Why the blockchain revolution has no leader — on purpose
It’s ‘power to the people’ time all over again. But this time, we really mean it.
Roger McNamee, a billionaire tech investor, psychedelic rock star, and author of the forthcoming book, Zucked — Waking Up to the Facebook Catastrophe, gave me some very simple yet sage editorial advice a couple of dozen years ago. “In the end, consumers always get what they want,” Mr. McNamee says. Translation — If you want to pick winning companies, bet on the ones who are giving people what they want. Sequoia Capital founder and original VC gangster Don Valentine puts it even more simply, “There is only one question that really matters when looking at a new company — Who cares?”
Power to the PC
Going back to the future, I can remember people embracing the Personal Computer so they could chuck their typewriters, white-out bottles, calculators, slide-rules and ‘secretaries’ (thank you Woz, Steve Jobs, Adam Osborne, and all the other early PC pioneers and members to the Homebrew Computer Club). By 1984, the average Joe could even become his own publisher, from design to final output (thank you Adobe founder John Warnock, Xerox Parc, and the Apple MacIntosh and Laser Printer teams).
As PC users started feeling their newfound power, people then wanted to share their work. Bob Metcalfe recognized this desire and invented Ethernet, which allowed people to connect their office computers, faxes, and printers over coaxial cable. By the early 1990s, the real consumer ‘Information Highway’ dream was finally becoming reality via a fusion of the existing Internet infrastructure with a new content publishing platform called the World Wide Web (invented by English scientist Tim Berners-Lee in 1989) and then put on steroids in October of 1994 with the Netscape web browser — which grabbed 90 percent market share only 3 months after its launch.
The ultimate fantasy of our generation was to have our very own Star Trek phone. And boy, did we get our Star Trek phone (thank you again, Steve Jobs and Apple team). While our smartphones can’t quite beam us up yet, they deliver waaaaaay more than we could have ever imagined through zillions of apps that assist almost every aspect of our life. While smartphone growth went flat for the first time in 2017 (despite declining average unit sales prices), over 2 billion people now happily own a smartphone.
When you roll all this product innovation together, the results are in and breathtaking. The United Nations just announced that more than half of the global population — a whopping 3.9 billion people — are now using the Internet, representing the biggest global market share grab in history. We all wanted to be empowered and connected, and we got more than what we asked for. In retrospect, a relatively small set of entrepreneurs sensed our nascent desires, delivered, and created trillions of dollars in new wealth along the way.
Entrepreneurial observation: Did these wizards see a rising consumer demand in the market that they rushed to fill, or did they imagine what we really wanted before we even know we wanted it? I think it is the latter for Steve Jobs and his creations, but that is a great discussion for another post.
A Bust In Institutional Trust
Ok, enough with ancient history. Let’s talk about now. What do consumers want today? The West's biggest consumer trend is a broad-based and precipitous fall in confidence in our oldest and most trust-based institutions — government, media, academia, and finance. A recent Gallup poll asked Americans about their confidence levels in 15 societal institutions. Only three — the military, small business, and police — earned a majority-level of trust.
Consumer trust in banks and mass media, in particular, is collapsing. The financial crisis in the late 2000s certainly took the wind out of much of the trust we had in big banks, and these institutions have failed to win our confidence back since, as can be seen in the inset graph. Ironically, the inspiration to create bitcoin was a response to the banks' failure to protect the common man.
The mass media has also been marginalized by an onslaught of online and social media content. It’s hard to imagine today, but upon his retirement in 1981, legendary CBS Evening News anchor Walter Cronkite commanded a whopping 50 million nightly viewers for his half-hour evening news broadcast from 6:30 and 7:00. His competitors at ABC’s and NBC’s were logging in similar results. Today, although the U.S. population has grown 35 percent over the last 30 years, those same news programs now command only between 6 and 8 million nightly viewers. Even when you add in the top three cable TV news shows (Fox 3.8M, MSNBC 2.8M, and CNN 1.1M), the numbers are still anemic compared to the old days. A new study from the Pew Research Center shows that over two-thirds of U.S. adults (68 percent) get their news on social media. Still, out of that population, over half (57 ) of these consumers say they expect the news they see on social media to be largely inaccurate.
