Sam Harris speaks with Marc Andreessen about the current state of Internet technology and culture. They discuss Marc's background in tech, the birth of the Internet, how advertising became the business model for digital media, the three stages of the Web, the blockchain, how successful technology reorders status and power in society, the Bitcoin white paper, the mystery surrounding the identity of Satoshi Nakamoto, the importance of distributed consensus, Bitcoin as digital gold, how society has performed during Covid, James Burnham and managerial capitalism, the principal-agent problem, negative externalities, risk and regulation, trust in institutions, WTF happened in 1971, regulatory capture, banning Trump and Alex Jones from social media, perverse incentives in philanthropy, and other topics. If the Making Sense podcast logo in your player is BLACK, you can SUBSCRIBE to gain access to all full-length episodes at samharris.org/subscribe. Learning how to train your mind is the single greatest investment you can make in life. That’s why Sam Harris created the Waking Up app. From rational mindfulness practice to lessons on some of life’s most important topics, join Sam as he demystifies the practice of meditation and explores the theory behind it.
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Okay, just a brief housekeeping here.
I hope you all enjoyed the beginning of the Oliver Berkman series on time management that I previewed here in the last episode.
Again, the rest of that will soon be appearing over at Waking Up.
In our new life section, and the whole point of the section is to bring relevant philosophy and science to bear on the question of how to live a good life.
And that will include conversations between me and outside experts, but also courses designed by other people.
And we have some interesting courses already in the works there.
Also, I enjoyed the previous podcast with Peter Zion and Ian Bremmer.
That was a new format where I invited a subject matter expert to ride shotgun with me and help facilitate a conversation that was somewhat outside my wheelhouse.
Perhaps I'll do more of that, or even begin moderating some debates here.
I've thought about doing that for a while, and this seems like a good provocation in that direction.
And also just a reminder that we launched the Best of Making Sense podcast, where we surface some of the evergreen episodes from previous years.
I know many of you are enjoying that, but for those of you who haven't discovered it, it is a separate podcast, where subscribers to Making Sense get full episodes, and otherwise we release half episodes in Podcatchers everywhere.
Okay.
Today I'm speaking with Mark Andreessen.
Mark is a co-founder and general partner at the venture capital firm Andreessen Horowitz.
He is one of the few people to pioneer a whole software category used by more than a billion people, and one of the few to establish multiple billion-dollar companies.
Mark co-created the first proper internet browser, Mosaic, which then became Netscape, which he later sold to AOL for $4.2 billion.
He also co-founded LoudCloud, which as Opsware was sold to Hewlett Packard for $1.6 billion.
He later served on the board of Hewlett Packard from 2008 to 2018.
Mark holds a degree in computer science from the University of Illinois, and he serves on the board of several Andreessen Horowitz portfolio companies, Applied Intuition, Carta, Dialpad, Honor, OpenGov, and Samsara Networks.
And he is also on the board of Meta, otherwise known as Facebook.
And, in this episode, we cover a lot of ground.
We talk about the current state of Internet technology and culture.
Some of what has gone right, but there is much that is in the process of going wrong.
We discuss Mark's background in tech, the birth of the Internet, how advertising became the business model for digital media.
We talk about the three stages of the web.
And the birth of blockchain.
How successful technology reorders status and power in society.
The Bitcoin white paper.
The mystery surrounding the identity of Satoshi Nakamoto.
The importance of distributed consensus.
Bitcoin as digital gold.
How society has performed during COVID.
James Burnham and managerial capitalism.
The ubiquitous principal-agent problem.
Negative externalities, risk and regulation, trust in institutions, what-the-fuck-happened-in-1971, regulatory capture, banning Trump and Alex Jones from social media, perverse incentives and philanthropy, and other topics.
Anyway, I really enjoyed this conversation.
Mark knows a lot about a lot, and he's a very fast talker.
I'm a slow talker, so those of you who listen to this podcast on 2x are probably screwed for this one.
Anyway, I now bring you Marc Andreessen.
I am here with Marc Andreessen.
Mark, thanks for joining me.
Hey Sam, it's great to be here.
So we have a lot to talk about.
You are a man of many talents and wide experience, and we haven't hung out much, but I've spoken to you enough to get a glimmer of your polymathic intentions, if not actual achievements.
You cover an incredible range of material just in your information diet.
I want to get into what you're most focused on and worried about these days.
And I also want to talk about your background a little bit because people will know some of it, but I think in having you recapitulate a little bit of that journey into tech, you might be able to give us some insights as to what we should be thinking about now.
But first, at a high level, how do you describe yourself these days in terms of what you do professionally and what you focus on?
Yeah, so my career has had three stages so far.
So stage one was as an engineer, and I was trained as an engineer, and sort of that method of engineering is kind of central to everything, as it turns out, that at least I do and think about.
Then I became an entrepreneur, so I went into business, despite having taken zero business courses, and sort of went to the School of Hard Knocks.
And so I went into business and started originally my first company with my partner Jim Clark in 94, and then my second company with Ben.
Horowitz in 99 and then so forth and so on.
And then, you know, phase three starting in 2009 was to become an investor, a professional investor, a venture capitalist.
And so that's phase three.
And then maybe someday one more phase, but at least those three have kept me busy so far.
Oh, and then, so what does it mean to be a venture capitalist?
Basically, think of it as like we're a hub that's the sort of center of flows of basically ideas, people, and money would be the way to think about it.
So we try to stay on the leading edge of all the new areas of technology.
We try to know all the really smart people who are working on new technology and want to be part of the technology ecosystem, and then we actually raise money and we invest money.
