AI transcript
0:00:03 Hello, and welcome to the A16Z podcast.
0:00:07 This episode is based on a fireside chat between Katie Hawn, Crypto General Partner,
0:00:13 and Mark Andreessen, co-founder of the firm, during our recent inaugural Crypto Regulatory
0:00:14 Summit.
0:00:18 Katie asked Mark to trace some of the possible parallels between the early days of the internet
0:00:22 and the current state of crypto, including how the browser went mainstream and its initial
0:00:28 usability gaps, the impact of regulators and policymakers in the early days, the beginnings
0:00:34 of commerce and the story of the world’s first online bookstore, hint it’s not named Amazon,
0:00:37 and the original sin, as Mark calls it, of the internet, and how crypto could revisit
0:00:42 that original sin and help create new economic models to drive the internet and the broader
0:00:43 economy forward.
0:00:49 Mark, you had a front row seat when the internet was kind of being developed, right, at least
0:00:50 for consumers.
0:00:56 How did the internet go from being this kind of weird thing that academics used, and by
0:01:01 the way, the government, to a mainstream growth engine for the economy?
0:01:05 Yeah, so to start with, I should say, to clarify, it wasn’t actually a front row seat.
0:01:06 It was the little kid’s seat.
0:01:10 It was the booster seat, whether you still use regular shoulder shop in the back of
0:01:12 the internet van at the time.
0:01:14 I was very young.
0:01:18 So the evolution of the internet over time has so many echoes and comparisons to what
0:01:19 we’re seeing.
0:01:22 What I’m seeing now with cryptocurrency and blockchain is really quite remarkable.
0:01:25 And so, you know, maybe the best way to think about that is kind of by actually telling the
0:01:29 story about how the internet actually first became useful as a commercial medium.
0:01:30 Yeah, that’d be great.
0:01:35 And by the way, for those who don’t know, I’m sure many know, but Mark, you co-founded
0:01:39 Netscape and brought the first kind of internet browser to mainstream.
0:01:43 And then even before that, a team of us at the University of Illinois created Mosaic,
0:01:45 which was kind of the prototype for what became Netscape.
0:01:46 And so that was in 1993.
0:01:48 And it actually turned out in 1993 was the pivotal year.
0:01:50 And so the internet has a very interesting backstory.
0:01:53 So first of all, you know, the origins of the internet kind of go back even decades
0:01:56 before the nineties, you know, they go back to the fifties or sixties.
0:02:00 And so there was academic research happening over multiple decades of the form of basically
0:02:02 how to develop a decentralized network.
0:02:05 And right, actually, decentralization was actually key to the internet early on because
0:02:08 the original motivation for it was to have a network that could actually survive a nuclear
0:02:09 attack.
0:02:13 So it was sort of, it was born out of the present dangers of the Cold War.
0:02:16 And as this, you know, revolutionary concept, you have this decentralized network with no
0:02:17 central hub.
0:02:20 At the time, there were data networks, but all data networks ran through centralized
0:02:24 switches run by companies like AT&T and true to form the senior executives in many of the
0:02:27 top scientists at AT&T always maintained the internet was impossible, right?
0:02:28 It could never exist.
0:02:29 It could never happen.
0:02:30 It could never work.
0:02:31 It could never scale.
0:02:32 It could never be secure.
0:02:33 So there’s one parallel right there.
0:02:35 Well, there’s there’s a parallel right now we could talk more about, but it did actually
0:02:36 start to emerge.
0:02:42 And then it started to go mainstream in academic circles in particular in the 1980s.
0:02:44 And it was actually at the time funded by the National Science Foundation.
0:02:47 So it was called the NSF net was like the precursor to the modern internet.
0:02:50 The thing that people forget today, because everybody now today you shop online and you
0:02:53 do all the stuff online by airplane tickets and all seems so natural.
0:02:57 It was actually illegal to use the internet for commercial activity or commercial transactions
0:02:58 until 1993.
0:03:01 And I want to stop you there because I remember when you told me that I thought, what?
0:03:07 I’ve never heard that it was illegal to use the internet for commercial transactions until
0:03:08 1993.
0:03:09 Yeah.
0:03:10 So it’s a different circumstance.
0:03:12 So the illegality or sort of prohibition, let’s say, I don’t know if they could have
0:03:14 sent you to jail, but they definitely could kick you off the network, which is kind of the
0:03:17 same thing at least in modern life.
0:03:20 So it was funded by the government is funded by the taxpayer.
0:03:24 And so the government got to set the policy and the policy was called the acceptable use
0:03:26 policy or AUP, that’s on Wikipedia.
0:03:27 You can pull this up.
0:03:32 And it’s basically the acceptable use policy is you can use the internet for academic non-profit
0:03:33 individual use.
0:03:37 If you can figure out a way to connect to it, you’re free to kind of play and explore and
0:03:41 kind of do experimental things, but you specifically can’t engage in commercial activity and commercial
0:03:42 transactions.
0:03:45 For example, companies were actually connecting to the internet prior to 1993, like a lot
0:03:48 of defense contractors were on early, a lot of tech companies were on early, but they
0:03:51 literally technically could not sell something to somebody.
0:03:53 And it was literally just taxpayer money.
0:03:57 So then there was this kind of turning point moment in around ’92, ’93, ’94 that I was kind
0:04:00 of sitting in the middle of at the time, which is sort of internet traffic was starting to
0:04:01 really kind of take off.
0:04:03 People kind of decided they liked this thing.
0:04:07 And then there was sort of growing latent demand for actual commercial activity, but
0:04:08 the government was kind of holding firm.
0:04:11 And then basically what happened was a set of, I would say, enlightened regulators and
0:04:15 policymakers decided basically two things at the same time.
0:04:20 Number one is they decided to legalize, basically revise the UP to legalize commercial activity,
0:04:25 but in parallel, they decided to hand off the internet backbone to the telecom companies
0:04:28 at the time, AT&T, Sprint and MCI.
0:04:30 And then that solved the economic problem, which is we’ll get companies to pay for this,
0:04:32 so it doesn’t have to be the government.
0:04:36 But it was a very enlightened and forward-thinking move to make this change because it wasn’t
0:04:38 consistent with internet culture at the time.
0:04:40 It wasn’t consistent with how this thing had gotten funded.
0:04:42 It wasn’t consistent with any of the governance mechanisms.
0:04:45 But there were a set of people in Washington who said, this would be a good idea.
0:04:49 And furthermore, be good idea for internet to exist, be good idea for it to engage in
0:04:50 commercial activity.
0:04:54 And in fact, in crazy upside scenarios, it might be a driver of economic growth.
0:04:59 And for those of you who are older like me, you’ll remember 1989 to 1993 in the U.S. was
0:05:03 a severe recession, and it was grim economic times.
0:05:07 It’s kind of forgotten a little bit because it happened a while ago, but it was pretty
0:05:09 dark and pretty bad.
0:05:12 And it turned out, I think, you can trace a direct line to the economic boom of 1994
0:05:16 to 2000 from basically legalizing commercial use of the internet.
0:05:19 I just heard you call the regulators enlightened.
0:05:20 Enlightened regulators.
0:05:24 My friend, Al Gore, gets a tremendous amount of teasing for having claimed to invent the
0:05:25 internet.
0:05:26 I will defend Al Gore’s honor.
0:05:27 Al Gore never said he invented the internet.
0:05:30 He said he helped to create the internet, and that actually is true.
0:05:34 He didn’t write the code, but what he did do was he set many of the original policies
0:05:37 for the funding of the NSF net, which led to the creation of the internet, and then he
0:05:41 was involved in this process of basically privatization and having it become an engine
0:05:42 for economic growth.
0:05:45 And so he was integral, and a whole bunch of other people in Washington as well on both
0:05:47 sides of the aisle, but he was in the middle of that whole thing.
0:05:50 And that AUP changed then in 1993?
0:05:52 So in 1993, the policy changed.
0:05:54 So now it was legal to do commercial activity online.
0:05:58 And so people started to have all these really crazy wacky ideas like, “What if you could
0:05:59 buy things online?”
0:06:01 And there was immediate backlash, right?
0:06:04 Response basically was, “Okay, it’s not illegal, but it will still never work.”
0:06:05 Because it’s not secure.
0:06:06 Right?
0:06:07 And so that won’t possibly work.
0:06:10 And then the other thing, of course, that was immediately obvious was it’ll never
0:06:12 work because big companies aren’t hooked up to it yet.
0:06:14 And so, right, it’s all going to be these fly-by-night operations.
0:06:16 And so that’s another parallel that you’re seeing in the crypto space?
0:06:17 Yeah.
0:06:19 So one of the things you talked about with crypto today is it’s like, “Okay, it’s like
0:06:21 sort of where are the use cases?
0:06:24 Yeah, I understand that there are these potential use cases, and yeah, there are specific examples
0:06:28 of these use cases today, but like where’s the amazon.com of crypto, right, or where’s
0:06:29 the Google of crypto?”
0:06:32 And it’s like, “Okay, well, let’s think about actually where amazon.com came from.
0:06:34 This is another kind of great analogy.”
0:06:38 So the first internet store was a bookstore.
0:06:39 It was not Amazon.
0:06:44 It was a cult little tiny science fiction and fantasy bookstore on El Camino Real in Palo
0:06:46 Alto called Future Fantasy Books.
0:06:49 And it was kind of this legend, and if you like science fiction at the time, it was
0:06:52 like the place in the Bay Area you’d go to buy science fiction books.
0:06:54 I mean, it was run by a guy who’d been running the store for whatever, 30 years in the same
0:06:55 location.
0:06:57 And it was just like a store.
0:07:01 And so actually another friend of mine, I got him, Brian Reed, I believe is his name,
0:07:05 got a research lab in Palo Alto, unconnected to this bookstore as a company called DEC
0:07:06 at the time.
0:07:08 And he was in the research department.
0:07:09 He said, “Boy, I really like this bookstore.
0:07:12 It might be fun to be able to buy science fiction books over the internet.”
0:07:13 Right?
0:07:14 This was a new idea at the time.
0:07:15 So he went to the owner of the store.
0:07:16 This is in ’93.
0:07:18 He went to the owner of the store right as this policy change happened.
