Vices and Virtues in Web3
What's Driving the Next Internet Age
As the next phase of the internet is quickly being built, what are the core principles that set Web3 apart from previous eras, and how is it influenced by the fundamental elements of human nature? Moreover, how are the lessons learned from earlier eras guiding – or hindering – evolution?
On the latest episode of Greymatter, Greylock general partner Reid Hoffman and his Blitzscaling co-author Chris Yeh examine the current development of Web3. While the alluring concept of decentralized ownership is fueling waves of innovation across the internet, it is highly likely that the creation of Web3 will come with some unintended consequences.
This discussion was sparked in part by an article by Bloomberg reporter Joshua Brustein. Joshua interviewed Hoffman about his recent essay on his experience as a Web 2.0 entrepreneur and investor. In that essay, Hoffman described the ways the “wild idealism” of the era led to major advances that both positively and negatively impacted the world, and how the “seven deadly sins” of humanity form the basis of many technological pursuits. For example, while greed may arguably among the most recognizable “sins” in the business world, in practice, it’s much more complex and nuanced than a simple base desire.
“Just because you have something that we would describe as a sin or as a negative emotion, it doesn’t mean in itself you’re bad or anything else,” says Hoffman. “It’s a question of what you do with them.”
Building on this idea, Hoffman and Yeh discuss the ethical considerations entrepreneurs and investors can bring to Web3; the core similarities and differences between Web3 and previous eras; and how humankind’s vices and virtues continue to provide a framework for innovation and investing.
“We’re in the first inning of Web3,” says Hoffman. “So, having wild idealism is a good thing even though of course, you should always pay attention to what could go wrong and try to steer towards positive outcomes and away from negative ones.”
You can listen to the podcast here:
Hello, I’m Chris Yeh, the coauthor of Blitzscaling. And I’m here once again with my coauthor and old friend, Reid Hoffman, the cofounder of LinkedIn and investor at Greylock Partners.
Now, Reid, back in October, you wrote an essay about your experience with Web 2.0. And in it, you extended on your famous heuristic about investing in the Seven Deadly Sins.
And I thought it was a great philosophical essay, thinking about how we should take on the challenge of applying Adam Smith’s other great book, The Theory of Moral Sentiments to harness deep-seated human appetites for the good of society.
Now, what happened was that reading your essay prompted Bloomberg journalist Joshua Brustein to reach out to you and ask about how some of the lessons from prior internet ages can be applied to what we’re seeing today, and the growth enthusiasm around what’s now being called Web3. I thought Joshua asked some pretty smart and provocative questions, and that we should dive deeper into your perspectives on the topic where we don’t have a constraining word limit.
So, let’s go ahead and get started with the first question. Joshua observed that much of what you describe as the founding principles of Web 2.0 resemble the way that people talk about the ethos of Web3. And I think he was thinking of the passage where you wrote, “Wild idealism was the lingua franca of Web 2.0. The general belief was that fewer gatekeepers, freer information flows, and peer-to-peer connectivity would inevitably create positive outcomes for individuals and society alike.”
I’m wondering whether you see those same similarities. What do you make of them?
Well, first to back up a bit on history, which I think even Web 1.0 (the internet), had that kind of wild idealism. And there’s a little bit of, consciously, today’s color to say all that was wrong as opposed to that was right, which I think it was right at that time.
I think that part of what was happening in the creation of the internet was the notion of redefining this kind of space by which people could communicate and find each other by which information could flow.
I mean, look at, for example, the fact that now anyone who has a cell phone with a data connection can essentially access Wikipedia and a wide variety of other kinds of information resources that didn’t exist before, that the questions were I think that a bunch of the kind of positive changes that we’ve seen in society, anything from the resurgence of the Black Lives Matter movement, which comes from being able to upload videos and other kinds of things and say, “Look, actually in fact, this was police brutality and police differentially creating challenges for underrepresented communities.”
And that we need to improve how we constitute our communities. What’s the way that we provide justice and fairness and healthiness to all of society? And I think all of this comes from this wild idealism around a broadly open internet communication system.
And I think part of where it moved from Web1 to Web 2 – and I was part of this kind of move from Web 1 to Web 2 – was Web 1 was you kind of went off to the pioneering cyberspace, and you maybe had a pseudonym, because it was unknown place where you’re going. So, I might be an anime fan and you might be a pop culture boy, and da-da-da-da and this is how we were interfacing with each other.