We invest in startups.
We get very deeply involved in the companies.
We are typically on the board.
We're very often the founder's main outside confidant, advisor.
We get the call when things go horribly wrong and try to pitch in and help, and then try to maximize the success for the companies that hit a chord.
Yeah, and how would you describe your politics at this point?
So, I would say mostly I'm sort of, you know, on an ice floe all by myself, headed slowly out to sea.
I think there's a few people on that floe with you.
Probably, or at least on nearby flows, drifting together and apart.
I could go on at length about this.
I was always kind of a centrist Democrat, like basically everybody else I knew in tech and in the Valley.
The Valley is like 99%.
The picture always gets painted, the Valley is a bunch of radical libertarians or something, and in reality it's just like 99%, basically Clinton Democrats, and now whatever, Warren Democrats.
Bernie Democrats.
And so, you know, I was always that up until, like, call it 2015, 2016.
And then like everybody else, I was just completely shocked by, really by two things.
One was Trump winning, you know, both the nomination and the election, and then also just the huge shift on the left, you know, that took place.
And so I kind of checked out of traditional politics in 2015 and kind of went on a spirit walk and decided to try to kind of reread everything from scratch and figure out what was going on.
And I've kind of come out the other side in sort of a weird, fuzzy, undefined It's a state, so I don't even know that I even apply any labels.
You know, I'm not doing anything politically.
I'm completely out of it.
So I'm mostly just trying to learn and understand at this point more than like have positions.
Yeah.
Well, that describes my own political identity pretty well at this moment.
Perhaps we'll get back to that.
I don't think we'll focus on politics, but the political context will inform much of what we say about the breakdown and rebuilding or failures of rebuilding.
around institutions and solving the massive coordination problem of how do we get strangers who don't trust themselves all that much or trust one another all that much to collaborate.
But before we talk about your background earlier, again high-level, what would you say have been a few of the influences or life experiences that you currently consider most formative of your worldview on a day-to-day basis?
You know, I think, look, part of it was growing up in the sort of, you know, Midwest.
I used to think I traveled sort of this weird road from, like, rural agricultural Midwest all the way to kind of high-tech Silicon Valley, and it was kind of, you know, an unusual thing.
And then I discovered years later, I discovered Tom Wolfe, the great American, you know, novelist, reporter, wrote a It's a long-form profile of a guy named Robert Noyce, who was basically the inventor of the microchip and the creator of Intel, and basically the creator of the tech industry as we know it today.
He wrote this profile of Bob Noyce, and Bob Noyce basically was an Iowa farm boy who grew up in rural Iowa and then moved to the Valley and created the Valley, created technology as we know it today.
Then Wolf also pointed out that's the story of Philo Farnsworth, who created television and many others.
I always describe the Valley as like this intersection of like 1950s style, Midwestern tinkerer, engineer, you know, the guys with like the brush cuts and the white short-sleeved polyester shirts, you know, like you see in all the old photos of NASA or something.
It's kind of got that kind of square culture, engineering kind of nerd culture.
And then it's got the kind of 1960s California counterculture, you know, which is because it happened here.
And so that stuff all kind of threaded into it.
And it's like balanced on a knife's edge between those two cultures.
And so I definitely, you know, kind of come out of that, of that kind of former background.
So yeah, I mean, going from, you know, there to here, you know, was, was, was very important.
You know, look, partnering with my, you know, my business partner, Jim Clark, was, you know, a very successful entrepreneur.
You know, was the founder of one of the most successful companies in the history of the industry.
And I kind of got lucky in that I got to work with him at a time when he wanted to start a new company.
All the smart people he knew were kind of working at his current company, so he had to go get fresh blood.
And I happened to be newly arrived, and so we kind of hooked up and built our company Netscape.
That was formative.
The dot-com crash was a very formative experience.
You know, we hit that really hard.
And then, you know, look, the last, you know, the last 20 years, you know, the fact the internet didn't die after 2000 and, like, there was, like, a whole second tech boom.
And then, you know, everything kind of magically coming together starting in 2007 or 2008 between the iPhone and broadband and social networking and everything else that created the world we're in today.
You know, all this stuff at this point has worked, you know, way beyond any expectation any of us could have possibly had.
So, you know, kind of seeing that all crystallize and come together, you know, has really taught me a lot.
And then, of course, you know, now we're in whatever weird state we're in today.
That's kind of how I got here.
So what was your academic background before you became an internet pioneer?
Well, you did a CS degree?
Yeah, so it's a classic Midwestern kind of story, which is, of course, the purpose of a college education is to make money.
None of this Harry Ferry stuff.
And so I went to the U.S.
News & World Report issue in, I think, 1988, and I looked up the income levels by bachelor's degree.
And, of course, the top degree was electrical engineering at that time.
And so, and then I looked for the top EE schools, and the number three school was University of Illinois, which was right across the border.
So, you know, that made those two decisions easy.
I got in school and then discovered I hugely preferred software, which I should have known because I was always coding as a kid, but software, there's just, you know, EEs are, you know, tremendously important and have done a lot to build the modern world, but software, there's a level of creativity that's just hard to do in atoms.
And so, you know, I kind of got seduced by software and then got a computer science degree.
And so let's talk through what happened with Mosaic and Netscape for a few minutes.
I mean, most people will associate your name with Netscape, but it was Mosaic first, right?
I mean, you started this company, and what was the name change about?
What happened there?
Well, it didn't start as a company.
It started as a project at the University of Illinois.