0:07:19 And he said, “You know, let’s put your inventory.
0:07:20 You got all these books.
0:07:24 Let’s put your inventory online so that anybody in the world can buy books from you on the
0:07:25 internet.”
0:07:27 And the guy’s first question was like, “What’s online?”
0:07:28 Right?
0:07:30 Because that’s just like a weird and unusual concept.
0:07:32 And so then, Brian explained, you know, my friend explained like, “Okay, here’s what
0:07:33 this means.”
0:07:34 And then the guy’s like, “Okay, that sounds great.
0:07:36 I would love to get orders from all over the world.
0:07:37 I don’t own a computer.”
0:07:39 And so Brian said, “Not a problem.
0:07:41 I work for a big computer company.”
0:07:43 He’s like, “You know, if you don’t have a computer, what do you have?”
0:07:45 And the guy’s like, “Well, I have a fax machine.”
0:07:48 So my friend basically set up in the research lab in Palo Alto.
0:07:51 He set up the online web store, the site for the bookstore.
0:07:54 And then you would order a book on the website.
0:07:56 And then my friend set up a fax gateway.
0:07:58 So the order would get sent to the store in a fax.
0:08:00 And then the guy in the store would package up the book and sell it.
0:08:04 In the first two weeks of that store going on the internet, that guy’s business doubled.
0:08:05 Wow.
0:08:09 And, you know, it’s small absolute numbers, but a huge relative boost.
0:08:10 And that’s what it turned out.
0:08:12 It turned out there were like science fiction readers all over the world, in particular
0:08:15 Germany and Japan, that couldn’t get a lot of the English books in their domestic market
0:08:17 since they immediately started to do mail order.
0:08:19 I hope he then got a computer.
0:08:20 He did buy a computer.
0:08:23 Unfortunately, then Amazon came along and he went under.
0:08:27 It’s not a totally happy story.
0:08:29 That’s, however, the whole phenomenon worked.
0:08:33 And that actually, you know, people who were experimenting like that kind of paved the way
0:08:34 for what became e-commerce.
0:08:37 But I hope that gives you a sense of how, like it was not obvious.
0:08:40 It was not obvious that these things, it was going to make sense to these online businesses.
0:08:43 It was not obvious that the use cases were going to have consumer demand.
0:08:45 It was not obvious that you were going to be able to secure it.
0:08:47 It was not obvious that there’d ever be a business model behind it.
0:08:49 Like, all that actually had to get invented.
0:08:52 Well, you just mentioned secure it, and I think that’s an important point.
0:08:56 So the government, with the help of the enlightened regulators, turns this thing over kind of to
0:08:59 the private sector, right, the internet thing.
0:09:01 And then you have SSL.
0:09:06 And then for those who don’t know in the audience what SSL is, it’s basically very strong encryption.
0:09:09 Did the government then kind of discourage SSL?
0:09:10 Yes.
0:09:11 So what’s about that?
0:09:12 Yes.
0:09:13 So then they turned around and tried to ban that.
0:09:15 You did have a front row seat there.
0:09:16 We did have a front row seat for this, yes.
0:09:19 So we drove encryption into kind of public use really for the first time in volume at
0:09:20 Netscape.
0:09:21 So basically what happened.
0:09:23 So now the internet’s available for commercial use.
0:09:24 Consumers are starting to log on.
0:09:25 The whole thing’s starting to work.
0:09:27 So then the whole problem was, okay, all the connections were unsecured.
0:09:31 So it’s just plain text data, right, traveling back and forth over the network, including
0:09:33 passwords and credit card numbers and everything else.
0:09:37 And so, right, the immediate logical conclusion is this is an unsafe place to do business.
0:09:40 No consumer, you know, the newspapers at the time were just filled with stories.
0:09:43 Consumer guide the stories basically saying whatever you do, never, ever, ever put your
0:09:46 credit card number on the internet, right, because it will instantly get stolen by hackers
0:09:48 and your entire net worth will be wiped out.
0:09:51 Now that wasn’t technically true, but that was the level of fear and anxiety.
0:09:53 And, you know, true enough, like it wasn’t encrypted.
0:09:55 So it was a bad thing.
0:09:58 And so we did what we thought was the logical thing, which was we built SSL basically as
0:10:01 the secure protocol to be able to have, you know, a client and a server connect to each
0:10:05 other, a web browser and a web server connect, and be able to exchange information securely
0:10:07 without hackers being able to penetrate.
0:10:08 What did the government say about that?
0:10:10 Well, we thought this was a really good idea.
0:10:11 And so we brought it to market, you know, we were about ready to launch it.
0:10:15 And then we discovered a regulatory regime that we were previously unaware of called
0:10:19 ITAR, which some of you may know about.
0:10:23 It’s like international trade and arms and something, something, something, bad stuff.
0:10:25 And so it’s the regulatory structure, I don’t know if it’s still current, but at least
0:10:28 the time it regulated Tomahawk missiles, right?
0:10:30 And like napalm and all kinds of fun things.
0:10:31 Export controls.
0:10:32 Export controls.
0:10:36 And so it basically governed what U.S. weapons manufacturers effectively could export overseas,
0:10:41 by the way, which, fair enough, I’m in favor of regulating Tomahawk missiles.
0:10:43 It turned out encryption was on that list, strong encryption was on that list.
0:10:48 And so the basic deal was at the time in the U.S., you were allowed to, we could build
0:10:51 strong encryption into the browser, strong encryption being encryption that was either
0:10:53 hard or impossible, depending on your point of view to break.
0:10:57 There’s a big debate about hard versus impossible, but fundamentally difficult to break.
0:10:59 And therefore safe for consumer use, let’s say.
0:11:02 So we were allowed to do that in the U.S., but we were not allowed to export it.
0:11:05 And so that led to this very lovely compromise we came up with, which is there were two versions
0:11:06 of an escape navigator.
0:11:08 And it was the same product, but there were two different boxes.
0:11:14 The sticker on one box said strong encryption, the sticker on the other box said weak encryption,
0:11:15 which is true.
0:11:16 So the export —
0:11:17 What’s sold better?
0:11:18 What’s that?
0:11:19 What’s sold better?
0:11:20 Yeah, well, it’s funny.
0:11:21 Funny, the market demand would line up maybe the way that you think it would.
0:11:22 And so, yeah, right.
0:11:23 Here’s the soft drink that tastes terrible.
0:11:24 Right?
0:11:26 Let’s see if people want to drink that.
0:11:29 So we were allowed to sell the browser overseas, but it was deliberately weakened now.
0:11:33 We were — and by the way, by weak, I mean like it was trivial — it was weak.
0:11:36 We had to degrade the encryption to the point where basically anybody could crack it.
0:11:39 Anybody with a computer and any level of software skills would be able to crack the encryption.
0:11:40 So basically useless.
0:11:44 The good news is all the other American companies were under the same restrictions we were.
0:11:48 So it’s not like any of our American competitors kind of outfox us by launching globally.
0:11:52 The problem was — I’ve heard rumors, America is not the only country in the world.
0:11:55 And so it turns out there are a bunch of other countries, and it turns out they have sharp
0:11:56 software people also.
0:12:00 And so then we immediately started to see this kind of cascade of international competitors.
0:12:03 It’s the most obvious way to compete with American software companies.
0:12:06 We’ll do the thing that they literally are not legally allowed to do.
0:12:08 So then it became a rush of foreign competition.
0:12:12 Well, speaking of parallels between crypto and the internet, one of the things that
0:12:16 I hear a lot — I know you hear this too — is, well, crypto is so hard to use.
0:12:20 Like, mainstream consumers can’t possibly figure this out.
0:12:21 It’s all janky.
0:12:25 But I know you’ve talked to me about it, and I’d love to hear your take on, you know,
0:12:28 just how easy was it to get on the internet in the early days?
0:12:29 Yeah, super easy.
0:12:30 You just pressed a button.
0:12:32 No, that’s not true at all.
0:12:33 So I’m a consumer.
0:12:34 I’m just a normal consumer.
0:12:36 And let’s say I’m totally comfortable with computers.
0:12:37 And so I know how to use computers.
0:12:38 I own a computer.
0:12:39 I’m perfectly happy with computers.
0:12:43 And it’s 1992, 1993, and I read about this internet thing.
0:12:44 I want to go on the internet.
0:12:46 So I go on my computer, and I look for the internet button.
0:12:47 There’s no internet button.
0:12:51 None of the computers in 1992, 1993, the consumers had had any internet awareness at all.
0:12:53 They didn’t have the software for access on the internet.
0:12:55 They didn’t have any of that stuff.
0:12:59 And so basically what you would do is — this is literally true — what you would do is,
0:13:02 if you knew to do this, you would go to a bookstore.
0:13:06 They used to have these physical places read by books.
0:13:10 And you would buy a book, and the book would be how to use the internet.
0:13:12 And there was a point when it seemed like all the bookstores were just going to be taken
0:13:16 over by literally just internet books, because this was how you got online.
0:13:19 So you’d bring the book home, and you’d read the book, and you’d tell you all these great
0:13:22 things about the internet, and then there would be a floppy disk, if you remember those,
0:13:23 in the back of the book.
0:13:26 And the floppy disk had the software that you had to load on your PC in order to get
0:13:27 on the internet.
0:13:31 If you’re technical in the room, it’s the TCP/IP stack and all the other kind of networking
0:13:32 coders on that disk.
0:13:36 And so you then had to go through a 38-step process, if you took you through this in the
0:13:37 book, of sticking the floppy.
0:13:40 And you basically had to rebuild — essentially rebuild your operating system on the fly as
0:13:42 an end user to add the internet support.
0:13:44 It’s a very complicated process.
0:13:46 By the way, you need to be very careful doing this, because if you made a mistake, you would
0:13:48 probably break your computer forever.
0:13:52 It would probably totally stop working, because you were mucking around in the operating system.
0:13:54 And so you wanted to be very careful kind of through that part.
0:13:56 So then you’d get all the way to the end of that process, and be like, “Great, I’m ready
0:13:57 to go on the internet.”
0:14:00 And then it’s sort of step 38, you know, the end, okay, congratulations.
0:14:02 Now you’re ready to go buy a modem.
0:14:03 Right?
