • Decentralizing AI with Crypto
    • Crypto can decentralize AI, shifting control from a few companies to a broader community.
    • This can be achieved by building open services for the AI stack, like crowdsourced compute layers (Jensen) and IP registration (Story Protocol). Transcript: Chris Dixon And so I think a lot of people think of it as Bitcoin or meme coins or something. And so that’s fundamentally not what it is to me or I think to the kind of smart people working in the space. There’s many different ways in which it intersects with AI. So the first way, which is something we’ve invested a bunch in, is just using this new architecture to build AI systems. And so, for example, one of the core questions I think, we’ve just talked a lot at this firm about the future of AI, is to what extent will AI be controlled by a small set of companies or controlled By a broad community? The obvious first question there is, is it open source? Yes. It’s negatively shocked me how closed source the world has become. Ten years ago, everything was open and put in papers, and then it all shut down and was closed. And they said this was for safety reasons. I think it just happened to be very good for their defensibility. I just think it’s beneficial business reasons. I don’t believe the safety thing. Thankfully, there’s these ones like Lama and Flux and Mistral and things who are open source. I worry that’s a little fragile because, first of all, I don’t know, a lot of them don’t put their weights open. Is it really open? Some of it’s open. The data pipeline’s not open. Is it really reproducible? They could switch it tomorrow. These models get better every month. And if they don’t start doing the new frontier, I don’t know. So it’s like, it’s very heavily dependent on one large company. Yeah. So one of the things we’ve invested in is a stack of internet services that are built for the AI stack, but open services a different layer. So as an example, there’s a project called Jensen, which is building, think of it as a crowdsourced compute layer. And so you as a startup can submit a job that goes beyond the compute you control, and it goes out to a network kind of Airbnb style of people that have access to compute, and the network Manages that supply and demand, right? And that’s the economic ledger. Yeah, that’s one example. Another one is one called Story Protocol, which is a new way to think about registering intellectual property. And so you can create image or video or piece of music, and then you register it on a blockchain, which keeps a record of the piece of media and the rights around it. It uses existing copyright law. So it actually, so like the blockchain record mirrors a legal agreement that’s been crafted to work internationally. And then anyone can come along. And as long as they abide by your terms that you set, you might say something like, you can use this, you can remix it, you can create derivative works. But any revenue you make, you have to pay me 10% or whatever. Downstream, yeah. You set the terms. But that creates this sort of open marketplace where right now you have to call up some company and try to do a BD deal and this and that. And so you end up having this kind of thing where people either basically steal it or don’t do it. Or they’re scaled enough to make a deal or something. Like you have OpenAI going to Shutterstock and they paid them $100 million. But this is really just for the very high-end companies. This is creating a broad, democratic kind of resource where anyone can, a small creator can set the terms. And then ideally what you create, and this is a recurring theme in the blockchain world, is you have this kind of what we call composability. I think the kind of core force behind the success of open source software. I mean, people forget this, but open source software, certainly the most successful open computing movement in the last, you know, 80 years. But Linux went from 0% market share in the 90s to probably, I don’t know what, 90-plus percent market share today. And a lot of that’s because of what we call composability, which is basically all these different people coming along and contributing little pieces to the system and the system collectively Getting much better in the same way that Wikipedia is a collective knowledge system. And so something like Story Protocol, you get the same kind of Lego break effect with media. So someone comes along and they create a character, someone else creates another character, someone else remixes them, someone else, and then you can use whatever AI tool, you can Create generative AI, and you can create your story. I create a new superhero universe where I use these other Lego bricks, and as long as the money kind of waterfalls back, that’s all okay. I think it’s a really great vision that both allows for people to embrace these new tools, but also provides an economic model for creative people. I think that’s a, to me, that’s a recurring theme in our investing is like, what will be the economic models for creative people in an AI world? Don’t stop the inevitable, which is the technology progressing. Lean into it and rethink those models. That to me is the most exciting area for this (Time 0:03:33)
  • OpenAI and Shutterstock Deal
    • OpenAI’s $100 million deal with Shutterstock exemplifies current limitations.
