För bolag som Facebook, Youtube och Airbnb har det – på gott och ont – varit ett mantra att ta fram något som ”konsumenten vill ha”. De tillhör internetgenerationen som brukar kallas 2.0. Med det som kallas web 3.0 ska internet på något sätt bli kryptobaserat. Men tanken att ge något till konsumenten är bortblåst. Förespråkare och investerare som storsatsat är oförmögna att förklara varför någon skulle vilja ha deras nya internet, skriver Bloomberg. Silicon Valley has been powered by a dogmatic fealty to customer needs. So how did the industry get so besotted with turning the internet over to crypto? By Max Chafkin June 28, 2022 Seventeen years ago, Paul Graham, then a relatively obscure web developer, gave a talk at Harvard titled “How to Start a Startup.” The lecture, which Graham adapted into a widely read essay, argued for a vision of entrepreneurship that was more limited than what had been attempted during the dot-com bubble. He suggested that entrepreneurs should be skeptical of venture capitalists, that they should be obsessively cheap, and that they should focus on small, unsexy markets. Above all, Graham urged founders to seek out customers from the very beginning and to respond to their needs. “Make something customers actually want,” he said. Over the next two decades, this advice became canonical in Silicon Valley. Graham co-founded an incubator and venture capital firm, Y Combinator, that would go on to seed dozens of big companies while adopting his advice as something of a mantra. Walk around tech campuses, and you’ll see T-shirts with the Y Combinator logo, proclaiming: “Make something people want.” The advice was applied to an entire generation of so-called Web 2.0 companies — a category that came to include Facebook, YouTube, Airbnb, and dozens of other wildly successful companies. As a startup philosophy, “Make something people want” comes with obvious limitations. Critics have long pointed out that Graham’s advice, which you could boil down to “Take a couple of MIT dormmates and build a little app,” led to companies that, at their worst, were less companies than impossibly trivial projects, led by founders who tended to be white, male, and dweeby. It also led to companies with shaky economics. There were the Web 2.0 startups that offered addictive products without making money—Vine, for instance—and those, like Uber, where customer desires (sure, dirt-cheap taxis sound great) have yet to translate into profitability. And yet the old Web 2.0 framework had a certain coherence compared with how Silicon Valley’s best and brightest speak about crypto and “Web3,” their new label for services built around the blockchain. The best example so far of this squishiness came earlier this month when Marc Andreessen, the Netscape co-founder and a key backer of Y Combinator startups, appeared on a podcast with Tyler Cowen and was asked to explain an industry he’s pouring billions into. Cowen, like Andreessen, is a libertarian, a critic of “wokeism,” and someone who’s written in praise of cryptocurrencies—in other words, a very sympathetic interviewer. (He also writes a Bloomberg Opinion column.) But when the topic of crypto came up, Cowen managed to skewer Andreessen by simply and persistently asking him to explain and defend his claim that Web3 would improve, say, podcasting. Over the course of several minutes, Andreessen struggled to offer a real answer for what was good about Web3, then landed on one that was close to incomprehensible. “Look, it’s injecting economics,” he said. “It’s injecting, at a very fundamental level, internet-native money, internet-native economics, and incentives into a system that simply hasn’t had that.” Cowen declined to press Andreessen on which of the country’s talk radio listeners were clamoring for “internet-native economics,” whatever that meant. The failure to explain himself might feel less pronounced if Andreessen hadn’t spent the past few months relentlessly dunking on critics, tweeting Ayn Rand catchphrases, and whining about “the current thing.” (An aside: One way to get better at parrying your critics is to engage them; Andreessen has favored an alternative path.) The moment might also seem less significant if it were the only example. There was also the investor and crypto influencer Packy McCormick, who serves as an adviser to Andreessen’s VC firm, trying heroically on a podcast to explain why putting one’s house “on the blockchain” might be better than the current system. Eventually, after much grasping and a bit of “these things could all be NFTs,” McCormick ended up more or less where he began. “You’ve just re-created the entire mortgage infrastructure that already exists today,” a host pointed out. McCormick’s confident response: “On the blockchain.” These moments have led to lots of well-deserved mockery, especially amid the ongoing crypto winter, but they reveal a key failing that’s common among most of Web3’s prominent backers. After years of obsessing over consumer needs, Silicon Valley seems to have forgotten the crucial test that helped it become a dominant economic force. Instead, as McCormick acknowledged in a follow-up blog post, Web3 companies have generally treated user needs as a secondary concern, if they’re a concern at all. Instead they’ve focused first on what he called “financialization” — that is, attracting money and attention to the projects by building crypto tokens into them. This is a huge oversight, but one that’s been masked, until recently, by the insanity of the crypto market. Hence we had a VC-backed video game, Axie Infinity, that isn’t very good as a game but somehow managed to convince people it was not only the future of the video game industry but also “the future of work.” That was until the market for its tokens crashed last year. It’s easy to forget about fun, as my colleague Joshua Brustein pointed out, when a game is promoted as a pathway to instant wealth accumulation. On Axie, player-investors made money by strategically “breeding” characters and then renting them out to others, mostly in developing countries such as the Philippines, who used them to earn pennies inside the game. “Ninety percent of people will not play a game unless they are being properly valued for that time,” said Alexis Ohanian, who like Andreessen is an investor in Axie, on a podcast in January. There’s something depressing about Ohanian — a guy who went through the first Y Combinator class as the co-founder of Reddit and who is a fan of the old kind of video games (the ones you play for fun) — attempting to turn gaming into an economy of digital haves and have-nots. It also hints at how a group of product obsessives became promoters of an obvious speculative bubble. If you’re a VC, financialization might seem natural and even fun. But most normal people don’t find financialization fun in the least. They view maintaining their 401(k) as a burden, they mostly ignore the stock market, and they don’t open their bills for a few days when they come in the mail. The idea that they’d want to get into a complicated financial transaction, with a nuanced risk/reward calculus, to play a game or listen to a podcast, probably sounds fun to a few galaxy-brained VCs — and pretty much no one else. Of course, there’s a second and simpler explanation for why Andreessen and others have bet so heavily on Web3, and why they continue to promote it: a profit motive. Andreessen’s firm just raised an enormous new crypto fund, but it’s also been selling into the bubble it helped create. Last year it unloaded roughly $5 billion in Coinbase stock, while spending lavishly on lobbying that seems designed to help the firm lock in its gains. The firm remains Coinbase’s largest shareholder, and with the company’s stock price now down 85% from its highs last year, it has a strong incentive to ensure the market for financialized software finds buyers. It’s possible — maybe even likely — that game-changing Web3 applications will eventually come, just as the investors say they will. But for years, the only thing investors have been giving consumers is the promise of instantaneous wealth accumulation. With prices of Bitcoin down 70% from last year’s highs, and the price of other tokens — such as Axie’s — down way more, it’s becoming obvious how empty, and cynical, those promises were.
Thursday, April 25, 2024