0:14:04 And so then you’re like, “Okay, so what’s a modem?”
0:14:05 All right.
0:14:08 And so then it’s like, “Okay, now I have to go find a computer store, and I have to
0:14:12 pay whatever 300 bucks to buy a modem, which used to be the thing that connected the computer
0:14:13 to the network.”
0:14:14 And then you bring that home.
0:14:17 You had to plug the modem into the computer, and then you had to configure the computer
0:14:19 and the modem to actually work with each other.
0:14:22 And that was like another 38-step process that you had to do very carefully.
0:14:24 And it was another process you didn’t want to screw up, because you were mucking around
0:14:26 in your operating system.
0:14:28 So then you get all the way through that and say, “Okay, got a modem, we’re ready to go
0:14:29 on the internet.”
0:14:31 And then I would say, “Now you need to sign up for an ISP.”
0:14:32 And then that began the process.
0:14:33 What’s an ISP?
0:14:34 Internet Service Provider.
0:14:37 Okay, that’s who your modem is going to call to go on the internet.
0:14:41 And so then that began the process of like, “Okay, what’s an ISP, who’s an ISP?”
0:14:45 And these are in the days where most people who were using networks at home were using
0:14:49 AOL, which was sort of a proprietary version of all this, but it was not a full ISP at
0:14:50 the time.
0:14:51 So you’d have to go track down.
0:14:54 A lot of these are like these little local ISPs, these little local neighborhood companies,
0:14:58 almost like the old neighborhood cable company, remember those days.
0:14:59 So then you’d have to call the ISP.
0:15:02 Remember, you’re not on the internet, so you can’t search for the ISP on the internet.
0:15:06 You got to go in the yellow pages, you find your local ISP, you call their phone number
0:15:11 and you sign up and you tell them your credit card number, and they give you the code.
0:15:14 And so basically, you know, this is like four weeks later, right, that you’re going through
0:15:15 all this.
0:15:17 And then of course hit dial, then you get the busy signal.
0:15:19 That’s how straightforward it was.
0:15:20 And so, and there was a good…
0:15:21 It makes crypto seem easy.
0:15:22 It does.
0:15:23 It does.
0:15:24 Crypto is easier.
0:15:25 Crypto is easier.
0:15:28 Now, I would say the good news is, in the earliest internet, you could argue like it applied
0:15:32 a high bar to the people who got on the internet, like you had to really want to use this thing.
0:15:37 And so, you know, the people who were on the internet early on were like incredibly enthusiastic
0:15:39 and like just absolutely thrilled to be there because, you know, it was like joining the
0:15:41 Marine Corps, like it was effort, right?
0:15:43 And so, you know, that was the good news.
0:15:44 The bad news is it was obvious.
0:15:45 I mean, this was just…
0:15:46 This was absurd.
0:15:47 Like this was just absolutely patently absurd.
0:15:48 And so then a whole…
0:15:51 You know, there were then several years of work by us and others to kind of streamline
0:15:53 this thing to the point where you all have today and your views just come…
0:15:54 Well, thank you.
0:15:55 Because I…
0:15:58 Thank you for letting me just develop products so I can now push a button.
0:16:00 But you did talk about it with the internet.
0:16:04 Now, we can get on the internet easily, but we’ve called something before.
0:16:08 I think I’ve heard you call it the original sin of the internet.
0:16:09 What is that?
0:16:10 Oh, okay.
0:16:14 So then you go on the internet and then you see something that you might want to buy or
0:16:15 pay for.
0:16:18 Like let’s say hypothetically that you wanted to have like an online newspaper or something.
0:16:20 And let’s say hypothetically you wanted to like read an article in that paper and you
0:16:23 know, maybe you wanted to have an economic relationship where you were like paying for
0:16:26 the information you’re getting because then you know there’s like alignment of interest
0:16:29 between the person writing information and what you’re reading.
0:16:32 So you might think their logical thing to do might be there must have been a button
0:16:34 in the browser that was like a buy button, right?
0:16:35 It’s like you actually kind of have…
0:16:38 You finally kind of have this in the form of like the Apple App Store with like the…
0:16:40 You know, the one click buy and then the…
0:16:41 Amazon.
0:16:43 The in that payments or one click buy on Amazon.
0:16:46 But like one would think like it was the most obvious thing to do would be building the
0:16:48 browser like the ability to actually spend money, right?
0:16:52 And so you’ll basically notice like that didn’t happen.
0:16:54 And in a lot of ways it’s like we don’t even think it’s unusual that that didn’t happen
0:16:56 because maybe that shouldn’t have happened.
0:16:59 But if you think about it, there isn’t a call to the original sin and I’ll explain why.
0:17:03 But because we were unable to build payments into the browser and I just like flat out say
0:17:04 we’re unable to do it at the time.
0:17:05 I want to hear why.
0:17:06 Yeah.
0:17:07 Well, I’ll explain why.
0:17:10 But as a consequence of being unable to do it, that is why the internet today at least
0:17:14 in the West and in the U.S. is predominantly based on advertising, right?
0:17:15 And so…
0:17:17 And by the way, kind of downstream from advertising is kind of everything else that people are
0:17:19 like anxious and worked up about online, right?
0:17:24 All this privacy, user data collection, user data targeting, all these third-party ad networks
0:17:27 that collect all this harvest, all this data, the data brokers.
0:17:30 And then kind of the misalignment of incentives, you know, is the news site that you’re reading.
0:17:33 Do they have the incentive to actually tell you the truth or are they actually getting
0:17:34 their money from the advertiser?
0:17:36 And so they’re just trying to get you all hyped up on something so that you’ll click
0:17:39 on more stories so they can generate more ad revenue.
0:17:43 And so I think the original sin was we couldn’t actually build economics, which is to say
0:17:44 money to the core of the internet.
0:17:46 And so therefore, advertising became the primary business model.
0:17:48 Did you try to build?
0:17:50 We tried very hard to build payments into the browser.
0:17:51 It was not possible.
0:17:52 Why?
0:17:53 Well, we made a huge mistake.
0:17:56 We tried to work with the banks and we tried to work with the credit card companies.
0:17:59 Let me start by saying those organizations have come a long way.
0:18:02 And so I’m not talking about the banks and the credit card companies today.
0:18:04 I’m talking about them in 1993.
0:18:08 And so we went to — actually, it’s funny, so we got embroiled early on in this kind
0:18:09 of big fight with Microsoft.
0:18:11 And so we ended up aligned with MasterCard.
0:18:15 The basic thing was to get into the credit card switch to be able to do transactions,
0:18:17 particularly microtransactions, like small transactions.
0:18:21 So we allied with MasterCard, Microsoft allied with Visa, and I bring up the Microsoft part
0:18:25 because it’s not — because you might say, “Okay, Mark, you try to do this, but you and
0:18:27 Netscape’s a little company, and maybe you guys just screwed it up.”
0:18:31 And it’s like, “Well, Microsoft also — Microsoft and Bill Gates also couldn’t make it work
0:18:32 with Visa.”
0:18:35 So both of us ended up frustrating by the same thing.
0:18:38 And so, you know, then we went — so we approached the credit card companies.
0:18:43 We sat down with our first meeting with MasterCard in 1994, you know, they said they wanted
0:18:44 to work with us to put money in the browser.
0:18:47 So they said, “Well, who at MasterCard should we meet with?”
0:18:49 And they said, “We’ve got this guy,” and I’ve long since forgotten his name.
0:18:51 “We’ve got this guy, Joe, who’s like our technology visionary.
0:18:52 And so he’s the guy.
0:18:54 If anybody in the organization is going to understand this stuff, it’s going to be
0:18:55 great.
0:18:58 And so we had Joe over to our office and sat down with Joe, and sat Joe — we’re going
0:18:59 to demo.
0:19:02 He hadn’t seen any of this, so we sat Joe down in front of a PC hooked up to the Internet
0:19:03 with the browser, and we kind of said, “Okay.”
0:19:05 And I kind of just said, “Okay, here’s the browser.”
0:19:08 I said, “Okay, click on — click on this link.”
0:19:09 Right?
0:19:10 And so, you know, he does the logical thing.
0:19:16 He takes his finger, presses it on the screen, completely ignoring the mouse that’s sitting
0:19:17 on the side of the thing.
0:19:18 And I was like, “No, no, use the mouse.”
0:19:19 Right?
0:19:24 And he’s like — and I was like, “Okay, it’s 1994, it’s nine years since Apple invented
0:19:26 the Macintosh.
0:19:27 He has never seen a mouse.”
0:19:28 But he was the visionary.
0:19:31 He was the technology visionary at MasterCard, and I was like, “Oh, God, we’re just completely
0:19:32 hosed.”
0:19:34 Like, there’s just no way on Earth —
0:19:35 And so you were hosed.
0:19:36 You didn’t get it, but then —
0:19:37 We were completely hosed.
0:19:38 We were completely hosed.
0:19:40 And so we went through the entire thing, and he stared at us, like, you know, we had three
0:19:41 eyes.
0:19:43 Microsoft went through the same thing with Visa at the time, like, it was just a completely
0:19:46 incomprehensible concept, and then the banks could not have been less interested.
0:19:50 And so basically, it was, you know, it was sort of the classic kind of single point of
0:19:53 failure bottleneck, or at least in this case, two points of failure with Visa MasterCard essentially
0:19:54 had a duopoly at the time.
0:19:57 And so they were just literally — you know, they just — if they did not want you to be
0:20:00 in the switch, they did not want you to be able to do transactions, you just simply weren’t
0:20:01 going to do it.
0:20:03 If you had had crypto then, how would that have changed the calculus?
0:20:07 Yeah, so this is the what-if, and so, you know, so the modern — what we’re all here to talk
0:20:10 about today, like modern Bitcoin blockchain, you know, sort of a new sense — effectively
0:20:11 since 2009.
0:20:14 So, you know, we were kind of, what, 15, 20 years too early.
0:20:17 If we had had it, we would have been able to have a parallel transaction system, like
0:20:21 completely parallel transaction system that would not have been reliant on the centralized
0:20:22 gatekeepers, right?
0:20:23 Hypothetically, it would not have mattered.
