Silicon Valley has always been driven by a dogmatic loyalty to customer needs. So how did the industry become so obsessed with turning the internet into cryptocurrencies?
17 years ago, Paul Graham, then a relatively unknown web developer, gave a talk at Harvard University titled "How to Start a Startup." The lecture was adapted into a widely circulated article by Graham, who argued that entrepreneurial visions were more limited than those attempted during the dot-com bubble. He suggested that entrepreneurs should be skeptical of venture capitalists, who should pursue cheap prices and focus on small, unpopular markets. Most importantly, Graham urges founders to find customers and respond to their needs from the beginning. He said: "Make something that customers really need."
Over the next 20 years, this advice became a Silicon Valley classic. Graham co-founded Y Combinator, an incubator and venture capital firm that has since spawned dozens of major companies while adopting his advice as its mantra. Walk around tech campuses and you'll see T-shirts emblazoned with the Y Combinator logo, proclaiming. "Make things people want." This advice was applied to an entire generation of so-called Web 2.0 companies (including Facebook, YouTube, Airbnb, and dozens of other wildly successful companies).
As an entrepreneurial philosophy, "making things people want" has obvious limitations. Critics have long pointed out that Graham's suggestion, which you can boil down to "find a few MIT classmates and make a small application", leads to the worst-case scenario for the company, not so much the company. are impossibly trivial projects whose founders tend to be white, male, and awkward. This also leads to economically unstable companies. There are Web 2.0 startups that offer addictive products but don't make money, like Vine, and there are companies like Uber where customer desire (cheap taxis sound great, of course) hasn't translated into profitability yet .
However, there is a certain consistency to the old Web 2.0 framework compared to the way Silicon Valley's best and brightest talk about cryptocurrencies and "Web3" (their new label for services built around blockchain). Earlier this month, Marc Andreessen, the co-founder of Netscape and a major backer of the Y Combinator startup, appeared on a podcast with Tyler Cowen where he was asked to explain what he was investing in A multi-billion dollar industry, this is by far the best example of this repression. Cowen, like Andreessen, is a libertarian, a critic of "wokeism," and someone who writes articles praising cryptocurrencies — in other words, he's a very sympathetic interviewer. But when the topic of cryptocurrency came up, Cowen managed to do so by simply and persistently asking Andreessen to explain and defend his claims about how Web3 would improve, for example, podcasts and products.
For a few minutes, Andreessen struggled to provide a real answer to the merits of Web3, then landed on an answer that bordered on incomprehensible. "Look, it injects economics. At a very basic level, it injects Internet-native money, Internet-native economics and incentives, and Web2's systems simply don't have that," he said. Cowen declined to comment. Andreessen asked which talk show listeners in the country were cheering for "internet-native economics," whatever that means.
Andreessen's failure to explain his situation might have been less of a problem if Andreessen hadn't spent the past few months mercilessly lashing out at his critics, tweeting Ayn Rand's mantras on Twitter and bitching about "current affairs." It's obvious. (An aside: One way to get better at dealing with your critics is to engage with them; Andreessen prefers a different approach.)
If this were the only example, this moment might seem less important.There's also investor and crypto influencer Packy McCormick, who serves as an advisor to Andreessen's venture capital firm, who heroically tried to explain in the podcast why putting his house "on the blockchain" might be better than the current system . Eventually, after a lot of scraping and a bit of "this stuff is probably all NFT", McCormick ended up more or less where he started. "You've just recreated the entire mortgage infrastructure that already exists today," one presenter noted. McCormick replied confidently: "On the blockchain."
These moments have led to a lot of well-deserved ridicule, especially in the ongoing cryptocurrency winter, but they reveal a key common to most of Web3's high-profile supporters point of failure. After years of obsession with consumer demand, Silicon Valley appears to have forgotten the key tests that helped it become a dominant force in the economy. Instead, as McCormick admitted in a follow-up blog post, Web3 companies often treat user needs as a secondary concern, if they are a concern at all. Instead, they focus first on what he calls "financialization" -- attracting money and attention by building crypto tokens into projects.
This is a huge oversight, but one that until recently was overshadowed by the craziness of the cryptocurrency market. So we have a VC-backed video game, Axie Infinity, which as a game is not very playable, but somehow manages to convince players that it is not only the future of the video game industry, but "The future of work". That was until the market crashed for its token last year.
As my colleague Joshua Brustein points out, when a game is promoted as a path to instant wealth accumulation, it's easy to forget about the fun. On Axie, player investors earn a cut of their game by strategically "breeding" characters and then renting them out to others, primarily in developing countries like the Philippines. Alexis Ohanian said in a podcast in January that "90% of people won't play a game unless they have been properly reviewed during that time." He is an investor in Axie along with Andreessen.
Ohanian - As Reddit Syndicate The founder, who went through the first Y Combinator class and is a fan of old video games (the ones you played for fun), is trying to turn gaming into an economy of digital haves and have-nots, which has some Frustrating. It also hints at how a group of product obsessives can be the drivers of an apparent speculative bubble.
Financialization may seem natural, even fun, to most ordinary people. See what fun there is in financializing. They see maintaining their 401(k)s as a burden, they mostly ignore the stock market, and when their bills come in the mail, they don't want to get in for a few days. The idea of a complex financial transaction, with nuanced risk/reward calculations, to play a game or listen to a podcast may sound interesting to some galactically minded VCs, but hardly anyone else is interested. .
Of course, there's a second, simpler explanation for why Andreessen and others are betting so big on Web3, and why they continue to push it: a profit motive. New cryptocurrency fund, but it has also been selling off the bubble it helped create. Last year, it unloaded about $5 billion in Coinbase shares while spending heavily on lobbying, seemingly to help the company lock in its gains. The company remains Coinbase's largest shareholder, and with the company's stock price now down 85% from last year's highs, it has a strong incentive to ensure that the market for financialization software finds a buyer for
's game-changing Web3 application. , as investors say, is possible, even certain, but for years the only thing investors have offered consumers is the promise of instant wealth.With the price of Bitcoin down 70% from last year’s highs, and the prices of other coins – like Axie’s – falling even more, it’s becoming increasingly clear how hollow and cynical these promises were.