It started as a federally funded research project at what was at the time called the National Center for Supercomputing Applications.
The short version is, remember when Al Gore said that he invented the internet?
It turns out that story is actually largely true, in the sense of, what he actually said was, the full quote was, I took the lead in creating the internet in the Senate.
And that story actually is true, which is in the Senate, the U.S.
Senate in the mid-1980s, funded two things that ended up being very important for my career.
One was they funded the internet backbone, what was called at the time NSFnet, after the National Science Foundation.
And then they funded what were called the four National Supercomputing Centers.
And one of those just happened to be at the University of Illinois.
The significance of that was basically they just dropped like a ton of money on these four universities, including Illinois, to basically buy state-of-the-art computers and then hook them up to the internet.
And, you know, this is starting in the mid-80s.
And so by the time I got there in 89, this was kind of underway.
And so we had, in retrospect, basically a modern computing, internet, networking, broadband, graphical environment just, you know, basically five, ten years before the rest of the world.
So you could kind of see it working.
Was that pure serendipity, or did you actually know going to Illinois that you were going to have access to unusual computer resources?
Well, they were, like I said, they were number three ranked for EE nationally.
It was like MIT, Stanford, and then University of Illinois.
So that reflected that.
They were top 10 CS at the time.
So they were by far the best engineering school in the Midwest at that point.
And it was just too much of a leap at that point in my life to go to the East Coast or the West Coast.
The reason they rank so high is because they were so central.
They had these very advanced programs and all these resources.
I had a glimmer of it.
I knew about it, but I didn't fully understand the import until I got there and I saw it.
What happened was NSF basically just funded this essentially to build the modern internet at the time as something for scientists at the time.
This is back in the days.
It was actually illegal to do business on the internet during this period.
There was something called the The acceptable use policy that basically banned all commercial transactions.
So it was purely a research thing.
Nobody really envisioned it having real-world applications at that time.
It was just kind of for scientists and academics.
But, you know, there was a research group there that had the job of basically writing software to make the internet work.
For, you know, people.
And we basically had a project that started as kind of a renegade project that became an official project that was this thing called Mosaic, which was the first browser that kind of got widely used.
It kind of pulled in all the functions, made everything graphical, and then made it work really well and fast and secure and so forth.
And then everybody started using that on the internet as it then existed.
And that was basically, that was when I was making $6.25 an hour.
Yeah.
Well, I hope you invested that wisely because I'm told compounding really works.
Until recently.
Until the last two months.
Then you formed a proper company, Netscape, and what happened?
What happened to Netscape as a product?
Yeah, well, so first of all, it was very tenuous that we ever even started that company because it was such a wall of negativity.
It was so universally known that the internet was not something that ordinary people would ever use, right?
And if you read the newspapers and magazines at the time, they were just wall-to-wall.
When they wrote about the internet, it was primarily either as an object of curiosity that would never matter, or negatively, if this thing's never going to move.
What year are we now?
93, 94.
Right, okay.
Yeah, kind of 92, 93, 94.
The first issue of Wired Magazine — I bought the first issue of Wired Magazine off the newsstand in, I think, early 93, when I was working on Mosaic, or late 92.
And I remember I bought it at like 4 in the morning, going to do a snack run, and I saw this thing on the newsstand, and I was excited.
It was finally a magazine for me, and I went back to my office and read it from front to back, and it didn't even mention the internet, right?
And I was like, okay, I guess I'm on the wrong end of this whole thing.
And it's not that Wired got anything wrong.
It's just that that was universally the view.
And all the experts said that, and all the big company CEOs said that.
It's just this is not going to be a thing.
What was motivating you at that point?
Did you actually believe that everyone was wrong and realize that the internet was going to be a way to not only get rich, but just basically do more or less everything that was going to prove indispensable in the future?
Or were you just tinkering and following your interests without any big picture vision?
So it was actually a process of elimination, which is we kind of tried everything else instead.
Basically concluded that, nope, it was just going to be the internet.
And so my partner Jim and I actually had other business plans that we kind of cycled through, trying to do, at the time, interactive television was this big idea.
And then we tried to do, we had a plan for an online gaming network.
That's sort of like what Xbox Live Today is today.
We basically worked through all these other ideas for kind of advanced, you know, AOL at that point was starting to work a little bit.
So it's like, what would it mean to do one of those, like a proprietary consumer service?
And we kind of kept, you know, just we had the startup mentality of like, okay, well, let's from scratch make a business plan for building a company that does anything like this.
And basically we cycled through all the other ideas.
And then, you know, in the background, kind of Mosaic kind of kept growing, right?
It kept going after I left Illinois and, you know, more and more people were using it.
And it was just like, you know, I was, and I still had my, you know, it's my email login.
And so I had the, I had the account.
Mosaic was free for academic use, but we put a provision in the license that said you have to pay for commercial use.
And we just did that as a placeholder because we didn't have a business model in Illinois.
But I had the email box where people would send in commercial inquiries where they would want to do something in the commercial sector with it, like e-commerce or whatever.
And so there were hundreds and hundreds and hundreds of these messages coming in from people who wanted to do crazy, crazy things, like, I want to build a bookstore on the internet.
Like, that's crazy.
I'd lose my email, Jeff.
Yeah, exactly.
Well, actually, pre-Jeff, right?
Pre-Jeff.
You know, even before that.
And so, yeah, so I just, like, at some point, Jim and I literally looked at each other and we're like, okay, this internet thing might actually be the thing.
Like, maybe all these other experts are just wrong.
Maybe this actually is the correct thing.