0:20:26 You know, if Visa MasterCard had wanted to cooperate, this is the time that would have
0:20:27 been great.
0:20:28 We would have done it.
0:20:30 But had they not, we still would have had a route to actually be able to build a transaction
0:20:31 network that wasn’t dependent on them.
0:20:33 And so that to me is the great what-if.
0:20:36 And had we done that, the internet today, like I was just like, I don’t know, 80 percent
0:20:39 of the things that people hate about the internet today would not be problems.
0:20:42 And then the other kind of what-if, and this is a big part of why we’re excited about crypto
0:20:45 and blockchain now, the other part of the what-if is it’s like, okay, what if you could
0:20:49 actually align economics, right, with user behavior and with company behavior?
0:20:52 Like what if you could actually have, I mean, it’s kind of the way the real world works.
0:20:54 The real world works is how do I know that something is valuable, if somebody is willing
0:20:55 to pay for it?
0:20:56 Well, how valuable is it?
0:20:57 Well, how much are they willing to pay for it?
0:21:01 And then by the way, any individual provider of any product or service, if they’re not
0:21:05 doing a good enough job, somebody else offers it, and then you write the consumer votes with
0:21:08 their wallet, and they go buy from somebody else, and so you have market discipline on
0:21:09 all the players.
0:21:13 And so the big what-if is like what business models could have existed this entire time,
0:21:14 right?
0:21:16 What drivers of economic, because look, the internet generated a lot of economic growth
0:21:18 just for the advertising model, right?
0:21:22 And so like what if you had had kind of the turbocharge of a real economic model based
0:21:25 on money kind of integrated into the thing from the very beginning?
0:21:27 What kinds of services would entrepreneurs have come up with that we haven’t even thought
0:21:28 of yet?
0:21:29 Or what might they come up with still?
0:21:31 What might they come up with now?
0:21:34 And so one of the reasons why we’re so excited about crypto and blockchain is it’s basically,
0:21:38 it’s the first chance I’ve seen, it’s the chance to kind of revisit the original sin.
0:21:41 And you know, it’s different now because it’s like, you know, the internet cats out
0:21:45 of the bag and like the browsers are proliferated and it’s a different game now.
0:21:49 So it’s much more already fixed and established on the other hand is it, you know, huge scale.
0:21:52 And so you don’t need that many people experimenting with something to get critical mass on a new
0:21:53 thing these days.
0:21:57 And so this is a chance to kind of reexamine that original sin and kind of envision, you
0:22:00 know, for the first time in a long time be able to say, okay, what if we could build a
0:22:04 different kind of system, you know, for example, a system in which, for example, advertising
0:22:05 was not the central model?
0:22:08 And how might that be an improvement, either an improvement on what we have or just something
0:22:11 completely different and, you know, better and potentially, you know, much bigger than
0:22:12 what we have today.
0:22:15 And so I think I think that, you know, this is, as we see every day, this is the wave
0:22:18 of entrepreneurship that we’re seeing now at our firm, which is entrepreneurs kind of
0:22:19 thinking in these terms.
0:22:20 Absolutely.
0:22:21 Well, where are we in this crypto journey?
0:22:26 I mean, having seen a technology like the internet go from something technical and obscure
0:22:31 to now a technology used by billions of people, where do you think we are in the crypto journey?
0:22:34 So my personal view, so it’s like, you know, what are the possible points?
0:22:38 It’s like, okay, it’s like the possible points are like, it’s like, I don’t know, 1965 or
0:22:43 something, and Vint Cerf and Bob Conner are coming up with the original idea for TCP/IP.
0:22:48 It’s like 1989 when it’s present on university campuses, but like no normal person would
0:22:53 use the stuff, 1992 when it’s like a fringe activity, but it’s not quite mainstream yet
0:22:55 and it’s still kind of too hard to use.
0:22:57 And then kind of 1994 where it kind of goes mainstream.
0:23:01 I mean, it feels to me, it’s sort of 1992, like 1992, 1993 somewhere in there.
0:23:05 Like it clearly, like they’re like, the usability gap still has a ways to close, although it’s
0:23:06 getting closer.
0:23:08 You know, the use cases, they now, you know, several big use cases exist.
0:23:11 They have to be, they have to be kind of more productized and provided to more people, but
0:23:13 like it’s starting to feel really, really close.
0:23:16 And by close, I mean really, really close to like mainstream, the kind of knee and the
0:23:17 curve.
0:23:20 By the way, it’s also worth saying like it was not, I think I made the point in kind
0:23:24 of macro ways, but I made the larger mac or microwaves, I made the larger macro point.
0:23:27 It was not clear in 1984, the internet was going to hit the knee and the curve.
0:23:31 Like that was not, if you just like read the press coverage of the internet in 1994, it
0:23:33 was like, this thing is a joke, it’s a toy, it’s not serious.
0:23:36 Hey, at least it didn’t have a real time price feed, like crypto.
0:23:37 That is true.
0:23:38 Yeah.
0:23:39 It’s a real time price.
0:23:40 That would have been extremely depressing.
0:23:41 Yeah.
0:23:43 Well, is that a feature or a bug?
0:23:44 It’s both.
0:23:47 It’s a feature just in the sense of like it, it just shows the fact you can get, you know,
0:23:51 the system is kind of alive and running, which was, the internet was kind of an open question
0:23:53 that a lot of people didn’t think the thing was even going to laugh.
0:23:57 And so it’s sort of a marker of like, let’s say existence, like it’s a pulse.
0:23:59 So it’s good to have a pulse.
0:24:02 It’s bad because you see this in the stock market right all the time, which is just,
0:24:06 there’s actually, this is a long established theory in behavioral finance with stock prices,
0:24:09 which is the more often you can measure something’s price, the more manic depressive the behavior
0:24:11 comes around that price.
0:24:14 And so there’s actually, you know, there are markets in which transactions happen, you
0:24:18 know, venture capitals like this, transactions happen every year or two or three.
0:24:21 And so there’s only price kind of measures is only kind of core samples of price every
0:24:23 year or two or three.
0:24:27 And so, you know, 364 days out of the year, nobody’s paying attention to the price.
0:24:28 Nobody’s talking about it.
0:24:29 It doesn’t matter.
0:24:30 You’re just working on the underlying thing.
0:24:33 You know, once you go public, it’s this radical change where now the stock, you know,
0:24:37 if you want, you can now see a real time stock ticker, you know, you can, you can see the
0:24:40 price every five seconds and you can get all excited when it goes up and you can get all
0:24:41 depression it goes down.
0:24:45 And so you definitely have this psychological manic depressive overlay that we didn’t have.
0:24:46 Yeah.
0:24:47 Absolutely.
0:24:48 Well, we have time for one more question.
0:24:52 I think I’m just under the wire and that’s a question I think with all the regulators
0:24:55 here in the room and also all the crypto builders in the room.
0:24:59 Are you, and I know you’re very bullish on Silicon Valley and keeping companies here.
0:25:04 Are you optimistic that the U.S. can be a center for emerging financial technologies
0:25:07 like crypto given the regulatory environment here?
0:25:08 Yeah.
0:25:11 So I think this is quite, this is very, this again is very analogous to the Internet because
0:25:12 this could have gone the other way.
0:25:17 Like had the AUP not been updated by the, by the, by the government 93, you know, we
0:25:18 could have definitely strangled it.
0:25:21 We had two, we had two chances to strangle the Internet and its crib here in the U.S.
0:25:24 And we, we missed both of those chances, which I think, I think is really good.
0:25:30 And I think we got, you know, tremendous national payoff and many, many fronts, including economic
0:25:32 growth coming out the other side of that.
0:25:33 I’m very optimistic.
0:25:35 Like we, we’re in kind of the same position.
0:25:36 We have the raw materials.
0:25:37 Like we’re in the best position.
0:25:39 We have the critical mass of talent.
0:25:41 You know, we’ve got, we’ve got the entrepreneurship community.
0:25:42 We’ve got the venture capital.
0:25:45 We’ve got the research universities where a lot of this work is happening.
0:25:47 A lot of it’s happening in the U.S.
0:25:49 We’ve got, you know, this risk taking culture.
0:25:51 You know, we just, we have a huge domestic market.
0:25:54 We have experience building multinational technology companies that can operate all over
0:25:55 the world.
0:25:58 And so we’ve got like all the raw materials to have this be a major engine for economic
0:25:59 growth.
0:26:02 However, much like the Internet and also like encryption, like the, the cat is well and
0:26:03 truly out of the bag.
0:26:05 Like there are crypto startups all over the world, right?
0:26:08 This is happening today and new kinds of fintech startups all over the world.
0:26:12 And so it, it is going to be a race, I think for sure.
0:26:15 And I think there’s a major, by the way, I think there’s a major economic argument that
0:26:16 we should want this to happen in the U.S.
0:26:19 And that we want the U.S. to be kind of the foundation for the global, you know, financial
0:26:20 services industry.
0:26:24 And for the global R and D in this area, I think there’s actually also national security
0:26:28 reason we should want that, which is, you know, same reason it’s good for national security
0:26:29 standpoint for the U.S.
0:26:31 Internet companies to be the winning companies, because like we want those to be American
0:26:35 assets that gets good from a national security standpoint for the global financial system
0:26:36 to be centered in the U.S.
0:26:40 And so again, I think there’s the opportunity here for enlightened policy, you know, that
0:26:43 helps set the right guidelines and the right guardrails, but fundamentally enables American
0:26:45 businesses to win these markets.
0:26:48 And I think that would be better for us than most of the alternatives.
0:26:52 Well, enlightened policy, enlightened regulators, and on that note, I think we’re out of time.
0:26:53 And thank you very much.
0:26:54 Good, good.
0:26:54 Thanks, everybody.
0:26:55 [applause]
0:26:55 [end of transcript]
0:26:57 (applause)
0:27:00 (audience applauding)
0:00:07 This episode is based on a fireside chat between Katie Hawn, Crypto General Partner,
0:00:13 and Mark Andreessen, co-founder of the firm, during our recent inaugural Crypto Regulatory
0:00:14 Summit.