    • Smaller creators struggle to make similar deals, hindering broader access and collaboration. Transcript: Chris Dixon And so you end up having this kind of thing where people either basically steal it or don’t do it. Or they’re scaled enough to make a deal or something. Like you have OpenAI going to Shutterstock and they paid them $100 million. But this is really just for the very high-end companies. This is creating a broad, democratic kind of resource where anyone can, a small creator can set the terms. And then ideally what you create, and this is a recurring theme in the blockchain world, is you have this kind of what we call composability. (Time 0:05:56)
  • The Broken Covenant of the Internet
    • AI chatbots answering queries directly disrupts the internet’s existing covenant.
    • Content creators, who previously traded free access for traffic, now face losing traffic and revenue. Transcript: Steph Smith Models in this world? One of the things that you pointed out to me right after the chat GPT moment is you’re like, hey, we have the potential for sort of a break in the pact of the internet. Chris Dixon Oh, yeah, yeah. Which I think is a super fascinating problem. Yeah, yeah. There’s a chapter on this in the book toward the end. I call it a new covenant. So like you think about the incentive system. One of the main reasons the internet succeeded is it had a very clever incentive system, right? Like how do you get 5 billion people to sort of opt into the system without having a central authority tell them to, right? This is because of the incentives of the internet. And specifically, there’s been a kind of what’s emerged over the last 20-ish years is I call it an economic covenant between the kind of the platforms, specifically social networks And search engines, and all the people that create websites that essentially those link to. And so if you’re a travel website or a recipe website or a artist who has illustrations, there’s an implicit covenant you have, let’s say, with Google, right? Which is you say to Google, it’s okay if you crawl my content and you index me and you show snippets in your search engine if you send me traffic back. This is how the internet has evolved, right? And why do you want traffic back? Because you have some business. Maybe it’s a free site. Maybe it’s an ad-based site. Maybe it’s a subscription-based site. But whatever it is, somehow you have a way to make money on traffic. There’s some understanding, right? Steph Smith Well, it’s mutually beneficial. Chris Dixon Mutually beneficial. And occasionally that has been breached. So there was a thing Google does called one-boxing, which is they would take your content and just put it, like I was on the board of Stack Overflow for a long time, and they would do this, Where they would take, you type in a thing for Stack Overflow, instead of clicking on it, they would just show you the answer and remove the click. They’ve done that with Wikipedia. They did it with Lyric sites. Yeah, but they did it with Yelp. They did it with Trout. Yeah, and people get very upset. Or they, with Yelp, they promote their own content on top. And so there were issues, but it worked, right? Now, the question in an AI world, right, is if you have these chatbots, if you go and you say, I want an illustration, and it just generates an illustration, or you say, I want a recipe, And it gives you a recipe. This might be a better user experience, by the way. I’m not against it. I think it’s probably better in the end for the users of the internet. But the problem is it breaks the covenant, right? They took this data. These systems were trained on data that was put on the internet under the prior covenant. Steph Smith Under the premise that they’re going to get traffic back. Chris Dixon That’s right. And they can monetize it. That’s right. And that was the premise. And that was the promise, right? And now you have a new system, which may not send the traffic. In fact, it probably won’t. If these things can just tell you the answer, why would you click through? And so that’s probably where we’re headed, is a world where you have five big systems, let’s call it, three to five big AI systems. You go to their websites, they give you an answer. And so what happens to the billion other websites if they aren’t getting traffic is the question, right? (Time 0:09:30)
  • Google’s One-Boxing
    • Google’s ‘one-boxing’, displaying answers directly, previously upset content creators like Stack Overflow.
    • AI chatbots exacerbate this issue by potentially eliminating click-throughs entirely. Transcript: Chris Dixon Mutually beneficial. And occasionally that has been breached. So there was a thing Google does called one-boxing, which is they would take your content and just put it, like I was on the board of Stack Overflow for a long time, and they would do this, Where they would take, you type in a thing for Stack Overflow, instead of clicking on it, they would just show you the answer and remove the click. They’ve done that with Wikipedia. They did it with Lyric sites. Yeah, but they did it with Yelp. They did it with Trout. Yeah, and people get very upset. Or they, with Yelp, they promote their own content on top. And so there were issues, but it worked, right? Now, the question in an AI world, right, is if you have these chatbots, if you go and you say, I want an illustration, and it just generates an illustration, or you say, I want a recipe, And it gives you a recipe. (Time 0:10:45)
  • Convergence of AI, Crypto, and Hardware
    • Generative AI, crypto, and new hardware are converging, similar to mobile, social, and cloud.