Populism and the Blockchain Revolution
Our growing mistrust in institutions and central power is now manifesting itself in the global political scene. The Brexit movement, the Trump and Bernie Sanders campaigns, recent populist victories in places like Italy, Mexico, Brazil, and France’s growing ‘Yellow Vests’ movement are all examples of people frustrated by static wage growth and a lack of faith in the centralized powers who promised to do something about it. Increasingly, people have also been willing to take some pretty big risks to rock the powers at be. A prime example was the election of Donald Trump — a candidate who had neither previously served in the military nor held a public office. It would have been unfathomable for anyone of his background to have been elected President before the 2016 election. To achieve this triumph, Trump and his populist followers beat out the Republican establishment, the Democratic Party, the Clinton machine, Hollywood, academia, and mainstream media. As liberal journalist John Heilemann observed on elections night 2016, “It’s like working Americans were so frustrated that they decided to roll a stick of dynamite into Washington DC and blow it up!”
One thing I have learned as a Silicon Valley OG, innovation never ceases to surprise. While consumer mistrust for institutions has been exploding, a growing set of entrepreneurs have also been hard at work developing a new security infrastructure for the Internet that might protect us from the Goliaths we now despise. It all started on October 31st, 2008, when the unknown author, under a pseudonym name Satoshi Nakamoto published the whitepaper titled ‘Bitcoin: A Peer-to-Peer Electronic Cash System.’ Satoshi’s single mission was to be the first to solve the double-spending problem for digital currency using a revolutionary Proof-of-Work distributed verification system based on a peer-to-peer network, and in doing so, the first killer blockchain application was born. In 2014, Ethereum proved that a blockchain could be used as a distributed peer-to-peer general computer without a centralized authority and database administrator. Hence, the first blockchain-powered by a ‘smart contract’ system was born.
Little did Satoshi and the Ethereum founders know, but by creating a security infrastructure so digital currency could be trusted without the need for government backing and verification or central administrator, they were also providing an approach to solve even bigger societal problems. For example, Google has been notorious for collecting their users' personal information without letting them know the extent of what they were gathering and selling this data like commodities to any advertiser who would pay. Compounding such consumer intrusions is a constant stream of security breaches, including the violation just announced on the 53 million people who had signed up for the failed Google Plus social media experiment.
Another example of consumer abuse is Facebook’s model, which is based upon ‘customer-as-product,’ a tactic very publicly and resoundingly denounced by Apple CEO Tim Cook. “We could make a ton of money if we monetized Apple’s customers if our customers were our product. But we’ve elected not to do that. We’re not going to traffic in our customers’ personal life. Privacy to us is a human right, a civil liberty,” observesCook.
People’s time is valuable. If companies like Google and Facebook care about their customers, they should protect their customers’ time with the same rigor they strive to protect their privacy and other digital rights. There is now a huge popular rebellion against Facebook (a.k.a. #DeleteFacebook campaign), and the Congressional authorities are all over Facebook like white on rice.
The Power of Bitcoin, the Blockchain, and Smart Contracts
Just when we all thought the centralization of computing in the hands of big ‘walled gardens’ like Google and Facebook was unstoppable, entrepreneurs have once again felt our pain and developed solutions to counter this presumed inevitability.
The Bitcoin project demonstrated that a suite of technologies could enable a new kind of trustless, decentralized economic network. Consumers will increasingly take back control of their personal data and hand it out selectively when they want to conduct specific, even anonymous transactions, but otherwise keep to themselves. We will eventually be able to unimpeachably share our transactions and behavior to the IRS, a prosecutor, the DMV, or anyone who might want to see the purchase and maintenance history of any asset we might want to sell.
As Silicon Valley VC and libertarian activist Patri Friedman (grandson of Nobel Laureate Milton ‘Freedom to Choose’ Friedman) has observed, “We believe the agaric potential of crypto goes far beyond the initial use case of hard money, and will steadily bring the world’s illiquid, opaque, paper-based assets online, a thesis we call ‘Markets Eating The World.’”