0:00:18 Katie asked Mark to trace some of the possible parallels between the early days of the internet
0:00:22 and the current state of crypto, including how the browser went mainstream and its initial
0:00:28 usability gaps, the impact of regulators and policymakers in the early days, the beginnings
0:00:34 of commerce and the story of the world’s first online bookstore, hint it’s not named Amazon,
0:00:37 and the original sin, as Mark calls it, of the internet, and how crypto could revisit
0:00:42 that original sin and help create new economic models to drive the internet and the broader
0:00:43 economy forward.
0:00:49 Mark, you had a front row seat when the internet was kind of being developed, right, at least
0:00:50 for consumers.
0:00:56 How did the internet go from being this kind of weird thing that academics used, and by
0:01:01 the way, the government, to a mainstream growth engine for the economy?
0:01:05 Yeah, so to start with, I should say, to clarify, it wasn’t actually a front row seat.
0:01:06 It was the little kid’s seat.
0:01:10 It was the booster seat, whether you still use regular shoulder shop in the back of
0:01:12 the internet van at the time.
0:01:14 I was very young.
0:01:18 So the evolution of the internet over time has so many echoes and comparisons to what
0:01:19 we’re seeing.
0:01:22 What I’m seeing now with cryptocurrency and blockchain is really quite remarkable.
0:01:25 And so, you know, maybe the best way to think about that is kind of by actually telling the
0:01:29 story about how the internet actually first became useful as a commercial medium.
0:01:30 Yeah, that’d be great.
0:01:35 And by the way, for those who don’t know, I’m sure many know, but Mark, you co-founded
0:01:39 Netscape and brought the first kind of internet browser to mainstream.
0:01:43 And then even before that, a team of us at the University of Illinois created Mosaic,
0:01:45 which was kind of the prototype for what became Netscape.
0:01:46 And so that was in 1993.
0:01:48 And it actually turned out in 1993 was the pivotal year.
0:01:50 And so the internet has a very interesting backstory.
0:01:53 So first of all, you know, the origins of the internet kind of go back even decades
0:01:56 before the nineties, you know, they go back to the fifties or sixties.
0:02:00 And so there was academic research happening over multiple decades of the form of basically
0:02:02 how to develop a decentralized network.
0:02:05 And right, actually, decentralization was actually key to the internet early on because
0:02:08 the original motivation for it was to have a network that could actually survive a nuclear
0:02:09 attack.
0:02:13 So it was sort of, it was born out of the present dangers of the Cold War.
0:02:16 And as this, you know, revolutionary concept, you have this decentralized network with no
0:02:17 central hub.
0:02:20 At the time, there were data networks, but all data networks ran through centralized
0:02:24 switches run by companies like AT&T and true to form the senior executives in many of the
0:02:27 top scientists at AT&T always maintained the internet was impossible, right?
0:02:28 It could never exist.
0:02:29 It could never happen.
0:02:30 It could never work.
0:02:31 It could never scale.
0:02:32 It could never be secure.
0:02:33 So there’s one parallel right there.
0:02:35 Well, there’s there’s a parallel right now we could talk more about, but it did actually
0:02:36 start to emerge.
0:02:42 And then it started to go mainstream in academic circles in particular in the 1980s.
0:02:44 And it was actually at the time funded by the National Science Foundation.
0:02:47 So it was called the NSF net was like the precursor to the modern internet.
0:02:50 The thing that people forget today, because everybody now today you shop online and you
0:02:53 do all the stuff online by airplane tickets and all seems so natural.
0:02:57 It was actually illegal to use the internet for commercial activity or commercial transactions
0:02:58 until 1993.
0:03:01 And I want to stop you there because I remember when you told me that I thought, what?
0:03:07 I’ve never heard that it was illegal to use the internet for commercial transactions until
0:03:08 1993.
0:03:09 Yeah.
0:03:10 So it’s a different circumstance.
0:03:12 So the illegality or sort of prohibition, let’s say, I don’t know if they could have
0:03:14 sent you to jail, but they definitely could kick you off the network, which is kind of the
0:03:17 same thing at least in modern life.
0:03:20 So it was funded by the government is funded by the taxpayer.
0:03:24 And so the government got to set the policy and the policy was called the acceptable use
0:03:26 policy or AUP, that’s on Wikipedia.
0:03:27 You can pull this up.
0:03:32 And it’s basically the acceptable use policy is you can use the internet for academic non-profit
0:03:33 individual use.
0:03:37 If you can figure out a way to connect to it, you’re free to kind of play and explore and
0:03:41 kind of do experimental things, but you specifically can’t engage in commercial activity and commercial
0:03:42 transactions.
0:03:45 For example, companies were actually connecting to the internet prior to 1993, like a lot
0:03:48 of defense contractors were on early, a lot of tech companies were on early, but they
0:03:51 literally technically could not sell something to somebody.
0:03:53 And it was literally just taxpayer money.
0:03:57 So then there was this kind of turning point moment in around ’92, ’93, ’94 that I was kind
0:04:00 of sitting in the middle of at the time, which is sort of internet traffic was starting to
0:04:01 really kind of take off.
0:04:03 People kind of decided they liked this thing.
0:04:07 And then there was sort of growing latent demand for actual commercial activity, but
0:04:08 the government was kind of holding firm.
0:04:11 And then basically what happened was a set of, I would say, enlightened regulators and
0:04:15 policymakers decided basically two things at the same time.
0:04:20 Number one is they decided to legalize, basically revise the UP to legalize commercial activity,
0:04:25 but in parallel, they decided to hand off the internet backbone to the telecom companies
0:04:28 at the time, AT&T, Sprint and MCI.
0:04:30 And then that solved the economic problem, which is we’ll get companies to pay for this,
0:04:32 so it doesn’t have to be the government.
0:04:36 But it was a very enlightened and forward-thinking move to make this change because it wasn’t
0:04:38 consistent with internet culture at the time.
0:04:40 It wasn’t consistent with how this thing had gotten funded.
0:04:42 It wasn’t consistent with any of the governance mechanisms.
0:04:45 But there were a set of people in Washington who said, this would be a good idea.
0:04:49 And furthermore, be good idea for internet to exist, be good idea for it to engage in
0:04:50 commercial activity.
0:04:54 And in fact, in crazy upside scenarios, it might be a driver of economic growth.
0:04:59 And for those of you who are older like me, you’ll remember 1989 to 1993 in the U.S. was
0:05:03 a severe recession, and it was grim economic times.
0:05:07 It’s kind of forgotten a little bit because it happened a while ago, but it was pretty
0:05:09 dark and pretty bad.
0:05:12 And it turned out, I think, you can trace a direct line to the economic boom of 1994
0:05:16 to 2000 from basically legalizing commercial use of the internet.
0:05:19 I just heard you call the regulators enlightened.
0:05:20 Enlightened regulators.
0:05:24 My friend, Al Gore, gets a tremendous amount of teasing for having claimed to invent the
0:05:25 internet.
0:05:26 I will defend Al Gore’s honor.
0:05:27 Al Gore never said he invented the internet.
0:05:30 He said he helped to create the internet, and that actually is true.
0:05:34 He didn’t write the code, but what he did do was he set many of the original policies
0:05:37 for the funding of the NSF net, which led to the creation of the internet, and then he
0:05:41 was involved in this process of basically privatization and having it become an engine
0:05:42 for economic growth.
0:05:45 And so he was integral, and a whole bunch of other people in Washington as well on both
0:05:47 sides of the aisle, but he was in the middle of that whole thing.
0:05:50 And that AUP changed then in 1993?
0:05:52 So in 1993, the policy changed.
0:05:54 So now it was legal to do commercial activity online.
0:05:58 And so people started to have all these really crazy wacky ideas like, “What if you could
0:05:59 buy things online?”
0:06:01 And there was immediate backlash, right?
0:06:04 Response basically was, “Okay, it’s not illegal, but it will still never work.”
0:06:05 Because it’s not secure.
0:06:06 Right?
0:06:07 And so that won’t possibly work.
0:06:10 And then the other thing, of course, that was immediately obvious was it’ll never
0:06:12 work because big companies aren’t hooked up to it yet.
0:06:14 And so, right, it’s all going to be these fly-by-night operations.
0:06:16 And so that’s another parallel that you’re seeing in the crypto space?
0:06:17 Yeah.
0:06:19 So one of the things you talked about with crypto today is it’s like, “Okay, it’s like
0:06:21 sort of where are the use cases?
0:06:24 Yeah, I understand that there are these potential use cases, and yeah, there are specific examples
0:06:28 of these use cases today, but like where’s the amazon.com of crypto, right, or where’s
0:06:29 the Google of crypto?”
0:06:32 And it’s like, “Okay, well, let’s think about actually where amazon.com came from.
0:06:34 This is another kind of great analogy.”
0:06:38 So the first internet store was a bookstore.
0:06:39 It was not Amazon.
0:06:44 It was a cult little tiny science fiction and fantasy bookstore on El Camino Real in Palo
0:06:46 Alto called Future Fantasy Books.
0:06:49 And it was kind of this legend, and if you like science fiction at the time, it was
0:06:52 like the place in the Bay Area you’d go to buy science fiction books.
0:06:54 I mean, it was run by a guy who’d been running the store for whatever, 30 years in the same
0:06:55 location.
0:06:57 And it was just like a store.
0:07:01 And so actually another friend of mine, I got him, Brian Reed, I believe is his name,
0:07:05 got a research lab in Palo Alto, unconnected to this bookstore as a company called DEC
0:07:06 at the time.
0:07:08 And he was in the research department.
0:07:09 He said, “Boy, I really like this bookstore.
0:07:12 It might be fun to be able to buy science fiction books over the internet.”
0:07:13 Right?
0:07:14 This was a new idea at the time.
0:07:15 So he went to the owner of the store.
0:07:16 This is in ’93.
0:07:18 He went to the owner of the store right as this policy change happened.
0:07:19 And he said, “You know, let’s put your inventory.
0:07:20 You got all these books.
0:07:24 Let’s put your inventory online so that anybody in the world can buy books from you on the
0:07:25 internet.”
0:07:27 And the guy’s first question was like, “What’s online?”
0:07:28 Right?
0:07:30 Because that’s just like a weird and unusual concept.
0:07:32 And so then, Brian explained, you know, my friend explained like, “Okay, here’s what
0:07:33 this means.”