Look, the internet had all kinds of problems and issues that I could take you through.
It has a long litany of, you know, people had all these complaints about it that were correct.
It's not secure and you can't do transactions and blah, blah, blah, blah, blah.
And it's not fast, right?
And it's just like, well, you know, look, if the network effect really takes and lots of people sign up to use this and lots of businesses come online, then it's going to drive an investment wave that's going to solve all these other problems, which is basically what happened.
And so we kind of did what in retrospect was the obvious decision, which is we just leaned in hard on that.
And how did the business model get anchored to ads?
Because of all the things that could have gone differently in the beginning, and maybe the tech wasn't there, you just said there was no way to pay for things, but it seems like that could have been an early priority.
And I'm not sure you entirely share my view of just how diabolical the ad-based economy has been in the end.
I wonder what was that moment like where you just slap a banner ad on it and that's how you monetize the future of digital media?
Yeah, so it's because we had no native money.
We had no native ability to do money, we had no way to do microtransactions.
We knew this at the time, so we knew right up front, we were like, look, there needs to be a way to send and receive money, there needs to be a way to do e-commerce, there needs to be a way to do microtransactions.
We knew this at the time.
There were two kind of big things, and we were in a position to do it, because we had the browser, but we also had the servers and the e-commerce software and all the backend stuff, and so we were in a position to do all this.
So we figured there were two parts to the problem.
Part one was cryptography, right?
So basically security, right?
So to be able to have secure communication.
And we invented this protocol called SSL for secure cryptography.
It's the first widely used kind of delivery of the science of cryptography to consumers, you know, sort of happened as a consequence of the Netscape browser and SSL.
And that's, by the way, that's still in use.
SSL is still the encryption method for the internet today.
So that part worked.
And then the other part was like, okay, you need to plug into the existing banking system, right?
And you need to be able to plug in so people can load, you know, have their credit card, their debit card, their bank account, their checking account, because they've got all their money somewhere and they've got to be able to, you know, kind of get it to the internet.
And so for that, we went and we started talking to all the big banks and the big credit card companies.
And, you know, we got, again, this sort of wall of skepticism.
And everybody kind of told us basically, basically, F off.
This is never going to work.
And then we got our big meeting that kind of really hammered this home for me.
We found this guy at just, I guess I shouldn't name names specifically, but one of the very big credit card companies, let's say.
There was a CTO who was like considered, we were told he was like the visionary for the payments industry and the guy that everybody listened to.
And it's like, if you can get him on your side, you know, you can really do something here.
So we had him to our office.
He had not used the internet or Mosaic or Netscape at that point.
So we sat him down in front of a workstation, you know, with a keyboard and a mouse and a big screen.
And, you know, I had it all queued up for the demo, and I basically pointed on the first link on the screen, and I said, you know, click here.
And so, of course, he reaches up with his finger and touches the screen.
And this is, you know, 1994, right?
So there's no touchscreens.
So nothing happens.
And then I'm like, no, no, you use the mouse.
And so then, of course, he looks at the mouse, and then, of course, he picks it up.
Right.
And so how could that possibly be the case?
Well, because the entire banking payments industry at that point was on mainframes from 30 years earlier.
They didn't do new things.
That's not what they were in business to do.
And so I remember in that meeting, I was just like, OK, this is it.
We're sunk.
There's no way this can happen.
So we tried.
Microsoft tried.
Other people tried.
AOL tried.
And it's just there was never any way to do it.
And so if you can't charge people for things, then you've got to run ads.
And that basically is what happened.
Let's maybe give us a short primer on the stages of development here.
We have Web 1, Web 2, and Web 3.
I'm imagining you envision Web 3 as ushering in a new age of monetizing everything potentially in a secure, trustless way.
Let's climb there.
What do we mean by Web 1, 2, and 3 at this point?
Sure.
So my partner, Chris Dixon, has sort of the best encapsulation of this.
He says Web 1 was read, right?
And so the big breakthrough was you go online, you could read stuff, you could see stuff, you could do searches, you could do all this, but you were like, you know, you could consume.
Web 2 was what he calls read-write, right?
So, and that's sort of the social networking, blogging, video, YouTube, you know, kind of user-generated content era, right?
So not only could you read, you could do what you do.
You could, you could, uh, you know, not only listen, you could produce podcasts.
And that, that led to the, you know, kind of the whole, the world that we've been in.
And then he says Web 3 is read, write, and own, right?
And own means you can own value, right?
You can own money.
You can own digital assets, right?
You can own, you know, you can have ownership claims on things, right?
Or you could equivalently, you could say read, write, pay.
You could say read, write, you know, make money.
You know, you could apply whatever term you want to that third one, but basically Basically, fill in all of the economics and all of the capability of having incentives and ownership that really should have been there from the start.
Like I said, we tried to get in from the start, but we just didn't have the technology for it.
Now we basically have a chance with these new technologies of blockchain, cryptocurrency, Web3.
We have basically, we think, a chance to kind of do the other half of the internet, is how I think about it, or the other third.
And it's basically have a trust layer, a money layer, and an ownership layer that rides on top of the sort of untrusted, unowned, you know, kind of space that's been the internet so far.
And then kind of, you know, fill in all the things that we wish we'd been able to do from the start, but now we can actually do.
I wouldn't be alone in noticing that there's a fair amount of skepticism about Web 3 at this point and a fair amount of schadenfreude watching cryptocurrency crash or almost crash in recent months.
Do you view that skepticism as truly analogous to all of the naysayers around Web 1 when they thought the internet was just going to be a bust and that no one was ever going to migrate away from either their answering machine, even this email thing wasn't going to take off?