The bottom line is the decentralization of data storage and ownership promises to dramatically upend the status quo, cutting out intermediaries and centralized platforms and replacing them with peer-to-peer transactions executed via ‘smart contracts.’ Within the next few years, a dramatic portion of the money and resources that currently fund large centralized systems will be distributed out on the blockchain and often maintained by a global ring of independent computer workers (We call them ‘d-workers’ — the ‘d’ is for ‘distributed) from India and Brazil and other developing nations at a fraction of the cost. And while the income earned by d-workers may seem modest by western standards, it could be game-changers for literally millions of those living in developing nations.
We recognize that by almost every standard, the global blockchain infrastructure is still in ‘alpha.’ But we also believe that over time, literally millions of independent blockchain applications will be spawned and suck much of the power out of current economic centers such as those in the US. Coinbase CTO Balaji Srinivasan calls these regions collectively ‘The Paper Belt’ — the four metropolitan areas where the most important industries and political infrastructures converged during the post-war era: Boston (education), New York City (publishing, finance), Los Angeles (media, Hollywood) and Washington DC (politics, law). This trend bodes well for developing nations, in particular. The nations will finally afford the costs of joining the modern economy, transfer money across borders at a small fraction of the current cost (think Ripple), take out microloans, and even buy insurance. A recent Oxfam report stated that 82 percent of all wealth created in 2017 went to the global top 1 percent. Perhaps this is a bold statement, but I believe that the Blockchain Revolution will get even out this concentration of wealth over the next 20 years by building the economic power and average wage levels in developing nations.
The Death of the Davos Man (and a French President)
For ten years (1996 to 2006), I gleefully participated in the World Economic Forum's annual meeting in Davos, Switzerland. I hobnobbed with private jet flying, helicopter landing, Dom Perignon swigging, titans of industry, and politics. As its mission states, the Davos Man is “committed to improving the state of the world by engaging business, political, academic, and other leaders of society to shape global, regional, and industry agendas.”
Far from owning my own private jet, my role at Davos was as a ‘media leader,’ which meant I helped moderate programs, covered the event editorially, and gratefully didn’t have to pay the $35,000 ticket to get in. My Davos life's highlight was joining forces with Accel Partners cofounder and global power broker Joe Schoendorf and holding our annual ‘Davos meets Silicon Valley’ cocktail reception at the Kirchner Museum center of the village. Armed with dozen of cases of California’s finest red wines and the best French champagne, those parties were epic. Over the years, our wine fests matched the likes of Peter Gabriel, Israeli President Shimon Peres (RIP), and Bill Gates, with the best and brightest young entrepreneurs spinning out of Silicon Valley, including Google founders Larry Page and Sergey Brin, Skype’s Niklas Zennström, YouTube founder Chad Hurley, and a 21-year-old Mark Zuckerberg.
Upon reflection, and as the Forum’s mission statement above reflects, Davos was the annual calling of the once and future masters of the universe to ‘shape’ the world agenda with the globe as their chessboard. I admit, in addition to drinking lots of Joe’s red wine, I drank the Davos Kool-Aid as well. For 10 years, I felt like one of the Masters of the Universe. But as long as this show has been going on, a populist earthquake has been brewing. Davos regular Larry Fink, the CEO of the $6 trillion-plus asset management firm BlackRock, nailed it before last year’s gathering. “Popular frustration and apprehension about the future simultaneously have reached new heights. We see the paradox of high returns and high anxiety. Low wage growth, dimming retirement prospects, and other financial pressures are squeezing too many across the globe,” he said, “I believe that these trends are a major source of the anxiety and polarization that we see across the world today.”
It also may be the elephant in the room that many people do not want to talk about. Still, open borders and huge influxes of new and often undocumented immigrants into mainly developing countries are also causing societal anxiety and providing further fodder for the populist movements. The dissatisfaction with immigration is not fueled by racism and xenophobia, as the global elite want us to believe, but by a sense of people feeling overwhelmed by the sheer numbers of immigrants flocking into their respective countries. For example, the US harbors close to 25 percent of the world’s immigrant population, totaling somewhere between 45 million to 60 million people. According to a recent Gallop poll, another 147 million potential migrants desire to come to the US.
While the average American still believes in the ‘melting pot’ ideal, it has become impossible for such an enormous infusion of new people and cultures to assimilate and secure gainful employment successfully. US citizens are not the only ones with these concerns. A recent Pew Research surveyed people from 27 countries, including Mexico, South Africa, and Sweden — found that most people in each country surveyed did not want more immigration into their country.