And then, Web 2 brought your real identity and your real relationships. Obviously, LinkedIn was being part of this by saying what your name was and who the real people that you have knowledge and alliances with, and how you help each other – not just navigate the world of the internet, the world of the web – but also the world of real life.
And the fact that you weren’t intermediated (like for example, you go out and find your own expert, not necessarily have to hire a recruiter), that you could have experts publish information in different ways, and not have to go through a magazine or a newspaper led to a huge explosion of lots of specialists and good information.
And so, all of that I think was true. Now, it doesn’t mean that in a little bit of like you and I, Chris, and Blitzscaling about some of the issues that when you get to a really big scale, you begin to have responsibility to society as a customer and you have to evolve what you’re doing, because now it’s no longer just those early pioneers, that early discovery of all the raw stuff that you have criminals and miscreants and bad incentive systems that create problems that you now need to the further up your game.
And so, we can go into like one of the changes that need to happen as you begin to evolve. But that wild idealism was actually, in fact, a great way to start.
So, that as a baseline for saying kind of the principles of what’s going on Web3, I think the answer is it’s good. Which is to say, “Hey, there’s a lot of really interesting potential here. There’s a bunch of things that could be made that are spectacular. You have a whole lot of engineers and developers around the world working on this.”
You said, “Well, what kinds of things? I haven’t seen anything yet.” And it’s like, well, there have been a few things so far. There’s been what is called think of it as gold 2.0, or digital gold. It’s kind of an asset diversification, which is a good thing. Because actually, in fact, part of how we have stability in the modern financial system is I have a whole bunch of different correlated asset diversifications and other kinds of things to keep the financial system healthy and thriving as you’re kind of balancing between assets.
I think you have seen some identification of protection of banking systems. So, we of course, in the west who are with really good banking systems, or at least robust banking systems go, “Well, we don’t need those.” But Venezuela, Argentina, and other places do [need those], as a function of the fact that this gives you a place where a corrupt government can’t kill your banking system, and where that same asset diversification can be a really good thing.
Ultimately, you could see your way to a much cheaper banking system that could then bring in the billions of people who are currently unbanked into the modern value of it. And then obviously today, if you’re saying, I want a cross-border cash solution, it’s actually, in fact, already one of the best cross border cash solutions. And I think there’s all kinds of things you see happening from what might happen with smart contracts.
And the theory by which Web3 folks are talking about this, which I think is very interesting, you say, “Look, what happened with the baseline internet technologies is we learned how to ship bits around that didn’t really carry a lot of intrinsic value.” They might have a lot of value as an essay or piece of information, or communication, or a video or a song. But they’re not like themselves carrying the value that money or contracts bring.
Web 2 brought an identity system into this kind of communication and collaboration through primarily real identities through LinkedIn, social networks, and other things. And then Web 3 now brings in this open ecosystem by which you can create a platform or development on value systems on assets, like digital gold or currencies, for paying things or contracts, for doing things or platforms for building new systems.
And I think what you’re seeing is a Cambrian explosion of lots and lots of efforts. Oh, by the way, of course, a bunch of them, just like Web 1.0 will be shuttered craters. And maybe we have to be a little bit more careful about this because of the financial system. But some of those will persist in really interesting ways.
And this is part of the reason why in 2015, I gave a talk at Davos and wrote an article for Wired UK on the fact that the world will want to have, as I call them, “crypto capital systems” –which capitalize upon on currency, asset platform cap, capital systems – that will actually facilitate commerce and trade within the world. And I think this wild idealism is the right place to start.
And if I’m hearing you correctly, I think that in addition to believing that there is a real positive to this wild idealism, part of it is – I’m loathe to put words in your mouth – but it’s almost like there’s revisionist history about the past, where because we’ve just become so accustomed to the things that the wild idealism of web 1.0 or the dot com era and while the ideas of Web 2.0 brought us that we’re just like, “Oh, it just brought us YouTube and Amazon, no big deal.”
And we’re like, “No, hold on for a second, look back to what the world was like before these things existed. These are actually a very big deal. It’s just that it’s human nature to become used to everything good and still focus on whatever irritates me.”
Exactly. But human nature is also why we have made progress. And I do think that some negative features that weren’t there before (before it got to scale and a bunch of other things, just like, by the way, crime goes up in cities because you get to the scale around people and that doesn’t mean we shouldn’t have a city. No, no, we should have a city and we should fix the crime. We should improve the crime. There’s reasons why we aggregate in cities).
And it’s the same kind of thing.