The Exchanges

Q My question is, you mentioned obviously the second being, you know, mental health and the state of mental health today. I'm fundamentally pretty terrified about this too. Um, how do you evaluate this today? And is this not only getting worse?

A Well, in the book I talk about, ah, kind of three freedoms that I believe we need to invest in so that we can, um, make this transition. I call them economic freedom, which mentioned that briefly, that's universal basic income. Informational freedom, which we can maybe come back to, which is about who controls computation. And then I talk about psychological freedom. And it's very much the case that our brains didn't evolve in this kind of information environment, right? I mean, our brains evolved in an environment where when you saw a cat, there was a cat. Right, and now the internet can produce an infinity of cat pictures for you. Uh, and we are maladjusted to this information environment, just we're like, we're maladjusted to an environment that has a lot of, um, high fructose corn syrup and everything, right? So that means we need to develop practices that allow us to live in this kind of environment, and to live healthily in that kind of environment. That means some type of form of mindfulness, which is a much abused term, But really what it means is, you know, being able to recognize that you can turn your phone off, that you can set your phone to do not disturb, that much of what you see online isn't real, never was real.

AI assessment note: “our brains didn't evolve in this kind of information environment, right?”

Q And I, I know at USV you focus very much on network effects, but before you've spoken about limiting the network effect that are provided to winning companies, what do you mean by this? And is this not kind of contrary or prior investments in the Twitters, Tumblers, Foursquares of the world?

A First of all, I think, yeah, just to make sure everybody understands what a network effect is, Uh, a network effect is any kind of service that as you add customers, you deliver more value to all the customers. In areas where that's true, uh, the winning companies will be often several orders of magnitude larger, uh, than other companies. Uh, certainly if you think about the social space, uh, Facebook is massive compared to anybody else. And so from an investor perspective, finding something with networking The network effect is amazing. From a social perspective, there is a good and a bad angle to it. The good angle is that, you know, networks that connect everybody and that deliver more value for everybody. It's great. But if there's a dominant network, then there is a legitimate question as to, you know, what are the dynamics that, uh, keep that network from extracting too much value from the network and also from manipulating its network to its own advantage. We know very well that, you know, monopolists or near monopolists tend to not behave particularly well because they are not checked by competition, and so I think if we take the perspective for a moment of Which is what we invest in, uh, then markets that are dominated by very, very large players that have the ability to, uh, control what market participants can do, at least to some degree, uh, are not as due to innova…

AI assessment note: “So that's why, that's why we think about how to sort of temper those network effects.”

Q social and kind of social equality and what's best for society. And one, one area that you're, you're a very strong protagonist for is, is a very, uh, how should I put it? Popular debate today, uh, in basic income guarantee. And, and so I'm, I'm intrigued. Why do you believe in this solution? Um, and what do you think the inherent challenges are to implementing the basic income guarantee?

A Yeah, so, um, the basic income, which is the idea of everybody getting enough money to be able to cover basic needs such as food, clothing, shelter, um, I believe is what's necessary to make people, uh, free economic actors in the labor market, and I think that's, uh, essential for, uh, Uh, innovation is essential for, um, the further embrace of what technologies can do, right? We have, we're on the cuff of dramatic increases in what we can automate, and historically automation has been very good for us. The example I like to give is agriculture. If we hadn't, uh, figured out how to use machines, tractors, uh, Agriculture. We would all be working in agriculture still and barely be feeding ourselves. Um, it's because we made lots of technological progress there that we were able to spend time on, on industrial production. And now I think we can, um, automate a lot of, not just industrial production, but also a lot of services, uh, whether that's, um, shopping services or insurance services, uh, or transportation services. We can now automate those and that will free us up to, um, Um, participate more in knowledge production, thinking of knowledge very broadly, and not just scientific knowledge, but also arts, music, and also frankly, just, uh, uh, taking care of, uh, friends, family, environment. So, but in order for people to feel like they're being freed up as opposed to feel …

AI assessment note: “I believe is what's necessary to make people, uh, free economic actors”

Q Why did you learn you weren't going to be a good operator?