This begs the question: If these massive influxes are so unpopular, and people didn’t vote for them, why does this continue? One of the starting 5 (in my opinion) on the cultural thought leader team of our time, Victor Davis Hansen from the Hoover Institute, who also runs an almond farm in central California and employs dozens of legal immigrants, says, “Whether, in California, Nevada, Paris or London, the administrative progressive elite are willing to take the short term hit on popularity, for the long-term ability to change the demography. Their goal is to create reasons for more government subsidies, entitlements, and gain fealty with newcomers who they hope will keep them in power.’
Meanwhile, the elite lives in gated communities and send their kids to private schools where everyone speaks the native language and is completely insulated from the ramifications and downside of their own ideologies. These folks largely believe that most people are ignorant and need an anointed elite to guide them. They have become the pigs in Orwell’s Animal Farm. They also ignore the existential questions. Why are an incredible 700 million people on the planet trying to move primarily from non-westernized countries to westernized countries? Why are the countries busy spreading their citizens worldwide, such as China, India, Mexico, and Turkey, the least likely to allow immigrants into their own nation.
“The elites that oversee this process never seem to consider that immigrants are attracted to countries with constitutional governments and promote rationalism, tolerance, and free-market economics,” observes Mr. Davis. “If they just advocated this menu of ideals outside the western world, people could stay in their home countries, which is usually always their preference.”
My perhaps hopeful premise is that as these anxieties have grown, blockchain and AI entrepreneurs have been hard at work in the background developing the technologies to soothe our global discontent. We are entering that third wave of the commercialization of the Internet. The goal is to finally deliver on the original promise to distribute economic and political power, not centralize it. If I were dictator of the US, the first public crypto project I would initiate would be putting the global immigration process on an independent blockchain. The goal would be to provide security and privacy and leverage the d-workers to help verify the good pilgrims from the bad and bring much-needed order to the immigration process. This is possible today.
Unlike the Davos Man, the blockchain revolutionary's role is not to rule the world but champion a plan that makes sure that no one rules the world.
It is safe to bet that the Davos Man and the institutions they represent won’t go down easy. As Mr. Srinivasan warns, ‘Even if the Paper Belt is vulnerable, it still wields incredible power. These industries literally control the world’s armies, information, knowledge, and economic systems. Like all incumbents, these industries will use their power for self-protection.’
Due to popular unrest in his country, France President Emmanuel Macron has emerged as the poster figure for the Davos Man. As Macron battles the Yellow Vests over energy taxes, his approval rating has plummeted to 23 percent in an Elabe survey. Bernard Sananes, head of the Paris-based pollster, explained the new findings, “Macron doesn’t listen to the people, doesn’t know the people, and doesn’t understand the people.” I predict that Macron's inevitable downfall will be a shot heard around the world that will send his fellow elites running for cover.
Surviving the Crypto Winter and Still Getting What We Want
Bitcoin billionaire Tim Draper remains bullish on the blockchain revolution's potential despite having to navigate the ‘Crypto Winter’ for the last several months. “Bitcoin is a metaphor for the societal change we are going through right now,’ says Mr. Draper. ‘If you want to win, you need to be a part of this change. You need to get in front of it. The only alternative is to be a Luddite, and they died out, didn’t they?’ Mr. Draper thinks that government-backed currencies — especially those that come from countries with a history of corruption, wild currency volatility, and manipulation — will eventually go away and be replaced by cryptocurrencies. “Japan has more or less declared that Bitcoin is their national currency and has welcomed crypto entrepreneurs from all over the world, and they are better off for it. They obviously got a big boost when China basically outlawed all things crypto.”
In the end, following the world views of Messieurs McNamee, Valentine, and Draper, crafty entrepreneurs eventually will create a more accessible, self-empowered, private, secure, and economically distributed online world — because that’s what we want. In the meantime, we can expect to see mainstream media talking heads to get more shrill, Wall Street’s money-changers to continue to dog Bitcoin and token offerings, and politicians desperately try to reboot socialism, all in their vain attempt to hold onto the power slipping through their claws. But like I said up top, it’s ‘power to the people’ time all over again, and it’s the blockchain entrepreneur who is working hard to give us our power back.