0:07:34 And then the guy’s like, “Okay, that sounds great.
0:07:36 I would love to get orders from all over the world.
0:07:37 I don’t own a computer.”
0:07:39 And so Brian said, “Not a problem.
0:07:41 I work for a big computer company.”
0:07:43 He’s like, “You know, if you don’t have a computer, what do you have?”
0:07:45 And the guy’s like, “Well, I have a fax machine.”
0:07:48 So my friend basically set up in the research lab in Palo Alto.
0:07:51 He set up the online web store, the site for the bookstore.
0:07:54 And then you would order a book on the website.
0:07:56 And then my friend set up a fax gateway.
0:07:58 So the order would get sent to the store in a fax.
0:08:00 And then the guy in the store would package up the book and sell it.
0:08:04 In the first two weeks of that store going on the internet, that guy’s business doubled.
0:08:05 Wow.
0:08:09 And, you know, it’s small absolute numbers, but a huge relative boost.
0:08:10 And that’s what it turned out.
0:08:12 It turned out there were like science fiction readers all over the world, in particular
0:08:15 Germany and Japan, that couldn’t get a lot of the English books in their domestic market
0:08:17 since they immediately started to do mail order.
0:08:19 I hope he then got a computer.
0:08:20 He did buy a computer.
0:08:23 Unfortunately, then Amazon came along and he went under.
0:08:27 It’s not a totally happy story.
0:08:29 That’s, however, the whole phenomenon worked.
0:08:33 And that actually, you know, people who were experimenting like that kind of paved the way
0:08:34 for what became e-commerce.
0:08:37 But I hope that gives you a sense of how, like it was not obvious.
0:08:40 It was not obvious that these things, it was going to make sense to these online businesses.
0:08:43 It was not obvious that the use cases were going to have consumer demand.
0:08:45 It was not obvious that you were going to be able to secure it.
0:08:47 It was not obvious that there’d ever be a business model behind it.
0:08:49 Like, all that actually had to get invented.
0:08:52 Well, you just mentioned secure it, and I think that’s an important point.
0:08:56 So the government, with the help of the enlightened regulators, turns this thing over kind of to
0:08:59 the private sector, right, the internet thing.
0:09:01 And then you have SSL.
0:09:06 And then for those who don’t know in the audience what SSL is, it’s basically very strong encryption.
0:09:09 Did the government then kind of discourage SSL?
0:09:10 Yes.
0:09:11 So what’s about that?
0:09:12 Yes.
0:09:13 So then they turned around and tried to ban that.
0:09:15 You did have a front row seat there.
0:09:16 We did have a front row seat for this, yes.
0:09:19 So we drove encryption into kind of public use really for the first time in volume at
0:09:20 Netscape.
0:09:21 So basically what happened.
0:09:23 So now the internet’s available for commercial use.
0:09:24 Consumers are starting to log on.
0:09:25 The whole thing’s starting to work.
0:09:27 So then the whole problem was, okay, all the connections were unsecured.
0:09:31 So it’s just plain text data, right, traveling back and forth over the network, including
0:09:33 passwords and credit card numbers and everything else.
0:09:37 And so, right, the immediate logical conclusion is this is an unsafe place to do business.
0:09:40 No consumer, you know, the newspapers at the time were just filled with stories.
0:09:43 Consumer guide the stories basically saying whatever you do, never, ever, ever put your
0:09:46 credit card number on the internet, right, because it will instantly get stolen by hackers
0:09:48 and your entire net worth will be wiped out.
0:09:51 Now that wasn’t technically true, but that was the level of fear and anxiety.
0:09:53 And, you know, true enough, like it wasn’t encrypted.
0:09:55 So it was a bad thing.
0:09:58 And so we did what we thought was the logical thing, which was we built SSL basically as
0:10:01 the secure protocol to be able to have, you know, a client and a server connect to each
0:10:05 other, a web browser and a web server connect, and be able to exchange information securely
0:10:07 without hackers being able to penetrate.
0:10:08 What did the government say about that?
0:10:10 Well, we thought this was a really good idea.
0:10:11 And so we brought it to market, you know, we were about ready to launch it.
0:10:15 And then we discovered a regulatory regime that we were previously unaware of called
0:10:19 ITAR, which some of you may know about.
0:10:23 It’s like international trade and arms and something, something, something, bad stuff.
0:10:25 And so it’s the regulatory structure, I don’t know if it’s still current, but at least
0:10:28 the time it regulated Tomahawk missiles, right?
0:10:30 And like napalm and all kinds of fun things.
0:10:31 Export controls.
0:10:32 Export controls.
0:10:36 And so it basically governed what U.S. weapons manufacturers effectively could export overseas,
0:10:41 by the way, which, fair enough, I’m in favor of regulating Tomahawk missiles.
0:10:43 It turned out encryption was on that list, strong encryption was on that list.
0:10:48 And so the basic deal was at the time in the U.S., you were allowed to, we could build
0:10:51 strong encryption into the browser, strong encryption being encryption that was either
0:10:53 hard or impossible, depending on your point of view to break.
0:10:57 There’s a big debate about hard versus impossible, but fundamentally difficult to break.
0:10:59 And therefore safe for consumer use, let’s say.
0:11:02 So we were allowed to do that in the U.S., but we were not allowed to export it.
0:11:05 And so that led to this very lovely compromise we came up with, which is there were two versions
0:11:06 of an escape navigator.
0:11:08 And it was the same product, but there were two different boxes.
0:11:14 The sticker on one box said strong encryption, the sticker on the other box said weak encryption,
0:11:15 which is true.
0:11:16 So the export —
0:11:17 What’s sold better?
0:11:18 What’s that?
0:11:19 What’s sold better?
0:11:20 Yeah, well, it’s funny.
0:11:21 Funny, the market demand would line up maybe the way that you think it would.
0:11:22 And so, yeah, right.
0:11:23 Here’s the soft drink that tastes terrible.
0:11:24 Right?
0:11:26 Let’s see if people want to drink that.
0:11:29 So we were allowed to sell the browser overseas, but it was deliberately weakened now.
0:11:33 We were — and by the way, by weak, I mean like it was trivial — it was weak.
0:11:36 We had to degrade the encryption to the point where basically anybody could crack it.
0:11:39 Anybody with a computer and any level of software skills would be able to crack the encryption.
0:11:40 So basically useless.
0:11:44 The good news is all the other American companies were under the same restrictions we were.
0:11:48 So it’s not like any of our American competitors kind of outfox us by launching globally.
0:11:52 The problem was — I’ve heard rumors, America is not the only country in the world.
0:11:55 And so it turns out there are a bunch of other countries, and it turns out they have sharp
0:11:56 software people also.
0:12:00 And so then we immediately started to see this kind of cascade of international competitors.
0:12:03 It’s the most obvious way to compete with American software companies.
0:12:06 We’ll do the thing that they literally are not legally allowed to do.
0:12:08 So then it became a rush of foreign competition.
0:12:12 Well, speaking of parallels between crypto and the internet, one of the things that
0:12:16 I hear a lot — I know you hear this too — is, well, crypto is so hard to use.
0:12:20 Like, mainstream consumers can’t possibly figure this out.
0:12:21 It’s all janky.
0:12:25 But I know you’ve talked to me about it, and I’d love to hear your take on, you know,
0:12:28 just how easy was it to get on the internet in the early days?
0:12:29 Yeah, super easy.
0:12:30 You just pressed a button.
0:12:32 No, that’s not true at all.
0:12:33 So I’m a consumer.
0:12:34 I’m just a normal consumer.
0:12:36 And let’s say I’m totally comfortable with computers.
0:12:37 And so I know how to use computers.
0:12:38 I own a computer.
0:12:39 I’m perfectly happy with computers.
0:12:43 And it’s 1992, 1993, and I read about this internet thing.
0:12:44 I want to go on the internet.
0:12:46 So I go on my computer, and I look for the internet button.
0:12:47 There’s no internet button.
0:12:51 None of the computers in 1992, 1993, the consumers had had any internet awareness at all.
0:12:53 They didn’t have the software for access on the internet.
0:12:55 They didn’t have any of that stuff.
0:12:59 And so basically what you would do is — this is literally true — what you would do is,
0:13:02 if you knew to do this, you would go to a bookstore.
0:13:06 They used to have these physical places read by books.
0:13:10 And you would buy a book, and the book would be how to use the internet.
0:13:12 And there was a point when it seemed like all the bookstores were just going to be taken
0:13:16 over by literally just internet books, because this was how you got online.
0:13:19 So you’d bring the book home, and you’d read the book, and you’d tell you all these great
0:13:22 things about the internet, and then there would be a floppy disk, if you remember those,
0:13:23 in the back of the book.
0:13:26 And the floppy disk had the software that you had to load on your PC in order to get
0:13:27 on the internet.
0:13:31 If you’re technical in the room, it’s the TCP/IP stack and all the other kind of networking
0:13:32 coders on that disk.
0:13:36 And so you then had to go through a 38-step process, if you took you through this in the
0:13:37 book, of sticking the floppy.
0:13:40 And you basically had to rebuild — essentially rebuild your operating system on the fly as
0:13:42 an end user to add the internet support.
0:13:44 It’s a very complicated process.
0:13:46 By the way, you need to be very careful doing this, because if you made a mistake, you would
0:13:48 probably break your computer forever.
0:13:52 It would probably totally stop working, because you were mucking around in the operating system.
0:13:54 And so you wanted to be very careful kind of through that part.
0:13:56 So then you’d get all the way to the end of that process, and be like, “Great, I’m ready
0:13:57 to go on the internet.”
0:14:00 And then it’s sort of step 38, you know, the end, okay, congratulations.
0:14:02 Now you’re ready to go buy a modem.
0:14:03 Right?
0:14:04 And so then you’re like, “Okay, so what’s a modem?”
0:14:05 All right.
0:14:08 And so then it’s like, “Okay, now I have to go find a computer store, and I have to
0:14:12 pay whatever 300 bucks to buy a modem, which used to be the thing that connected the computer
0:14:13 to the network.”
0:14:14 And then you bring that home.
0:14:17 You had to plug the modem into the computer, and then you had to configure the computer
0:14:19 and the modem to actually work with each other.