    • Crypto incentivizes early network growth for physical infrastructure like Helium’s telecom network. Transcript: Steph Smith One of the things you’ve talked about is just this trifecta of technology products that have come along at the same time. So generative AI, crypto, and new hardware platforms. So how do you think about the three of those coming together? Chris Dixon So yeah, and the analogy, of course, is like mobile social cloud, the last wave where they all ended up reinforcing each other. So you’re already seeing some of this. You have these new devices, the AR and VR glasses and things, which use a lot of AI, and the sort of Her style kind of stuff. There’s a whole area of crypto I’m excited about called D-PIN, which is decentralized physical infrastructure. The most prominent example is a project called Helium, and Helium is a community-owned crowdsourced telecom network that tries to compete with Verizon and AT&T. And so basically what they did is they created an incentive system where anyone can put a Helium node up in their house, and that adds a little bit to the network. It’s a wireless transmitter. They got hundreds of thousands of people in the country to put these networks up, and now they offer a cellular service that’s, I think, significantly cheaper than something you get From Verizon. It’s like $20 a month instead of $70 a month. And it’s cheaper because much of the time it’s using this homegrown network. They didn’t have to spend tens of billions of dollars to build it out. But what’s interesting about it is that crypto is very good at creating incentive systems. And traditionally in networks, the hardest part of a network is the bootstrap phase. Once a network has critical mass, it’s clearly valuable. Once I can sign up for a cellular network and use it anywhere in the country, clearly I’ll pay for that. When you start it off and there’s only 10 houses with the cellular access, it’s not something you want to use. Think of a dating site. If there’s 10 people on a dating site, you don’t want to use it. If there’s millions, you do want to use it. This is a classic problem with building networks is how do you get over this early phase when the network effects are weak? And so crypto is the perfect complement to that. Crypto is a great way to provide incentives in the early areas of building a network. And it turns out a lot of interesting networks in the world are physical networks. So there’s people doing this for climate weather modeling. There’s people doing it for mapping self-driving data and mapping cars. There’s people doing it for electric car charging, for cellular networking. We just did one that’s around energy metric monitoring. And there’s people doing decentralized science, which is you mix it in with a more scientific application. So one sort of simple heuristic is anywhere where you want to build a network and is a challenge to build the early phases of the network, crypto can be a really useful way to help bootstrap That. Oh, interesting. Right. And so that’s one of my favorite areas where the physical world and robotics intersecting with data collection and all these other themes that intersect with AI are relevant. (Time 0:13:13)
  • AI: Frosting or Sugar?
    • AI’s impact depends on whether it’s a superficial addition or a core ingredient.