Or do you think there is a greater foundation for a perception of misspent dreams and failures of scaling the technology around the energy concerns, the cost of it all, the capacity for fraud, the tulip mania aspect of the kind of the investing landscape or the speculation landscape there?
How much of this is an echo of the early 90s and how much of this is a genuinely new condition of uncertainty?
Yeah, so there's a lot in there, and we can, you know, we can go through each of those points.
Here's the big thing I'd say overall.
Look, a lot of things just don't work, right?
So a lot of people have ideas for things that don't work, and so, you know, it's always possible that the critics are correct, and it's always possible something either is just never going to work, or the other possibility is things are just too early, right?
What happens with a lot of new technologies is they just take time.
You know, there were people doing analog—there were people doing mechanical television 30 years before Philo Farnsworth did electronic television.
They did mechanical television like the 1880s, 1890s, with like spinning wooden blocks representing pixels.
Right, right.
And so there's this prehistory, you know, it's like, what was it, Paris had a telegraph system working through flashes of light through long glass tubes under the streets of Paris in like the 1830s, right, which was not practical, right, because the tubes kept breaking, but like, you know, people had that idea way before the telegraph rolled out.
So anyway, you know, look, for any new technology, maybe you're just early, maybe you're just wrong altogether, maybe it doesn't happen.
For the new technologies that do work, you see basically a pattern of the reaction to them.
And I used to kind of think I was kind of fantasizing this, and then I found a book that kind of explained it.
It's this book by this MIT guy named Elting Morrison, 50 years ago, where he kind of goes through, this is even pre-internet, but he goes through the whole history of new technologies, and he said there's basically a three-stage process to the adoption of any new technology.
Stage one is just ignore, right, where basically just people pretend it doesn't even exist.
And of course that's, you know, the internet was ignored basically from the 1960s through to the, like I said, even into the early 90s.
Stage two is basically vigorous protest, and that's the stage where basically it's like, basically, here are the 30 reasons this can never happen.
Or call it the reasons phase, right?
So here's the 30 reasons this could never happen.
And usually what that is, is a laundry list of everything that's technically wrong with new technology.
So the internet, it was, it's too slow, and it's not graphical, and it's this, and it's insecure, and hackers, and fraud, and all these sort of basically facts.
By the way, real issues, right?
These are all issues that actually had to get fixed, and then ultimately were fixed.
And then he said Stage 3.
Stage 3, in the book he says, is when the name-calling begins.
And so Stage 3 is basically Rage.
And what he basically says is, it's basically Rage.
It's basically the existing power structures basically just go incandescent with Rage.
And he said the reason for that is because any new technology that works is a reordering of status and power in the system.
And basically the status quo is, what do they hate more than anything else?
A reordering of status and power.
There's only downside.
For them, and so they just go crazy.
And that's when they pull out all the stops, and they call you names, and they try to put you in jail, and they do everything under the sun they can possibly do to sabotage it.
And then look, it has to prove itself, right?
To get through those three gauntlets, it has to be a real thing.
So like I said, it's not predictive that because something goes through this, it's going to work.
It's just that every single time something works like this, it goes through these stages.
And so at this point, I'm like inert to it, right?
I've seen it now so many times in the exact same sequence of things that I'm just like, okay, fine, bring it.
This is what they're going to do.
We're just going to keep going.
What percentage of your time and commitment of resources at this point is focused on Web3?
I mean, we might actually need to... I know I've done this on other podcasts, but we probably should define Web3 a little bit more, just differentiating, you know, cryptocurrency from everything else that could be done on a blockchain.
But you can do that.
But then how much of your attention and material resources are aimed at that at the moment?
Yeah.
Look, it's a very big push for us.
So we have a very big group in the space now.
It's probably a third of, I would say, you could top line it and say maybe a third of the firm in terms of a combination of people and money.
Right.
Which for us, it's one of our biggest things.
Okay.
So give me the potted definition of Web3 at the moment.
Yeah, so let's take the three terms that we kind of, again, kind of conjoined.
So blockchain is like the underlying technological breakthrough.
So basically what happened was this person, he, she, it, or they, named Satoshi Nakamoto, never identified.
Are you swearing that this is not you?
It is definitely not me.
Although if it was, that's exactly what I would be saying.
Yes.
But still I trust you somehow in this trustless environment.
Well, you know, same is true for you.
If it was you, you'd be pretending to ask me the question without knowing too.
I think it does stand a better chance of being you, given our different backgrounds.
But do you have any suspicions about who it is, or whether it's a single individual?
Yeah, there are suspic—most of the people in the space think it was a combination of people.
It was a deep technological breakthrough, and it built on—it was one of these things that built on 30 years of prior work.
It's one of these things that had kind of a long windup before it happened.
And so it was somebody—and he, she, it, or they posted a lot on forums, and you can read all the posts as it was in development.
So you can kind of see whoever it was had like a very deep knowledge in the space, and that kind of reduces it down to a pretty small number of candidates.
Just given the nature of the technology at that time.
So it was probably, people think it was a handful of those people probably working together.
This is the Bitcoin white paper, which, when was this?
2010?
2009? 2009.
By the way, just profoundly significant, this gets missed, but 2009 was the low of the economy and the stock market and everything else and the high of unemployment following the financial crisis.
It was the last year you would expect a major new break.
Everybody was in a horrible mood in 2009.
I remember it very clearly because we started the firm then and everybody was uniformly negative that you could start a new venture capital firm.