0:14:22 And that was like another 38-step process that you had to do very carefully.
0:14:24 And it was another process you didn’t want to screw up, because you were mucking around
0:14:26 in your operating system.
0:14:28 So then you get all the way through that and say, “Okay, got a modem, we’re ready to go
0:14:29 on the internet.”
0:14:31 And then I would say, “Now you need to sign up for an ISP.”
0:14:32 And then that began the process.
0:14:33 What’s an ISP?
0:14:34 Internet Service Provider.
0:14:37 Okay, that’s who your modem is going to call to go on the internet.
0:14:41 And so then that began the process of like, “Okay, what’s an ISP, who’s an ISP?”
0:14:45 And these are in the days where most people who were using networks at home were using
0:14:49 AOL, which was sort of a proprietary version of all this, but it was not a full ISP at
0:14:50 the time.
0:14:51 So you’d have to go track down.
0:14:54 A lot of these are like these little local ISPs, these little local neighborhood companies,
0:14:58 almost like the old neighborhood cable company, remember those days.
0:14:59 So then you’d have to call the ISP.
0:15:02 Remember, you’re not on the internet, so you can’t search for the ISP on the internet.
0:15:06 You got to go in the yellow pages, you find your local ISP, you call their phone number
0:15:11 and you sign up and you tell them your credit card number, and they give you the code.
0:15:14 And so basically, you know, this is like four weeks later, right, that you’re going through
0:15:15 all this.
0:15:17 And then of course hit dial, then you get the busy signal.
0:15:19 That’s how straightforward it was.
0:15:20 And so, and there was a good…
0:15:21 It makes crypto seem easy.
0:15:22 It does.
0:15:23 It does.
0:15:24 Crypto is easier.
0:15:25 Crypto is easier.
0:15:28 Now, I would say the good news is, in the earliest internet, you could argue like it applied
0:15:32 a high bar to the people who got on the internet, like you had to really want to use this thing.
0:15:37 And so, you know, the people who were on the internet early on were like incredibly enthusiastic
0:15:39 and like just absolutely thrilled to be there because, you know, it was like joining the
0:15:41 Marine Corps, like it was effort, right?
0:15:43 And so, you know, that was the good news.
0:15:44 The bad news is it was obvious.
0:15:45 I mean, this was just…
0:15:46 This was absurd.
0:15:47 Like this was just absolutely patently absurd.
0:15:48 And so then a whole…
0:15:51 You know, there were then several years of work by us and others to kind of streamline
0:15:53 this thing to the point where you all have today and your views just come…
0:15:54 Well, thank you.
0:15:55 Because I…
0:15:58 Thank you for letting me just develop products so I can now push a button.
0:16:00 But you did talk about it with the internet.
0:16:04 Now, we can get on the internet easily, but we’ve called something before.
0:16:08 I think I’ve heard you call it the original sin of the internet.
0:16:09 What is that?
0:16:10 Oh, okay.
0:16:14 So then you go on the internet and then you see something that you might want to buy or
0:16:15 pay for.
0:16:18 Like let’s say hypothetically that you wanted to have like an online newspaper or something.
0:16:20 And let’s say hypothetically you wanted to like read an article in that paper and you
0:16:23 know, maybe you wanted to have an economic relationship where you were like paying for
0:16:26 the information you’re getting because then you know there’s like alignment of interest
0:16:29 between the person writing information and what you’re reading.
0:16:32 So you might think their logical thing to do might be there must have been a button
0:16:34 in the browser that was like a buy button, right?
0:16:35 It’s like you actually kind of have…
0:16:38 You finally kind of have this in the form of like the Apple App Store with like the…
0:16:40 You know, the one click buy and then the…
0:16:41 Amazon.
0:16:43 The in that payments or one click buy on Amazon.
0:16:46 But like one would think like it was the most obvious thing to do would be building the
0:16:48 browser like the ability to actually spend money, right?
0:16:52 And so you’ll basically notice like that didn’t happen.
0:16:54 And in a lot of ways it’s like we don’t even think it’s unusual that that didn’t happen
0:16:56 because maybe that shouldn’t have happened.
0:16:59 But if you think about it, there isn’t a call to the original sin and I’ll explain why.
0:17:03 But because we were unable to build payments into the browser and I just like flat out say
0:17:04 we’re unable to do it at the time.
0:17:05 I want to hear why.
0:17:06 Yeah.
0:17:07 Well, I’ll explain why.
0:17:10 But as a consequence of being unable to do it, that is why the internet today at least
0:17:14 in the West and in the U.S. is predominantly based on advertising, right?
0:17:15 And so…
0:17:17 And by the way, kind of downstream from advertising is kind of everything else that people are
0:17:19 like anxious and worked up about online, right?
0:17:24 All this privacy, user data collection, user data targeting, all these third-party ad networks
0:17:27 that collect all this harvest, all this data, the data brokers.
0:17:30 And then kind of the misalignment of incentives, you know, is the news site that you’re reading.
0:17:33 Do they have the incentive to actually tell you the truth or are they actually getting
0:17:34 their money from the advertiser?
0:17:36 And so they’re just trying to get you all hyped up on something so that you’ll click
0:17:39 on more stories so they can generate more ad revenue.
0:17:43 And so I think the original sin was we couldn’t actually build economics, which is to say
0:17:44 money to the core of the internet.
0:17:46 And so therefore, advertising became the primary business model.
0:17:48 Did you try to build?
0:17:50 We tried very hard to build payments into the browser.
0:17:51 It was not possible.
0:17:52 Why?
0:17:53 Well, we made a huge mistake.
0:17:56 We tried to work with the banks and we tried to work with the credit card companies.
0:17:59 Let me start by saying those organizations have come a long way.
0:18:02 And so I’m not talking about the banks and the credit card companies today.
0:18:04 I’m talking about them in 1993.
0:18:08 And so we went to — actually, it’s funny, so we got embroiled early on in this kind
0:18:09 of big fight with Microsoft.
0:18:11 And so we ended up aligned with MasterCard.
0:18:15 The basic thing was to get into the credit card switch to be able to do transactions,
0:18:17 particularly microtransactions, like small transactions.
0:18:21 So we allied with MasterCard, Microsoft allied with Visa, and I bring up the Microsoft part
0:18:25 because it’s not — because you might say, “Okay, Mark, you try to do this, but you and
0:18:27 Netscape’s a little company, and maybe you guys just screwed it up.”
0:18:31 And it’s like, “Well, Microsoft also — Microsoft and Bill Gates also couldn’t make it work
0:18:32 with Visa.”
0:18:35 So both of us ended up frustrating by the same thing.
0:18:38 And so, you know, then we went — so we approached the credit card companies.
0:18:43 We sat down with our first meeting with MasterCard in 1994, you know, they said they wanted
0:18:44 to work with us to put money in the browser.
0:18:47 So they said, “Well, who at MasterCard should we meet with?”
0:18:49 And they said, “We’ve got this guy,” and I’ve long since forgotten his name.
0:18:51 “We’ve got this guy, Joe, who’s like our technology visionary.
0:18:52 And so he’s the guy.
0:18:54 If anybody in the organization is going to understand this stuff, it’s going to be
0:18:55 great.
0:18:58 And so we had Joe over to our office and sat down with Joe, and sat Joe — we’re going
0:18:59 to demo.
0:19:02 He hadn’t seen any of this, so we sat Joe down in front of a PC hooked up to the Internet
0:19:03 with the browser, and we kind of said, “Okay.”
0:19:05 And I kind of just said, “Okay, here’s the browser.”
0:19:08 I said, “Okay, click on — click on this link.”
0:19:09 Right?
0:19:10 And so, you know, he does the logical thing.
0:19:16 He takes his finger, presses it on the screen, completely ignoring the mouse that’s sitting
0:19:17 on the side of the thing.
0:19:18 And I was like, “No, no, use the mouse.”
0:19:19 Right?
0:19:24 And he’s like — and I was like, “Okay, it’s 1994, it’s nine years since Apple invented
0:19:26 the Macintosh.
0:19:27 He has never seen a mouse.”
0:19:28 But he was the visionary.
0:19:31 He was the technology visionary at MasterCard, and I was like, “Oh, God, we’re just completely
0:19:32 hosed.”
0:19:34 Like, there’s just no way on Earth —
0:19:35 And so you were hosed.
0:19:36 You didn’t get it, but then —
0:19:37 We were completely hosed.
0:19:38 We were completely hosed.
0:19:40 And so we went through the entire thing, and he stared at us, like, you know, we had three
0:19:41 eyes.
0:19:43 Microsoft went through the same thing with Visa at the time, like, it was just a completely
0:19:46 incomprehensible concept, and then the banks could not have been less interested.
0:19:50 And so basically, it was, you know, it was sort of the classic kind of single point of
0:19:53 failure bottleneck, or at least in this case, two points of failure with Visa MasterCard essentially
0:19:54 had a duopoly at the time.
0:19:57 And so they were just literally — you know, they just — if they did not want you to be
0:20:00 in the switch, they did not want you to be able to do transactions, you just simply weren’t
0:20:01 going to do it.
0:20:03 If you had had crypto then, how would that have changed the calculus?
0:20:07 Yeah, so this is the what-if, and so, you know, so the modern — what we’re all here to talk
0:20:10 about today, like modern Bitcoin blockchain, you know, sort of a new sense — effectively
0:20:11 since 2009.
0:20:14 So, you know, we were kind of, what, 15, 20 years too early.
0:20:17 If we had had it, we would have been able to have a parallel transaction system, like
0:20:21 completely parallel transaction system that would not have been reliant on the centralized
0:20:22 gatekeepers, right?
0:20:23 Hypothetically, it would not have mattered.
0:20:26 You know, if Visa MasterCard had wanted to cooperate, this is the time that would have
0:20:27 been great.
0:20:28 We would have done it.
0:20:30 But had they not, we still would have had a route to actually be able to build a transaction
0:20:31 network that wasn’t dependent on them.
0:20:33 And so that to me is the great what-if.
0:20:36 And had we done that, the internet today, like I was just like, I don’t know, 80 percent
0:20:39 of the things that people hate about the internet today would not be problems.