    • Incumbents win if AI is ‘frosting’, startups win if it’s ‘sugar’, requiring new architectures. Transcript: Chris Dixon Mark actually gave me this framework, which I like a lot, which is, is the AI frosting or sugar? Steph Smith You know, if the AI is a core ingredient, if it’s frosting, all the incumbents are going to win because you just slap a chatbot on your existing product and you’ve got distribution. You know, you have that like selling reference power, incumbent relationships. If it’s more fundamental of an ingredient, like you can’t actually just slap AI into the product. You have to build it from scratch, and that favors the newcomers. It’s just very TV. We haven’t seen anything that tells us what the answer is. The more seal your thing, the more skeuomorphic it is, which is an early cycle thing, the more it probably favors the incumbents. Chris Dixon Another way maybe to frame Mark’s thinking is the Clay Christensen view, is it disruptive or sustaining? And specifically, I think what people misunderstand about Christensen view, right? Disruptiveness doesn’t just mean new, it means misaligned with the incumbent business model. Yeah, exactly. That’s sort of the interesting part of his book, right? Is that even when the smart incumbent sees it coming, it’s very, very hard for them to react to it because it’s not what their best customers are asking for. Yeah, exactly. Right? And so that’s where I think somewhat overlaps with Mark’s frosting icing thing. Well, it could be that the business model is a fundamentally shifted business model. Yeah, so you come in and you’re like, instead of databases, it’s some radical new architecture that’s database free. I don’t know what. It’s something that cannibalizes the incumbent business model and therefore makes it organizationally and economically harder for the incumbents to layer it on. Yeah. Right? We haven’t seen it yet. We’ve seen people talk about outcome-based pricing. Well, let’s talk quickly about consumer. So in consumer right now, at least, I don’t think you see a lot of network effect businesses, right? So as successful as the Claude and ChatGPTs are, I don’t think they have a network effect. The switching costs are relative. Maybe they learn your history. But the question is, how do they avoid in the steady state having just a model and price competition to the base to the bottom, right? Obviously, they’re important big businesses, but will they be dominant? Yeah. And then what’s the opportunity for new startups? If you’re doing venture investing and AI consumer, like you see a lot of these things that make your face prettier, like these kind of fun apps, and they zoom up in the app chart, and then TikTok copies it and so forth, right? Because it’s just not, because again, no network effects. No network effects, yeah. And there’s this technique kind of strategy I like to talk about called come for the tool, stay for the network. And the idea is maybe you can use that, make my face prettier, and then use that as a hook to get people into your new network, like your social network, possibly. Although it just feels very, very hard today, given the scale and power of these incumbents. And that, by the way, will intersect back to crypto, because what crypto is, and what I argue in my book, is that crypto is a new way to build networks. And so, you know, you sort of have the chocolate and peanut butter. You have AI with all these really interesting use cases, and then you have this new technique for building networks. AI, the interesting use cases, but no network effect. And then you have this new thing that’s like all network effects are there interesting ways to combine them. (Time 0:15:36)
  • Phases of Technology Adoption
    • Technology adoption happens in phases: skeuomorphic (old things better), native (new things), and second-order effects.
    • AI’s current phase is skeuomorphic, focusing on automation, but native applications will be more transformative, like film replacing photography. Transcript: Chris Dixon But before I get to that, I think it’s important to talk about how big technologies roll out in multiple stages. So there’s a distinction. It’s not my distinction, but I’ve talked about it a lot. It’s sort of one way to think about technology is that they can do one of two things. They can do old things better, or they can do new things you couldn’t do before. We call the first one skeuomorphic. This is a Steve Jobs term, which sort of refers to products and designs that kind of harken back to a prior era to make them more understandable. And then there’s what we call native apps, which are the kind of new things that couldn’t be done before. And then there’s actually a third stage, I think, which is second order effects, which is you created the car and now you have the highway system. And now you’re able to create suburbs and trucking infrastructure, right? Those are second-order downstream effects. There’s a famous line that good science fiction writers predict the car, great science fiction writers predict the traffic jam, right? So, like, it’s like that idea. So, it’s like down, like, what are the second-order, like, Bitcoin is something that couldn’t have existed before social networking, right? Like, so, 30 years ago, you say, someday people are going to have their own media, and you’re going to remove these gatekeepers. Who would have thought? Then you’re going to create these digital currencies. There would have been no way to create the community. Yeah, yeah, it would have been a New York Times article saying it’s stupid, and then that’s the end of it. There’s nowhere to get together and talk about it and create your own. I mean, they’re really kind of religious movements, you know, most token communities, and they need places to congregate and discuss it. And now they have that. And so there’s all these kind of second order. I mean, we’re seeing effects in politics and all these other things. There’s the whole, arguably, our