And so in the middle of just like complete misery, and by the way, in the middle of like the collapse of the prior financial system, right, the sort of what we call the trad financial system, right, just being like completely trash and discredited and falling apart and having to be bailed out, right, this like magic thing happens.
This paper comes out and it just like, you know, basically redefines the industry.
It was a very special moment.
Did you see its significance immediately?
No, I didn't.
No, I wouldn't claim that.
You know, it was something kind of people knew about.
Everybody read it.
People talked about it a lot.
It was like a parlor game in Silicon Valley for the first five years or so, which is, it's like, you know, like even in Silicon Valley, right?
It's like, okay, this probably is not going to be a thing.
Like really?
Internet money?
You know, geez, right?
Like all the reasons why, you know, you shouldn't be able to do that.
Can't do that.
It won't work.
But, you know, the Silicon Valley parlor game of that is less, maybe, you know, some people had foresight and saw it, but a lot of people didn't, and a lot of us were like, wow, but wouldn't it be cool if it did, right?
And so then the parlor game was like, wow, like, you know, what if, you know, we always have the joke, it's like on Earth-2, right?
You know, this stuff is all working, right?
And it's like, well, what would Earth-2 be like if it really had Bitcoin everywhere?
It was like, wow, this is a really cool idea.
And then at some point, you know, we and others were just like, okay, like, we need to stop being idiots here and basically just be like, yeah, this is actually a thing.
This is actually going to happen.
This stands a very good chance of actually happening.
I'll credit our partner, Balaji Srinivasan, you know, was the guy who kind of got us really clued in on this and, you know, kind of sat us down at one point and was like, look, you guys have to stop thinking about this as hypothetical.
Like, this thing is actually happening.
And so, you know, we were early relative to the world, but there were other people in the valley who were ahead of us.
And is there a kind of an initial cash of Bitcoin that has not been claimed, which is Satoshi's coin, or there's an initial wallet that still has the coin sitting in it, or what's the story there?
Yes, this is part of the great kind of mythic legend behind the whole thing.
So, you know, all of Bitcoin is basically based on this underlying science of cryptography, right?
Which is a, you know, it's an ancient science, but in its modern form, you know, it's a 50, 60 year old kind of thing in terms of the way we use the technologies now, the so-called public-key cryptography.
And so it's all based on that.
And as part of that, you can have what are called private keys that are uniquely yours.
And as part of that, you can sign messages with your private key, such that anybody in the world can decode them or read them, but only you could have written them.
So you can have absolute validation that you were the creator.
And then Bitcoin wallets basically work the same way.
You have a private key for the wallet, and anybody who has the private key can decrypt it.
It's like a bearer instrument in that way.
But anybody who doesn't have the private key can't.
They have no claim to it.
Over the years, various people show up and claim to be Satoshi, but none of them can demonstrate that they have the private key, so therefore you have nothing.
So anyway, we know how to recognize Satoshi when we see he, she, it, or they, which is they can use their private key to sign things.
They could also use their private key to unlock the money.
I don't know what the current value is.
I'm going to guess it's somewhere in the neighborhood of $30 to $50 billion U.S.
dollars today that is sitting in a wallet somewhere that the Satoshi key unlocks.
That money has never been touched.
That's an extraordinary fact if it's a single individual or a group of people.
I mean, even without that, this is one of the best kept secrets ever.
But when you look at the treasure of Sierra Madre incentives that are growing with that kind of wealth locked up in a box, How do you explain that?
This person is ideologically so pure and enamored of the brilliance of this founding myth and moment that they're not tempted to suddenly own $50 billion?
Yes, exactly.
So this is the amazing thing.
The fact that money was not claimed for a long time, right?
And by the way, the message has stopped.
After the Bitcoin white paper came out, Satoshi stopped posting in public.
And by the way, you have to pause for a second here to say how prescient must this person have been to not only develop this thing and write it and create it after basically 30 years of people trying to do the same thing, by the way.
Like, this was the breakthrough.
How prescient was he, she, it, or they that not only did they get the technology right, but also they knew ahead of time that they needed to stay anonymous?
Right?
Like, that's not normal.
Like, it's not... I've never been anonymous.
Like, it's not normal in our industry to be anonymous.
And so whoever it is had, like, tremendous, tremendous foresight to know to do that.
And then, yeah, to not claim the money.
So the prevailing view for a long time was he, she, it, or they are dead, right?
Which is the most obvious thing.
And, you know, there is at least one candidate for Satoshi who did pass away.
So, you know, it's certainly possible that's the case.
It's also possible, by the way, something very embarrassing happened.
It's possible he, she, it, or they lost the key.
Forgot their key, yeah.
Forgot their key, which would be embarrassing.
The kind of thing that might torture you for a long time.
And then this weird thing happened.
I don't know if you remember, Newsweek magazine did this cover story claiming that they had uncovered Satoshi Nakamoto.
Okay, so this is several years ago now.
This huge Newsweek cover story, and they said, we found Satoshi.
And they identified an older gentleman who is a Japanese-American named Dorian Nakamoto, who is like an aerospace engineer or something in, I forget, Southern California somewhere.
I want to say San Diego or Orange County.
And they did this entire expose about he's the guy.
And the whole time, he's like, I'm not the guy, I'm not the guy, I'm not the guy, I'm not the guy.
And they're like, yes, you are.
And in the CS community, we're all like, well, he's not a computer scientist.
He seems like he's a smart engineer, but he doesn't have this background.
This seems weird.