0:20:42 And then the other kind of what-if, and this is a big part of why we’re excited about crypto
0:20:45 and blockchain now, the other part of the what-if is it’s like, okay, what if you could
0:20:49 actually align economics, right, with user behavior and with company behavior?
0:20:52 Like what if you could actually have, I mean, it’s kind of the way the real world works.
0:20:54 The real world works is how do I know that something is valuable, if somebody is willing
0:20:55 to pay for it?
0:20:56 Well, how valuable is it?
0:20:57 Well, how much are they willing to pay for it?
0:21:01 And then by the way, any individual provider of any product or service, if they’re not
0:21:05 doing a good enough job, somebody else offers it, and then you write the consumer votes with
0:21:08 their wallet, and they go buy from somebody else, and so you have market discipline on
0:21:09 all the players.
0:21:13 And so the big what-if is like what business models could have existed this entire time,
0:21:14 right?
0:21:16 What drivers of economic, because look, the internet generated a lot of economic growth
0:21:18 just for the advertising model, right?
0:21:22 And so like what if you had had kind of the turbocharge of a real economic model based
0:21:25 on money kind of integrated into the thing from the very beginning?
0:21:27 What kinds of services would entrepreneurs have come up with that we haven’t even thought
0:21:28 of yet?
0:21:29 Or what might they come up with still?
0:21:31 What might they come up with now?
0:21:34 And so one of the reasons why we’re so excited about crypto and blockchain is it’s basically,
0:21:38 it’s the first chance I’ve seen, it’s the chance to kind of revisit the original sin.
0:21:41 And you know, it’s different now because it’s like, you know, the internet cats out
0:21:45 of the bag and like the browsers are proliferated and it’s a different game now.
0:21:49 So it’s much more already fixed and established on the other hand is it, you know, huge scale.
0:21:52 And so you don’t need that many people experimenting with something to get critical mass on a new
0:21:53 thing these days.
0:21:57 And so this is a chance to kind of reexamine that original sin and kind of envision, you
0:22:00 know, for the first time in a long time be able to say, okay, what if we could build a
0:22:04 different kind of system, you know, for example, a system in which, for example, advertising
0:22:05 was not the central model?
0:22:08 And how might that be an improvement, either an improvement on what we have or just something
0:22:11 completely different and, you know, better and potentially, you know, much bigger than
0:22:12 what we have today.
0:22:15 And so I think I think that, you know, this is, as we see every day, this is the wave
0:22:18 of entrepreneurship that we’re seeing now at our firm, which is entrepreneurs kind of
0:22:19 thinking in these terms.
0:22:20 Absolutely.
0:22:21 Well, where are we in this crypto journey?
0:22:26 I mean, having seen a technology like the internet go from something technical and obscure
0:22:31 to now a technology used by billions of people, where do you think we are in the crypto journey?
0:22:34 So my personal view, so it’s like, you know, what are the possible points?
0:22:38 It’s like, okay, it’s like the possible points are like, it’s like, I don’t know, 1965 or
0:22:43 something, and Vint Cerf and Bob Conner are coming up with the original idea for TCP/IP.
0:22:48 It’s like 1989 when it’s present on university campuses, but like no normal person would
0:22:53 use the stuff, 1992 when it’s like a fringe activity, but it’s not quite mainstream yet
0:22:55 and it’s still kind of too hard to use.
0:22:57 And then kind of 1994 where it kind of goes mainstream.
0:23:01 I mean, it feels to me, it’s sort of 1992, like 1992, 1993 somewhere in there.
0:23:05 Like it clearly, like they’re like, the usability gap still has a ways to close, although it’s
0:23:06 getting closer.
0:23:08 You know, the use cases, they now, you know, several big use cases exist.
0:23:11 They have to be, they have to be kind of more productized and provided to more people, but
0:23:13 like it’s starting to feel really, really close.
0:23:16 And by close, I mean really, really close to like mainstream, the kind of knee and the
0:23:17 curve.
0:23:20 By the way, it’s also worth saying like it was not, I think I made the point in kind
0:23:24 of macro ways, but I made the larger mac or microwaves, I made the larger macro point.
0:23:27 It was not clear in 1984, the internet was going to hit the knee and the curve.
0:23:31 Like that was not, if you just like read the press coverage of the internet in 1994, it
0:23:33 was like, this thing is a joke, it’s a toy, it’s not serious.
0:23:36 Hey, at least it didn’t have a real time price feed, like crypto.
0:23:37 That is true.
0:23:38 Yeah.
0:23:39 It’s a real time price.
0:23:40 That would have been extremely depressing.
0:23:41 Yeah.
0:23:43 Well, is that a feature or a bug?
0:23:44 It’s both.
0:23:47 It’s a feature just in the sense of like it, it just shows the fact you can get, you know,
0:23:51 the system is kind of alive and running, which was, the internet was kind of an open question
0:23:53 that a lot of people didn’t think the thing was even going to laugh.
0:23:57 And so it’s sort of a marker of like, let’s say existence, like it’s a pulse.
0:23:59 So it’s good to have a pulse.
0:24:02 It’s bad because you see this in the stock market right all the time, which is just,
0:24:06 there’s actually, this is a long established theory in behavioral finance with stock prices,
0:24:09 which is the more often you can measure something’s price, the more manic depressive the behavior
0:24:11 comes around that price.
0:24:14 And so there’s actually, you know, there are markets in which transactions happen, you
0:24:18 know, venture capitals like this, transactions happen every year or two or three.
0:24:21 And so there’s only price kind of measures is only kind of core samples of price every
0:24:23 year or two or three.
0:24:27 And so, you know, 364 days out of the year, nobody’s paying attention to the price.
0:24:28 Nobody’s talking about it.
0:24:29 It doesn’t matter.
0:24:30 You’re just working on the underlying thing.
0:24:33 You know, once you go public, it’s this radical change where now the stock, you know,
0:24:37 if you want, you can now see a real time stock ticker, you know, you can, you can see the
0:24:40 price every five seconds and you can get all excited when it goes up and you can get all
0:24:41 depression it goes down.
0:24:45 And so you definitely have this psychological manic depressive overlay that we didn’t have.
0:24:46 Yeah.
0:24:47 Absolutely.
0:24:48 Well, we have time for one more question.
0:24:52 I think I’m just under the wire and that’s a question I think with all the regulators
0:24:55 here in the room and also all the crypto builders in the room.
0:24:59 Are you, and I know you’re very bullish on Silicon Valley and keeping companies here.
0:25:04 Are you optimistic that the U.S. can be a center for emerging financial technologies
0:25:07 like crypto given the regulatory environment here?
0:25:08 Yeah.
0:25:11 So I think this is quite, this is very, this again is very analogous to the Internet because
0:25:12 this could have gone the other way.
0:25:17 Like had the AUP not been updated by the, by the, by the government 93, you know, we
0:25:18 could have definitely strangled it.
0:25:21 We had two, we had two chances to strangle the Internet and its crib here in the U.S.
0:25:24 And we, we missed both of those chances, which I think, I think is really good.
0:25:30 And I think we got, you know, tremendous national payoff and many, many fronts, including economic
0:25:32 growth coming out the other side of that.
0:25:33 I’m very optimistic.
0:25:35 Like we, we’re in kind of the same position.
0:25:36 We have the raw materials.
0:25:37 Like we’re in the best position.
0:25:39 We have the critical mass of talent.
0:25:41 You know, we’ve got, we’ve got the entrepreneurship community.
0:25:42 We’ve got the venture capital.
0:25:45 We’ve got the research universities where a lot of this work is happening.
0:25:47 A lot of it’s happening in the U.S.
0:25:49 We’ve got, you know, this risk taking culture.
0:25:51 You know, we just, we have a huge domestic market.
0:25:54 We have experience building multinational technology companies that can operate all over
0:25:55 the world.
0:25:58 And so we’ve got like all the raw materials to have this be a major engine for economic
0:25:59 growth.
0:26:02 However, much like the Internet and also like encryption, like the, the cat is well and
0:26:03 truly out of the bag.
0:26:05 Like there are crypto startups all over the world, right?
0:26:08 This is happening today and new kinds of fintech startups all over the world.
0:26:12 And so it, it is going to be a race, I think for sure.
0:26:15 And I think there’s a major, by the way, I think there’s a major economic argument that
0:26:16 we should want this to happen in the U.S.
0:26:19 And that we want the U.S. to be kind of the foundation for the global, you know, financial
0:26:20 services industry.
0:26:24 And for the global R and D in this area, I think there’s actually also national security
0:26:28 reason we should want that, which is, you know, same reason it’s good for national security
0:26:29 standpoint for the U.S.
0:26:31 Internet companies to be the winning companies, because like we want those to be American
0:26:35 assets that gets good from a national security standpoint for the global financial system
0:26:36 to be centered in the U.S.
0:26:40 And so again, I think there’s the opportunity here for enlightened policy, you know, that
0:26:43 helps set the right guidelines and the right guardrails, but fundamentally enables American
0:26:45 businesses to win these markets.
0:26:48 And I think that would be better for us than most of the alternatives.
0:26:52 Well, enlightened policy, enlightened regulators, and on that note, I think we’re out of time.
0:26:53 And thank you very much.
0:26:54 Good, good.
0:26:54 Thanks, everybody.
0:26:55 [applause]
0:26:55 [end of transcript]
0:26:57 (applause)
0:27:00 (audience applauding)
What can we learn from the history of the internet for the future of crypto? In this episode of the a16z Podcast, general partner Katie Haun interviews a16z co-founder Marc Andreessen — and co-founder of Netscape, which helped popularize and mainstream the internet for many — and who also penned ”Why Software is Eating the World” (in the Wall Street Journal in 2011) and ”Why Bitcoin Matters” (in the New York Times in 2014).
This episode is based on a fireside chat between Katie and Marc at our inaugural Crypto Regulatory Summit, which brings together leading crypto experts and builders, other technologists, academics, industry executives, and government officials — along with forward-thinking regulators — to foster collaboration and the exchange of ideas around this important emerging industry.
Why is crypto an important evolution (or revolution) of the internet? What can entrepreneurs, corporations, and policymakers learn from the beginnings of the browser, e-commerce, and other examples about how emerging technologies move forward?