society and world is changing as a second order effect of social networking. So one way to think about AI. So the first stage is the skeuomorphic phase, which is, this is the stuff you see talked about all the time in the business and startup community of your customer service bots, right? You take a job that’s currently done by a person sitting in a call center, and you replace that with an AI voice and chat bot, right? In the simplest case, it’s a one-to exchange. It’s cheaper, and it’s more systematic, and it will displace jobs. Hopefully, it will also create equally or more jobs and better jobs. But that’s sort of an obvious first stage. And look, and this is, I think, one of the reasons people get so excited about the opportunity for AI is you can just see that happening in, I don’t know, tens of millions of jobs, I guess. Like the whole laptop middle kind of section of the economy, you can see many of those jobs. Everyone, including us, who spend their days typing emails are at risk. Steph Smith That’s the joke. It’s like we can speculate on it, but we’re part of that group too. Chris Dixon So that’s phase one, right? It’s skeuomorphic. But that’s phase one can last 20 years. So just to be clear. Yeah. And the next phase is the native phase. And that, to me, that’s what gets me more excited. And by the way, let me give a little analogy to the internet. So the skeuomorphic phase was the 90s. And so basically, if you look at 90s internet, people were taking offline things like magazines and catalogs and putting them online. So you would go buy things, you know, and it was much easier. You could type in a website and go buy this rare book on Amazon. And it was much easier and it was convenient, but it was fundamentally something you could have done before. It just would have been clumsy and getting some weird magazine, some catalog or something. But it wasn’t until the 2000s that people did things like social networking. And these things were just brand new things. There’s no analog in the offline world to a lot of these new behaviors that people created. I talk a lot in detail about this in the book if people are interested. So anyway, so you saw the internet play out that way. 93 was Mosaic. In 2000, I would say 5-ish was sort of YouTube. And before, I think, was Facebook or whatever it was. So it took at least a decade. And by the way, one of the things you get in the native phase, which is why it’s so exciting, is you get new products. You get new forms of media. So if you go back when photography was growing in popularity, there were all of these cultural art criticism think pieces about what will happen to art. You know, the famous like Walter Benjamin, the art in the age of mechanical reproduction. There’s all these like famous essays where it was like, what’s going to happen? Because now that you can take a photo and create a beautiful landscape, what’s the role of the artist in that world, right? And so people were worried about it in the same way they’re worried today about generative AI, right? So like, what if you can now, you know, create a movie? It looks like you can pretty soon, right? Yeah, I mean, images is there. Images is there, and probably videos coming soon. What happened in the case of photography is that you had, I think, two things happen. Fine art went more abstract and went away from photography, right? It leaned into what they were unique at. And that’s when you had whatever, cubism and all these other kinds of movements. And then on the other side, I think what’s really interesting, right, is you had the rise of film. You had someone say, hey, maybe you can use machines to replace photography, but you can also now use machines to create a brand new art form that never could exist before, right? You sort of had it with animation, but now you can do it a really interesting, sophisticated way with film, right? And so film would be what was the native form of media in the age of mechanical reproduction, right? Steph Smith Oh, that’s a fascinating analogy, yeah. Chris Dixon And so I think to like today, like, so when you look at the gender of AI, like the negative way to look at it, and you do see some, a lot of this negative sentiment from like the art community And things on Twitter, where they say, look, this is just a cheap replacement for human creativity. The positive way to look at it is this is the base layer, the same way the film was a base layer back then. But now there’s this new canvas of human creativity where you can create new art forms. I don’t know what those are. They may be virtual worlds or games or new types of films and movies. I don’t know. Steph Smith They may intersect with a new way to consume the media altogether. Chris Dixon Yeah, maybe there’s new interfaces. And this is, to me, what’s so exciting about the new native media, the native apps, is that I won’t think of it. Because in my experience, through watching some of these waves in the past, it really does take brilliant, creative people to come up with these new things. And it surprises you in many cases. And so I think that that’s going to be the exciting phase I’m looking for. Not how do you just use this technology to do the things you could do today, but do them cheaper. But how do you use the technology to push the frontier and do things that could never be done before in the same way that film did that, right? Yeah. I think photography probably unlocked more opportunities for creative people than it removed. And I think this would be the hope in this kind of phase. So that’s the media example, but there’s probably that for consumer applications and that for social networking and that for productivity. And so that will be the really exciting thing I think to see is not just the replacing things we do today, but come up with brand new behaviors that are t… (Time 0:18:12)
  • Bottlenecks to Native AI
    • The transition to native AI applications depends on human creativity and regulatory hurdles.