A Um, to be a good operator, you have to really stay on one thing, um, with a kind of a singular focus for a prolonged period of time, and you also have to deal a lot with people, and I'm not really a people person at the end of the day. So, um, so the fact that my mind kind of, um, likes to, you know, go between different things, and the fact that I, uh, like to, you know, um, not have to deal with people, uh, for the most part, You know, I have lovely relationships with entrepreneurs, don't get me wrong, but that's a very different relationship from, um, having a reporting relationship, you know. From there, I decided I should get into venture capital, and it took me, you know, a variety of false starts. I won't bore you with all the details, but, uh, it along the way included an incubator at the height of the dot-com bubble. Brad and I tried to raise a fund after the, you know, in the nuclear winter after the implosion of the dot-com bubble, uh, and then eventually Brad and Fred raised the fund, and, uh, they launched in 2004, and I joined in 2006. In between that, I, I briefly worked with Joshua Schechter, who had started Delicious, and I kind of became the president of that, and Yahoo acquired it shortly thereafter, and then I started hanging out in the USV offices.

AI assessment note: “to be a good operator, you have to really stay on one thing”

Q When you think about crypto being a viable alternative to fiat, and like there's stable coins for different tiers, which I totally agree with you, and I would like to see a future when that happens. Genuinely, I'm, I'm naive here. Do governments allow for a loss of control in this way? You know, they, they.

A Well, it's not so much a loss of control. I think is like a lot of what's currently planned is a further increase and shift of control to government relative to a world of, you know, traditional banking and cash and so forth. So I don't want to go to the other extreme where all payments are secret all of the time either, because You know, I gave a talk at Blockstack Berlin a few years back where I'm like, there's a failure mode in both directions. There's also a failure mode where anybody can be bribed at, you know, and you can never trace any money, and that's bad. I don't think, you know, you want to live in a society where there are these vast movements of money that nobody knows where they're going. I don't think that's good. And I don't want to live in a society where somebody with a button in Washington can control everybody's bank balances. The answer is somewhere between those two.

AI assessment note: “Well, it's not so much a loss of control.”

Q Albert, can I ask, you saw that bust. We're now going through a downturn of sorts. I've never been through a downturn. Many listeners have never been through a downturn before. How does it feel? What's different? What's the same?

A I think that the dot-com bubble bursting, it felt somewhat dreamlike in the sense because it was such a short and super intense period of a few years. You know, the hangover was, um, pretty dramatic. Now we're coming off a very prolonged period of time. I also think that when the dot-com bubble burst, um, there was in fact a lot of opportunity. I think what's different now is that we've actually had a prolonged period of, uh, exploring and building in lots of opportunities, and I'm not sure, you know, it's not to say that there aren't opportunities in software left, there always are, but it feels very, very different. Now, Um, contrast that with crypto for a moment. Um, crypto, we've just come out of a bubble as well. Um, but in crypto, it feels like there's a lot of opportunities, a lot of building, there's a lot of things, um, and this new cycle, you know, feels like the beginning of that, it feels very similarly to me, where we are in crypto today, feels very similar to me where we were in the web post-implosion of the outcome bubble.

AI assessment note: “I think what's different now is that we've actually had a prolonged period”

Q And I, I know at USV you focus very much on network effects, but before you've spoken about limiting the network effect that are provided to winning companies, what do you mean by this? And is this not kind of contrary or prior investments in the Twitters, Tumblers, Foursquares of the world?

A First of all, I think, yeah, just to make sure everybody understands what a network effect is, Uh, a network effect is any kind of service that as you add customers, you deliver more value to all the customers. In areas where that's true, uh, the winning companies will be often several orders of magnitude larger, uh, than other companies. Uh, certainly if you think about the social space, uh, Facebook is massive compared to anybody else. And so from an investor perspective, finding something with networking The network effect is amazing. From a social perspective, there is a good and a bad angle to it. The good angle is that, you know, networks that connect everybody and that deliver more value for everybody. It's great. But if there's a dominant network, then there is a legitimate question as to, you know, what are the dynamics that, uh, keep that network from extracting too much value from the network and also from manipulating its network to its own advantage. We know very well that, you know, monopolists or near monopolists tend to not behave particularly well because they are not checked by competition, and so I think if we take the perspective for a moment of Which is what we invest in, uh, then markets that are dominated by very, very large players that have the ability to, uh, control what market participants can do, at least to some degree, uh, are not as due to innova…

AI assessment note: “So that's why, that's why we think about how to sort of temper those network effects.”

Q replacing many low level jobs, and then we think about, you know, new level technologies like, you know, NFTs in the forms of crypto, which actually a lot of the wealth, despite theory being decentralized, is concentrated to a load of bluntly male crypto nerds. Um, it's actually just further concentrating wealth into the hands of even fewer. Is that not like a concern that tech just makes this worse?