So anyway, there was one final message signed by Satoshi's private key that came out at that point, and it literally was, I am not Dorian Nakamoto.
And then Satoshi has since gone quiet, and so now we're back to the great mystery, which I hope will... I don't know.
Actually, I don't know if I hope it gets solved.
The engineer in me would like to know, but it may be better for... I think the world should have some mystery to it, and if this is the fundamental breakthrough that sort of is a division in before and after in civilization, we never find out who the person was.
There's something romantic about that, so I kind of hope we never find out.
That's a great story.
So I derailed you.
You did not yet differentiate Bitcoin from all else that can happen on the blockchain.
So basically the white paper basically came out, the Bitcoin white paper.
It's very short, people can read it.
And basically it says we have basically a data structure called the blockchain, which is a way to do decentralized, permissionless basically data structure that everybody agrees on, which we could talk about.
It's sort of a way to do a database, but in a database that kind of is spread out across the internet.
We call that the blockchain.
It's literally a chain of blocks.
And the computer science term is distributed consensus, and so if you read the computer science literature like that, that's the thing that was solved.
That's the technology breakthrough, like the cold fusion or whatever of the thing.
And then basically said there's sort of an immediate and obvious use case for this, which is digital money.
Because if I have basically an internet-wide database that records debits and credits, or records ownership of assets, then basically those slots can represent money.
They can represent value.
If you own the slot today, you own the money.
If I own the slot tomorrow, I own the money, and there it goes.
It's this way to get agreement.
It's a distributed consensus.
It's a way to get consensus of who owns what across the entire internet.
Actually, what happens, and this is a subtle point, is the capability of doing digital money is sort of an artifact.
It's sort of a natural consequence of having this kind of database.
And then, by the way, it turns out you also want a form of digital money to make a blockchain work because you need to pay the miners, right?
And so the way the blockchain works is people run the code on their computers, and that costs them some amount of money, primarily in the form of power.
Well, they've got to buy the computers, then they've got to power the computers and store them somewhere.
And so the way the miners get paid is with the currency that sort of emerges from the system.
So you've got the blockchain, which is sort of the infrastructure, and then you've got this like use case, artifact, spin-off, emergent thing, which is kind of this, you know, the coin, the currency that comes out the other end.
That was that original pairing.
And then immediately upon that release, people started to say, OK, that's great.
And you know, the true believers right up front were like, OK, that's great.
That's obviously going to happen.
And then they basically right from the beginning, they started saying, OK, what else could you do with the blockchain?
And that leads to all these other use cases that people are talking about now.
And that's what we call Web3.
So we use the term Web3 for all of the basically use cases of the blockchain, which includes digital money, but the other, you know, hundred ideas that people are pursuing today.
Right, right.
And how much of your investment and bullishness with respect to Web3 is predicated on the expectation that Bitcoin will endure, Bitcoin specifically as a, if not the only cryptocurrency and store of value, a major one?
Yeah, so Bitcoin's really unusual, and it goes back to this original kind of founding myth, reality, which is very unusual, which is it's not changing.
And if you just think about technology, we have this adage in the Valley, technology is like bananas.
New technology becomes obsolete almost immediately.
You see this all the time now, I ship a new whatever, this, that, video game player, whatever.
It's like a year later, it's last year's news, it's the previous iPhone model.
It's the great glory of the tech industry.
We keep pushing this stuff forward.
We keep doing new things.
There's a museum in San Jose called the Computer History Museum.
It's fun to go to, but every single thing in it is something nobody uses anymore because they're all obsolete.
Any other area of technology, you'd say, you know, Bitcoin comes out, the founder vanishes.
It doesn't change.
It's essentially unchanged.
They made a little tinkering around it, but it's essentially unchanged since 2009.
It's now 13 years old.
It's obviously going to be completely obsolete.
And by the way, lots of other people have developed lots of new blockchains and lots of new forms of cryptocurrency and lots of new Web3 things and so forth along the way.
And so shouldn't it just kind of fade away?
You know, we honor it as the forerunner of what we have, but we're building better systems now.
The thing that's so unusual about it on this topic is that it is digital gold, right?
And so it's sort of one and only real foundational, fundamental use case of store of value.
And basically it's like, okay, it's digital gold.
And so if you were going to basically write a spec for digital gold, what would you say would be the main thing you would need from it?
And the main thing you would need from it is that it doesn't change.
Right, so this is like the one application of technology I've ever seen where it's actually a benefit, right?
It's a part of the bull case for it that it doesn't change.
In particular, the amount of it doesn't change.
You're not going to find much more of it suddenly.
Yeah, that's right.
The amount of it is fixed.
The amount of it is fixed.
But even more than that, it's like Bitcoin 10 years, it's the only thing I know of where 10 years from now, 20 years from now, 100 years from now, it's going to be running essentially the same way that it runs today.
And it's just literally because like Satoshi is not here to change it and nobody else is going to change it.
And like, it's just, it's, it's on his track.
And so, but it's, if it's, if it's literally digital gold, if it's like a permanent store of value, then all of a sudden you've taken what historically be a weakness, turned it into a strength.
So my best guess would be that Bitcoin is sort of the digital gold.
My best guess, though, also would be that it's new systems being developed today or over the next 10 years that will basically take all the other use cases.
And again, it's the same thing.
Bitcoin is not changing.
Bitcoin can't actually do all the other use cases.
And so it's going to have to be new developments.
And so we're in the and camp.
You know, this has become a very, you know, this is, you know, this is a full-fledged religious war at this point.
So there are, you know, very strong believers with a great deal of kind of force and energy on all sides of this.