    • Demand-side adoption, organizational changes, and policy will shape the timeline. Transcript: Steph Smith Of the AI revolution. Yeah, just think about the timelines. Chris Dixon Yeah, it’s probably gonna take a very long time for like, I’m always overly optimistic on these things historically. I’m like, okay, we’re done with the skeuomorphic phase of AI. Now we’ll do the native phase. Steph Smith But the reality is, each phase probably takes a decade. One of the interesting things you said around these distinct phases, obviously the internet took a long time partially because you had to build a network. It was a supply and demand issue, right? A physical network and then also… Literally laying cables and then wireless. And sure, you have to build large clusters of compute GPUs here with networking. But I think the constraining factor for getting from that skeuomorphic phase to the native phase is not necessarily capabilities themselves, but like human creativity. Chris Dixon Yeah, I think so. I think the bottleneck will be humans and regulation, which are obviously closely connected. And I think humans on both the supply and the demand side, probably more on the demand side. So meaning supply side, you need to have people come up with all the creative things. But the world’s different now in that I just think the startup world is different now. It’s much more mature and much more sophisticated, honestly, than like when I was coming up in it. I mean, when I was starting off, there were 10 venture firms. Now there’s thousands, the number of startups. And honestly, there’s a lot of good, smart advice out there. Yeah, this is a more popular path for smart people to go. Yeah, it’s like a thing you do, like, you know, in places like Y Combinator and other places have done a good job of this. If you’re coming out of a top school, I mean, even 10 years ago, this wasn’t, like, I knew people that were like, wow, you could do startups. I mean, definitely that was the case 15 years ago. But now I think it’s like an established career path. There’s an established set of mentors, established set of funding. There’s a canon of pretty good advice out there. Like the standard advice used to be terrible advice. Now person, get embedded pretty quickly. And then, you know, and then Silicon Valley, it’s gotten just very good at throwing tons of capital energy against those problems. So there’s a supply side. I suspect the demand side is more like, meaning like changing organizational and human work and behavior patterns. Like getting an organization, like take the video example we’re talking about. Yeah, I mean, look, I wrote my book. I wanted to have my own voice, use AI to read the book using my own voice. Both the publisher and Audible, the podcasting platform, ban AI completely. And part of it’s unions and just a bunch of resistance. I think people know this, but like the capabilities are fully there to do that. Yeah. I mean, look, Mark Andreessen had a great blog post. It’s like, how do I know they’re going to ban AI medicine? Because they already have, essentially. I mean, essentially, these things are so heavily regulated. And so many areas where it’s going to have an impact are so heavily regulated. And just the organization, like, look, take the Hollywood Gen AI thing. You’d have to lay off a whole bunch of people, probably, who you don’t want to lay off, who are unionized. So that means maybe there’ll be some fresh upstarts, maybe in another country, who create AI-native movie studios. But that will take a very long time. The right answer is probably to harness all of that talent in Hollywood and combine it with AI in some way. There is a lot of very smart people and talent. But how long will that take culturally? It may take a whole new generation to really play out, right? So that’s something by the demand side, right? And then just human behavior, changing your workflow, using an AI assistant, I don’t know. Anyway, so. Yeah, having like a co-pilot for everything you do, like it feels like it’s. Yeah, maybe that can be solved with interfaces and things. I don’t know. Then there’s the policy side, which is there’s going to be this resistance I’m discussing already is going to be, you know, enshrined. There’s going to to be movements to enshrine it in law. And that’s going to play out, I think, in multiple levels. It’s already starting to play out in the courts. And it’s starting to play out in state legislatures. Like California had the AI bill. You have a bunch of lawsuits around copyright. My view is ultimately this will play out in Congress. This is such a big issue. When you have something that affects tens of millions of jobs, it is beyond something that people are going to allow just to happen through. (Time 0:25:00)
  • The Future of the Internet
    • The internet faces a crossroads: centralizing under a few companies or returning to a decentralized model.