A Technology The way I talk about it in the book is, what it does is it kind of grows the space of the possible. So meaning, a lot of new things become possible, some of which are good, and some of which are bad. Like, the earliest human technology was fire, and fire is great, it lets you cook, it lets you, you know, melt things and make metals, but you can also use it to burn down somebody else's village, you know, or to torture, right? So like, it makes new things possible. Um, robotics makes amazing new things possible. And let's face it, automation has been very good to humanity today, right? So, like, the reason you and I can have this conversation on all this high-tech gear is because we're not working the fields, and why are we not working the fields? Because we have big tractors and other machines that do a lot of the agricultural work. If you go back not that long, 80 plus percent of the population was engaged in agriculture, so that 20% couldn't. Today, in advanced economies, it's sub-five percent that's engaged in agriculture, and so 95 is Percent of sites doing something else. So I believe that if we play our cards right when it comes to AI and robotics and crypto and everything else, that we can get to a place where we will look back at the current time and we'll be like, oh my god, 80 plus percent of humanity is engaged in what I think of as the economic sphere, mea…

AI assessment note: “what it does is it kind of grows the space of the possible.”

Q When you think about crypto being a viable alternative to fiat, and like there's stable coins for different tiers, which I totally agree with you, and I would like to see a future when that happens. Genuinely, I'm, I'm naive here. Do governments allow for a loss of control in this way? You know, they, they.

A Well, it's not so much a loss of control. I think is like a lot of what's currently planned is a further increase and shift of control to government relative to a world of, you know, traditional banking and cash and so forth. So I don't want to go to the other extreme where all payments are secret all of the time either, because You know, I gave a talk at Blockstack Berlin a few years back where I'm like, there's a failure mode in both directions. There's also a failure mode where anybody can be bribed at, you know, and you can never trace any money, and that's bad. I don't think, you know, you want to live in a society where there are these vast movements of money that nobody knows where they're going. I don't think that's good. And I don't want to live in a society where somebody with a button in Washington can control everybody's bank balances. The answer is somewhere between those two.

AI assessment note: “Well, it's not so much a loss of control.”

Q Albert, you said before in terms of, like, climate, it's about shifting attention, which you mentioned earlier, and you said before about putting 50% of GDP to climate and sustainability, and I read this and I was like, wow, jeez, um, is that even possible? We're at five percent today, I think you said. How can it be done?

A I think it can be done if and when we get the right kind of leadership. Certain types of topics go from being kind of a losing proposition to being a winning proposition. And I believe that climate will be that kind of thing. It'll go from something where politicians feel, oh, I can't really talk about it. There's not enough voters. I'm not going to get elected and so forth. I think it's going to go from that to something where somebody will run. And say, no, this is both the biggest threat and the biggest opportunity that we've had in a long time. And so we're going to lean into it. We're going to lean into it hard. And once that happens and somebody gets elected somewhere in a big way on that program, I think that'll make a lot of things possible that aren't currently possible. You know, when I look at the set of technologies that we have on the table, if we deploy them the right way, we can Wind up with very cheap, almost free electricity. I think we can wind up with very clean cities. I think we can wind up with less land being used for agriculture, more land being available for biodiversity, for recreation, um, and some combination of the two. I think there's an incredible, amazing future that we can get to once we develop the will to, to, to do it. And I think there's another related misunderstanding, and it goes back to what we were talking earlier about transitions. As …

AI assessment note: “I think it can be done if and when we get the right kind of leadership.”

Q replacing many low level jobs, and then we think about, you know, new level technologies like, you know, NFTs in the forms of crypto, which actually a lot of the wealth, despite theory being decentralized, is concentrated to a load of bluntly male crypto nerds. Um, it's actually just further concentrating wealth into the hands of even fewer. Is that not like a concern that tech just makes this worse?

A Technology The way I talk about it in the book is, what it does is it kind of grows the space of the possible. So meaning, a lot of new things become possible, some of which are good, and some of which are bad. Like, the earliest human technology was fire, and fire is great, it lets you cook, it lets you, you know, melt things and make metals, but you can also use it to burn down somebody else's village, you know, or to torture, right? So like, it makes new things possible. Um, robotics makes amazing new things possible. And let's face it, automation has been very good to humanity today, right? So, like, the reason you and I can have this conversation on all this high-tech gear is because we're not working the fields, and why are we not working the fields? Because we have big tractors and other machines that do a lot of the agricultural work. If you go back not that long, 80 plus percent of the population was engaged in agriculture, so that 20% couldn't. Today, in advanced economies, it's sub-five percent that's engaged in agriculture, and so 95 is Percent of sites doing something else. So I believe that if we play our cards right when it comes to AI and robotics and crypto and everything else, that we can get to a place where we will look back at the current time and we'll be like, oh my god, 80 plus percent of humanity is engaged in what I think of as the economic sphere, mea…

AI assessment note: “what it does is it kind of grows the space of the possible.”