And so there's definitely, you know, schisms on this, but we're kind of a big tent kind of thing.
And we're making all the bets, including Bitcoin.
But you're betting that Bitcoin doesn't become the digital currency.
You're distinguishing it as a store of value from it being an efficient and scalable digital dollar, essentially.
Yeah, so it can't.
In its current form, it can't.
It can't be the digital dollar.
The transaction processing system Of Bitcoin, the way the blockchain works, it's not built for that level of scale and performance.
Right.
And you can see that, by the way, because there's a cost associated with transactions.
There's so-called mining fees.
And, you know, the cost to clear a transaction through Bitcoin is not, I don't know what it is today, but it's non-trivial.
And so, and then there's long delays.
And so, we just like, it's just not going to be able to do that.
And that's today, right?
If it actually takes on, you know, even like a quarter of the global economy, it's going to be many, you know, Orders of magnitude bigger than it is today, and it's not going to be able to handle it.
So this is the downside of Satoshi no longer being with us, is like, it's not adapting to be able... Like, on Earth-2, Satoshi stayed involved, and Bitcoin became everything, but like, that's not what's happening on Earth-1.
Now, look, having said that, there are smart entrepreneurs that are developing layers on top of Bitcoin, where they're going to try to, like, make that happen.
You know, Jack Dorsey is a smart guy, has a whole effort to try to, like, have layers on top of Bitcoin to do this kind of thing.
There are other people trying to do it.
So there are people trying to kind of augment Bitcoin and kind of turbocharge it in different ways.
Maybe some of those efforts will work, or maybe it will just be brand new systems.
There's also, by the way, a big transition, a big technology transition underway.
You know, the original way Bitcoin worked was so-called proof of work.
Where you solve all these math problems, you know, to sort of validate that you own what you own.
That's the way the underlying transaction processing engine works.
There's sort of an overall architecture change being kind of proposed in the industry, which is to what's called proof-of-stake, which is a sort of a much less energy, you know, sort of aggressive thing.
And so if Ethereum is switching from proof-of-work to proof-of-stake, and so proof-of-stake works like it's one of these phase shifts that happens in the industry where just things work differently on the other side.
Bitcoin would remain proof of work because it kind of can't change, but you may have these new systems that just fundamentally work both different and much better for high-scale transaction processing.
That's a TBD, but we're pretty confident that that has a good chance of succeeding.
So, I guess, so now I want to kind of pivot to, if not politics, you know, politics adjacent, you know, larger societal concerns, you know, where we are at this moment in history, how technology is coming to the rescue or failing to come to the rescue.
And I guess as a starting point to this chapter in the conversation, I would reference the essay you wrote early in COVID titled, It's Time to Build.
Which was really this, you know, the technologists and entrepreneurs, and in your case, VCs, heart cry for, you know, over just the misspent energy of the moment and just how much, how we should, so many of us at the time were feeling that we really needed to seize this opportunity to shore up our society against, you know, the forces of fragmentation.
And it really was an opportunity to get our heads straight.
And I don't know how you feel about this, but I think I, you know, looking back on it, I mean, obviously, we're still in COVID land to some degree, but I look back on it as a kind of failed dress rehearsal for something much worse.
I mean, I think that I think there will be things that are that are much worse.
And I'm not drawing the comforting lesson that I wish I could draw from our performance over these last couple of years, that we've learned many lessons, even if we've made some obvious mistakes.
We understand what those mistakes were, and we're not going to make those mistakes again.
I just feel like we're all waking up from a bad dream, and in the waking state, some of the horrible creatures of the dream are still with us.
And that we're not all that much wiser.
Take me back to the moment you wrote that essay and give me your view of the last couple of years.
What did COVID do to us?
Yeah, so that essay was a primal scream.
I think it probably comes across that way, and I kind of say that in the essay.
So it was at a very specific moment.
It was when COVID was hitting in New York City, and we all thought COVID was going to hit us hard everywhere.
Fortunately, it didn't.
But in retrospect, there were specific moments.
Italy was a catastrophe, and then And then, you know, New York City was a catastrophe.
There were some others.
But, you know, fortunately, it didn't actually hit the rest of the country the way it hit New York.
But at that moment, it seemed like we were all really in for it.
Yeah.
To the degree to which New York was in for it at that time, which was, you know, very catastrophic for people in New York at that moment.
You know, those were the days of just like constant wailing, you know, ambulance, you know, sounds everywhere in New York.
And so the mayor of New York, the sense departed Bill de Blasio, put out a call and said, you know, the people with rain ponchos could please donate them to local hospitals for use of surgical gowns.
Yes, that inspires confidence in our civilization.
I was just like, gee, you know, by the way, is this a family podcast or can I swear?
Swear to your heart's content.
Jesus, you know, I'll just give the light, but Jesus Christ, like, like, really, like, you know, the civilization of the United States of America, 240 years in or whatever, literally, like, we're using rain ponchos for surgical gowns in hospitals in New York City.
Honestly, like, that's where we've gotten to.
You know, we don't, you know, we don't have masks.
We don't have this.
We don't have that.
And now we don't have freaking surgical gowns.
So it's like, this is just ridiculous.
And so that, that, that, that sort of, and then, you know, literally what I try to do in the essay is I kind of say, If you'd like to continue listening to this conversation, you'll need to subscribe at SamHarris.org.
Once you do, you'll get access to all full-length episodes of the Making Sense Podcast, along with other subscriber-only content, including bonus episodes and AMAs and the conversations I've been having on the Waking Up app.