    • Open source software, blockchain technology, and pro-competition policies are crucial for a decentralized future. Transcript: Chris Dixon Just to happen. Through free markets, yeah. Yeah, and through regular court decisions. Like the copyright thing is an example. Like right now the question is, when an AI system is trained on a piece of data, is it copying that data or is it learning from that data? Steph Smith Yeah. It’s a philosophical question. There’s a fundamental question across different media happening right now. That’s right. Chris Dixon And so you could have five years from now some federal judge decide that philosophical question. Or I think more likely, you’ll eventually have some legislation, like congressional legislation, that’s some kind of compromise struck between the media industries and the tech Industries that comes up with a solution that both creates incentives for creators, but also allows AI systems to exist. I don’t know. But that thing will play out over a very long time. When will you be allowed to use AI in medical and finance? And I mean, a significant part, what is it, probably 70% of our economy are regulated industries, right? Yeah, of course. You know, on the flip side, like the stuff with Waymo is really impressive. I’m surprised they’re actually allowed in San Francisco. Steph Smith Well, it turns out it’s seven to 10 times safer than a human driver. And there’s now millions of miles of game film. So maybe that’s the playbook to get this stuff adopted more broadly. What is an ideal future state of the internet? So there’s near zero cost of creation and distribution, transparent ownership, governance. What does this look like? Chris Dixon I think that we’re at a crossroads and there’s a real question as to whether it looks more like its original vision, which is the vision of the internet, like the 90s vision and the 80s Vision or something, was an internet that was community-owned, community-governed. The money mostly flowed to the edges of the network and not to the intermediaries in the middle. Like, originally, in the 90s, the money flowed to the edges, to small businesses, to innovators, to entrepreneurs. If you looked at a map today, it mostly flowing to the middle. This is why these seven companies are- Yeah, it’s 200 billion in revenue in social networking. It’s all- Yeah, I think the top five internet companies are something like more than half of the market cap, not more. It might be higher by now. And so just you have all the green stuff flowing into the middle. I think of it as two kind of important things that you want is power and money, control. And my core argument in the book is that those two questions are a product of how you build these services. The first sentence of the book is your architecture is your destiny or something like that. Like the architecture you choose determines how it’s controlled and how the money flows. And so, and I think we’re really at a kind of critical point. In fact, I worry we’re approaching a point of no return where it’s going to be an internet controlled by five companies. And what’s happened is these networks have all gotten to a certain scale, and they’ve just decided that the next kind of wave is to keep you trapped there. Well, there’s no way to grow users anymore. They’ve captured all the users. That’s right. That’s right. They climb the ladder, and they’re kicking it away. And it’s really negative. And this is why we as a firm have felt that this is such an important topic of being able to build internet services with new architectures, like using blockchains, is such an important Topic for the future of small tech, little tech as we call it, along with open source AI is the other kind of critical thing, which is if startup has to pay this giant tax to an incumbent To build competitive services, they won’t be able to build services that threaten those incumbents, right? Steph Smith Yeah, we’ve seen that before, right? Like you’ve talked about it as Singo was built on top of Facebook. Chris Dixon Yeah, it’s platform risk, right? I mean, it’s building on quicksand. So startups need access to distribution and networks, and they need access to modern software, open source software. And so I think those are the critical questions. Those will be, I think, a hugely important thing, which is why we’ve invested so much time and money, and it is the regulatory side of this, is like what policies are there? And are they policies that encourage competition and innovation and little tech? And then I think just raising awareness of these topics and having discussions about them are important. What I’m worried about now is we’re sort of backing ourselves without having really thought it through into a situation where there’s four companies that control everything. And it ends up, we’re kind of eating our seed corn. So much of what we benefit from today is the startup innovation of the past. And we’ll risk losing that if we let these small set of companies control everything. Steph Smith Yeah. Chris Dixon Well, I’m optimistic. Steph Smith Look, the bright side is through all the work that you guys have done and our firm, we’ve gotten the word out about little tech. And I think understanding that building a new architecture, new infrastructure, and then the importance of open source, I think the word is getting out. (Time 0:28:38)