Q Albert, you said before in terms of, like, climate, it's about shifting attention, which you mentioned earlier, and you said before about putting 50% of GDP to climate and sustainability, and I read this and I was like, wow, jeez, um, is that even possible? We're at five percent today, I think you said. How can it be done?

A I think it can be done if and when we get the right kind of leadership. Certain types of topics go from being kind of a losing proposition to being a winning proposition. And I believe that climate will be that kind of thing. It'll go from something where politicians feel, oh, I can't really talk about it. There's not enough voters. I'm not going to get elected and so forth. I think it's going to go from that to something where somebody will run. And say, no, this is both the biggest threat and the biggest opportunity that we've had in a long time. And so we're going to lean into it. We're going to lean into it hard. And once that happens and somebody gets elected somewhere in a big way on that program, I think that'll make a lot of things possible that aren't currently possible. You know, when I look at the set of technologies that we have on the table, if we deploy them the right way, we can Wind up with very cheap, almost free electricity. I think we can wind up with very clean cities. I think we can wind up with less land being used for agriculture, more land being available for biodiversity, for recreation, um, and some combination of the two. I think there's an incredible, amazing future that we can get to once we develop the will to, to, to do it. And I think there's another related misunderstanding, and it goes back to what we were talking earlier about transitions. As …

AI assessment note: “I think it can be done if and when we get the right kind of leadership.”

Q like, a top fund the other day, and they said, the reason we don't have a climate fund, Harry, is we don't think there will be Enough winners in climate to justify a separate climate fund. We think there will be a couple, maybe five, 10, 15, whatever that is, but there's not enough venture scale returns in climate to purely do a climate fund. Would you disagree with that?

A Well, I'm thrilled to hear, um, other people think that way. It leaves more room for us. No, actually, um, actually we need more, more capital pointed at climate, so I actually, um, that's, um, but, you know, at USV we've, um, always taken the approach of, um, being very clear about what our thesis with a specific fund is. We don't have a growth fund, for example, we have a fund that we call the Opportunity Fund. And why do we call it the Opportunity Fund? Because things we put in there need to feel like they're actual opportunities. And so it doesn't have any revenue requirements. It's not a chase the hot deal kind of fund, throw money at companies we missed. Um, it's an opportunity fund. And so people sometimes say, why do you have three separate funds? Because it forces discipline. Like if you raise one big fund, you can be less disciplined than if you have three vehicles where you have a very specific thesis for each vehicle. And each time you can ask yourself, does this fit with the thesis? Or am I just, you know, I have too much money and so I'm chasing things.

AI assessment note: “It leaves more room for us. No, actually, um, actually we need more”

Q like, a top fund the other day, and they said, the reason we don't have a climate fund, Harry, is we don't think there will be Enough winners in climate to justify a separate climate fund. We think there will be a couple, maybe five, 10, 15, whatever that is, but there's not enough venture scale returns in climate to purely do a climate fund. Would you disagree with that?

A Well, I'm thrilled to hear, um, other people think that way. It leaves more room for us. No, actually, um, actually we need more, more capital pointed at climate, so I actually, um, that's, um, but, you know, at USV we've, um, always taken the approach of, um, being very clear about what our thesis with a specific fund is. We don't have a growth fund, for example, we have a fund that we call the Opportunity Fund. And why do we call it the Opportunity Fund? Because things we put in there need to feel like they're actual opportunities. And so it doesn't have any revenue requirements. It's not a chase the hot deal kind of fund, throw money at companies we missed. Um, it's an opportunity fund. And so people sometimes say, why do you have three separate funds? Because it forces discipline. Like if you raise one big fund, you can be less disciplined than if you have three vehicles where you have a very specific thesis for each vehicle. And each time you can ask yourself, does this fit with the thesis? Or am I just, you know, I have too much money and so I'm chasing things.

AI assessment note: “at USV we've, um, always taken the approach of, um, being very clear”